They don’t mean to offend you.  It’s not that they don’t have time, don’t want to waste time or that they are being rude.  You may very well have impeccable credit, more than adequate income and a ton of money in the bank.  If you do, fantastic!  The pre-approval process should be a breeze.  However, the experienced real estate agent knows that the above isn’t always the case and showing you properties that you may not be eligible to purchase could lead to a tremendously negative experience for you.  

That said, you need also to understand the difference between a mortgage pre-qualification and a pre-approval.  There is a BIG difference and I’ve encountered many situations where a mortgage pre-qualification went south once actual supporting documentation was received.  Conversely, it could also improve.  I’m not trying to be a negative Nellie here – I’m just being real.  You talk to someone on the phone or submit an online mortgage pre-qualification and they tell you that you are “pre-approved”.  They’re lying.  You’re not really pre-approved, you’re pre-qualified. 

Until you have supplied actual supporting documentation; tax returns and W2’s or 1099’s, paycheck stubs, bank statements and other information specific to your financial circumstances, you’re NOT pre-approved.  Once you’ve supplied that documentation, and everything you discussed in your pre-qualification is support, then, and only then, do you have an actual mortgage pre-approval.  

Let me give you a few examples that may put this in perspective.  I had a client contact a large on-line mortgage provider and he got a “pre-approval” over the phone.   He contacted me on the advice of his real estate agent and I requested supporting documentation before I could issue an approval letter.  Begrudgingly, he supplied the documentation and it was discovered that he had a started a small side-business and there was a loss for this business on his tax return.  In his mind, this didn’t matter.  It was “paper loss” and they were actually going to make some money this year.  Unfortunately, we had to count this loss against him for qualifying purposes and his pre-approval amount was reduced.  That phone pre-qualification was worthless and he had been looking at properties that were $20,000 higher than his actual approvable amount.  I don’t think I need to explain his disappointment further.  Had he met with me in the beginning, his first time home buying process could have been a positive experience.  Instead, it was riddled with disappointment from the get-go. 

I met with a client just yesterday who submitted an online pre-qualification with net income vs. gross income.  Had we based the qualification numbers off of what was supplied to us in the online pre-qualification worksheet we would have qualified her for far less than what she was actually eligible to purchase.  However, we requested the documentation, discovered the error and her qualifying ability increased by over $400|month.  That’s roughly $80,000 in purchase price.  You think that might make a tiny difference?  

All of the personal examples aside, sellers come into play as well.  And, there’s this little tiny thing called the law, which governs what we can and can’t do with regard to mortgage pre-approval letters.  Just last week I had a client who could not view homes without a pre-approval letter.  The sellers were not willing to allow anyone to look at their home without a valid pre-approval letter.   That one was new to me, but in higher-end properties, it makes sense.  Sellers just don’t want people going through their houses that aren’t actually qualified to make an offer.   In today’s real estate market, sellers absolutely will not entertain an offer without a valid mortgage pre-approval letter and, good listing agents follow-up on them as well. 

In Minnesota, Pre-approval letters need to specify any contingencies.  That means if you haven’t supplied documentation to support your income, assets or other information, we need to say we haven’t received it.  Put yourself in the sellers shoes for a second.  Do you want a letter that says the lender has reviewed income, asset and credit information or one that says they’re still waiting for those same items?  No brainer. 

Get pre-approved first.   Taking this step first in the process will put you in a position of strength when you start your home search. 

Start with an online pre-qualification or contact Carrie Guarrero today to get the process started right!

If you’re thinking about buying your first home or your next home in Minnesota, we have home buyer classes designed to fit your needs and keep you informed about current mortgage and real estate market conditions in Minnesota.   We offer no-cost, no-obligation, monthly home buyer classes in our Burnsville, Minnesota office location the 3rd Thursday of the month from 6:30-8PM for the First Time Home Buyer and the 3rd Saturday of the month for Home Sellers and Home Buyers with experience in home buying from 10-11:30 AM. 

All home buyer classes are hosted by Carrie Guarrero and are located at 436 Gateway Blvd, Burnsville, Minnesota 55337.   You can register online below, by phone at 952-808-0042 or e-mail carriesteam@houseloan.com. 

Register for our First Time Home Buyer Class - Next class is Thursday, December 15th.

Register for our Right Move Class for Home Sellers and Home Buyers – Next class is Saturday, December 17th.

The media may have you believe that getting a mortgage today is very difficult and that the standards are out of reach for a great number of people.  While the standards for mortgage lending have certainly tightened up, I work with and finance a large number of clients on a monthly basis. Mortgage lending is alive and well and people can qualify for buying a home today.  There are some simple things that we need to verify, like the fact that you have decent credit, are employed and have verifiable income to repay the loan and that you have enough down payment to purchase the home from any number of acceptable sources.

Here are a few of the real challenges that people encounter:

• Depositing cash – recently a number of my clients have come to me, with large, non-payroll related deposits into their bank accounts. Pure cash is not an acceptable source of funds for down payment. If you are selling something of value – make the purchaser get you a cashier’s check, and save a copy of the check before depositing so that the funds are traceable. Also don’t forget to get write up a bill of sale or some sort of receipt that states what was sold, when it was sold, to whom it was sold and for what amount. If it was something like a car – a copy of the title transfer will work. Understandably, we need to verify where all money for down payment comes from and cash is simply one of those things that is not traceable. Where’s the concern? A couple potential options we need to prove against – you could have taken out a loan that we aren’t aware of or, possibly received the money from someone who is part of the transaction.  Neither of these are acceptable.  We simply need to be able to verify where money came from or, we can’t use it toward your required down payment.

