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Simple mistakes are easily corrected by writing to the reporting company, pointing out the error, and providing proof of the mistake. You can also request to have your own comments added to explain problems. For example, if you made a payment late due to illness, explain that for the record. Lenders are usually understanding about legitimate problems.
If a creditor sues to collect a debt you owe and wins a court judgment against you, the creditor can ask the court for an order to garnish your salary, bank account, or other assets.
There are no easy ways to improve your credit score, but you can work to keep it acceptable by maintaining a good credit history.
As a consumer you are entitled to 1 free credit report annually.
There are three major credit reporting companies: Equifax, Experian, and Trans Union. Obtaining your credit report is as easy as calling and requesting one.
A credit bureau score is a number, based upon your credit history, that represents the possibility that you will be unable to repay a loan. Lenders use it to determine your ability to qualify for a mortgage loan. The better the score, the better your chances are of getting a loan.
Typically it takes 6 months for the credit reporting bureaus to pick it up for FICO score calculation.
In the vast majority of cases, owing federal or state taxes makes people ineligible for real estate loans. The only exception would be if there were a valid offer and compromise agreement with the government in place.
A credit score is not factor, but what is on the credit report might be a factor in certain circumstances.
According to NeighborWorks America, the breakdown is as follows:
1. Payment history – 35%
2. Amounts owed – 30%
3. Length of credit history – 15%
4. Types of credit – 10%
5. New credit – 10%
Housing counselors will typically advise a score of 620 or higher.
The statute of limitations varies from state to state, and may be different for various types of consumer debts.
A FICO score is a number that summarizes your credit risk. Credit reports list the types of credit you use, the length of time your accounts have been open, and whether you’ve paid your bills on time.
A mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.
The Vantage Score is a credit rating system developed by the top three credit agencies, Experian, Equifax and TransUnion.
Anyone with “Permissible Purpose” can pull your credit report including:
2. Credit grantor/creditor
4. Employer (potential)
5. Insurance company
6. The courts
7. Child support enforcement
1. Old derogatory accounts with balances owing
2. Public record items
3. Opening of new accounts
4. Significatnt balance increases
5. Customers do not pay as agreed, and this is reported
Down Payment Resources
No. Though you can’t roll closing costs into your FHA loan, you may be able to use the amount you pay for them to help satisfy the down payment requirement. Ask your lender for details.
Yes. Lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.
Real estate professionals suggest that none of the earnest money deposit is from borrowed funds as this amounts documents the buyer’s intent and the ability to pay for the purchase.
Typically, no. Down payment money may be gifted, however, and some closing costs may be paid by a seller.
No. Though you can’t roll closing costs into your FHA loan, you may be able to use the amount you pay for them to help satisfy the down payment requirement. Ask your lender for details.
Ask around. Ask Realtors, lenders and friends. Many counties and cities have 1st time homebuyer programs. An online resource is http://downpaymentresource.com/.
The FHA works to make homeownership a possibility for more Americans. With the FHA, you don’t need perfect credit or a high-paying job to qualify for a loan.
Lender claims paid by the FHA mortgage insurance program are drawn from the Mutual Mortgage Insurance fund. This fund is made up of premiums paid by FHA-insured loan borrowers. No tax dollars are used to fund the program.
The closing costs include not only the down payment for your new mortgage but also 3% to 6% for fees that are required by a lender such as, title insurance, transfer taxes, initial deposits for escrow accounts and property taxes, hazard insurance fees, to list a few. Check with your lender for an estimate.
The mortgage menu is very diverse, and exploring the loan options takes time. What is good for one borrower, is not the best for another. Housing counselors are a good source of information.
Many federal, state and local agencies administer programs to assist people who need help buying a home.
Seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, Social Security income, alimony, and rent paid by family all qualify as income sources.
When you purchase a home, make sure to talk to your lender and Realtor about the possibility of seller’s concessions. Simply put, these concessions are a set dollar amount or percentage of the purchase price that a seller agrees to contribute to you, the buyer, towards your closing costs which will lower the amount you need to close on the property.
The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing.
Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It’s required primarily for borrowers making a down payment of less than 20%.
Now an agency within HUD, the Federal Housing Administration was established in 1934 to advance opportunities for Americans to own homes. By providing private lenders with mortgage insurance, the FHA gives them the security they need to lend to first-time buyers who might not be able to qualify for conventional loans. The FHA has helped more than 26 million Americans buy a home.
You must have a down payment of at least 3% of the purchase price of the home. Most affordable loan programs offered by private lenders require between a 3%-5% down payment, with a minimum of 3% coming directly from the borrower’s own funds.
Anyone who meets the credit requirements, can afford the mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan.
That depends.&nbnbsp; Determining value is always tricky for real estate buyers and sellers.
Because a lender charges more for a borrower with great risk factors including a higher credit score, they include a prepayment penalty.
If you have mold in your home, this needs immediate attention. Not only is it bad for your health, mold can grow aggresively and be a costly remediation.
First, devise a checklist for the information from each lending institution. You should include the company’s name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.
Your real estate agent should help you by providing you with information.
