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?
I love California, and I am excited to announce that I am licensed to do mortgage loans in the Golden State. Whether you are a first-time home buyer, a seasoned home buyer, or a home owner refinancing, I can help you get the best loan for your situation.
Here are some of the loan programs I can help you with:
* First-time home buyer FHA loan with 3.5% down or with gift money for the down payment.
* Grant money for the down payment on an FHA loan with no pay back whatsoever. A true grant, from a private bank. No neighborhood restriction.
* Conventional loans: 30-year fixed, 20-year fixed, 15-year fixed, 10-year fixed rates.
* 5/1 ARM: fixed for the first five years, then adjusts annually. A good loan for people who plan to keep the home for five years or less.
* VA loan for U.S. Veterans
Getting Pre-Approved is No Cost
There is no cost to get pre-approved and/or to find out how much house you qualify for. Let me know what you want, and I will take it from there.
What Does It Mean to Be “State Licensed”?
Loan originators who work for banks and credit unions do not have to be state licensed. The CFPB assumes the bank will vouch for their integrity and competence. However, mortgage brokers and direct lenders (such as myself) have to pass multiple hurdles in order to do business in California. Here are the requirements we go through that those at banks and credit unions get to skip over:
* 20 course hours plus additional class hours for California state law.
* Pass both a national test and a CA state test.
* Get fingerprinted and have a background check done.
* Have a credit report pulled and checked for personal financial responsibility.
* Be approved by the CA state authority.
You might say that state licensing ensures a higher level of scrutiny, which means more security and peace of mind for you.
Please feel free to contact me about your mortgage questions or financing needs via the Ask a Question page here.
Looking for a Recommendation for a Licensed Real Estate Agent?
I have worked with fine real estate agents in California. If you would like my recommendation for an agent who will work hard and put YOUR best interests first, send me a message here.
1) Stay in town during the loan process.
This is not the time to travel so that you are unavailable to provide additional documents the underwriter might ask for. If your vacation to Europe was pre-planned and cannot be changed, then allow ample time after you return home before the closing date. It is unrealistic to think you can check out during the loan processing and come back to sign one day later.
2) Leave your money where it is.
Do not transfer funds from one account to another during the loan process without your loan officer specifically instructing you to do so. In addition, do not transfer funds the two months prior to applying for a mortgage. The reason is because doing so can cause a paper-trail nightmare for you and the underwriter.
3) Leave your credit as is; open no new accounts.
If you open a new credit card or installment loan during the loan process, you are potentially sacrificing your home. Don’t do it! Although your credit has been checked and approved, it is likely your credit will be checked again right before closing. If new accounts appear, then your debt ratio and/or your credit score could suffer.
One first time home buyer decided to buy new appliances for the new home during the loan process. When her credit was re-checked, the new Sears account showed up and the payments put her debt ratio over the line. Her loan was denied! In order to proceed, she had to return the appliances and prove with receipts that she had done so. How embarrassing, right?
The same goes for buying a new automobile. Don’t even think about it! Your priority must be buying the house.
4) Write your purchase offer contingent on a home inspection.
Waiving a home inspection is a dangerous move. Inspectors are paid to find fatal flaws and major problems that are not obvious to the eye. When you visit a home, do you climb up on top of the roof? Do you crawl under the house? Do you inspect the electrical wiring, plumbing, water heater, sump pump, etc.? That is what your home inspector is for. It is an important step that prevents you from having to shell out thousands (or tens of thousands) of dollars later.
5) Obtain your own buyer’s agent.
Calling the real estate agent listed on the for sale sign is a colossal mistake. The same goes for using the agent that is hosting the open house. When you use the seller’s agent, it is like using your opponent’s attorney in a court of law. Who would do that?! The seller’s agent is required by law to get the highest price and best terms for the seller. Dual-agency is not in your favor!
Since the seller pays for both the listing agent and the buyer’s agent, it is free to you to have your own expert agent representation. Therefore, there is never a reason not to do so. You do not save money or get a cheaper price on the house if you use the seller’s agent. Be smart and get your own agent representation.
If so, I have good news for you. After looking at local banks, credit unions, and other lenders, I have joined VITEK Mortgage Group, a lender with a stellar reputation. As a mortgage loan officer, I can shop the wholesale divisions of lenders such as Wells Fargo, Chase, Ditech, Caliber, and more — as well as VITEK’s own line of loan products.
It is important to me to get the very best loan at the very best pricing available for my clients. Having the ability to shop without being limited to only one lender’s loan products gives me the ability to do that. If I worked for a bank or credit union, I would be limited to their loan products only — and when it comes to a mortgage, it is NOT a “one size fits all” situation.
If you want a seasoned professional who wrote the book on mortgage rip-offs and money savers to do your loan shopping for you, then I am your gal. Not only that, but I go another step in helping you get a good title and escrow company, because now in 2015, too many title and escrow companies are piling on the junk fees and over-charges.
