Buying a Home with Little or No Credit

Establishing good credit is very important when seeking a loan. This is a critical element that lenders evaluate your ability to handle debt and make payments on time. There are a few suggestions for how to establish good credit, such as securing a credit card, car loan or other personal loan. Once you have the credit, be sure to make timely payments on all your bills, and pay at least the minimum payment on your new credit card every month. Keep records of payments for such expenses as phone, utilities, and rent payments. This offers documentation of your credit worthiness, should you need it. Don’t fall into the “more is better” trap where credit cards are concerned. One or two established accounts may be better than several accounts -- avoid taking on excessive debt as this may decrease your credit score and ability to qualify for a home loan. This blog is about what you must do to purchase a house when your credit is not well established.

The three general things lenders consider when qualifying applicants for a home loan are credit, income, and assets. Of course, there is more complexity to the qualification process, but these are the main categories that are reviewed. If you do not have an extensive credit history, you must show you can handle a mortgage loan through your income and assets, and you may be asked to put down a sizable down payment to mitigate the risk of loss.

Here are some options to help you with the process of homeownership if you have little or no credit:

• ·        Raise your credit score with credit card purchases and other credit purchases
• ·        Ensure all other areas of your financial life are strong and intact such as job, rental history and outstanding monthly bill payments
• ·        Find a co-signer with strong credit who will lend their financial strength to your mortgage application - consult with your loan officer on the implications of this approach

There are options available if you are trying to obtain a home loan with no credit. Government-sponsored FHA (Federal Housing Administration) loans may be a good option for you to consider. We offer several types of mortgage loans, with options to suit a variety of situations. The main thing is to contact me so I can help you determine which option is best for you to use to buy your new home.

What’s The Best Way to Get a Down Payment

For many potential homebuyers, the money necessary for a down payment is often the biggest deterrent to home ownership. A typical down payment for a house is 20%. Many people, particularly first time home buyers who do not have money from the sale of their previous home, don’t have that much cash available. This blog is about helping you with the process of homeownership by giving you some tools to acquire the most important prerequisite; the down payment.

Suppose you have found the perfect house and interest rates are still low, but the one thing standing between you and your dream home is a 20% down payment. We’ve compiled a list of several ways you can acquire enough money for a down payment. As with all aspects of the mortgage lending industry, which can be complex, these suggestions should be run past your loan officer to get their professional input prior to making any decisions:

·        Monetary Gifts - Ask your parents or a relative give you money as a gift. You may agree to pay the money back (more like a loan) but acquiring the funds in the form of a gift rather than a loan is preferable for certain mortgages. All gifts need to be documented as such.

·        Shared Costs - Ask the seller to pay all or part of your closing costs. Many loan programs allow seller contributions.

·        Zero Point Loan - Consider this as a way to help lower your closing costs. In some cases you can even take a slightly higher interest rate in exchange for a credit back from your lender at settlement.

·        Low/No Down Payment - Ask your loan officer about some of the loan programs available today that require little or no money for a down payment. Examples include; 100% financing, 103% financing, 80/15/5 loans and more.

·        Borrow from Yourself - You may have financial resources in a retirement plan, such as a 401K or Thrift Savings Plan (TSP). You may consider borrowing money from your retirement funds or from the available cash value of a life insurance policy. Consult your tax or insurance advisor for these options.

·        Sell Something of Value - You may consider selling an asset to raise cash for your down payment, such as a car or boat.

The down payment will be a critical factor in whether you get the house you want. As stated in previous blogs, there are many options available and we are here to help. Don’t let the amount of a typical down payment keep your from exploring your options to own a home.  Now is the time to buy for multiple reasons so don’t miss out on these low home prices and mortgage rates. Contact me and get the house you desire.

Homeownership is Good For Your Well-being

Owning a home is a critical part of the American dream and the economic benefits of homeownership are immense. Instead of paying rent every month to someone else who gets all of the benefits of home ownership, you get all of the benefits of  purchasing something that you will own, which usually appreciates in value and offers significant tax benefits. But there's more to owning a home than financial profit. Did you know that owning a home has been proven to be better for your health, your well-being, and the health and well-being of your family? This blog is about why this is so.

