Where do I begin when looking to purchase a home? This is the most common comment I hear when I receive calls inquiring about wanting to purchase a home. Whether you are a first time home buyer or someone who has purchased previously but it's been over 2-3 years since you last purchased, this seems to be a common feeling. Purchasing a home can feel very daunting, scary and overwhelming, as it should be. It is one of the largest purchases you will make in your lifetime and should not be taken lightly.
I want to help by noting the main areas I talk to potential clients about when starting the process. These are the key areas of where to start and I hope it helps guide you in the right direction if you are looking to purchase a home and don’t know where to begin.
First, you need to know your credit score (FICO), I’ve written about this previously, it is really important, your credit score reflects your credit worthiness. You need to know if your report is accurate. Review your balances on your credit cards, are they high (close to limit or maxed)? Do you have any late payments? If you know you have credit issues then those need to be addressed. You may have heard that medical collections don’t need to be paid. Main thing is if you have collections of over $2000 they will be required to be paid (always contact a lender if unsure what is acceptable). If your credit score is low you will want to remove collections because they will negatively reflect and affect your FICO score. Make sure to get letters from the collection agency when you satisfy the collection. If you have judgements, they will need to be paid and released. You will need to get the release of judgement from the county in which the judgment was placed (you have to pay for a copy of the release). You are unable to qualify for a mortgage if you have unsettled judgments, no exception. Last item to be aware of on your credit is keeping your credit card balances no higher than 30% of your max available credit limit. If they are higher they will report negatively. Also make note that all your credit liabilities (credit cards, student loans, car loans, etc) on your credit report is what is used to figure your debt-to-income ratios. You want good revolving credit that can help outweigh the negative as well as keeping your monthly expenses in line with your income.
Second, you need to have some money in the bank. Whether you are looking for down payment assistance (DPA) or have gift funds to assist you with a home purchase, you still need to have some assets. DPA does not assist with the closing costs, earnest money (which will get applied towards your closing costs), appraisal fee and inspection. These funds need to be readily available when getting ready to purchase. Besides even if you were able to have minimal costs to purchase, would you really want to go into homeownership with no money in the bank? What if your water heater breaks the first month and you have no money in the bank and credit cards are maxed out? What would you do? It is always advisable to have some reserves.
Last but not least, look for a lender. Don’t contact a realtor until you have spoken to a lender in order to know if you are pre-approved and for what purchase price. Make a list of what you need, even if you are unsure of exactly what you need and looking for, a good lender will help guide and educate you. Remember no question is considered “stupid”. If you know you need down payment assistance, make that known right away. If you have had a bankruptcy or foreclosure, make sure to be upfront even if it has been longer than 4 years ago. Have an idea of what you can afford monthly for a mortgage payment. If you don’t know where to begin, no worries, a good lender will guide you!
If you have any questions and/or feel you are ready to get started, give us a call.
We are very happy when we get a call from a qualified veteran looking to purchase or refinance their home using their VA benefits. First off, thank you for all those who have served. Being a fellow veteran helping other qualified veterans learn the benefits of a VA loan and providing them with the best mortgage available gives me great gratification.
Purchasing a home is an exciting and rewarding time but it can also be stressful and confusing. Many of us have difficultly in saving a down payment and coming up with 20% feels like an impossible feat, more less even 5%. The benefit of VA loans allows for a no down payment and at times no closing costs as well as no mortgage insurance. Yes, there is a VA funding fee (which some veterans may be exempt) but this fee can be rolled into your loan and is what goes towards a "pool" of funds which is what allows VA to keep rates low and assist with your fellow veterans to take advantage of the same VA benefit you are acquiring. Your lender will need a certificate of eligibility (COE), here is a link that can assist you in obtaining a copy of your certificate of eligibility. Your lender can also request your COE but this can take some time and if you are needing to get pre-approved quickly it helps your lender tremendously if you can have your COE ahead of time.
Again, VA loans are the best loans out there, if you would like to learn more about them and are a qualified veteran please give us a call. *Please know that if you are in need of a Jumbo loan you can still use your VA benefits, make sure to ask us how.
You may be asking yourself “am I ready to purchase a home?” If you are like the many of us who have just received a notice from your landlord informing you that your rent is going to raise, and not just by a little but a few hundred dollars. What do you do and why are the rents rising? The rise is due to Denver’s growing economy and more people moving to Colorado. This puts landlords in a prime position. If their current tenant can’t pay the increased rent they will have another tenant waiting in the wings who can. They also know that the Real Estate market is tight and those who are looking to purchase are in a very competitive market and if they can’t find a property to purchase they will be looking for a rental.
