Am I Eligible for FHA Loan?

Buying a home is stressful, especially when you’re trying to buy a home when money is tight. When life hands you lemons, it can be hard to secure conventional home loans from banks, credit unions, or other lending institutions due to one factor or another. Thankfully, there is another option.

The Federal Housing Administration (FHA) offers loans for those with lower credit scores, first-time homebuyers, low- to moderate-income buyers, and many other situations that may apply to you.

An FHA loan is a mortgage loan backed and insured by the FHA and issued by an FHA- approved lender. These loans often require less of a down payment as well.

We discuss how FHA loans work, along with how they differ from conventional loans. There are also various types of FHA loans that we describe as well, along with general eligibility requirements. If you are interested in learning more or think that an FHA loan is right for you, be sure to contact an FHA-approved lender.

How does an FHA loan work?

An FHA loan works similarly to a conventional loan -- you borrow money to pay for a house with the agreement to pay it back with interest. However, there is one catch: borrowers have to purchase FHA mortgage insurance. This protects the lenders if you default on the loan and cannot pay it back.

And who pays for the mortgage insurance? You do. But it is not as daunting as it seems. Under all FHA loans, you are required to pay two different premiums: an upfront mortgage premium and an annual mortgage premium. 

An Upfront Mortgage Insurance Premium is around 1.75% of the amount for the loan, which you pay when you receive the loan. Often, this premium gets included in the financed loan amount, so you do not have to worry about having that money saved already.

The Annual Mortgage Insurance Premium varies in percentage of the loan amount, depending on the term, amount, and the loan-to-value (LTV) ratio of the loan you are looking to get. It is paid monthly.

These FHA mortgage insurance premiums may be canceled after 11 years if you finance around 90 percent or less of the property value and are current with all your payments. If your loan has a high loan-to-value (LTV) ratio, as in more than 90 percent, you will have to carry the insurance until the loan is fully paid off.

FHA Loans vs. Conventional Loans

Conventional loans require more from you as the buyer in terms of a down payment and line of credit. You may even have already experienced a denial for a conventional loan based on these factors. And if you are just getting started but are not sure if your credit score is good enough, here is a breakdown of the differences between FHA mortgage loans and conventional loans.

Requirements	FHA Loans	Conventional Loans
Credit Score (minimum)	500	620
Down Payment	If your credit score is between 500 to 579: 10% If your credit score is 580 or higher: as low as 3.5%	Between 3% and 20% to qualify
Down Payment Assistance Available	Yes	No

As illustrated in the table, there is often less required for you to put up front in terms of an FHA loan versus what you have to pay for a conventional loan. There are more requirements that go into an FHA loan to qualify than just credit score and down payment, and we will discuss them below.

Different types of FHA Loans

There are a variety of FHA loans that are available to you if you qualify. Each has unique pros and cons that are involved, and some have more requirements than others. There are two types of interest rates available for you to choose from: fixed or adjustable.

The fixed-rate mortgage means that the interest rate is a flat rate throughout the duration of the loan. It never changes.

There is also an adjustable-rate mortgage (ARM) that changes periodically over time, potentially even giving you a lower interest rate at times. Often, the FHA has a hybrid version between the two where a set time at the beginning of the loan is fixed-rate, with the remainder being adjustable.

There are several types of FHA loans you can explore. If you have any questions about the different types, be sure to talk to an FHA-approved lender to find what options are the best for you.

Home Equity Conversion Mortgage (HECM)

A Home Equity Conversion Mortgage (HECM) is one of the most popular types of a reverse mortgage. This type of FHA loan is applicable only to seniors age 62 and up. It works by allowing you to convert your home’s equity into cash while keeping the title to your home. You can get these funds either through a fixed monthly stipend or as a line of credit. You can also do a combination of both the fixed monthly payments and lines of credit.

Section 245(a) Loan

The Section 245(a) Loan is a type of FHA loan designed for borrowers who expect their income to increase. If you are this type of borrower, this program is a graduated type of payment as your income increases. The Graduated Payment Mortgage starts lower with monthly payments, and it gradually increases over time. The Growing Equity Mortgage has scheduled increases in payments that reduce the term of the loan.