• Depositing “other” non-payroll related monies – You guessed it, we need to verify it and it’s source.  For any deposit that is not payroll related, we will question where the money came from and request proof of the deposit in the form of a copy of the check deposited etc.  Depending on the source, and your loan type, we may or may not require additional documentation.  We do use common sense.  If you’re a home buyer who has plenty of money in the bank after we subtract out any non-payroll related deposits and|or the deposits are minor in comparison to your monthly earnings, we likely won’t question them. But, if you need most of what’s in your checking account to close on your home and you have a series of unexplained deposits or even just a few large ones, this could pose an issue. Best solution?  Don’t deposit non-payroll related funds into your bank account.  The most common source of non-payroll related money in bank accounts is gift funds.  While gift funds are an acceptable source of funds for some mortgage programs for down payment, there are still specific processes that need to be followed for verifying the gift and also your remaining money available for closing.  If a gift is deposited prior to closing, it can make for a few extra hoops. Again, visiting with me first will help pave the way for getting a mortgage and having a smooth loan process.

• Credit Woes – It’s not uncommon for me to start a conversation with a client and find out very quickly that there are some past credit issues that will prevent them from getting a mortgage right now.  Items like prior bankruptcies, foreclosures or short-sales can be show stoppers if not enough time has passed or, if new, positive credit isn’t there. Understandably, a number of people will decide that they don’t want to go out and obtain new credit following a bankruptcy or foreclosure.  While this makes absolute sense to me, it could prevent you from getting a mortgage downstream depending on where your current credit score. My advice? Know your credit score and get advice from a mortgage professional at least 6-9 months prior to your intended move date when you’ve had prior credit challenges. If you’ve had a prior Chapter 7 (debt elimination) bankruptcy, you will need to wait 2 years from the discharge date to qualify for traditional financing.  This means you should be visiting with a mortgage lender at least 6 months prior to the 2nd anniversary of your discharge.  If you’ve had short-sale or foreclosure, in general terms you will be waiting for 3 years from the sale date, though it totally depends on your prior loan type and your particular situation and rare exceptions to the 3 year rule are made.  I am happy to visit with you about your situation and get you on a new path to buy your next home.  It’s best to start the process early so that we have the time we need to work out any unresolved issues.

• Income Stability- Recently moved from a salaried position into a commissioned one or went from a W2’d position to a 1099? This changes the mortgage qualifying game dramatically if you don’t have a history of these types of earnings in the past.  Be cautious about making job changes or changes to your income without visiting with a mortgage professional first.  If you intend to purchase a new home in the next year, this could mean the difference between you being able to qualify or not.  I know what you think – this is a pay increase, or this is an improvement from my last job on so many levels.  While I understand that, the potential it offers you also lends to the ability to not earn as much and what the amount will actually be is something that we need to have historical data on in order to use it for qualifying. We don’t know and can’t prove that you’re going to be a stellar sales person and earn double what you did before. In general terms, if you switch to commissioned income or 1099 pay, we will need a 2-year history of that income before being able to use it.  However, your saving grace may be a guaranteed minimum or your base salary – if it’s enough for you to qualify.  Again, I’m always happy to discuss with you and each individual situation will vary.

This is certainly not a comprehensive list of all of the potential issues when getting a mortgage loan today, but some of the common issues clients encounter.   Apply for a loan early and getting the advice of an expert on your particular home loan scenario is a key element in pre-approval success.  

I work for Cornerstone Mortgage Company and is a full-service mortgage lender.  We offer Conventional, FHA, VA, RD, Minnesota Housing loans for first time home buyers and many down payment assistance and closing cost assistance programs for first time home buyers as well.  Whether you’re buying your first home, a new home, thinking about refinancing or remodeling your current home, or purchasing a second home or investment property; we have a loan program to meet your individual needs.  Apply Online and we’ll be in touch to discuss your options.  Prior credit issues? We offer no-obligation credit consultations and will help you get on the right path to buy your next home.  Did you know, if you haven’t owned a home in the last 3-years, you may be eligible to receive first time home buyer benefits again?  Contact me for more details.

1) Bank

2) Brokerage

3) Correspondent Lender

Before I dive into the explanations of what these lending types are, it’s important to have a brief understanding of the different people involved in your loan from the mortgage company.  You will have a Loan Originator, who is the person with whom you apply for a mortgage.  The next person in the process is typically a mortgage Loan Processor, who takes the information you have supplied to the Loan Originator and verifies everything, requests additional documentation and gathers property specific information in preparation for underwriting.  Upon completion of processing, your file will be submitted to an Underwriter for review. Once underwriting is completed, your loan will go into a Closer who will prepare everything for your loan closing.   The Closer is typically the one person who is getting your documents to closing and also getting your money to the closing.

Each of these four people has a very detailed and distinctive role inside the mortgage lending process. While parts of their roles may vary from one organization to another, with more responsibility on one role than another, they are each specific steps that take place in the process of getting a loan. The purpose of this background is for you to understand that while you may not see them, there are a number of different behind the scenes people and tasks that are being completed after you meet with your Loan Originator.

Banker: A Mortgage Loan Originator that works in a bank is originating a loan for you based only on their internal products and programs. They will typically originate, process and underwrite your loans all within the same company and they use their own money for closing your loan. Oftentimes, these institutions have centralized processing centers that are in another city or state. 