What are your options? You have two choices, keep renting or look to purchase. If you choose to purchase you need to make sure you are in a position to get pre-approved. You may be asking, “what do I need to do to get in a position to get pre-approved”?
First step is to know your credit score, more specifically your FICO score! This is not the number you get from CreditKarma or possibly even your credit card. You need to check in with www.myfico.com or go directly to the bureaus, www.experian.com, www.transunion.com, www.equifax.com and retrieve your FICO score. If you are not wanting to pay for your FICO score than at the very least pull your credit report and review what is reporting. Is it accurate? Do you have any collections that you were not aware of? Judgements? Late payments? Etc. These items are critical to your score and for a pre-approval. Do you have active, current, good revolving credit? If you are not aware of any of these you need to get familiar and check on your reports. Most lenders are unable to provide a pre-approval with a FICO score under 620.
Second step is having some money in savings. There are down payment assistance programs available BUT these funds do not cover all the costs involved in purchasing a home. You will need to have funds readily available for earnest money, appraisal, inspection and the remaining closing costs. Most of the down payment assistance programs require that you have $1000 or 1% of purchase price (whichever is greater) in the transaction. You can not nor should not be purchasing a home with no money in the bank.
Third step is if you have step #1 & #2 complete then the next step is finding a qualified lender. You want to find someone who can help, guide and educate you in what options are available to you. If you know you need down payment assistance then this should be one of the first questions you ask. Not every lender is qualified and approved to work with many of the down payment assistance programs. Are you looking for a VA loan? Make sure to ask if they are an experienced lender with VA loans. These are very important questions. You don’t want to find yourself completing loan applications, running your credit and submitting financials only to find out that they don’t have the services or loan programs you are needing. Make sure you also check their credentials. Ask for past clients that you can reach out to, or check for online reviews with Google, Yelp, FaceBook pages and Better Business Bureau.
If you are new to purchasing a home you should take the homebuyer education courses that are free and available to you, click here for more information. If you have any questions and would like to start the process of getting pre-approved please contact us.
I received a call today inquiring about our services and the possibility of transferring their existing loan to us. That’s good news right? Well, yes and no, bad news is that they were supposed to be closing on their home purchase today! They received a call last night from their existing lender, one of which claims to have the highest ratings per J.D. Powers & Assoc and that they can “quicken” the process, informed the buyer that they will be unable to close on their loan tomorrow. They stated that there are additional loan conditions that need to be met, one of which would be bringing more money to the closing. This would bring the buyer whom originally was putting 3.5% down would now be required to put 8.5%.
I wish I could say this was the only call I've ever received with this situation but unfortunately this is not the case, we have been seeing an increasing number of calls with similar situations and the majority coming from the same mortgage company.
As first time home buyers you may not feel comfortable and/or are uncertain as to where to begin your home buying process so many times we may be directed by very popular home buying websites. Whether it be websites that are credit score companies that monitor your credit, properties for sale, home values (bankrate.com, realtor.com, zillow.com, creditKarma) etc. they will have a link and/or notifications of rates and mortgage companies. What may be of surprise to you is that these links are paid advertisements. These larger mortgage companies have a vast budget for advertising and are able to place their company on multiple websites. Because many of us feel they are trusted sources we also also feel that they wouldn't be on their page if they weren't recommended, right? Again, unfortunately that is not the case, these companies pay to be recognized on these popular websites.
I wish there was a way that when we click on a referred or recommended company and a “caution” signal flashed or “alarm” sounded when to notify you that this is a paid advertisement AND take it a step further had a signal for “beware” low customer service ratings per Google/Yelp/Bing. Unfortunately we don’t have such a service so it is our responsibility to take that extra time and do our due diligence.
I always recommend researching a mortgage company AND the loan originator before ever completing a loan application, running your credit and/or sending in your financial documents. When researching a loan originator they are required to list their NMLS number and are required supply the link to their license registration. Remember in finding a good lender it goes beyond looking for the lowest rate!
If you have any questions or would like to inquire about our services please contact us.
