News! Now Helping Home Buyers in the West, including Alaska and Hawaii, in Kansas, Missouri, Iowa, Minnesota, and Florida
I am pleased to announce that I have joined the team at TILA Mortgage (dedicated to the Truth-in-Lending-Act), a division of American Pacific Mortgage Corp. #1850. This lender is aligned with my own high standards of being an advocate for the Borrower, following all lending laws, and transparency. As the author of Mortgage Rip-Offs and Money Savers, this is important to me.
If you would like to get the pre-approval process started, please use this quick and easy form here. (Input your own name and email.)
Please pass on this info to other folks who want to buy a home or refinance, because a lot of people are looking for a licensed, ethical and honest expert to help them.
I appreciate it so much!
Carolyn Warren, NMLS #1284134
According to a new study, 1 in 4 U.S. adults would like to buy
a house this year. Perhaps you or someone you know is among them, but having sufficient income is a concern. Here are some facts and tips that I hope will help.
Little Known Facts About Income Qualification for a Home Loan
1) With compensating factors, you can be approved for a higher debt-to-income ratio than what is posted.
Don’t get me wrong: I am not suggesting that anyone take on a mortgage payment they cannot afford. Nor am I suggesting that you become a slave to a mortgage. But you should know that the strict 41% or 43% debt ratio requirement is broken every day. With compensating factors, borrowers are getting approved for up to 49.9%. (This makes sense if there is a non-borrowing spouse who contributes income or if there is a secondary income that cannot be counted, because in reality, the debt ratio is much more reasonable.)
2) If you recently got a pay raise, you will qualify based on your new higher income, not last year’s W2.
Similarly, if you are offered a promotion, even if it is with another company, you are always free to take that (and switch companies if required) and still get pre-approved. That said, do not switch jobs in the middle of your loan process without first speaking with your loan officer.
3) You can have a co-signer to help qualify; just be aware that the co-signer must have credit equal to or better than yours and the co-signer will be on title as a co-owner.
4) If your auto loan has less than 10 months remaining, that payment will not be included. (Remind your loan officer in case he or she doesn’t notice this.)
Some Things to Be Aware Of
5) If you take a second, part-time job, you will need to be working at that part-time job for two years in order to include that income on your loan application.
6) If you pay off your credit cards in full each month (as you should), then the minimum payment required will be used for calculating your debt ratio.
7) If you are self-employed, do not take so many deductions that your Adjusted Gross Income does not qualify for the home loan you want. You cannot tell the IRS you make $40,000 and tell your mortgage lender you make $90,000. That is not how it works! You can’t have it both ways.
8) If your income has declined, the lender uses your new lower income, not the average income.
9) You cannot count the following as income: inheritance, gifts, winnings, gambling income, IRS refunds, or any other one-time, non-recurring income. However, you can use that money toward a down payment.
Don’t Give Up Your Dream!
If you want to become a home owner, don’t be like one person who said to me, “If I don’t get approved now, I’m going to spend all my money on a vacation.”
Instead, be like the person who said, “If I don’t get approved now, I’m going to do what it takes in order to get approved next time. Let me know what I need to do.”
Tips For Approval
10) Pay down your credit cards and then going forward, keep those balances low.
11) Go on a spending diet! Sacrifice now for a home, and you will build wealth in the long run. A good way to control spending is to stay off the buying websites and out of the stores. In other words, remove the temptation.
12) Fix the old car, don’t take on a new auto payment. Many people have been sad to learn that their auto payment prevents them from home ownership. Listen friend: a vehicle goes down in value while real estate goes up in value. Be smart and save your money for your piece of The American Dream and then you will increase your wealth through home ownership.
Thank you for reading my blog. Please feel free to share it on social media for others who could benefit from this information.
The best time to get a map is before you walk into the forest. Likewise, the best time to get your mortgage map is before you go shopping for a house. If you work the system backwards, you are setting yourself up for possible disaster.
Here is a simple checklist for home buyers:
Notice that you take care of the financing first, then the house shopping second.