Broker: A Mortgage Loan Originator that works for a brokerage will originate and process your loan in their office, but will then send your loan off to the broker lender they choose for underwriting and closing. They do not use their own money for closing. They could have access to a large number of mortgage companies or to only a few. It truly depends on their size and who they’ve signed up and been approved with as a broker. All processing, underwriting and closing is outside of their control.

Correspondent Lender: A Correspondent lender has both worlds available to them. They establish relationships with multiple mortgage lenders to be able to offer a wide variety of products and programs but also maintain the control of originating, processing, underwriting, closing and funding within their organization.  Again, these lenders can be large or small, but the important difference is that they have both the access to multiple options and the control over their internal process of getting your file from origination to closing.

Even within these three categories, it’s important to know that not all lenders have access to all of the same products and programs or have different policies that prohibit them from doing things that another lender could do for you as a borrower.  For example, when you’re buying your first home in Minnesota, there are a large number of first time home buyer programs and down payment assistance programs.  Not all lenders are signed up with Minnesota Housing, or other first time home buyer programs that may significantly benefit you.  Oftentimes lenders who don’t have access to these programs will attempt to sell against them as a result.  Even mortgage lenders who do have access to them may do the same because the loans are more challenging for the originator.

I highly encourage you to do your research; know you’re working with someone who has experience, a vast array of product availability and if you’re a first time home buyer, ask about first time home buyer program availability. If you are a first time home buyer in Minnesota, you should gather as much information as you can before selecting a loan program.  We hold a free monthly first time home buyer seminar in our Burnsville office location each month.  Our next first time home buyer seminar is scheduled for Thursday, October 20th. Register to attend now.

Cornerstone Mortgage Company is a full-service national correspondent mortgage company.  We offer FHA, VA, Conventional, Rural Development, and a number of First Time Home Buyer Programs.  We Originate, Process, Underwrite and Close and Fund our loans from our local office in Burnsville, MN.  

At Cornerstone Mortgage and on the Carrie Guarrero Team in particular; we are truly focused on making your home buying experience a great one.  We have a strong desire to deliver predictable service and a process that we know works.  Unfortunately, as you can imagine, every individual has different financial circumstances and manages money differently.  Many of us truly have a different relationship with money than our neighbor or co-worker may.  For example, saving money comes naturally to some, regardless of income level and to others, saving money is very challenging.  For that reason, mortgage loans and the mortgage loan process can vary dramatically from one client to another.  Frankly, the fact that every person and therefore every loan is different is one of the things about my career that I love the most. 

Here are a few things that aid in leveling the playing field:

Top 10 Things Not to Do When Applying for a Mortgage

1. Do not overdraw your bank account. This includes using your ready reserve or overdraft protection. Unless you have significant funds somewhere else and/or this was an obvious one time blip, this shows a sign of financial mismanagement to underwriting. If it happens, we need to know about it and address it right away. Significant overdraft issues (NSF’s) can be a large issue in loan approval today.

2. Do not quit your job, change jobs or pay structures without first discussing it with your Loan Officer.  A job change or pay structure change could be a positive thing, but depending on your loan type, you may have to wait a period of time for verification of your new job before you can close on your home loan. It’s always best to discuss this upfront to eliminate any potential issues.

3. Do not deposit non-payroll related funds into your bank account unless specifically approved by your Loan Officer. If you must deposit funds that aren’t your payroll, they need to be from verifiable sources, make sure you make a copy of the check before depositing, alert your Loan Officer or Loan Processor and be prepared to provide additional documentation. NEVER deposit cash.

4. Do not spend money that we had verified unless we discuss it. Oftentimes the belief is, well, I only need $1000.00 to close on my home, so I can go spend the other $1000.00 I have in my account on whatever it may be that I need for the house. What you need to understand is that we may very be using that extra money in your account as “reserves” (money left over after closing), to prove you had some extra to fall back on or, there could have been a deposit issue relating to #3 that has caused the actual balance we have verified as useable funds to be less than what you see in your account. This can cause issues. Avoiding large expenditures and keeping your bank balances relatively stable through closing is the best way to go.

5. Do not increase your credit balances. Period. Once you have applied for an been approved for a mortgage loan, do not make large purchases on credit or allow your balances on credit to be greater than that which was on your loan application and initial credit report. If you know that this will change; i.e. a business trip etc. alert us to that fact and we will address it upfront. Depending on your credit profile, an increase in balances could cause a decrease in credit score that is large enough to cause your mortgage loan to be denied.

6. Do not apply for new credit. Just say no to inquiries. Don’t apply for a credit card to get the discount or to get a free prize for registering. Avoid others pulling your credit. This too can cause a decrease in credit scores.

7. Do not incur new debt through large purchases like a car or furniture. If you must, contact your Loan Officer first. If you can hold off on making large purchases until after your mortgage loan closing, this is a best practice but we realize that’s not always an option. Just make sure you talk to us before you make changes.

8. Do not ignore collection notices. I know that probably sounds silly to you as you read it but you need to pay attention to the potential for anything negative to report on your credit report and a new collection can also be a double whammy for you in both credit score and proving financial readiness for a home loan. A little $60 collection can cause a significant drop in credit score in a quick way. Pay attention to your mail and any final bills if you’ve moved from one place to another recently or if you’ve had unsettled insurance and medical stuff floating out there. I don’t want something little to prevent you from getting a mortgage.

9. Do not pack up all of your financial documents. It’s a best practice to keep your financial records accessible through the day of closing so that when we call for an additional piece of paperwork, you have them available. If you’ve packed them all up and stored them in the back of your storage unit, you’re not very happy with us when we call asking for something.