A rehab loan which is also referred to as an FHA 203k is a loan, is a mortgage that includes the costs of rehab/remodeling needed to a home. Why would purchasing with a 203k be beneficial? In a tight market like this it is always great to have options. For many of you who are out there in the market and having a tough time finding a home or having a chance to even put in an offer. Here is some food for thought, is there a specific style that you are drawn to but are noticing that in your price range they move quickly? Here is an option, how about looking in a lower price range, same and/or similar model of your favorite home,put on your " see potential" glasses and then look at a property. Would just a little TLC (new flooring, paint, appliances, kitchen cabinets, etc.) make the home more appealing? This is where a rehab loan such as a FHA 203k loan or Conventional Rehab loan would make sense.
The rate on a FHA 203k is a lower interest rate than getting a new credit card, adding a home equity line of credit or financing through a personal loan. Plus you only have one mortgage payment!
There is only one appraisal done, you get an "as-is" value and the appraiser gets a copy of the contractors bid and will take into account what work is being done on the home and will give you an "as completed value". You will see what amount of value you are adding into the property and most likely could be walking into the property with build-in equity.
So if that is not enough of a reason to look into a rehab loan, here are 3 reasons you should consider:
If you would like to discuss or see if you qualify, give us a call.
We get a fair amount of calls on daily basis inquiring about a 203k loan. So I wanted to put a few main components together to help aid in learning about a 203k loan. A 203k loan is a home mortgage that includes the costs of remodeling/rehabilitation for a home. It is an FHA loan. It can be used on a purchase or you can refinance into a FHA 203k. This type of loan is extremely beneficial whether it is for minor rehab or a major renovation to a home.
There are two types of the FHA 203k, one is the streamline and the other is the standard. The streamline FHA 203k is for renovation/rebab work that is up to $35,000 and does not include structural or landscaping. The Standard or aka Full FHA 203k is for $35,000 and greater (on up to FHA loan limits), which can include structural and landscaping. When doing a Full 203k it is required to also hire a HUD consultant. Do not let this be a discouraging factor, we like to think of them as the "big brother" on the project. They are there for your protection and will also help facilitate the project and communications with your contractor and lender.
You will need to hire a licensed and insured contractor, with a the streamline you are able to facilitate as a general contractor (GC) but we highly suggest hiring no more than 3 contractors. For a full you are required to hire a GC, which we even suggest for a streamline.
In order to know what amount you qualify for with a 203k loan you will need to meet with a lender to get pre-approved. You need to keep in mind that the approximate amount needed to rehab the home will be added to your mortgage. If you were pre-approved for a purchase price of $200,000 and the home you are looking to purchase is $200,000 and needs rehab work added, then you are exceeding your loan limitations for approval. The important thing is to check with your lender if you know you would like to purchase with a 203k so they can help guide in what your max purchase ability would be using a rehab loan.
If you even have the slightest thought that you would be interested in this type of loan I highly suggest that you talk with your lender and discuss. Not all lenders can do FHA 203k loans so you need to know ahead of time before you get too far into the pre-approval process and then start looking at homes because the last thing you will want is to find out that you need a FHA 203k and your lender can't provide, then you are stuck with needing to find a new lender and don't have much time to be going through the process again! This is a FHA 203k in a nutshell, f you would like to learn more please contact us. Please note that there is also a Conventional rehab loan available, make sure to ask us about it!
The Denver Real Estate Market is the top in the nation. Being one of the top 10 states for business in 2015 could be one of the main factors. There is no denying that Denver is the most desired place to live and being a native I can understand why. With this, it makes for a very tough and tight market and finding a home to purchase becomes more difficult. If you haven't already heard the purchase prices are going up and many buyers are over bidding on the homes. If you are currently renting a home have you considered offering to purchase from your landlord? Even if you don't know that your landlord is wanting and/or willing to sell the home, wouldn't it be worth asking?
Recently I've been noticing an increase in calls looking to get pre-approved to purchase the home they are currently renting. This is a huge advantage, here are four reasons why buying a home from your landlord makes sense:
To sum it up if you are in the market to purchase maybe the first place to start is talking with your landlord! **Note:Talk to a lender to get pre-approved first!!! Better to know if you qualify before offering to purchase!!
Give us a call if you have any questions and get pre-approved!
Did you know that there is a tax credit available to home buyers? And I'm not talking about a tax deduction its a tax credit. It's call the Mortgage Credit Certificate or aka as an MCC. Here is a little more info:
What is an MCC? It is a certificate awarded by the City allowing the holder to take federal income tax credits. When awarded with an MCC you can take an annual credit against your federal income taxes of 20% or *30% of the annual interest paid on your mortgage. *30% is available only in City and County of Denver
What is the difference between a "Tax Credit" and a "Tax Deduction"? Basically a tax credit entitles a taxpayer to deduct the amount of the credit from their total federal income taxes owed, allowing you to receive a dollar for dollar savings on your tax liabilities. A tax deduction is subtracted from your adjusted gross income before federal income taxes are computed. When you purchase a home you are eligible to deduct your annual mortgage interest payment on your taxes.
