What Will Keep Me From Getting A Mortgage Right Now?

Transcription

1 What Will Keep Me From Getting A Mortgage Right Now? Why can t I get a mortgage? Why was my mortgage application denied? What s keeping me from getting a mortgage right now?

2 Page 2 of 11 What Will Keep Me From Getting a Mortgage Right Now? Table of Contents: Page 3... Introduction Page 4... Debt Page 5 : Low Credit Score Page 6 : Recent Foreclosure/Short Sale Page 7 : Bankruptcy Page 8 : Down Payment Page 9 : The House Page More Guides Page Contact Us This guide brought to you by: AmeriFirst Home Mortgage a division of AmeriFirst Financial Corp. 950 Trade Centre Way, Suite 400 Kalamazoo, MI

3 Why can t I get a mortgage? Why was my mortgage application denied? What s keeping me from getting a mortgage right now? These are all great questions not great in that you have to experience the frustration behind them, but great in that you re asking a lender these questions and getting answers. Page 3 of 11 Buying a house can seem a bit overwhelming. Even those of us who have bought before look at the current housing market and wonder what lies ahead for us. We talked to someone recently who bought a house just 5 years ago, and said that his experience in 2013 was much different. It s a new world out there. This ebook will help you navigate that landscape of documents, foreclosure listings, tighter lending guidelines and specialty mortgage loan options. In this guide you ll find some common issues keeping hopeful home buyers from closing on a deal. We also include solutions to these problems, so you can see that it s not impossible to buy a home. Sometimes the solution is to wait. Renting is not some big, evil scam meant to take your money. Sometimes renting is the right choice maybe you re thinking of moving soon or you at least like the flexibility or maybe you need to rent for a year to get your credit in order and a savings account established. If you have to rent for a while but don t really want to, don t be discouraged. We re going to offer a lot of solutions to obstacles when it comes to owning a home and getting a mortgage loan to finance it. Picture qualifying for a mortgage as an exercise in the 3 Cs. Lenders look at Credit, Capacity and Collateral when considering borrowers. You have to show that you pay your bills (Credit), that you can handle the cost of a house payment (Capacity) and that you have some skin in the game, so to speak (Collateral). When the 3 C s are met, you re good to go. When one of the Cs is lacking, another C should be overflowing much like 3 buckets. At the end of this guide you ll also find more resources to help you navigate the home buying journey. From guides about specific mortgage loan options, to ebooks on how to buy your first home, we re all about education. We also share a ton of information in video format over on YouTube. If you prefer videos, subscribe to the AmeriFirst Home Mortgage YouTube channel. Good luck on your home buying experience. Let us know if you have any questions. We re here to help, and to get you to the point where it s time to say Welcome home.

4 Page 4 of 11 Debt Too much debt or too much money going out each month can keep you from getting a mortgage. It can also limit you on how much of a house payment you can afford. You might go from wanting a $120,000 to bring able to afford a $70,000 home. It s all about the monthly payments you re making, and whether you can afford more. So how do you fix it? You can do a few things. First decrease your debt. Pay off some of your revolving debt. If you ve had a second job for more than 2 years that could also be considered as income. Remember: it s not necessarily the overall debt that s of concern; it s the monthly payments vs. monthly income. So if you can refinance some of your monthly bills to lower the payments, you may possible be able to afford a house payment. Here s an example* for you. Imagine you have a car loan payment of $500 per month that s 12 months away from being paid off. But that $500 each month means you can t afford a house payment. If you were able to refinance the car loan to lower the payment to $300 a month or maybe even $200, you may have a better chance of qualifying for a mortgage loan or a larger loan. Did you know: $60 a month in debt payment reduction could actually lead to you qualifying for about $10,000 more in a mortgage loan. Of course, we re not suggesting you refinance everything so you re paying on it for years and years. This is just one solution to the debt issue that may help you qualify for a mortgage. The biggest help is to keep your debt as low as possible maybe even zero debt so your monthly bills are low. Decrease Debt Increase Income Modify Monthly Payments

5 Page 5 of 11 Low Credit Score When a low or non-existent credit score is the issue, you have several legitimate options. First, if you have no FICO score, it generally means you have no recent credit history, or not enough credit references. First, we can consider 3 non-traditional lines of credit in cases like this. This could include monthly bills like: utilities, auto insurance, rent, a gym memberships, a Netflix account. Options for building credit include: Get a secured credit card with a low limit, charge a minimal cost & pay it off each month (Search online for secured credit card or ask your credit union or bank) Save up cash for a larger down payment this will help fill the collateral bucket If your credit score is low, begin to raise it by first paying your bills on time every month. One 30-day late payment can drop a score by a lot be sure to pay on time, all the time. Another relatively quick solution to low credit is to ensure the credit you re using is at 30% of the limit (or less) on a particular card or line of credit. For instance, a credit card with a $1,000 limit should not have more than $300 in charges. For more help on getting mortgage-ready credit, download a complimentary guide here. Create Credit Pay Bills on Time Pay Down Limits

6 Page 6 of 11 Recent Foreclosure/ Short Sale If your recent financial history includes a foreclosure or a short sale, you may find yourself waiting a while before you can get a mortgage again. Even in the difficult and frustrating landscape of the housing market meltdown, a short sale or foreclosure can really damage your credit. To start off, you ll need to begin rebuilding your credit as soon as possible after a foreclosure or short sale. You ll also have to be patient. Rebuilding credit takes time a year or more most often. The standard answer you ll hear in regards to how long you ll have to wait is 7 years. Fortunately, this isn t necessarily always the case. Below is a rundown of the basics on how long after a short sale or a foreclosure you ll likely have to wait. Foreclosure: 7 years Fannie Mae, 3 years for FHA, 3 years for USDA Rural Development (RD), 2 years for VA loans*. Short sale: Short sales come with the same time frame as foreclosure with the exception of Fannie Mae 4 years. (NOTE: If you have a 20% down payment, the time limit is 2 years.) So the lesson here is that you ll find virtually no different between foreclosure and short sales when it comes to finding a mortgage through government agencies like FHA and USDA. Conventional Fannie Mae and Freddie Mac are a little different. You may need to rent for a few years after a foreclosure or short sale, while you re rebuilding your credit. *(RD, VA, FHA must have a clear CAIVAR for 3 years check with mortgage consultant for more information) Work on Credit Be Patient Rent