10. Do not try to hide any of the above. Seriously folks. We’re not against you, we’re with you, alongside you in this journey and we want to make this enjoyable. We dot every I and cross every T throughout this process. What goes on in the back room is so intensive today that you would be amazed. We validate everything and we will find out about these issues if you don’t tell us about them upfront so please, just be an open book. I know that can be challenging as it relates to finances, but I assure you it will make the process of getting a mortgage easier for you!

I go through the above list with every home buyer I meet with and also in a group setting with our first time home buyers that attend our First Time Home Buyer Class. I get a lot of chuckles and rolling of eyes, like, “yeah right”, or “duh”.  The reality is that first time home buyers or not, this list is something that I have seen people not even consider as abnormal and I’d have to tell you that while #3 in particular can really mess with verifying cash to close when you’re getting a mortgage, we see it all the time. Kids use their parents accounts because they don’t have their own. They give their parent cash – I have college aged kids myself and I would prefer they give me cash if I’m paying for something for them too. But, cash isn’t verifiable and people just don’t even think about it because it’s a normal practice for them. This is just one of many examples I can use that I know applies to a large number of people. The best thing to do is be 100% open and provide all of your documents upfront on the front end of the pre-approval process so that your Loan Officer can appropriately advise you before you’re in the thick of it. And then, take our words seriously. We don’t want to cause you undue stress or make you jump through more hoops than you need to get a loan. This is the new normal in mortgage lending and we need your help to make the process an enjoyable one!

Upcoming Events:

First Time Home Buyer Class: Thursday, September 22^nd, 6:30-8:00 PM, Cornerstone Mortgage, Burnsville.  Register online or call 952-808-0042 to register live today.

7^th Annual Fall Festival: Saturday, October 1^st, 12N-4:00 PM, Cornerstone Mortgage, Burnsville.  Come one come all and don’t forget, we’re collecting non-perishable food items and gently used winter clothing to benefit our local CAP Agency Food Shelf and Thrift Store throughout the entire month of September in all of our Cornerstone Mortgage locations in preparation for our Fall Festival when we will FILL THAT TRUCK!

At today’s record low mortgage rates, you can finance home improvements or home repairs with an FHA 203K right along with your home purchase price at the time of your initial loan closing and know that you’ve already got those items financed and under control. 

I highly recommend getting a complete home inspection upon making an offer on a property.  Oftentimes, we don’t see items that may become issues for us down stream or, even pay attention to deferred maintenance items that we will need to take care of when we fall in love with the home. 
When we purchased our last home, and had our home inspection completed, we discovered that we would need to replace a few windows, the furnace and siding within the next 3-5 years.  We could have guessed that while we were looking at the home.  The siding was deteriorating in a number of obvious places and, it was the original wood siding from the 80’s and the furnace was obviously the original as well.  The likelihood that maintenance or replacement would be in order was high and we were experienced enough home buyers to know that going in.  

What we didn’t know was that the electrical panel that was in the home was in need of replacement and that the lower-level kitchen appliances limited our ability to add our electric clothes dryer to the panel without adding additional capacity to the panel.  The cost was approximately $2500 to cure.  There were a number of other small maintenance issues that we didn’t see going in and having the home inspection allowed us to make sure we were both aware of and took care of these home repair items before they  became bigger issues.  

I tell you this story for two reasons:

 1) I highly encourage home buyers to get a home inspection done.  Remember, an FHA appraisal is not a home inspection.  Read more about Appraisal vs. Inspection.  I have two different home inspection specialists that I work with on a regular basis.  Steve Stalock and Mike Podany.    If you need a trustworthy resource, they’re great home inspectors. 

2) Most people financing today with an FHA mortgage don’t have an extra $5,000-$10,000 for home repairs.  Many of them don’t realize that they don’t have to let a property go and move on if the seller isn’t willing to make home repairs after an inspection like the one I describe of my own above.  You can use an FHA 203K loan and finance these home repairs.  

An FHA 203K is still an FHA mortgage loan.  We simply add the cost of the repairs into the loan.  You close just as you originally would have and we pay off the seller and then, your home repairs are completed by a licensed and insured contractor after you close.  Read more about the basics of the FHA 203K Loan.

The FHA 203K mortgage loan is a great alternative when you walk into a home that needs a little TLC or, even some major work.  We regularly work with three different FHA 203K mortgage loans. 

1)      Streamline FHA 203K(S) Mortgage – Total Cost is under $35,000 and home repairs are not structural in nature.

2)      Full FHA 203K Mortgage – Costs are over $35,000 and/or home repairs are structural in nature.

3)      Streamline FHA 203K(S) Mortgage|Minnesota Housing – Total Cost is under $15,000 and this loan is combined with a first time home buyer program that allows for reduced interest rates, down payment assistance and closing cost assistance. 

If you’re interested in an FHA 203K and want to get the process started, complete our online pre-qualification worksheet and we’ll get the loan process started today. 

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1) Complete a pre-qualification. You can do this a couple different ways. We want to make it easy for you! You can complete an online mortgage pre-approval worksheet and we will contact you by your preferred method to schedule a one-on-one appointment with Carrie. Or, you can call Carrie Guarrero @ 952-808-2810 or Nichole Fredrickson @ 952-808-2802 and we’ll collect your pre-approval information over the phone in a 15-20 minute phone conversation.

2) Schedule a time to meet with Carrie Guarrero over the phone or face-to-face.