As a loan originator for VITEK Mortgage Group, I can extend their Peace of Mind Guarantee:
* Guaranteed On-Time Closing
* Guaranteed Real-Time Status Updates
* Guaranteed Best Value
VITEK stands for Value, Integrity, Teamwork, Excellence, Knowledge.
That is pretty much everything you and I want in a company.
I am licensed in WA state and will soon be licensed in CA as well. (I have met all the requirements for California and am awaiting on the Dept. of Business Oversight for their acknowledgement.)
Please let me know how I can help you with your home purchase or refinance.
NMLS License # 1284134
A Missouri couple thought they were having their $680,000 dream home built in the perfect location. They purchased a lot in the gated community of Ocean Hammock, an exclusive community that is accessible by beach or air.
As you can see from the photo, it’s a three-story home with balconies from which to enjoy the impressive view. What a vision! The only problem is that Keystone Builders constructed it on the wrong lot, not the land Mr. and Mrs. Voss bought.
How could this happen? East Coast Land Surveying incorrectly marked off the stakes for the home — and didn’t catch their error during any of the three surveys they conducted during the construction process.
The mistake was finally caught by a different surveyor working in the area, but only after the home had been rented out several times.
“We are in total disbelief,” the Vosses told local media.
Both the Flagler County Home Builders Association and the Flagler County appraiser said that houses built on the wrong property “happen more often than people think.”
Perhaps a trip down to the construction site early in the process is a prudent step for home owners to take. In the case of the Vosses, it will be interesting to find out what happens next.
Source: Housing Wire
The one who holds the money makes the rules.
If the underwriter says your debt ratio is too high, you will be denied. (And be forewarned: the spreadsheet you made showing you can afford it means nothing. The underwriter will not give it a moment’s glance.)
As I mentioned in a previous post, your loan officer can calculate your debt-to-income (DTI) ratio for you. But what if you want to do it yourself? What if you want to double-check the loan officer? Here’s how it’s done.
1) Take your gross income (before taxes and other deductions). Use the highest figure on your W-2 forms. You must have been employed in the same line of work for the last two years in order to count the income. If you have a brand new part-time gig, it won’t count. If you have brand new bonus income, it won’t count.
For self-employed people, use the Adjusted Gross Income near the bottom of page one of your tax returns. Again, you must be self-employed for the last two years. If you have a new business, you cannot count your self-employment, even if it is in the same line of work as your previous W-2 job.
2) Add up your monthly outgo. Use all of the minimum payment obligations that show on your credit report. If you pay your entire credit card bill each month, you do not use that balance in your outgo; instead, use only the minimum payment required.
Do not count expenses that do not show on a credit report such as phone, utilities, cable, gas or bus, or grocery.
Add in the new proposed mortgage payment for the house you want to buy. Include principal, interest, taxes, insurance, and monthly mortgage insurance if putting less than 20% down. (You can use the easy calculator at MortgageHelper.com here.)
3) Divide your total outgo by your gross income. This is your DTI. Most mortgage lenders want to see a max of 38% DTI, but some will go higher if the rest of your application is strong. The highest I’ve seen is 49% DTI with a 800 credit score and significant cash reserves.
For example, if your gross income is $5,000/mo. and your outgo is $3,000/month:
5,000 divided by 3,000 = 60 DTI. That is too high and will be denied.
You would then need to pay down debts and/or choose a less pricey house.
By knowing your price range, you avoid the disappointment of being denied. And again, if it seems too complicated to calculate yourself, all loan officers at mortgage companies and banks are happy to do it for you. They love using their handy HP calculators, so don’t hesitate to ask.
Happy house hunting! It’s a good time to own your own home.
Emily Johnson found the perfect house for her family. Four bedrooms, three baths. The master suite had a garden Jacuzzi tub, just what she needed after a long, hard day of work. There was plenty of street appeal, too. After hours of looking on the Internet, she’d found The One.
Her next step was to contact the real estate agent who was listing the house and ask to see inside.
Emily fell in love.
That evening, she brought her husband out to see the house, and he agreed with her that it was just what they wanted. They asked the real estate agent how they could make an offer. And that’s when everything fell apart.
You see Emily, like so many other house shoppers, had done everything wrong — starting with her initial search.
What Went Wrong?
When you want to buy a house, your first step is not searching the Internet for what you want. Your first step is to find out how much house you can afford. That way, you can tailor your search to what is appropriate and realistic. What’s the point of falling in love with a house that is out of your price range? Why set yourself up for disappointment?
A pre-qual is a quick evaluation by phone. The loan officer will ask you a couple questions about your income, outgo and down payment, then give you an estimate for the loan amount and home price you can qualify for.
No credit check is needed. To make sure your credit report is not pulled without your authorization, do not give out your social security number.
Once you know your true price range, you can cruise the Internet to your heart’s delight. By looking at homes you can afford, you set yourself up for success and avoid heartbreak.
A new Gallop poll suggests Americans are ready to buy real estate again. Optimism about the housing market is up, especially in the West where 72% of respondents said they expect home values to rise. And it’s no wonder.