1. Choose a lender by asking for a cost estimate worksheet.
This is your very first step. Not, go house hunting. Not, get pre-approved. And certainly not, make an offer! Why? Because, you don’t want to shop for houses that you are not qualified to buy, so you take care of your financing first. And, you don’t want multiple lenders pulling your credit report, so you choose your lender first. The way to choose a lender is to review the estimate worksheet and speak with the loan officer to ascertain how they answer your questions. (What to ask a loan officer is a topic for my next blog post.)
2. Get pre-approved for financing.
Now that you have your trusted loan officer, you are ready to have your credit report checked, provide your financial documents, and receive your official pre-approval letter.
3. Choose a Realtor.
I recommend working with a certified Realtor rather than a real estate agent, because a certified Realtor has gone through extra training and is held to a higher standard of ethics and work practices.
4. Go house hunting and make your offer.
Your Realtor will guide you through the offer and negotiations. Your loan officer will guide you through the financing.
Thank you for stopping by my blog. Feel free to share this simple list via social media and with others who are thinking of buying a home. You would not believe the horror stories I’ve heard from people who have run headfirst into disaster by signing purchase contracts before they had their financing approved. I hope to save more people from that situation!
Do you know someone who would love to stop renting and buy their own home? A new study says 79% of Millenials want to buy a house. This study, by Bloomberg, goes on to tell them they can’t save fast enough for a down payment. I am here to tell you that I disagree! Why?
Bloomberg’s chart shows how many years it takes to save 20 percent down.
But who says you have to make a large down payment? It is not required.
Here are tips for buying a house when you can’t save fast enough for Bloomberg.
- If your credit score is 720+, take a 3% down conventional loan.
- If your credit score is 580 – 719, take a 3.5% down FHA loan.
- If your family is able to give you gift money for a down payment, you’re ready to go.
- If you are a U.S. Veteran, you may qualify for zero down.
- Use one of the many down payment assistant programs offered by your state. For example, I have a program in WA that will cover your down payment plus kick in a little for closing costs. You can earn up to $97,000/year to qualify. When you sell the house (or refinance), you pay back the down payment out of the proceeds. This is an interest-free loan to help more people enjoy home ownership.
If home values continue to increase next year as fast (or nearly as fast) as they did in 2015, you are better off buying now than waiting until you can save for a larger down payment.
Also consider that home owners receive the best and biggest tax deduction available. Typically, a home owner can deduct the interest portion of their payment plus property taxes. This lowers their tax bracket, potentially saving significant taxes. (Speak with your CPA for tax advice.)
If credit score is your barrier, then pick up a copy of Repair Your Credit Like the Pros here and get to work. Earlier today, I heard from a lovely young woman in Ohio who followed the book’s directions and is now applying for a home loan. Yes, credit repair works! But you must do it properly, like the credit attorneys and certified credit professionals.
What barrier is keeping you from the American Dream? Post a comment (see top of this article) or send me an email here. I promise to reply.
How much have home values increased in the past year? Has real estate been a good investment?
If you are in Colorado, your home value has increased by 12.28% (on average).
If you purchased a $400,000 home with 5 percent down, your $20,000 investment has grown to an equity of $49,120. You have more than doubled your money in only one year! (Not cash in hand, but by wealth in real estate.)
$400,000 x 12.28% = $449,120 value
The Federal Housing Finance Agency has released this annual appreciate by state for 2015:
No one can predict what 2016 will bring. The best reason to buy a home is simply because you want to own the space where you live and sleep. You want to stop paying your landlord’s mortgage and pay your own. You want the joy of home ownership! In the meantime, if owning real estate also increases your personal wealth, then that is great, too.
If you are a real estate agent who would like to be on my Recommended list, send me an email here.
If you’re buying a home in California or Washington state, I would love to provide you with excellent pricing, no junk fees, and stellar service.
If you plan to buy a house or refinance in the foreseeable future, this is important information. To avoid stress, grief, more paperwork, and a possible loan delay — or even a denial — don’t make these common mistakes.