3) Collect and e-mail, fax or drop off the following documents:

a. 2 Years Federal Tax Returns and W2 Forms (3 Years if you’re a First Time Home Buyer)

b. Most recent 30 Days of Paycheck Stubs

c. Most recent 60 Days of Asset Statements (All Pages, all asset types, Checking, Savings, Retirement)

d. Copy of your Driver’s License or other Government issued Photo ID

e. Additional documents may be defined based on your specific situation.

4) Meet with Carrie at your scheduled time to go through your loan options and pre-approval information.

There is a big difference between a mortgage pre-qualification and a mortgage pre-approval as you will see above.  A pre-qualification can be handled in as little as 15-30 minutes over the phone, but a pre-approval requires that we view documents that substantiate your pre-qualification information.  Click here to read the more about the difference between a pre-qualification and pre-approval.

We try to make the mortgage pre-approval process a seamless one for you so that you don’t have to guess what’s next in the process. Once you’ve provided us with the necessary documentation, the time to complete pre-approval is short. We want you to be able to get out looking at houses as soon as you’re ready, but we also want to be sure that your pre-approval is valid and that you understand your loan options and the financial considerations of buying a home. For first time home buyers, we prefer to meet face-to-face to go through all of your program options, discuss numbers and make sure you understand all of the steps in the loan process clearly.  This insures that your first home buying experience is a great one. 

If you are a first time home buyer and you’d like to learn more detail about the home buying process and the housing market today in Minnesota, sign up for our upcoming First Time Home Buyer Class. This class is jam-packed with useful information for you as you start to explore becoming a home owner.

Our next class is this Thursday, August 18th at 6:30PM at Cornerstone Mortgage Company in Burnsville. Register Here! or call 952-808-0042 to Register.  If you don’t have time this week, that’s okay too. We hold our First Time Home Buyer Class every month, on the 3rd Thursday of the month.

If you’re ready to start the mortgage pre-approval process, click here to submit your online pre-approval worksheet and Carrie or Nichole will contact you to discuss your application and schedule a time to review your options!

You’ve written a purchase agreement on a property and you’re excited about the next steps and moving forward toward closing.  You schedule your home inspection and you meet your home inspector out at the house to go through it with them.  A few items that are in need of repair that you didn’t see when you originally saw the house come out during that home inspection.  Or, your appraisal reveals some required repairs for the mortgage lender for them to give you a mortgage your new home.  

These are not uncommon circumstance and there are options to get the home in tip-top shape for you as the new home owner.  First, let me explain your options in simple terms.   I have a good friend in real estate who says it like this, “If it’s not a big deal, don’t make it one.  If it is a big deal, let’s settle it now before it settles you later.”  The reality is that if you have a home inspection contingency written into your purchase agreement and you bring items back to the seller after your home inspection for them to repair, you’re technically opening the contract back up.  Yup, this is just like Pandora’s Box.  Once it’s opened, you can’t shut it and they have the right to move on, just like you do.  The bottom-line is you don’t want to make a big deal out of items that aren’t really a big deal during a home inspection.   Your real estate agent should really be able to help you out in this decision process and you obviously need to consider what the home repair items are and your position to fix them as this will be your responsibility once you own the home.  

That said, let’s pretend you don’t want to open up that box with the seller.  You know you’re getting a fair deal, considering the current “As is” state of the property, but you’re trying to figure out how you can finance these home repair items or you know that you want or will need new carpet, new appliances, a new toilet and a few new windows.  

There are great financing options available today to allow you to not go back to the seller, but rather, finance these home repairs in your current mortgage.  An FHA 203K loan is a simple way to go about financing these home repairs and repairing them the way you want to as the homeowner.  The bonus when you do an FHA 203K vs. asking the seller to repair something is that you get to choose the who, what and how the work gets done.   Click here  to read more detail about FHA 203K home mortgage loans.   The FHA 203K program is a perfect loan option to solve the Home Inspection or Appraisal concerns without bringing the seller and contract negotiations back into the picture.  

Understand, I’m certainly not saying that there aren’t times where it makes all the sense in the world to bring the seller back into the picture and ask them to make the necessary home repairs in order to make the property eligible for mortgage financing.  I have three loans in process right now where the clients have similar situations to that which I’m describing and they are all handling the situation differently.  

The first is a home buyer who initially wrote a purchase agreement and found in the home inspection that the siding and a portion of the roof was going to need repair or replacement.  That client opened the contract up, went back to the seller and asked for a reduction in the purchase price to compensate for these items and or asked them to make the repairs.  The seller said no, rejected their offer and put the house back on the market.  That was 60 days ago.  Last week, the purchase price was reduced and the client is now presenting another offer, using an FHA 203K to do the repairs and will purchase the home for the amount she originally offered after taking the repair amounts into account. 

The second client had a home inspection and didn’t bring any issues to the seller as a result of the home inspection.  Overall, he felt that the home inspection items were maintenance issues and as a prior home owner, with some money in the bank, he felt comfortable with what he needed to deal with in the way of maintenance or home repair.  The appraisal came in last week with a requirement to repair some chipping and peeling paint on a shed on the property.   In this situation, it doesn’t make sense for the seller to not make a quick fix to meet the conditions of the appraisal and we’ll move forward toward closing. 

The third client has found their first home and loves the property but it needs some minor updating in the way of carpet, paint and appliances.  These aren’t items that a seller would likely consider repairing or replacing as they are selling the property “As is” and it’s not technically in need of repair.  None of these items will be called out on an FHA appraisal, but they will indeed increase the quality of living for the first time home buyer who is buying the house and, if the buyer paid for these items out of pocket, it could cost anywhere between $5,000-$10,000 depending on what they want to do for flooring and appliances.  They are in the process now of getting bids on these items and will likely choose to finance them with an FHA 203K vs. depleting their savings after closing or financing these items on consumer credit after closing.  