A lower interest rate allows you to borrow more money than a high rate with the some monthly payment. Interest rates can fluctuate as you shop for a loan, so ask-lenders if they offer a rate “lock-in”which guarantees a specific interest rate for a certain period of time.
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses.
There isn’t a definitive answer to this question. You should look at each home for its individual characteristics.
Housing counselors and real estate professionals emphasize the importance of a thorough home inspection. It is critical for many reasons.
Discount points allow you to lower your interest rate. They are essentially prepaid interest with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point.
Sometimes a FSBO fits a buyer’s needs to the tee. Then what?
The amount of the down payment, the size of the mortgage loan, the interest rate, the length of the repayment term and payment schedule will all affect the size of your mortgage payment.
Does frugal living mean dooming yourself to a life of deprivation? Not at all. Google “frugal living,” and you will find tips including:
1. Actively stretching your money for maximum benefit
2. Creating substitutions for old expensive habits
3. Managing financial options such as buying online with free shipping and no tax
Make it a game, and reap the rewards. Challenge yourself with the vision of new money management.
PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance.
If interest rates drop significantly, you may want to investigate refinancing.
Most loans are either 30 or 15 year mortgages. During the life of the loan, you’ll pay far more in interest than you will in principal, two or three times more.
Yes, you can purchase a home 7 years after bankruptcy according to most lenders, but it’s always best to call a few lenders to confirm as lending programs are always changing.
Yes, a 2nd modification is possible, but the borrower needs to explain why the 1st modification didn’t work. Be prepared to document the past events.
Yes, 2nd mortgages can be modified. The process is the same.
Yes, with some, but not all investors, a rental mortgage can be modified.
It depends. Non-owner occupied loans are sometimes modified. Investor guidelines are the determining factor.
Typically, the shortest period of time for newly generated mortgages is 15 years.
Every lender and loan can vary, but typically a lender will offer a forbearance and not a modification when client is unemployed. With a forbearance, a client is allowed to defer a number of payments while they are finding new employment.
Yes they can, and banks often do lose money during the foreclosure process, which is why most banks prefer not to go that route if they can avoid it.
As long as you own your home, there are options available to you. However, once the foreclosure process is complete or your house is sold, you’ll have markedly fewer options.
The key is to arm yourself with information before going through the foreclosure process, as it may help you to avoid foreclosure altogether.
Yes, with a few exceptions.
There are a number of ways to avoid foreclosure scams including:
Not all loans can be modified to 2%. Investor guidelines dictate what programs are available to distressed borrowers.
You can speak with a housing counselor to discuss what options there are to help you to avoid foreclosure. You can also talk with your lender.
In short, times vary immensely. To keep the process moving, it is suggested that borrowers call the lender periodically to check if the lender needs additional documents.
As a rule of thumb, most lenders ask for 30 to 45 days to receive approval from an underwriter for a loan.
It varies but it can take as little as a week to longer than six months. Real estate laws are dictated by states.
If you walk away from your home or forfeit your property, there could be legal and financial consequences. Contact a real estate professional who has experience with this type of situation.
Some may be, but others may not.
Yes, self-employment income qualifies for a modification. The borrower needs to provide a profit and loss statement which also needs to be documented by bank statements.
There are 2 nationwide programs with zero down payments required.
A Compromise Sale or ‘Short Sale’ would allow you to sell your home rather than lose it to foreclosure.
If you think the layoffs will lead to financial hardship and could prevent you from paying your mortgage, consider whether you can make adjustments to your budget or tap into any savings accounts that would allow you to make your payments.
Unfortunately, foreclosure scams are something that you may run into. Typically a scam will sound too good to be true, which should tip you off to tread carefully.
Housing counselors often tell clients that doing a deed-in-lieu is a graceful way to leave a property.
A Short Payoff is a situation in which your lender will accept an amount for your property that is less than the total owed.
If you have more than one mortgage, and the lender that holds the first mortgage forecloses, then the lenders who hold the other mortgages no longer have a right or title to your home.
If you miss your mortgage payments, you could experience foreclosure on your home.
Foreclosure is the process in which banks and mortgage companies legally reclaim possession of your home in order to sell it to repay a debt — typically the outstanding mortgage on your home. A homeowner may receive a foreclosure notice after three or four missed payments.
These two ways of exiting a property vary greatly.
The foreclosure process varies by state. However, borrowers must receive some warning or notice before a foreclosure can occur.
The redemption period varies by state. Check online to find the laws in your area.
There are a number of options including:
Never ignore calls or letters from your lender requesting payment.
The worst thing you can do is ignore the foreclosure notice.
A deficiency is the difference between what is owned on a loan and the amount that the lender receives upon sale. A deficiency judgment is a court order against the borrower for the amount of the loss which could include principal, interest, late fees, attorney fees, etc.
First, real estate taxes are paid. Then all of the mortgages on the home are paid. If there are any liens on the home, those are paid next.
No, they are not necessarily licensed by states, however, some states have forms of oversight and there are associations which check for credentials and ongoing education.
Your question is an excellent one for a homeownership advisor. They would know how to guide you if your cash is low or your credit score needs some tweaking. There are many loan programs out there, and finding the one that is good for you deserves a professional.
