“Buy low, sell high.” We’ve all heard that stock market advice. So how does it apply to buying a home?
During the holidays, fewer home buyers are out there looking. People set aside this time for shopping, parties, travel, and celebration with family. They postpone their dream of becoming a home owner until after the New Year. Thus, December is the perfect time for YOU to make an offer on a home.
With less competition, you have a better chance of getting a Purchase Agreement at the seller’s best price.
My advice is to go for the home purchase now. You can set your closing date after Christmas when it is a convenient time for you to move.
First step: Get pre-approved for financing and obtain your pre-approval letter.
Second step: Contact your local real estate agent for help in locating a home and presenting the offer.
Best wishes and Merry Christmas!
Both Fannie Mae and Freddie Mac announced today that they are raising the loan amount for conventional loans for 2018. This means home buyers can borrow more money without having to take a jumbo loan (with a higher interest rate and tougher approval requirements).
For most of the U.S., the new loan limit is $453,100. For 2017, it is $424,100.
For “high cost areas” the new loan limit is $670,650. (These are areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit. The calculation is 150% of $453,100.)
For a map showing the loan limits by county, click here.
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“Would you like to open a store credit card and save 10 percent on your purchase today?” asks the helpful clerk.
“No thank you, I don’t wish to lower my credit score today,” I say with a smile. I am ready for the question she will ask next: why?
But no, the clerk looks bored. She doesn’t care about credit scores or financial well being. She’s supposed to promote their store credit card by dangling the bait in front of every customer.
Holiday shopping is an optimal time for retailers to scoop in more debtors who will give in to temptation, overspend, and end up paying 20.99% interest.
Two Ways a New Credit Card Can Lower Your Score
1) A retail store credit inquiry is the most damaging inquiry you can have. It hurts more than an auto or mortgage inquiry, especially if you have several within a short time frame, like the month of December. It stays on your credit report for 24 months.
2) Opening a new score can lower your overall credit history and thus lower your score. For example, if you’ve had one credit card for five years and one for three years, your average credit history is four years. If you now open two new cards during the shopping season, you instantly lower your credit history to an average of 2 1/2 years. Bam! Your score is docked.
(36 months + 60 months + 1 month + 1 month = 98 months ÷ 4 = 24.5 months)
True Story of an Angry Shopper
A nice couple came to me for pre-approval to buy a home. “My wife’s score is 800,” the husband said proudly.
Unfortunately, he was mistaken. It had been 800 in the past, but it was not now. Her score had dropped to the mid-700s. Why? Because while shopping, she accepted a credit card to save 10 percent. When she learned it had lowered her score, she was mad–especially since she decided not to purchase the item after all. So, she’d saved no money and had lost her impressive credit score.
If You Already Have a Long and Varied Credit History…You Are the Exception
If you’ve had credit established for 10+ years and have a good mix of credit cards, auto financing, and a mortgage or two in your past, then you won’t be harmed by opening a new store card. If you really want that card, go ahead and get it. Just don’t go overboard by opening up half a dozen new cards or you will likely see a negative impact on your golden score.
Please pass on this information to other good folks via social media and email, because no one needs to have their credit score dropped over a needless store card--especially if they plan to apply for financing in 2018!
Five things I am thankful for this holiday season:
1) For all the good folks who took the time to email me their success stories after reading my books.
2) For living in a free country where all individuals can buy their own home without regard to race, color, religion, national origin, sex, marital status, age (as long as the legal age is met), or whether they receive public assistance.
3) For employment and the ability to shop wholesale lenders to find the best loan at the best price for my mortgage clients.
4) For friends and family, business associates, my sweet yet feisty kitty.
5) Most of all, for the grace of God and salvation through Jesus Christ our Lord.
Happy Thanksgiving to all!
Richard Cordray, the Director of the Consumer Financial Protection Bureau has announced he will resign at the end of this month. Cordray has been at the epicenter of controversy.