If you’re having home inspection or appraisal repair issues and looking for alternative options to finance the repairs, we’re here to help cover your options with you and talk through the variety of solutions that are available to you.  The last thing we want is for you to follow-through on the purchase of home that then leaves you with repair needs.  Why not deal with them upfront if you know they already exist.  Sometimes you don’t have a choice, as shown in one of the examples above, but whether it’s a want or a need, an FHA 203K mortgage may be a viable solution for you. 

We are FHA 203K experts and we’re happy to discuss your situation with you.  Give us a call at 952-808-2810 or complete our quick pre-qualification worksheet to get the pre-approval process started today. 

Whether you’re in the middle of the mortgage pre-approval process or if you haven’t yet started the home buying process; understanding the FHA 203K program in today’s real estate market can come in handy. A large number of the properties on the market today are bank owned or short sale properties where the seller may not entertain doing any repairs on the property.   Being armed with all of your options for mortgage financing upfront will help you to be best prepared.  

Whether you’re a first time home buyer or a home buyer who owns a home now or has in the past, your credit will impact what mortgage loan terms you are offered today and some simple things can take you from a, “not yet” to a simple yes, bring you into qualifying for programs you otherwise wouldn’t, or could save you .25-.50% in interest over a 30-year term.  Yes folks, today, credit matters in a way it hasn’t in the past.  If you pay attention, you can save thousands of dollars and maybe even a serious headache or two.

Keep in mind, we finance people from all walks of life who have been through ups and downs and if you’ve had bad credit in the past; late payments, prior bankruptcy, prior short sale, prior foreclosure or collections, that doesn’t mean you can’t get a mortgage today.  Actually, if you have had a prior foreclosure, bankruptcy or short sale, this post may be exactly what you need in order to insure that you’re on the right track moving forward so that you can have a clean mortgage pre-approval when you’re ready to look at getting a mortgage again.  Even if you haven’t had any major derogatory credit, statistics tell me that over 60% of US Consumers have had some type of credit woe at some time in their history so, likelihood is if it’s not you, someone you know may benefit. Pass it on!

I recently wrote an article about credit score. If you want more information on credit scoring, check it out.  Today’s post is geared toward preparing a clean slate for mortgage pre-approval.  There are really only a few major things that impact your credit score and what shows on your actual credit report. Here they are in a nut shell:

• How you pay your bills – on time, delayed, late, never

• What type of credit you have – mortgages, installment loans, credit cards, lines of credit

• How much credit you have and how much you use – how many open accounts you have and how much credit you still have available

• How often you apply for new credit – do you say yes every time someone offers you a discount for apply for a new XYZ card today? DON’T!

• How long you’ve had the accounts you have open currently – Depth of your credit history

For deeper information on the topic of what’s in your credit score and what you can do to improve it, click here for wisdom from one of our trusted resources, Joe McGlynn from United Credit Consultants. If you’ve had a tough time and you have no idea where to start with repairing your credit, Joe is an excellent resource for making decisions about whether you need a credit repair company or whether you can make some simple changes on your own that will put you in the place you need to be for mortgage pre-approval. You can also reach out to the Minnesota Home Ownership Center at www.hocMN.org and find a non-profit housing counselor near you.

If you’re not in a place where you need credit help, there’s still the issue of whether or not the credit report we look at is right. I haven’t done the numbers on the credit reports we pull for people applying for a mortgage but in the past, I know that the national numbers were in excess of 60% of credit files contained erroneous information.  Based on what I see and ask my mortgage clients to explain on a daily basis, I would say those numbers still hold true.  For conservative numbers sake, you’ve got less than a 50-50 shot that your credit report that we would pull may very well have some inaccuracies.  They could be major, they could be minor.  Whether or not errors are in the report may likely depend on what’s in your credit history.  Some common places we see errors in credit reports:

• Collections that have been paid but never reported as paid off to the credit bureaus. YOU need to take charge of this. If you pay off a collection. SAVE the proof and get that information to the credit bureaus to be sure it’s updated. Better yet, make paying the collection contingent upon you receiving a letter that states they will report the item as paid to the credit bureau upon receipt. I wish I could tell you that would insure that they would. It should, but it doesn’t. Once it is paid and you have proof, you should contact the credit bureaus yourself.

• Judgments that have been satisfied but are still reporting as current. The same rule applies as above. Just because you pay off the attorney on a judgment doesn’t mean that gets back to the credit bureau and reported accurately. Save your satisfaction of the judgment or go to the county and get one if you haven’t received one and, get it into the credit bureaus.

• Student loan late payments that “should never have been reported because I was in the deferment period.”. Well folks, I’m here to tell you, they often report even when you think they didn’t. Be sure and if you have any confusion with a student loan company, or any company that you’ve disputed a late payment with, get correspondence in writing. Written word is KING when it comes to getting items on a credit report updated.

• Revolving accounts that continue to report with balances that we long-ago paid.

• Aliases or Also Know As (AKA’s). Your credit profile likely contains name variations. It could be as simple as a correct maiden name or an incorrect middle initial or as complex as your last name being spelled completely incorrectly. Most of these come as a result of people who are pulling your credit inputting inaccurate information.  You say S, they hear F and we’re off.  You are now Fam instead of Sam. Oh well.  That’s not a huge deal and shouldn’t get you all worked up, but we will ask you for a letter explaining that you haven’t ever been “Fam” before just to be sure. A good rule of thumb is to be sure you’re spelling it out to someone if you’re applying for credit over the phone and that you’re printing clearly on applications you may do in writing.  Beyond that, this one isn’t going to impact your credit score like the items above will.  There are many others of course as everyone’s credit report is different and unique to them, but these are a few I see each and every week and people shoot the messenger or have great frustration over why items are still there and digging up information for me to help them get it fixed so that they can get a pre-approval for a mortgage. 