7 Page 7 of 11 Bankruptcy If you ve been through a Chapter 7 bankruptcy, you ll likely need to wait around 2 years before you can get a mortgage. With patience and hard work on your financials, it s possible to get back on track and own a home. If you did not have a house in your bankruptcy, most lenders will be able to help you secure a home loan as quickly as 2 years after your bankruptcy discharge date. One major component to getting a mortgage after a bankruptcy is getting your credit score back on track. Work to build your FICO score through on-time payments, a varied credit portfolio and minimum spending on credit. Reminder: Get yourself 3 credit accounts to establish credit as you work on bankruptcy recovery. If you ve been through bankruptcy, you re probably already renting your living space, since a mortgage is likely out of reach at the moment. Don t be afraid to keep renting for now. Bankruptcy may keep you from getting a mortgage right now, but it doesn t have to keep you out of a home forever. Chapter 13 bankruptcy is different. In Chapter 13, you re paying back the debt or you have paid it back. In this case, you can actually get a mortgage if the bankruptcy trustee approves. Be Patient Rent Work on Credit

8 Page 8 of 11 Down Payment A major obstacle a lot of home buyers have during the mortgage process is not having a down payment. A down payment is basically further proof to a lender that you re in it for the long haul. With skin in the game, you re less likely to have a problem paying your house payment...at least that s the common thought behind a down payment. So, what happens when you don t have thousands of dollars in the bank? As a home buyer, you actually have several low down payment options for a mortgage loan. FHA loans require 3.5% down. A HomePath mortgage comes with a 5% down payment requirement. Even renovation loans like FHA 203k or HomeStyle Renovation can have a low down payment. You also have options for 100% financing with a couple of mortgage loans. If you re a Veteran, you should qualify for a VA loan, which doesn t require a down payment. If you re willing to live in a specific area, USDA Rural Development can help you finance 100% of the purchase price of a qualified home. Know your options before you go house hunting. You might have a great financing choice right in front of you. Gifts and down payment assistance come in many forms as well. FHA loans allow you to use a gift as your down payment. As long as it s not a loan, that can help you buy your dream home! Finally, down payment assistance from state and local agencies can come in the form of grants and financial aid. Talk to your local mortgage consultant about what s out there for you. Know Your Options Gifts Down Payment Assistance

9 Page 9 of 11 The House When the home you want becomes the obstacle in your way, you have a few solutions. Maybe the house has water damage, old windows, peeling paint or a crack in the foundation. If the house fails an inspection, you ll need to make a decision. One quick fix is to simply move-on if the house has too many things wrong with it. If you re not comfortable with the house and it fails an inspection, you can certainly say no thanks, and go on to the next house. Of course, your success will depend on the housing market and how many homes are out there. Another option when the house is a problem is to ask the seller to make the repairs. Certainly a lot of sellers will likely want to make a buyer happy in order to make a deal happen. However, not all sellers will agree to foot the bill for all of the things wrong with the house. Negotiating these can be tricky, and that s why having a professional real estate agent can be a huge asset. Finally, if the house needs work you could consider a renovation mortgage. This option allows the borrower to close on the loan and roll the cost of repairs, renovations and remodeling into the loan. This means you ll have one interest rate, one payment and one loan for everything. Options for this include FHA 203k, HomePath Renovation or HomeStyle Renovation. Renovation mortgages come with their own set of challenges and adventures. Learn more at this link: The Ultimate Guide to Home Improvement Loans Move On Seller Fixes Issues Renovation Mortgage

10 Page 10 of 11 More Home Buyer & Homeowner Resources At AmeriFirst Home Mortgage we believe in educating home buyers and homeowners. Whether it s home improvement loans like the FHA 203k or a first home buyer s guide, we offer several complimentary ebooks. You can click one of the pictures below to find the ebook that s right for you!

11 Page 11 of 11 Let Us Know How We Can Help For more than 30 years, AmeriFirst Home Mortgage has helped first time home buyers realize the dream of leaving that rental behind, and owning a house. Whether it s conventional lending, an FHA program, VA loan, USDA Rural Development or a 203k mortgage loan, the team at AmeriFirst is here to find the right mortgage for you. See where AmeriFirst is licensed for mortgage lending at the AmeriFirst office locator here. < We re easy to find. The website: AmeriFirst.com Read the blog and keep up with the industry so you can be an informed borrower. Copyright Notice & Legal Notice 2014 AmeriFirst Home Mortgage 950 Trade Centre Way, Suite 400 Kalamazoo, MI AmeriFirst Home Mortgage is a division of AmeriFirst Financial Corp. Feel free to share this ebook (AT NO COST OR OBLIGATION) with anyone you want to. All rights reserved. While attempts have been made to verify information provided in this publication, neither the author nor the publisher assumes any responsibility for errors, omissions, or contradictory information contained in this document. This document is not intended as legal, accounting or investment advice. The reader of this document assumes all responsibility for the use of these materials and information. Down payment amounts and other figures shown are for informational purposes only and are not intended as an advertisement. Not all borrowers will qualify; please contact us for a specific quote and for information on fees and terms.