North Shore Views

Damaged Credit? How Soon Can You Buy a Home?

Yesterday I wrote about how your credit rating affects your mortgage and how you can improve it. But what if you’ve filed for bankruptcy or been foreclosed on? Those situations are not so easily remedied, and people who have experienced the credit damage that comes with these events wonder if they can ever be eligible for a mortgage again.

It’s true that after a  foreclosure, short sale or bankruptcy there is a significant waiting period for mortgage eligibility but you are not locked out of homeownership forever. Betsy Hanrahan of PHH Home Loans provided the useful chart below to clarify wait times for mortgage eligibility, depending on the type of financing you are going for. If there are extenuating circumstances the wait time may actually be shorter than what’s shown in the table. An extenuating circumstance would be a temporary event beyond the borrower’s control, like loss of a job, medical bills or death of a wage earner. Unfortunately, however, divorce or the inability to sell a home after a job relocation do not qualify as extenuating circumstances.
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Tags: credit score, foreclosure, home mortgage

How Your Credit Score Affects Your Mortgage

There are lots of myths and misconceptions surrounding credit scores, how they are used and how to improve them. I recently attended a lunch and learn session at my brokerage put on by National Credit Care and learned some little known secrets to improving your score that I’d like to pass on.

But first things first. Let’s do a little Credit 101 to set the stage:

What is a credit score?
In a nutshell, your credit score is a three digit number that represents the risk that you will default on a loan, using your past payment history as a benchmark. Your score will determine IF you can get financing and AT WHAT RATE. Insurance companies, credit card companies and mortgage lenders all use different models to calculate creditworthiness. Since we’re talking about home loans here, we’ll focus on the FICO (Fair Isaac and Co.) score. A high FICO score means you will have an easier time getting a mortgage at a low interest rate.

How is my FICO score calculated?
There are five components of your score:

1. Payment history: Do you pay your bills on time? Yes, it matters.
2. Balances on revolving accounts (you don’t want your balance to be too high as a percentage of your credit limit)
3. Length of credit history: Longevity is good, so don’t cancel that credit card you’ve had since college
4. Types of credit accounts (you want to have a variety)
5. New credit: you lose points when you open a new account
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Tags: credit rating, home mortgage

How to Get a Mortgage on the North Shore

Ever since the meltdown of the housing market, getting a home loan has been considerably more challenging than before. In the video below  Brett Lotsoff of 1st Advantage Mortgage shares some tips on how to be successful in obtaining a mortgage in today’s environment:

If you would like more information on finding a lender and qualifying for a home mortgage, give Brett a call at 847-239-7810 or email him at [email protected].

Tags: home mortgage

10 Mortgage Pitfalls to Beware of

During the boom years, anyone with a pulse could get a mortgage. Not so anymore. There are lots of things that can torpedo your ability to get a home loan even if you have good income and a great credit score.

MSN Money ran a great piece called “10 Things That Can Kill a Home Loan”. Here is their list of things that can keep you from getting a loan:

1.  The house needs too much work – beware if you’re buying distressed property or a real fixer-upper.

2.  The house doesn’t “appraise out” – the appraiser says the house is worth less that the price you and the seller have agreed on.

3.  You have too much debt – if your monthly housing and other debt exceeds 40% of your income, you might not qualify.

4.  You are self-employed and your income has declined – your lender will look at two years’ of tax returns and use the lower income of the two.

5.  You recently started being paid on commission – you may have to qualify based on your spouse’s income, or wait a couple of years to get a loan.

6.  There are issues with your tax return – things like second home expenses, a too-small estimated tax payment or unreimbursed employee expenses can be a problem when trying to qualify for a mortgage.

7.  You can’t get private mortgage insurance – which means you may need a bigger down payment.

8.  The lender doesn’t like the condo association’s finances – lenders may balk if the association’s cash reserves are too low, someone owns more than 10% of the building’s units or the association’s fidelity bond is too small.

9. Your loan takes too long to get approved because the lender has had to cut back on staff- your deal could fall through or your rate could go higher while you are waiting for approval.

10. You don’t stay on top of the paperwork required by the lender – be prepared to prove everything and anything and respond quickly to requests for information.

The bottom line: the mortgage game has changed and there are a lot more rules and restrictions nowadays. The best way to win the game is to educate yourself on the requirements and potential pitfalls, and get your ducks in a row before you try to get a loan. Ask your Realtor for recommendations about mortgage professionals who can advise you well and guide you through the process.

Read MSN Money’s “10 Things That Can Kill a Home Loan“.

Tags: home buying tips, home mortgage