So what happens to the tax deduction for mortgage interest when you have an MCC? When using the MCC tax credit, you are still eligible to deduct the remaining 80% or 70% not claimed as a credit. For example, if you paid $8,200 in mortgage interest for the first year, with a 30% MCC, you could take a credit of $2000 and a mortgage interest deduction of $6,200. Which ends up being a higher benefit for you and more money in your pocket, its a win win!
An MCC is available to first time home buyers (have not had home ownership in the past 3 years), qualified veterans or if you are a non-first time home buyer purchasing in a targeted area.
You must apply for the MCC at time of purchase! You can not apply after you have closed on your home! You must also apply with an MCC approved lender.
Unfortunately there are many Realtors and Lenders who are unaware of the MCC and may not disclose this information to you so this is why we are trying to get the information out. We don't want you missing your opportunity!
The MCC is available state wide and there are income and purchase price eligibility requirements (which have recently been raised for the City & County of Denver), please contact us to find out more and see if you qualify.Please Contact Us!
You called your bank, discussed that you would like to purchase a home instead of continuing to pay rent and would like to get pre-approved. You may or may not schedule a meeting; maybe you weren't even asked if you would like to schedule a personal meeting. They ask about your employment, income and complete a loan application then run your credit. They maybe discuss a few loan options with you. Then they tell you that they have put you through the "automated underwriting system" (AUS) and your pre-approved. Hooray! Time to go look at houses!
Now you go out and find the house, put in your offer, your offer gets accepted and now you’re under contract, now what? Your file gets sent to underwriting and here is where there is a true separation from pre-approval and pre-qualification and if you were really pre-approved. Let me give you two scenarios:
First scenario, you completed a loan application and had your credit ran, stated your income, then they ran you through an AUS system (automated underwriting system) and said you're pre-approved, gave you a lender letter and send you on your way to look at home (as previously mentioned above).
Second scenario, you completed the loan application, they ran your credit, you sent them your pay stubs (one month's earnings), two months most recent bank statements from checking/savings and possibly retirement or stock accounts, your last two years W2's and tax returns (all pages). Then they gave you a pre-approval AFTER discussing loan options, showing you what purchasing a home would look like including discussing your desired monthly mortgage payment, what funds would be expected for down payment and closing costs. After knowing what you are comfortable with and having a firm grasp of what purchase price you should be staying and looking at in order to maintain your desired monthly mortgage payment. Then they sent you on your way to look at homes with a lender letter.
Now, if you had the first scenario, YOU ARE NOT PRE-APPROVED! You have been set up for possible denial on a loan and the risky part is that you are already under contract. There is a high probability you may not close and/or could lose your earnest money. Maybe you can close but you find out that you will need more funds to close then you initially expected or were never advised nor discussed what would be expected and required for funds to close and now you don't know if you have enough money for down payment or closing costs. You soon realize you may need down payment assistance or other options to help with funds for closing. But you find out that your current lender does not have those options available. What do you do? You have to find a new lender and you have limited time to find one because you are under contract and against deadlines.
The unfortunate thing is that the first scenario is happening way too often. We receive many calls regarding this exact situation or very similar. Usually the first place we search for a mortgage is our bank. I'm not saying that this is not a good place to start; I'm just saying to be cautious because these are the calls we are getting and where they are receiving these supposed "pre-approvals".
If you are a first time home buyer, most likely you don't know where to begin and don't necessarily know what you should be expected so your initially instinct may be to trust your bank and this is the most common place homebuyers start.
My advice is that no matter whom you choose to work with on getting pre-approved for a home mortgage, you should first do your homework. Start with asking friends and family for a referral to a lender. Then make sure to research them online, check out their website, blogs and most importantly reviews (Google, Yelp and Facebook). Then when you have chosen a lender you need to know they should request all your financial documents along with completing a preliminary loan application and running your credit. This is the process of getting pre-approved. Keep in mind that a lenders pre-approval is not the final approval, only an underwriter can provide a final approval, which happens once you are under contract.
