Saturday, November 2, 2013

Home Financing Secrets Revealed - Part ONE

The American Dream of home ownership resides in all of us.We all want a nice home in a nice neighborhood for our children to enjoy with friends and family. We want our own backyard...our own garage...our own paint colors...our own real neighborhood for our children to enjoy with their friends.We want our own American Dream, a place we can call "home" and a mortgage that is ours..We all know what we want - that is the simple part.The real challenge is discovering how to get what we want without having the wrong home loan program haunting us for years to come.Therein lies the challenge.Smothering us are people who claim to know what is best for us: Realtors, loan officers, mortgage brokers, and rent-to-own home specialists. They all claim to have the answer for us about financing our new home.How do we know what is really best for us when pursuing home ownership? To whom do we listen for advice?The answer to your question is ...?The answer is that you should listen to all of them. You are pursuing your America Dream and the paper you eventually sign will encumber or make you responsible for hundreds of thousands of dollars for many years.This is a huge decision and is by no means an easy or simple process. You should not complete the learning process in one weekend or with only one source of information.Do not automatically believe that the "best" way for you to purchase your new home is the traditional way by getting a loan officer or mortgage broker to get you approved for a terrible loan program, telling you that this is the only way for you to get your home.You really do have options for purchasing your new home, without getting hammered by a mortgage on which you will pay dearly for years.Options exist, and this e-course will present some important considerations for getting the keys to your new home without taking a loan with an outrageous interest rate, an equally outrageous down payment requirement, and obscene fees for closing the loan with damaged credit.How bad can a "terrible" loan really be?If your situation varies slightly from the items below, you will pay dearly for the privilege of getting your own loan right now. If your situation varies a bit more toward the "bad/ugly" side from the items below, you will suffer an even worse loan. Consider the following factors before signing the mortgage paperwork for your new home:Is your middle score from a tri-merge of Equifax, Experian, and Transunion a 620 or better?The term "tri-merge" means that you have pulled your credit report from each of the three top credit bureaus: Equifax, Experian, and Transunion.Without a 620 or better credit score, a loan officer or mortgage broker will shop among "B" or sub-prime lenders for a mortgage supporting your damaged credit file.For some lenders, you must achieve a 680+ score in order to meet the "A" lender credit score requirement.Are your debt-to-income ratios in line with Fannie Mae or the Freddie Mac benchmark ratios, i.e. 41%?What this means is that underwriters (risk assessment gate-keepers for lenders who determine whether you receive the money for your new home) for banks, credit unions, etc generally utilize Fannie Mae or the Freddie Mac benchmark ratios. Loan underwriters will allow 41% of your total monthly gross income to go toward all expenses including housing, medical payments, judgments, collections, child support, auto payments, credit cards, etc.For instance, your monthly gross family income is $6,000 or $72,000 gross income per year. Your monthly debt, not including groceries, utilities, or entertainment, equals $586.00. Total monthly obligations divided by monthly gross income must equal 36% to fall within Fannie Mae Standard Eligibility Guidelines.The amount of monthly housing payment this formula claims you can afford is $1574.00 (principal, interest, taxes, and insurance). For example, let's say your gross monthly income is $6,000. We multiply your $6,000 (gross monthly income) x 41% (allowable debt) and that gives us $2,460 in monthly allowable debt.We now must deduct your $586.00 in monthly debt from the $2,460 and the resulting $1,874.00 is the maximum monthly payment allowed by the lender.Generally, the "better" loan programs adhere to Fannie Mae Standard Eligibility Guidelines for underwriting the loan and determining risk to the lender.However, many other loan opportunities exist, and that defines the value of a mortgage specialist -- your mortgage specialist must ask you lots of questions to find out exactly how long you envision living in your new home and what you believe your future earnings potential will be. By asking the right questions, listening carefully to your answers, and knowing the requirements of various loan programs, a mortgage "specialist" can recommend the most appropriate loan program.Whatever you decide, you must research enough to know what questions to ask.Perhaps you have decided renting to own your new home is the best solution right now.Benefits of Renting to Own Your New HomeYou choose your new home in your desired neighborhood or choose a nice home in a nice neighborhood from existing inventory.You enjoy your new home as if it is your home, i.e. your colors, your backyard, and your newly installed swimming pool, fence, landscaping, etc.You enjoy a reasonable monthly payment and a very reasonable down payment on your new home.You get the time you need by renting while repairing your damaged credit.You work with one of our mortgage specialists during the lease term to match you with the most appropriate loan program and to educate you about home financing.You lock in the future purchase price of your new home. You pay a monthly payment not inflated and not gimmicky, that is you won't face an inflated monthly payment in order to get a monthly rent credit.You get the title seasoned, thereby qualifying you for a refinance when you complete the home financing and get your home in your names.Understanding exactly what home financing lenders want is critical to getting the best loan program. In Part ONE, you discovered the target middle credit score required by many "A" or "prime" lenders. You also learned about debt-to-income ratios utilized by mortgage brokers, realtors, and lenders/loan officers when adhering to Fannie Mae Standard Eligibility Guidelines.Stay tuned for Part TWO -- you will learn how to think like a lender in order to avoid unpleasant surprises when trying to get your new dream home.-------------------------------------------------