FHA 203(k) Improvement Loan

This type of FHA loan factors in both the cost of the home and the renovations and repairs needed. The FHA 203(k) Improvement Loan rolls both the price of the home and the cost of improvement into one loan. This can help you if you do not have a lot of spare cash to help fix the house after the down payment.

FHA Energy Efficient Mortgage

The idea behind an FHA Energy-Efficient Mortgage loan is that it upgrades to increase your home’s energy efficiency to lower utility bills--which means you have more money at the end of the month to pay for mortgage payments. This loan is similar to the FHA 203(k) Improvement Loan, but instead for maintenance and repairs, it is to renovate your home to be more energy-efficient. This includes adding solar panels, wind energy, or even new insulation

Am I eligible for an FHA loan?

Contrary to popular belief, FHA loans are not restricted to first-time buyers or low-income households. You can be a repeat home buyer if you meet other requirements, in addition to the general guidelines. Moderate-income households can also qualify for FHA loans. However, there are some general requirements. It should be noted that if you are delinquent on your federal student loans or federal income taxes, you will not qualify, even if you meet all other requirements.

1. Verifiable income

To be considered for an FHA loan, you have to have a verifiable employment history for the previous two years and a verifiable income. It can be done through pay stubs, tax returns, and bank statements.

2. Payment of existing debt

Another requirement is that your income-to-debt ratios allow you to pay the monthly payments and keep consistent on all your other debts. Your “front-end debt ratio” is the monthly mortgage payment for the loan and cannot exceed 31% of your gross monthly income. Your “back-end debt ratio” is the mortgage and all other debt payments (car loans, student loans, etc.) and cannot exceed 43 percent of your gross monthly income.

3. Appraisal

The property also needs an appraisal conducted by an FHA-approved appraiser. This is to ensure the cost of the house, along with the property, meets certain minimum requirements.

4. Good credit history

Just because you may not have good credit now does not mean that you always had or will have bad credit. This is especially true for first-time homebuyers who may not have much credit to begin with but are good to make their payments. Essentially, you need to be able to demonstrate a history of being able to pay things back. This can be from rent payments to utility bills, or other loans. You also have to demonstrate that you are working towards establishing good credit.

5. Down payment

To qualify, you have to have money ready for a down payment. The amount you need depends on your credit score, and you can reference the table earlier for the down payment percentage for your credit range.

6. FICO score of at least 500

Your FICO credit score must be at least 500. But the higher your credit score, the lower percentage of a loan you need to be saved up for a down payment.

7. Primary residence and FHA Loan limits

The house must be your primary residence and cannot exceed more than the FHA loan limit for that particular unit type. These limits are determined by the region in which you live, with a special exception to the areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

8. Bankruptcy and mortgage foreclosures

At least two years must have passed if you experienced a bankruptcy event. Some special considerations can be made if you can demonstrate the bankruptcy was due to an uncontrollable circumstance. You must also be three years removed (at least) from mortgage foreclosures.

Final thoughts

When it comes to finding the right home, it can also mean finding the right loan. And when getting a conventional loan from a bank or another lending institution is not an option, it can be difficult. FHA loans are designed to help those who do not qualify or cannot get a conventional loan if they meet certain basic requirements. There are five types of FHA loans, and if you are interested in seeing if you are the right fit, reach out to an FHA-approved lender to get started.

Not sure where to start? Make Hero Home Programs™ your first call. Our specialists will help you along the home buying journey. We have helped thousands of people and look forward to serving you.

Am I Eligible for FHA Loan? was originally seen on https://herohomeprograms.com

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How to Choose a Loan Officer?

Buying a home is a huge accomplishment—and a huge amount of stress. But it does not have to be if you have the right loan officer that will work with you and your financial needs to get you set up with a home loan.

A loan officer is a representative from a financial institution or mortgage company that meets with you, your real estate agent, and the other banking professionals to turn your home-buying dream into a reality.

And finding the right one can be a hassle. Thankfully, there are some ways to narrow down your search. Here we discuss what a loan officer is, how they work during your home-buying process, and why you should consider a dedicated loan officer when purchasing a home. We will also discuss the differences between a mortgage broker and a loan officer and how to look for the right one for you.

