Buying a House with 3% Down

My favorite loan for people who need a minimal down payment is called HomePossible or HomeReady.

It is a 30-year fixed rate conventional loan. HomePossible is backed by Freddie Mac and HomeReady is backed by Fannie Mae. These loans have the identical requirements and identical interest rate, so either one is awesome.

Here’s why I love this loan:

  1. Only 3% down and the seller can pay some or all of your closing costs.
  2. You get the same interest rate as if you were putting 20% down.
  3. You get a reduced monthly mortgage insurance payment.

Requirements:

  • You must show income to cover the total mortgage payment (includes property taxes and insurance) plus your monthly obligations that show on the credit report with a 43% Debt-to-Income ratio. This is very reasonable.
  • If you are a W2 employee, you must show a two-year history of working. It’s okay if you switched jobs.
  • If you are self-employed, you must show 24 months of being self-employed and show sufficient Adjusted Gross Income on your 1040 tax returns.
  • You must have a credit score of 620+ for your middle score of three. The lowest score is thrown out.
  • A former bankruptcy Chapter 7 must be discharged for four years.
  • Your household income cannot be more than 80% of the median income for your area. This is often surprisingly high.
    For example, if the home is in Fairfax, VA, you can make up to $95,920.

To check the income limit for your area, you must input an actual address into the search space. You can check it here.

If your income is too high to qualify, then take the 5% down conventional loan instead.

If your credit score is too low to qualify, take the 3.5% down FHA loan instead.

REMEMBER: Always get preapproved with your mortgage broker before making an offer on a property.

REMEMBER: Get a licensed real estate agent to present your offer and negotiate terms. The Buyer’s agent is free to you (paid by the seller), and everyone needs the advantage of a professional real estate advocate to avoid costly mistakes.

Credit Repair Tip: Is your settled account still showing negative on your credit report?

This is a tip for people who negotiated a settlement on a collection.

If you and the collector agreed on a settlement amount, and then you paid as per your agreement, then you have “paid as agreed.” Simple as that.

Best case is that you got in writing from the collector that they would delete the account from your credit report upon receiving payment in full.

But what if you forgot to get that all-important letter? Or what if you did, but the credit bureaus are still reporting it (and it’s been over 30 days)?

You can write a letter to the credit bureaus that says this:

<Company Name> made an arrangement with me regarding account # 1234. I PAID AS AGREED. This account was not delinquent as shown on my credit report; but was, in fact, paid according to our Agreement. This account is a violation of FACTA, because it is not accurate nor is it fair. Delete this account from my credit file permanently.

The Fair and Accurate Credit Transaction Act is in violation when erroneous and/or unfair information is posted on your credit report. You have the right to request an investigation and correction of anything you believe is in violation.

For detailed information about repairing your credit and restoring your good name, please see Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete bad credit and restore your good name

“Does Illness Impact My Ability to Get a Mortgage?”

This is a timely question. A person might be afraid to ask their lender, for fear they might jeopardize their ability to get approved for a home loan. So, I will answer here, publicly, for all.

No, a loan officer may NOT inquire about your health. It is illegal to ask if you have an illness.

Similarly, it is illegal to ask if you are pregnant or plan to get pregnant in the future.

However, if your W-2 income has recently changed, then that might be an issue. Does your income still qualify for the loan at the new, lower rate of pay? If so, then you should have no problem with debt-to-income ratio approval.

If you lose your employment and income, then your approval can and probably will turn into a denial. Even if previously approved. Even if it’s 10 minutes before the loan is to close. The lender has the right to deny the loan at any time if it looks like you cannot make the payment.

If you are a 1099 employee or self-employed, then declining income is a significant issue. Lenders are very concerned right now with ability to pay if your business has taken a hit due to the economy. For approval, “worse case” is used when calculating income for approval. This would be something to address with your loan officer right up front so you don’t waste anyone’s time.

I hope this helps explain that an illness does not directly affect your ability to get a mortgage. Only if your income changes does it become a concern to the lender in order to verify Ability to Pay.

No more Equifax, Experian, TransUnion?!

Are you fed up with the Big Three credit bureaus? Would you like someone to lock them up, shut them down, and throw away the key? It could happen.

In case you aren’t aware, President Biden has proposed closing these private credit bureaus and replacing them with ONE mammoth credit bureau run by the Consumer Finance Protection Bureau (CFPB).

Instead of having three credit scores, you would have only one score. (No more throwing out the lowest score and going by the middle score for a home loan.)

The CFPB’s president is appointed by the president of the United States. Each four years, the bias could change from Democrat to Republican and vice versa. How would this change the rules of scoring?