Three Mistakes Home Buyers Make (Also applies to people refinancing)
- Don’t move money around!
This is not the time to transfer funds from one account to another. Keep your money where it is until after your loan closes. If you get angry at your bank and want nothing more than to say, “I’m outta here!” I don’t blame you a bit for feeling that way. But please, keep your patience and save that action for later. If you close one account and open another, you are in for a hassle in the underwriting department. Yes, you can still get your loan, but why set yourself up for more paperwork and letters of explanation? If a family member is giving you a gift toward the down payment, the same advice applies. Have them keep the funds in their own account until you receive instructions from your loan officer. Most lenders will ask the family member to wire funds directly to the closing agent at the time of signing.
- Don’t open new credit! Don’t buy a car!
No exceptions. Do not purchase new appliances or new furniture until after closing. Do not open a new credit card to get the instant discount. And whatever you do, don’t you dare buy a new automobile, truck, or SUV. Taking on any new debt could cause your loan approval to turn into a denial — even if you have signed the loan note and closing disclosures. Until your loan is officially funded and closed, the lender can still deny your loan.
- Don’t close out your good credit!
This is not the time to decide you have too much open credit and start shutting down your credit cards. Doing so could lower your credit score for two reasons. First, you can lose the positive points that the on-time credit card was awarding you. Second, you will be changing your percentage of total credit usage-to-available credit, and this has the potential of lowering your score. Even though the lender has already pulled your credit report and approved it, most lenders will do another soft pull right before closing. You don’t need to risk lowering your score and therefore risk your interest rate or approval.
Thank you for stopping by my blog. Feel free to subscribe. I post tips on mortgage and credit about once a week. If you have a topic you’d like to see, please email me here.
Mid-March, just about the time of the NCAA basketball tournament, home sales skyrocket to the highest of the year. That’s what happened last year and in the years before. There is no reason to think 2016 will be any different. Savvy sellers who have been waiting like patient cats suddenly list their homes for sale. Buyers, giddy with excitement at finally seeing more choices on the market, race to outbid one another.
I saw it with my own eyes right on my little cul-de-sac. Three home owners placed their properties for sale, and all three sold above asking price inside of a week.
Typically, the market continues at a brisk pace (although not as brisk as those two mad weeks in mid-March) until mid-August when the heat finally drives buyers off the streets and down to the beach, and families with children turn their attention to back-to-school.
If you are in the market to buy a home and want to save tens of thousands of dollars, you might want to get your Purchase Agreement signed around now before the spring frenzy begins. Whatever you do, make sure you have a written pre-approval letter in hand before you go out house shopping. Without that, no seller will take you seriously. If you are buying in California or Washington, I am state licensed in those states and am happy to help you.
Contact me here or send me an email at cwarren @ envoymortgage.com.
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- Interest rates will rise slowly and gradually, ending 2016 about half a percent higher than 2015.
- March will see a rapid increase in home sales with buyers bidding up prices.
- More home buyers will waive the home inspection contingency in “hot markets.” (A mistake in my opinion.)
- Hot markets will be Seattle-Bellevue, Denver, Dallas-Fort Worth, Portland, Boise, Salt Lake City, and Omaha. (Thanks to Bloomberg for this one.)
- More young home buyers will look at neighborhood walkability as well as ability to ride their bikes to work as an important consideration.
- First time home buyers will look at townhomes and condominiums for more affordability, and lenders such as Envoy Mortgage will close more of these purchases due to their more lenient guidelines for multi-family structures.
- Buyers will preview homes online but will avoid clicking on online ads by agents and lenders.
- Builders will continue to build larger homes on smaller lots, making existing homes more attractive to families who want privacy.
- More home buyers will get pre-approved before touring homes, thanks to being better educated about the home buying process.
- More people will choose the conventional 3% down payment loan over the FHA 3.5% down payment loan.
- First time home buyers will take advantage of private grant money for their down payment as well as state down payment assistance programs.
- Underwriting requirements will lighten up and do away with some of the overly tight requirements of yesteryear.