His official statement is below:
“It has been a joy of my life to have the opportunity to serve our country as the first director of the Consumer Bureau by working alongside all of you here,” he wrote. “Together we have made a real and lasting difference that has improved people’s lives.”
It has been the position of many that he used the lack of Congressional Oversight to abuse the power bestowed upon him. During a hearing in April, Rep. Jeb Hensarling, R-Texas, who chairs the House Financial Services Committee, called for Cordray to be fired.
“For conducting unlawful activities, abusing his authority, denying market participants due process, Richard Cordray should be dismissed by our president. Not only must Mr. Cordray go, but this CFPB must go as well,” Hensarling said.
Let’s hope the next representative represents the interests of American citizens in a fair and ethical manner.
If you’re a first-time home buyer (or haven’t owned real estate in the last three years), ask your loan officer about “The 97 Loan.” The down payment required is only 3%, and it’s a cheaper loan than FHA’s first-time home buyer loan.
Too often, banks and other lenders push the FHA loan, and here are two reasons why:
- The FHA loan is a big profit-maker for lenders.
- Loan officers think about the 5 percent down conventional loan and forget about The 97 for first-time buyers.
Compare FHA to “The 97”
FHA has an upfront mortgage insurance fee of 1.75 percent. The 97 has no upfront fee.
FHA’s monthly mortgage insurance fee lasts forever. The 97 Loan’s MI fee can get dropped when you have 20-22 percent equity.
FHA down payment is 3.5%. The 97 Loan is 3%.
How to Qualify for The 97 Conventional Loan
- Credit score must be at least 620. (Some lenders want 640.)
- Bankruptcy must be discharged for 24 months.
- Debt-to-income ratio should be 43% max, based on gross income (before deductions).
- Maximum loan amount is $424,100. Maximum price is $436,216.
Getting Together the Down Payment Money
The down payment money may be from your own verified funds or from family. Unverified cash is not allowed, meaning get that dough out of your safe into a bank account now.
You can also get creative and borrow money from your retirement account. Or, you can sell something like a car or motorbike, as long as you show the bill of sale and matching deposit receipt into your bank account.
Enough already! Pick up your phone. Tell your loan officer you want to get pre-approved, then call your real estate agent and go find a home to call your own!
If you’re in California or Washington, click here to reach me.
Please share this with others who want to become a home owner.
When you’re buying a home, who gets to choose the title company? Who chooses the settlement provider, that is, the escrow company or attorney to handle the closing and disbursement of funds?
The law is clear: it is Buyer’s choice. Even if the Seller’s Realtor has already set up escrow with a particular company, the Buyer has the right to designate the title company and the closer.
What’s more, any Seller who denies the Buyer the right to choose shall pay the Buyer three times the cost of the title insurance.
Sorry, but there’s not an exception in the law for a “busy market.”
If you’d like to read it verbatim, see below. This applies to all 50 states when a federally related mortgage loan is involved in the transaction.
RESPA refers to the Real Estate Settlement Procedures Act.
Section 9 of RESPA [12 U.S.C. § 2608] states:
(a) No seller of property that will be purchased with the assistance
of a federally related mortgage loan shall require directly or
indirectly, as a condition to selling the property, that title insurance
covering the property be purchased by the buyer from any particular
(b) Any seller who violates the provisions of subsection (a) of this
section shall be liable to the buyer in an amount equal to three times
all charges made for such title insurance.
12 C.F.R. 1024.16 states:
No seller of property that will be purchased with the assistance of a federally related mortgage loan shall violate section 9 of RESPA (12 U.S.C. 2608). Section 1024.2 defines ‘‘required use’’ of a provider of a settlement service.
12. C.F.R. 1024.2, with regard to “required use”, states in part:
Required use means a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service.
I hope this clears up some questions and settles some arguments. If you have an interesting or unusual story on this topic, I’d love to hear it.
Thank you for stopping by my blog.