Would having one government-owned and government-run credit bureau promote fairness and equality, and prevent errors?

Would it make disputing errors more difficult? We all know how slow government agencies run compared to private enterprises.

Let’s keep our eyes on the news to see what happens. Meanwhile, I am interested in YOUR opinion. And since we’re still dealing with the Big Three, if you need help improving your credit, please see here.

Available on Amazon

Beware of Mixed Credit Files

It’s a good thing King Louis XVIII didn’t have a credit file with Equifax, Experian, and TransUnion; because if he did, chances are good that one of the 17 other King Louis’s credit accounts would have been mixed in with his.

If your name is similar to someone else’s name, if you have a common name, if you are a Sr. or Jr. or have numerals after your name, you should check your credit report. Another individual’s unpaid bill, collection, or tax lien might be showing up on your report and dropping your credit score.

If you stroll happily through life without checking, you could be paying too much for auto insurance premiums, homeowner’s insurance, and credit card interest rates.

You should recognize each account as your own.

In addition, your name should be exactly correct.

To order your free annual credit report, send a one-sentence letter that says, “Please send me my free annual credit report.” One letter gets you all three credit bureaus’ reports. With your letter, include a copy of your photo ID (driver’s license or government-issued ID card) and one other piece of ID that confirms your correct name and mailing address.

Send your request by regular U.S. mail to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

No need to send by certified mail. If you have a freeze on your credit, that does not affect your ability to get your annual report through the mail.

The law allows you one free report per year for a reason: errors on credit reports are all too common.

Do Homeowners Need Title Lock?

I am a homeowner with a lot of precious equity in my property. Here is why I am not buying title lock, even though I have experience with this type of situation.

I purchased title insurance when I bought my house. All lenders require it and all smart cash buyers also purchase title insurance. This protects your title from false liens, judgments, errors, omissions, false heirs, or a criminal who tries to file a false quit claim deed on your property.

That is my legal protection, and it is all I need.

The new “title lock” services are nothing more than monitoring services. They check public records (which you can also do for yourself), and then if they see that you were that extremely rare property owner in which a criminal filed a false quit claim, they alert you. But at that point, the filing is already done. (No, it doesn’t mean they now own your house!)

The title lock service is not clairvoyant to alert you ahead of time that a criminal is planning to file a false claim. Nor do they have any way of stopping it from happening. They can only tell you it happened.

What if it does happen? The title insurance you and I purchased when we bought our homes protects us. The title company is responsible to fix the error and pay whatever costs are involved in doing so. Just like fire insurance, the insurance company pays for damages — but with title insurance there is no deductible, so even better.

A couple of criminals posing as friends tried to steal my father’s house. He owned it free-and-clear. He had Alzheimer’s. They figured they could Quit Claim his property to a so-called charity, one they set up with themselves as the owners and trustees. One that no one ever heard of, because they just set it up for the purpose of stealing his half million dollar home. They filed the Quit Claim with the King County Court Recorder. Anyone can file anything; it doesn’t make it legal.

He had purchased title insurance decades ago with First American Title in Seattle. The title representative looked at the Quit Claim and said it was fraudulent. Which was obvious.

As my father’s legal guardian, I was able to stop that illegal nonsense. In this case, I also saw they stole other things from my father, so I hired a good attorney and we sued.

Back to the title lock services: As far as I can tell from Internet searches, it is unanimous among real estate attorneys and among real estate brokers who have been in business for 30+ years: title lock monitoring is a waste of money and does you no real good. You can always monitor your own public record if you’re nervous about being that rare (and usually it is the elderly who are targeted) victim.

If you’d like to read more about why it’s a waste of money, here is a good article with video by Fox5 Atlanta.

The penalty for filing a false Quit Claim or false lien ranges from one to 20 years in prison.

How Do Politics Affect Interest Rates?

Where are mortgage interest rates headed in 2021, and how do politics affect rates?

Historically, who is elected President does not change interest rates; however, investors are influenced by major historic events, such as political unrest, war, and a pandemic.

An easy-to-understand rule is this:
GOOD economic news = higher interest rates
BAD economic news = lower interest rates

Also: The perception and expectation of investors = what’s good and bad.

Earlier last week and this week, when president-elect Joe Biden was declared the winner and when the Senate and House of Representatives gained Democratic seats to match the party of the incoming president, that was perceived as good economic news, because unity means work can get done. Interest rates took a sudden spike upward. The suddenness and severity of the increase was a bit of an over-reaction and rates inched downward on Thursday.