There have been many studies on the psychological impact of homeownership; this is a summary of a few salient points from these studies, with more description to follow. These are study outcomes, reflecting general trends. There are, of course, people who do not fit these outcomes:

1. Your community thrives
2. Your kids gain confidence and a strong sense of safety and security, thus doing better in school and setting a foundation for a successful life
3. It creates a healthier environment
4. The economy prospers
5. You don’t have to worry about a lease and rent increases causing you to  have to move from year to year

“Pride of Ownership” is the concept that gives the homeowner the desire to invest time, money, and energy in their homes, neighborhoods, and local communities. Homeowners are more likely to participate in local elections, become part of a church/religious organization, volunteer, and join community organizations. Children of home owners tend to do better in school because they  feel the stability and security around them. They are statistically much more likely to graduate from high school than children of renters and less likely to engage in criminal activity and become teen parents. People who own their own homes rather than renting tend to be more stable, and stability is good for kids.

There is also evidence that homeowners have higher self-esteem and are happier than renters and statistically even have better physical health generally. People staying in the same place tend to develop positive and supportive friendships, as well as support systems, which are proven to be good for your health. Also, having equity in your home gives you more financial options should you need to access resources to deal with health concerns.

As you can see, the benefits of owning your own home go beyond the obvious and significant financial ones. With mortgage rates and house prices as low as they are, now is the time to secure a home for you and your family’s future. At Intercoastal Mortgage Company we can help you achieve this goal and we provide the highest quality service to our clients. Contact me for help with this and together you can obtain the American dream of homeownership.

Is Your House Worth Less Than You Owe?

Millions of Americans owe more on their home mortgage than what the home is worth now. This can make purchasing a new home or refinancing your current home difficult. This is particularly prominent for those who bought their homes at the peak of the market. However, there are options available to you, which will be discussed in this week’s blog.

Experienced mortgage professionals can tell you whether you qualify for a loan, once you fill out the mortgage loan application. If you do not qualify, we will explain why and give you specific suggestions for steps to take to improve your chances of qualifying for a loan in the future. Here are a few suggestions to help you with negative equity in your current home:

·        Sell your house at the best price you can get for it. Try to sell it at least for the mortgage balance, but make sure to consult your realtor and mortgage lender for guidance.

·        Ask about mortgage refinancing.  Refinancing may be difficult if there is no equity in the home, but it is worth exploring with your mortgage lender. 

·        If you are able to stay in your home, you may want to wait until home values rise again before putting your house on the market.

·        Consider reducing expenses and paying off debts. Though this does not improve your home equity status, it will put you in a better position when you apply to refinance or purchase a new home.

The housing market has been through some dramatic fluctuations and rebounding is the next natural phase after a downturn. Dealing with negative equity is not pleasant, but you do have options. At Intercoastal Mortgage Company, we are skilled in all areas of the refinancing and mortgage lending process. Contact me for a consultation and I will assist you in refinancing or purchasing your next home.

What Is Single Premium Mortgage Insurance?

Mortgage insurance is an insurance policy which compensates the lender for losses in the event of a default on a mortgage loan. Private mortgage insurance is typically required when down payments are below 20%. Rates vary based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable, and credit score. The rates may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). This blog will be discussing the single premium option and why this is valuable to a home buyer.

At Intercoastal Mortgage Company we offer multiple types of loans, and lender-paid insurance policies. The mortgage insurance we offer is designed to protect the buyer and the lender alike. The benefit of mortgage insurance to you (the buyer) is that you are afforded the ability to own a home when you don’t have the standard 20% down payment. Single premium mortgage insurance is one of the many ways we can offer insurance coverage to suit your specific needs.

Single premium mortgage insurance is a one-time, lump sum that is typically paid at closing. When you have less than 20% to put down on a house, the premium to cover the gap may be financed into the interest rate. Financing the one-time premium has positive outcomes; it lowers the monthly cost of the insurance, and provides a tax deduction as an additional interest expense to the borrower. This buys you out of monthly mortgage insurance for the lifetime of the loan. Single premium is also cheaper than monthly payments when compared over time.

Single premium mortgage insurance (or upfront mortgage insurance) is available on most loans that require private mortgage insurance.  It can be paid by the seller or lender as a closing cost contribution. The seller can offer a percentage (3% for example) that will cover a non-refundable premium for the borrower, who will then never have to make a mortgage insurance payment.

With a smaller fee added into the closing cost, you can eliminate any extra monthly cost and still benefit from having an insured mortgage and ultimately getting your loan. At Intercoastal Mortgage Company we specialize in offering the right loan for our clients. Contact me for any additional information or to get the process of home ownership started.