I am licensed to do mortgage loans in CA and WA,
NMLS # 1284134. Carolyn Warren,
Sr Loan Officer, Cherry Creek Mortgage Co #3001
After criminals hacked into Equifax’s credit system, people are asking if they should freeze their credit.
Here are ten facts to know about freezing credit:
- Freezing your credit will lock down and stop all new credit activity, so that no one can open a new account in your name or with your social security number.
- If you want to apply for credit, such as a mortgage or auto loan, you will need to contact the credit agencies with the personal identification number (PIN) they supplied you with.
- You must give them three days to unfreeze your credit.
- If you unfreeze your credit to apply for financing, you can then refreeze it afterward.
- A credit freeze does not prevent you from using your existing accounts.
- You can still dispute erroneous information in your credit file during a credit freeze.
- You can request your free annual credit report while your credit is frozen.
- A credit freeze does not affect your credit scores.
- You can permanently open your credit again at any time (allowing three days for the credit agencies to do so).
- To freeze your credit, you must contact Equifax, Experian, and TransUnion individually. A fee may or may not apply.
Fees to Freeze Credit By State
In some states, freezing your credit is free. For minors and victims of ID theft, a credit
freeze is usually free. For seniors, a credit freeze may be free.
Here is the link to check out the fee in each state.
Thank you for reading and passing on this essential information. Because some people are wondering, personally, I chose to freeze my credit with all three agencies. I did not enroll in a credit monitoring service.
Imperfect credit? Be encouraged with this success story.
Two days ago, I closed a loan for a lovely couple whose credit suffered all due to an uninsured driver slamming into their car so hard, it knocked the husband unconscious and threw them both in the hospital, fighting for their lives.
Naturally, they could not carry on with their business during this time, so they ended up with a state tax lien and a medical collection on your credit report.
Now that they’ve recovered and are back to work, they were approved for a conventional loan (better than FHA).
In addition, because they had not owned a home in the last three years, they got a first-time homebuyer’s program with a .125 lower interest rate.
- Down payment required was 3 percent; although, they chose to put down more to get a smaller loan and payment.
- They did not have to pay off the collection account.
- They did have to pay the state tax lien, and that was easily done by adding to the cash-to-close. The closing agent collected the funds and paid the state at closing. This way, there was no complication with getting the proof that it was paid, and it saved them the hassle of doing it early.
The loan closed in only 28 days. Pretty good for our busy market!
Better Interest Rate
As a loan officer for a full service mortgage lender, I have the option of using our own company money or brokering out the loan to a wholesale lender. By brokering out, they got an interest rate of 3.875% rather than 4.25%. This saves them $37 per month and $444 per year.
Congratulations! They are in their own home just in time to enjoy the gorgeous autumn leaves and upcoming Thanksgiving holiday.
If your credit has some dings, you may still be able to become a home owner. If you’re in WA or CA, I’d be happy to take a look for you. Contact me here. If you’re in a different state, check in with your local full service mortgage lender who will have more choices for you than a big, stuffy bank or fussy credit union.
With rising home prices and interest rates, it makes sense to buy a home now before real estate becomes more expensive. But what can you do when you don’t have the cash for a down payment or gift funds available? Here’s an idea that just might work for you.
Cash From Another Source
You can take out a loan using a car, recreational vehicle, collectibles, or other item of sufficient value for your down payment on a conventional loan.
You can borrow money from stocks, investments, a retirement account, or from a home equity line of credit from another property for your down payment on either a conventional or FHA loan.
You can borrow money from a family member (documented and recorded) for an FHA loan. Simply tell your loan officer up front if this is your plan, and then he or she will guide you through the steps.
As a Reminder…
Make your house a priority over your car/truck/SUV.
Real estate goes up in value. Vehicles go down in value.
Therefore, it makes no sense to take on payments for a vehicle before you get into your house. Do what’s most important first. Save the fancy wheels for later.
Thank you for reading! Any questions, let me know. I appreciate your comments and “likes.”