This morning, Friday 15th, the stock market took a hit, which is bad economic news, and rates went down, but only very slightly. It looks like rates are on the way to recovering from the sudden spike — but probably not 100 percent.

Another rule to know: Rates go up faster than they come down.

The vaccine rolling out is perceived as good economic news, because when more people can get back to work, that helps the national economy.

Where are Mortgage Rates Headed in 2021?

The expectation is that interest rates will remain low, but not as low as they were at the end of 2020. The bottom is behind us. By spring, we expect rates to be higher, but still good. How much higher? Perhaps an increase of .25% higher.

That said, no one knows for sure what will happen. No one predicted the pandemic and further lowering of mortgage rates in 2020. The expectation was for rates to gradually increase, but instead they decreased.

My personal expectation and prayer is for 2021 to be a better year (because the pandemic will lessen), for small business to open again, for people to get closer back to their normal lives, and for more Americans to realize the dream of homeownership.

A New “Hot Topic” Scam

Scam artists look for hot topics and then create scams out of them. For example, here’s a new one I don’t want anyone to fall prey to.

The liar tells you that you can get your name on a “fast track” or “priority list” for the vaccine. They tend to target older people but might contact anyone via online or a phone call.

Sometimes they ask for a fee to get the vaccine sooner. Sometimes they are just collecting your personal information. Either way, THERE IS NO FAST LIST. It’s all a big lie.

Here’s a two-minute video that explains it HERE

Please make sure your family and friends are aware there is no such thing as a pay-for-priority list.

Let’s shut out the scammers and keep our money and information safe.

Three Steps to a Happier New Year

A restaurant owner saw his business dwindle after state guidelines shut down indoor dining. The takeout orders weren’t enough to cover expenses, and he was forced to close. He loved his work, so the loss was devastating.

“I’ve lost my happiness,” he confessed to a friend.

One of his loyal customers, a man who owned a small mortgage brokerage, was booming in business. Due to the economy, interest rates dropped to historic lows, and he was bombarded with people asking to refinance. In order to keep up with demand, he worked 12 hours a day, seven days a week. He missed family events and gained weight because he didn’t have time to exercise or prepare healthy meals. At the end of the year, he was exhausted and burned out.

“I’ve lost my happiness,” he confessed to a friend. The end of this story is below, but first…

Maybe you, too, lost some happiness this year — all due to circumstances beyond your control. Or maybe it’s not you, but someone you know.

Maybe finances and credit are down. Maybe lack of activity is down. Maybe social interaction and love is down. Who among us doesn’t know someone in this situation?

Are there any of us who wouldn’t like to be better, happier in this next year? It’s time to kick 2020 to the curb and take control of what we can to make 2021 better!

How can you make 2021 a happier year?

Practice #1: Focus on what you can control.

Do you need to change some habits to be healthier? To improve your finances? To connect with people more? Regardless of where you’re at now, you do have choices. Break out of a rut and put yourself on a path for improvement. You can take one step! Then one more step. A series of mini steps can lead you to great success! (I like the book, Mini Habits: Smaller Habits, Bigger Results by Stephen Guise here.)

Practice #2: Write it down.

A goal that is not written down isn’t a goal: it’s a wish. I learned that in sales training a long time ago. You must write it down if you want it to be a goal that turns into reality. Some people like to create a vision board, which is a collage of pictures and large words showcasing their goals for the year. They post it in a prominent place where they’ll see it and be inspired every day.

Part of writing it down is breaking it down. If your goal is to get a better job, then break that down into mini steps, such as (1) update your resume, (2) tell all associates you’re looking for work in case they know of an opening, (3) list your search spots, (4) name how many emails and phone calls you will place per day, etc.

Practice #3: Ask for help

We are not meant to live life alone. Reach out to family and friends for help in making the changes you desire. Who can help keep you accountable? Is there an online Meetup group you can join? (Go to meetup.com and search your zip code and topic.)

First and foremost, ask God for help. Our Creator is more powerful than circumstances. He is a miracle-working God. He doesn’t share with us all the reasons for what happens on Earth, but He does hear when we call out to Him. He is Counselor, Way-Maker, and Mighty God.

The End of the Story: the restaurant owner and the mortgage broker

In our story above, the restaurant owner got to talking with his acquaintance, the mortgage broker. After some conversation, it came to light that the restauranteur most enjoyed interaction with the customers and that he had excellent organization skills. His happiness wasn’t really about the food, but about the people. “I could use someone with your skills,” said the broker. And just like that, the restaurant owner was set on a new career path while the broker freed up his time to enjoy life more.