An experienced and licensed mortgage professional will do their best to "pre-approve" you and won't provide a lender letter and send you out looking for a house unless they are confident that you can close. If they don’t ask for all the financial documents upfront and state that these are not needed until you go under contact, then again please be cautious!
Prepare yourself, do your research, and I also recommend taking a homebuyer education course. They are free and extremely helpful.
If you would like more information, have questions or would like to get pre-approved, please contact us!
Your credit score is not everything when looking to purchase or refinance your home! Don’t get me wrong it is important BUT there is more to your credit than JUST the score! So what does that mean? There is really no easy way of saying this, your credit score is a reflection of your creditworthiness. The lower your score, the higher the risk your are in the a bank's eyes.
First things first, you need to have an idea of what your FICO score is and should be monitoring your credit. You should be aware if you have collections, judgements and/or any other negative reporting. If you have NO credit, meaning you don’t have any good revolving credit such as credit cards, student loans, car payment, etc., then you need to know your FICO score will not move in a positive direction. Using credit it important but more importantly is how you use it, how long and how much you use on a consistent basis, along with making your payments on time.
Now, keep in mind investors (banks) don’t just look at your FICO scores, your FICO score is just ¼ of the evaluation. Credit scores are a reflection of how disciplined you are with your lines of credit. Do you make your payments on time? When you show late payments, repossessions, evictions, collections, judgements, etc. And if you have had these in the past, what are you doing to rebuild your credit? Again, as I mentioned before, what is your creditworthiness?
If you can take away anything from this, is would be that you ...Check your credit, make your payments on time, don’t overextend your credit (max out lines of credit), and avoid collections & judgements! Check out this article on the 10 crucial credit questions from MoneyTalks.
Every year you are allowed to receive a FREE copy of your credit report. So go to each credit bureau and get it, Transunion.com, Experian.com & Equifax.com. You don't need to sign up for a regular service and get monthly monitoring, just get your one free copy every year. Review your credit report and make any needed corrections. If you would like to follow your credit I would suggest www.myfico.com .
This will help you in knowing if you are ready to take the next step and meet with a lender to get pre-approved. **KEEP IN MIND, prior to setting up a meeting with a lender make sure you have some money in the bank!! In this market you can not purchase a home with no money down!! Read more about “can you purchase a home with no money down?”. Also keep in mind that the higher your score the more loan programs that may be available to you, including lower rates.
If you need any assistance or have any questions please don't hesitate to contact us. We are always happy to help.
Can you realistically purchase with no money down? There are definitely multiple choices for loan programs that will allow for lower down payment options and even some that offer down payment assistance grants. The era of only being able to purchase a home with 20% to put down is gone. Yes, 20% down is great and can sometimes be ideal but not necessarily realistic for all of us, many are unable to come up with 20% down, and that is ok. Many times hanging on to the money you saved may be more important than putting ALL of it into the down payment.
The problem I am consistently coming across is that just because there are down payment assistance grants available it doesn't mean that you don't need ANY funds for purchasing a home. It does not mean that you can purchase a home with zero down. Unless you are a veteran, this is HIGHLY unlikely! You should not expect or assume that you can purchase a home with no money in the transaction. You need to have money in the bank. Trust me, even if you are lucky enough to have close to zero down, the money you did save and ended up not using you will need it later for the home!
Most of these assistance programs require that you will need to have a minimum of $1000 of your own funds into the transaction. Now, there are ways of bringing less money to the table, such as getting gift funds, lender credits, seller concessions, etc., but if you don’t have these available to you then the answer is NO. You can’t purchase a home with no money in the bank (again, whatever you did save and didn't use, you will use later) and no money at the closing table. Remember you will need to have funds for earnest money. These funds need to be readily available and verified, which will be applied to your closing costs.
The truth is that even though there is down payment assistance grants, there is still a cost in getting a home mortgage. To understand and get a better idea of what it would look like and what would be expected in purchasing a home you need to talk with a lender. You need to see what options may be available to you. If you need or are interested in the possibility of down payment assistance, you need to find a lender that can offer these programs.
What is the ideal amount you should save when looking to purchase a home? You should expect that closing costs are around 2-3% of the purchase price (on average $3000-5000). You honestly should not be buying a home if you have no money in the bank. Make sure you get pre-approved before looking at any properties! This means at minimum completing a loan application, running your credit, sending paystubs (one month's most recent earnings), two years tax returns & W2’s and two months most recent bank statements.
If you would like to discuss further, please reach out to us, we are always happy to educate and assist.