The great news is that most of the time, the above items don’t prevent clients from getting a mortgage pre-approval.  Sometimes, it slows the process; particularly if the above collection or judgment items are causing a significant drag down on your credit score but ultimately, getting a mortgage is possible and most of the time we can help you clear these items up relatively quickly IF you’ve saved your documentation.  At the end of the day, there are a few key things that I see, every week that I’d wish every client, young and old did:

• Know your credit profile. Don’t be surprised. Check your credit before the week you want to start looking at homes.

• SAVE documentation related to any credit mishap.

• Don’t make changes to your credit just before applying for a mortgage pre-approval. Consult with a mortgage expert first and let them help you decide what changes to make.

If you’re thinking about applying for a mortgage and want to discuss your credit situation, call me today at 952-808-2810 or, complete our quick pre-qualification worksheet and we can be sure you’re positioned best for when you want to buy.

If you need credit repair help, let us know that too. We’d be happy to recommend someone you can trust.  If you’re a first time home buyer and you want to learn more about credit, getting a mortgage, pre-approval and loan program options that could help you with down payment assistance for first time home buyers in Minnesota, we have a first time home buyer class August 18, 2011 at 6:30-8:00 PM in our Cornerstone Mortgage office location in Burnsville, MN.  We cover everything first time home buyers need to know before they dive into getting a mortgage or looking for a home. The current real estate and mortgage market, credit scores, interest rates, and home inspections vs. appraisals are a few of the topics we cover as we walk you through the home buying process from beginning to end. Click Here to Register.

Every month, I hold a first time home buyer class in our Burnsville Cornerstone Mortgage Office and every month, I get the same question.  “What’s the minimum credit score I need when getting a mortgage?”. 

I actually hear the question from first time home buyers, real estate agents and previous home owners every day.  Credit Score is definitely a big ticket item in the mortgage approval and loan process today. 

It used to be that there was no minimum credit score.  Our credit analysis was based on what the credit report contained.  Today, we consider both and it’s not quite as simple as what’s your score and is there a minimum. 

In very general terms – not to be used across the board by ANY means – we want a 640.  If you’re a first time home buyer, we want a 620 minimum and yes, there are exceptions.  Typically, those exceptions to minimum credit scores for mortgages come along with validated alternative credit like rental, insurance, gym memberships, cell phone bills and utilities that don’t report to the credit bureaus, and quite possibly higher down payment requirements. 

I never want someone to discount themselves due to credit score alone, but it is a very important part of today’s mortgage lending environment and credit score is something everyone should be in tune to before they jump into the home buying process.   I preach, every month in our first time home buyer class that even if you’re looking to buy a home a year from now, checking your credit out today is the best first step to getting a mortgage in the future. 

Why is that so important?  Well, quite honestly, if you haven’t looked at it and had it explained to you, there could very likely be things there of which, you aren’t aware.  It’s not uncommon for me to pull someone’s credit and find that there are errors in reporting all the way from simple items like an old account that was paid long ago but is still showing a balance to the worst case being fraud.  I see everything from late payments that people didn’t know were there, collection accounts that they knew nothing about to my worst ever situation where a long-time friend of mine had someone steal their identity and they had over $100,000 in debt on their credit report that they didn’t take out and it took attorney’s and law enforcement involvement to have the items cleaned up and removed.  We’ve all seen the commercials and they are very true.  The big part that is missing from the commercials is the interpretation piece.  Yes, you  can get your free credit report, but then, how do you interpret it?  How do you know what it says and how that equates to a mortgage loan?  You need to visit with an expert and make sure you’re on the right path. 

Furthermore, it’s not credit score alone that we look at from a mortgage qualifying or mortgage pre-approval perspective.  As I mentioned above, we will definitely be considering your score, but we’ll also be looking at what made up that score and proving that it’s valid.  Items like disputes, where you’ve gone to the credit bureau and disputed an account that may have been reporting inaccurately, or accurately but you were arguing it, may need to be removed.   If you have a 780, but you only have 1 line of active credit, that’s not necessarily a good thing.  We will likely need to validate your score by adding some of the alternative lines I mentioned above and proving that you pay more than one thing on time every month.  It’s simply so much more than just what is your credit score.  They don’t tell you that on TV and if you listen to some of the top budgeting and financial advisors on TV and follow their advise, you could actually find yourself in a position where you can’t qualify for and getting a mortgage today.  Silly I know, but true.  You need to speak with a mortgage professional if you are preparing to get a mortgage.  That’s truly the bottom line. 

So, what gets you the best available mortgage interest rates and loan program options from a credit score perspective?  A 740 or better credit score is ideal.  Click here for credit score tips from our preferred credit repair specialist.

If you’re thinking about buying or refinancing a home anytime in the near future, the best place to start is checking your credit and doing a quick pre-qualification.  You can complete our quick pre-qualification worksheet by clicking here  and we’ll let you know where you stand today and get you started on the path to credit score improvement if necessary or just reassure you that you’re in a great place when the time is right for you to get a mortgage.  