Home prices have recently risen by double digits in several Western states, and especially so in California.
People in the South are slightly less optimistic, where 54% said it’s a good time to buy.
Midwestern folks seem to agree with 53% home values are rising.
Skepticism runs higher in the East where only 44% expect an increase in values.
Home owners are more optimistic than renters. Of all Americans who own a home, a big majority at 81% expect real estate prices to increase. On the other hand, only 44% of renters expect prices to increase.
Perhaps there’s a marketing clue there for real estate agents and mortgage lenders. Current home owners are feeling more urgency to sell and move up before prices continue upward than are renters.
And speaking of pessimism among renters, those who would have eagerly sought loan approval in the past are now of the mindset that they won’t qualify. A surprising 56% of renters said in a national consumer survey that fear of rejection is holding them back for applying for a home loan. The two biggest concerns are credit and income qualifications.
Good News for Home Buyers
It comes as a surprise to some that perfect credit is not required. Not all lenders have the same requirements. If you fear that your bank is too strict, call a local mortgage broker. Brokers, somewhat like travel agents, have access to multiple wholesale lenders. A mortgage broker will do the shopping for you. Brokers know which lenders will go down to a 620, or even lower, credit score for an FHA loan. And the good news is that a mortgage broker does not necessarily cost any more than a bank. Nowadays, many small and midsize lenders are both brokers and direct lenders (with their own money). This gives them greater flexibility and gives you a greater chance of approval than going to a bank or credit union that has only their own money and strict guidelines to offer.
Something to Think About: How You and I Control House Prices
When people think the economy is improving, they are more willing to spend money; therefore, their mindset actually improves the economy. The same goes for the housing market. If people think values are going up, they want to buy now before their desired home costs more. When more people are selling and buying, the housing market improves and values increase. So even if you don’t think real estate is increasing in value, if your neighbors believe it is, their attitudes and actions can make that happen.
That would make them right then, wouldn’t it? Hmmmm, something to think about.
Seller financing is when the seller allows you to make payments directly to them, bypassing the bank and Fannie Mae. If the seller does not need all their cash immediately, they might be happy to let you make payments and collect the interest for themselves.
Here is how a typical seller-financed loan works:
1) Most sellers will carry the contract for five years. After that, they want to be cashed out. Thus, the loan is amortized for 30 years with a 5-year balloon payment. This gives you the lower payment a 30-year loan would have, but at the five-year mark (or sooner), you would refinance with a bank loan. This gives you plenty of time to get your credit and debt ratio in compliance with Fannie Mae underwriting.
2) Make sure there is no prepayment penalty so you can refinance sooner than five years, if you choose.
3) A typical interest rate for seller financing is 8% to 10%. Remember, the seller is taking a risk that the lender was not willing to accept, so you have to pay for that. This is also why you want to refinance out of seller financing as soon as you can, preferably after one year. On a short term loan, interest rate is not as significant as for a long term loan.
You should have a real estate attorney write up the contract. It should include the amount owed, the interest rate, the principal and interest payment, that it is a fixed rate, that there is no prepayment penalty, what day of the month the payment is due with a 15-day grace period, and what the late penalty is if you are late (typically 5% of the payment). It should also spell out the terms of the 30-year amortization and 5-year balloon payment. Do not sign the documents unless you completely understand all the verbiage.
You should also hire an appraiser to verify the value of the home and a home inspector so you know exactly what the condition of the home is. Do not bypass these important steps.
Seller financing is not for everyone, but it has worked very well for others. One home buyer who could not qualify for bank financing, due to a bankruptcy that was less than two years old, was able to work out seller financing at only 5%. That enabled them to get into a home of their own sooner, and they were very happy as a result.
Or, “Can I take a cash advance on my credit card to help with my down payment?”
The answer to both questions is no. Your down payment must be either your own money or gift money from family or grant money from an acceptable source. No part of your down payment can come from a loan, not even from your mom. No exceptions.
If a family member is providing cash toward your down payment, then they will need to sign a form letter stating it is a gift and no repayment is required. Usually, they also need to show the source of their gift money by providing a bank statement(s) or other document such as investment statement.
Why can’t you take a loan from your parents for a down payment? Because the lender thinks that if you get into financial trouble and have to make a choice between paying mom and dad or the mortgage bank, your family ties will be stronger and the bank will lose out. Therefore, it is an unacceptable risk to lending. The bank is not going to take “second position” behind your family.
Any other loan, such as a cash advance from a credit card, is also unacceptable. This would affect your debt ratio as well as put the bank at a higher risk for getting paid.
For a small down payment of only 3.5 percent of the purchase price, look at the FHA loan. FHA allows all of your down payment to be gift money from family.
If you are eligible for a VA loan, you may qualify for a zero down loan.
The no-down sub-prime loans of yesteryear are gone, and I think that’s a good thing. It takes time and discipline to save for a down payment and closing costs, and that’s not a bad thing either.