What is a loan officer?

A loan officer reviews, authorizes, and recommends your home loan for approval. They determine your creditworthiness and your ability to pay back a loan. Loan officers work with you throughout the home-buying process. They also work with your real estate agent, loan processor, and loan underwriter at the financial institution.

Your loan officer will discuss mortgage options with you and will keep you in the loop about your loan throughout the approval process. They play a large part in the home-buying process, so it is important to find the right one for you and your financial needs.

How does a loan officer work?

A loan officer is the face of your home buying loan. They meet with you (via phone, in-person, or sometimes online) and determine the right mortgage option for you and your ability to pay the loan back, along with seeing if you have a good line of credit. Once all of that is figured out, they recommend your loan for approval and send it to the loan underwriter.

Think of them as your inside agent to the lending institution. They are your intermediary between you, the underwriter, and the loan processor. The loan officer is the one that gives you the green light for your home shopping budget and is there when you are ready to make a purchase.

Why do you need a loan officer?

Loan officers are important people you want to have on your side as you journey through the home buying process. To use another analogy, they are the head coach to your home-buying baseball team. The lending institution is the owner, you are the general manager, and your realtor is your third-base line coach. Hence, you should (and need) to choose a loan officer before finding a real estate agent. Loan officers possess a lot of knowledge in the home-buying arena and have a lot of power to recommend your loan to be approved. It is vital to start working with a loan officer as soon as you start looking to buy a house.

Here are some key reasons why you need a loan officer:

• Guide you on your budget and mortgage options before starting to look for a home.
• Connect you to real estate agents in the area.
• You can get unbiased information about the differences between various parts of the area.
• Goldmines of information on home buying, the process, and the market
• Highly accessible and available
• Can grant you a preapproval to make you a more competitive buyer

Loan officer vs. mortgage broker: what’s the difference?

A loan officer, as discussed previously, is an employee of a lending institution. They are the head coach of the whole operation. That means mortgage brokers are the scouts. They bring together the lenders and the borrowers.

Mortgage brokers and loan officers are good to have from the get-go of buying a home. But you may not always need a mortgage broker—however, there are some situations they are handy to have on your side. They can connect you to lenders and banks and can make a deal from almost anything.

When is it handy to have a mortgage broker?

• Bad or problematic credit
• Unique personal or commercial properties
• Finding a loan officer in a different part of the country
• If an online bank doesn’t have an in-person office in your area

Mortgage brokers can help you find the right loan officer and lending institution for your needs, but they are not always required. If you bank at a local institution, you may not need the middleman to connect you with a loan officer. Keep in mind as well that mortgage brokers do take a percentage in their own fees.

Whether you choose a mortgage broker to help you find a loan officer or not, it is important to start finding those people as soon as the idea to buy a home enters your head. You may not need a mortgage broker, but you will need a loan officer, and it is important to start looking for the right one for you.

How to choose a loan officer

Choosing the right loan officer for you is important. There are a lot of factors that play into what loan officer is right for you. You should pay attention to those more genuine and ethical officers versus those that push you to make a decision quickly.

Fees

Loan officers sometimes receive a commission from the loans they help get approved, so it is important to consider their fees. And it is also vital to ask about the types of fees the lending institution itself has regarding your loan (late penalties, appraisal costs, etc.)

Familiarity with different types of loans

Taking into consideration the types of loans your loan officer is familiar with is a crucial factor. For example, a car loan officer knows many car dealerships and may not be as helpful as a loan officer with expertise in the housing industry.

Number of lenders dealt with

Some loan officers work with different lending companies. You want a loan officer that works with a variety of lenders so you can spread a wide net to find the right home mortgage loan for you.

How long in the mortgage business

Finding out how long your loan officer has been in the business is helpful information. You can ask for their license number and look it up on the national registry to see if they have any complaints filed against them. Also, looking up the company itself is useful, and you can see if there have been any reports to the Better Business Bureau.

Does the company hold or flip loans?

A lending company may hold the loan and collect the payments from you and answer any questions. Sometimes a lending company will flip a loan to a third party after it has originated. If that is the case, you must understand and be comfortable with payments and contacts to an unidentified third party.