If you’re interested in attending our first time home buyer class, click here to register.  Do you qualify for first time home buyer programs that offer down payment assistance?  Attend our seminar or click here and complete our quick pre-qualification worksheet and we’ll let you know.   We offer a number of first time home buyer programs with down payment assistance and closing cost assistance through the Minnesota Housing Finance Agency and other local county and city programs.  Read more about these programs here.

Get the process started right by investigating where you stand with your credit!  It’s truly one of the most important pieces in qualifying for a mortgage today!  Our first time home buyer class is held every month on the 3rd Thursday of the month in our Burnsville, MN, Cornerstone Mortgage Comapny office.  If you are a first time home buyer and you want to learn more about first time home buyer programs, credit scores, getting a mortgage today, this is a great place to start. 

If you or someone you know (now I’ve included everybody right?) had a prior short-sale or foreclosure and you want to know what it takes to own a home again after a bankruptcy, foreclosure or short sale, this post is written for you.  

First, let me tell you that I get it.  I know where you are, that you didn’t want to be there and that you’ve had a tough time.  At my personal core, I understand how it feels and what you’ve experienced.  I am here to help. 

I often tell client’s that I never say no.  Sometimes I say “not now”, but I always help to create a plan for future success.  So with that said, let me help those of you who have experienced a short sale or foreclosure, oftentimes combined with a bankruptcy, to pave the way to future success and becoming a homeowner again. 

Whether you had a foreclosure or short sale last month or 3 or 4 years ago, the time to start preparing for your next home purchase is now.  I don’t say this lightly.  It’s relatively common today for me to get a loan application from someone who has experienced short sale or foreclosure in the past and they never got advice from someone right after the short sale or foreclosure occurred, they know it’s been a while now and they want to get into a new home.   That’s great, and I’m here to help, BUT, if I would have visited with them a year prior, they could have had a way better picture and a whole lot less struggle getting a mortgage approval today. 

In order to be eligible for FHA financing today after a mortgage default, with rare exception, you need to wait three years before you can get another mortgage approval for a loan.  Conventional loan guidelines are longer and VA loan guidelines can be shorter, so I’ll use FHA as my baseline for the purpose of our conversation today. 

The type of mortgage or mortgages that you had matters.  Whether a short-sale or foreclosure was handled correctly and whether you were advised correctly matters as well.  Unfortunately sometimes people aren’t advised correctly.  Examples of this are often found when I meet with people who had a first and second mortgage at the time when they went through their foreclosure and they didn’t realize that the second mortgage company could very well still had a claim and a right to collect that debt from them.   If you had a bankruptcy and wrote off that second mortgage, you’re likely clear, but if not, chances are, you could still have an obligation to settle.   If handled correctly in a short-sale, you received full satisfactions from both the first and second mortgage companies.  

I say, if handled correctly because many real estate agents, who don’t specialize in short sales, have handled this incorrectly.  Working with an expert in short-sales is key to your future success.  If you’re in a position where you’re thinking about your options today and you need a recommendation to a short sale expert to discuss your options, let me know.  I am happy to recommend someone and connect you with the right resources to make a solid decision.  

Key factors in qualifying again for a mortgage approval:

• Re-established credit, particularly rental history.   You’ve likely been renting, or will be.  Always pay your payments by check and save copies of your cancelled checks.  We will want to verify on-time rental history and many people rent from individuals today.  Direct verifications from an individual are generally not acceptable, so save your canceled checks and never pay cash.  If your landlord requires it, use money orders or cashier’s checks or automatic transfers from your checking account.
• Improved Credit Scores.  If your mortgage foreclosure or short sale  is the only thing that had problems, you’re likely okay here, but if you had other late payments on other bills during this time frame, you may need some help.  Analyzing your credit report and what you need to do in order to get to where you need to be from a credit score perspective is tremendously important.  Click here  to read about credit scores from our preferred credit repair specialist. 
• Pattern of Savings. Establishing a pattern of savings can go a long way when presenting your loan application after a short sale or bankruptcy.  This may not be an issue for many of you, but for some, it’s challenging.  Set-up a separate savings account that money goes into each month that equates to the difference between what you are paying in rent and what you believe you can afford and will want to pay in a mortgage.   I recommend an account that also reports to the credit bureaus so that you’re killing two birds with one stone and re-establishing credit while saving some money. Ask me about this type of account. 
• Isolating the incident.  No late payments post bankruptcy, foreclosure or short sale.   Do whatever you can do to avoid any late payments on any other debt that reports to your credit report after a short sale, bankruptcy or foreclosure.  Late payments after these items can be very challenging to overcome.  While they aren’t a reason for denial alone, the absence of them shows that the situation was isolated to a specific period in your life and that you have overcome it.  We want to be able to show that in this period of time, you had challenges, but since then, things look great.
• Save all of your documents relating to the foreclosure, bankruptcy or short sale.  We will  need to see these documents and it’s not uncommon for us to hear that people don’t know where they are because it was so long ago.  Keep your records and expect that we will ask for the documents to support the timing and what transpired. 

The great news is, if you’re short sale or foreclosure was more than 3 years ago or is approaching that time frame, you may very well be eligible to purchase a home again!  In addition, you may also be eligible as a first time home buyer again and receive the benefits of being a first time home buyer.  To be considered a first time home buyer again, you need to not have owned a home in the prior 3 year period. 

Check out these first time home buyer programs. If you’re a year out, or you’re just facing this situation now, please don’t hesitate to call.  We want to help set-up a path that will lead you to a successful outcome down the road.   There will be a time when you’re ready and we want to be sure you’ve received expert advice on how to be approved for a mortgage again after a foreclosure, short sale or bankruptcy.