Thank you for 28,000 views of my blog. I know next year will see even more! Thank you to all the readers who purchased my books and a double thank you to the readers who emailed me their gratitude for the information.
May God bless and keep us all healthy and safe in 2016!
The first house I bought as a young, single woman was a smelly little house with stained floors, dingy walls, and a stove covered in black baked-on gunk. Part of the roof was rotten, and the refrigerator was disgusting. It was ugly for sure, but it was all I could afford with my pre-approval of $80,000. The best thing it had going for it was the charming white picket fence.
Before you feel sorry for me, let me state that this turned out to be one of the best real estate purchases I ever made. Here’s why.
Ten Things I Learned From My Ugly House
- After ripping up the dog-stained carpet, I discovered the hardwood floors were permanently damaged. There went my vision of having beautiful hardwoods as I couldn’t afford to replace them. It was much cheaper to install a nice wall-to-wall carpet.
- Fresh paint in a light neutral color completely brightened up the home. My daughter chose pale pink for her bedroom, and my son wanted green. Letting them choose their bedroom colors gave them a sense of personal ownership in the new house.
- It made more sense to have the disgusting appliances hauled to the dump than to try to renovate them. New appliances made me feel like I had a new kitchen even though the cabinets and counter tops were the same.
- I splurged on pretty light switch covers and I could not believe how many compliments I got on those little things.
- Before my loan could close, the lender required the seller to replace the rotten roof. (It showed up on the appraisal report.) This delayed the closing of my loan, but it was worth the inconvenience. (Thanks again, Mom, for letting me crash at your place for a month after I had to be out of my apartment.)
- I chose an FHA Adjustable Rate Mortgage. This turned out to be a very smart choice, because I saved a significant amount of money on my payments for the three years I was there. Because this wasn’t my dream home, I knew I wouldn’t live there a long time, so taking a 30-year fixed rate would not have made sense. Why pay more interest than needed?
- Because I got a lower interest rate with the ARM, my payments paid down the principal balance faster. Thus, when I sold the house three years later, my loan pay-off was smaller and I netted more profit than I would have if I’d taken the fixed rate mortgage.
- It doesn’t take a dream house to be happy. I discovered a great deal of satisfaction by cleaning up that little house. When my friends came to visit, they exclaimed, “What a cute house!” And it was.
- If the bedroom window won’t open on a hot summer night, don’t give it a little smack with your hand. I tried that and my hand went right through the glass, which cut my wrist pretty badly. It took a bath towel to stop the bleeding. Fortunately, 9-1-1 sent out a handsome fireman to wrap me up and take me in for stitches.
- A smelly, little house can bring in a nice profit after you clean it up and live there for three years. I sold the house for $125,000. After subtracting the money I put into the house and subtracting the payments I’d made, I calculated that I earned over $300 per month just for living there.
How’s that for a happy ending?
One mistake people sometimes make is closing off their credit cards so that they have no open accounts.
With no open credit card accounts and all your auto loans, student loans, and other installment debt paid, your credit score will disappear. This is because the credit bureaus have no way of rating your credit when you have no credit!
I believe in living debt-free. However, it is imperative that a person keep two to three credit cards open and active in order to qualify for the best mortgage at the best price. Otherwise, you could find yourself being forced to take a higher priced mortgage — or pay all cash for your house.
For a conventional loan, lenders want to see three trade line accounts. A closed installment loan (auto, etc.) is acceptable if it is not more than three years old.
For an FHA loan, lenders want to see two trade line accounts.
You do not need to carry a balance from month to month. In fact, it is better for your credit score if you pay off the balance in full each month and avoid paying interest. You can use the credit card minimally once a quarter to keep it active and accruing credit score points.
I urge you to pass on this information to folks who have dug themselves out of debt and then make the error of closing down all their credit cards. People get so sick of being in debt, that when they are finally free of that burden, they shut down all their accounts. THIS IS A BIG MISTAKE! Unless you are financially independent and will be paying cash for your houses, you need some open credit and a credit score to get a good mortgage.