And additional good news if for those whose first home was lost in foreclosure as there are currently government programs helping people get back into homeownership.
Yes, HomeFree-USA is a HUD intermediary, and our services are mostly free to the public. Please contact us at 301-891-8400 for any assistance you may need.
You may be a good candidate for one of the federal mortgage programs. Start by contacting one of the HUD-funded housing counseling agencies that can help you sort through your options.
Most mortgages can be paid off early, and that information is found in your mortgage Note.
Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan.
Absolutely. A real estate transaction is complex, and education is helpful to getting the best deal. Many of the services earn their living off of commissions so it’s critical to know as much as you can.
Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable.
Initially, write down and note all of your expenses for a month. Then determine what are your Needs and your Wants. Be objective as to what is absolutely necessary, and then get creative about how and when to handle your Wants. I budget doesn’t mean you will deprive yourself. It allows you to have choices and control over your money.
There are mortgage options now available that only require a down payment of 5% or less of the purchase price.
If you purchased the policy, it will last indefinitely as of the purchase date as long as you own the property. However, any liens placed on the property later will not be covered.
That depends on a number of factors, including the cost of the house and the type of mortgage you get.
There are many different types of housing available, and just as many loan programs for each type of housing. Most people start with a thorogh review of their finances to discover what type of house payment they would be comfortable with, what price home they could afford and then review the housing prices in specific neighborhoods.
There are monthly utilities, and if your utilities have been covered in your rent,this may be new for you.
Paying $300 to $500 for a home inspection is considered a wise investment as the inspector could reveal costly required repairs or future maintenance problems with the home.
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier.
There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:
|Attorney’s or escrow fees (Yours and your lender’s if applicable)|
|Property taxes (to cover tax period to date)|
|Interest (paid from date of closing to 30 days before first monthly payment)|
|Loan Origination fee (covers lenders administrative cost)|
|First premium of mortgage Insurance (if applicable)|
|Title Insurance (yours and lender’s)|
|Loan discount points|
|First payment to escrow account for future real estate taxes and insurance|
|Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable)|
|Any documentation preparation fees|
Most loans have 4 parts which are abbreviated to PITI and sometimes PITIA if there is an Association such as a condo association fee or a homeowner association fee. The parts are defined as:
Delivering thorough and detailed documents to your lender is critical to loan approval by the underwriter. A list documents include:
This is a loan that enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage.
FSBO stands for “For Sale By Owner” when a seller does not have representation from a real estate broker.
It’s an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home.
Earnest money is money put down to demonstrate your seriousness about buying a home. It is also known as a good faith deposit.
The U.S. Department of Housing and Urban Development was established in 1965 to develop national policies and programs to address housing needs in the U.S.
RESPA stands for Real Estate Settlement Procedures Act. It requires lenders to disclose information to potential customers throughout the mortgage process, By doing so, it protects borrowers from abuses by lending institutions. RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction.
The FHA allows you to use 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt. With a conventional loan, this qualifying ratio allows only 28% toward housing and 36% towards housing and other debt.
They are quite different.
Title insurance is for your and your lender’s protection. The policy insures against any defect in the title, old liens, unpaid property taxes, easements or claims on the title.
Prequalification is an unverified estimate of what the lender thinks you can qualify for, many times after they have run a quick credit report. Preapproval is a result of submitted documentation from the client such as, paystubs, bank statements and tax returns in addition to reviewing the credit report.
An adjustable rate mortgage may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren’t concerned about potential increases in interest rates.
When a lender is intersted in the client’s LTV for a specific property, it is the appraiser’s value that is used. An appraiser compares the subject property with 3 other local, recently sold propterties, and the appraiser is typically hired by the lender and the expense paid by the buyer.
If your down payment is less than 20% of the appraised value, you will have to pay for private mortgage insurance. This protects the lender if you default on your loan. PMI coasts about 0.5% to 1.5% of the loan amount per year.
One policy is the Lender Policy. The other policy is the Owner Policy.
Lenders require that the loan amount be insured until the balance is paid, hence the borrow incurs the cost for the new policy.
A home is an investment. When you rent, you write your monthly check and that money is gone forever.
No. You can only be removed from your home via a court order, called an eviction notice.
FHA doesn’t actually make loans. Instead, it insures loans so that if buyers default for some reason, the lenders will get their money.
In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which typically is 30 years.
An Adjustable Rate Mortgage (ARM,) your interest rate and monthly payments usually start lower than a fixed rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive home because your initial interest rate will be lower and is appropriate for someone who knows their income will be increasing.
Without financial goals, you have no direction, which makes it easy to spend money on things you’ll regret later. But if you know that you’re saving for a house, for your daughter’s college education, or for a new car, your goal will keep you focused.
If you record a month’s expenditures, you’ll have a good understanding of where your hard earned income goes so you can prioritize.
Millionaires have budgets. Budgets allow you to have some control over what you spend. A monthly budget can help you to decide how to spend your money, plan for your future, pay off existing debt, and save a few pennies each month by reducing wasteful and impulsive purchases. Spending plans can give you options.
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