Closing time

Asking how long the loan’s processing time is crucial. You want to know when everything will be finalized and approved, and the house is done and bought. Your loan officer can answer these questions and keep you in the loop as the process moves along.

The most important question, however, is one you have to ask yourself. Determining your comfort level with the loan officer is, and should be, the final deciding factor. If your gut is telling you that it is not a right fit, trust it and keep looking for the loan officer that makes you feel comfortable.

Start your home buying journey off on the right foot

There are a lot of factors that go into choosing the right loan officer for you and your needs. From finding the right officer to asking the right questions, you can be sure that the loan officer you choose to work with on your home loan is the right one for you. And once you find that perfect fit, you are one step closer to finding your perfect home. If you are ready to start the home buying journey, reach out to the home specialists at Hero Home Programs™. They offer reduced lending fees, access to grants and tax rebates, discounted vendors, and more.

The following post How to Choose a Loan Officer? is republished from https://www.herohomeprograms.com/

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Is Down Payment Assistance a Loan?

Home buying is stressful, but to add falling short of down payment can be something akin to a disaster. When you don’t have enough money to cover a down payment, that throws a wrench into the whole home buying operation. Thankfully, there is help in the form of down payment assistance (DPA).

What is Down Payment Assistance?

Down payment assistance are programs designed to help reduce the amount of money potential homeowners need to save for a down payment. This assistance often comes in the form of grants or low-income loans.

How much funding can you get from down payment assistance?

The amount of money awarded from a DPA is influenced by several factors, including the program and the state you’re from. However, a RealtyTrac study found that, on average, people saved over $17,000 throughout the life of their loan by using down payment assistance.

Types of Down Payment Assistance available

There are various programs available for down payment assistance. However, the type and amount of these programs vary by state, so it is a good idea to look into the programs specific to your area.

Grants

Grants are the best option. They never have to be repaid! Think of it as a giant gift of money. The amount and type of grant vary by state and some grants may have extra guidelines for eligibility.

Forgivable loans at zero percent interest

Another option for down payment assistance is a forgivable loan. These loans are second mortgages at zero percent interest that are forgiven after you live in a house for a set number of years. The forgiveness period varies and is determined by the lending institution. If you move before the forgiveness period occurs, you will have to pay back a portion or all of the loan.

Low-interest loans

Down payment assistance can come in the form of a second mortgage granted simultaneously with the first one. The key is to have a low interest rate (some lending institutions even offer zero percent!) as you will be paying this loan back. Essentially, you have two monthly mortgage payments, but the help from the second mortgage can cover the costs of a down payment.

Deferred payment loans at zero percent interest

Combining the forgivable loan along with the low-interest loan and you have what is called a deferred payment loan. These 0% interest loans don’t have to be paid as long as you live in your house. However, they are not entirely forgivable. You will have to pay back this type of down payment assistance when you move or sell your house or refinance your first mortgage.

Matched savings program

Another type of assistance is the matched savings program, also known as the individual development accounts. With this, homebuyers deposit an amount into a financial institution, and the institution matches the amount. You then can take that whole amount and apply it to a down payment.

Types of loans where you can use DPA

There are a variety of loans that you can have in conjunction with down payment assistance. These loans often come from government agencies, but some also are private.

The most popular are:

• HUD loan: The U.S. Department of Housing and Urban Development (HUD) makes it easier for those with shaky credit or with low- or moderate-income to own a house through their various programs.
• FHA loan: The Federal Housing Administration (FHA), a division of HUD, are also loan options. These loans are backed and insured by the FHA and help first-time homebuyers with buying a house.
• VA loan: The Veteran’s Administration (VA) offers loans to current members of the Armed Forces, veterans, and in some cases, spouses of deceased service members. You must meet service requirements to qualify.
• USDA loan: If you are looking to buy a home in a rural or suburban area, you may want to look into a loan from the U.S. Department of Agriculture (USDA). These loans have specific income and property requirements, so be sure to know if you qualify.

Eligibility

The exact eligibility requirements for down payment assistance vary by program and state and whether you live in a “target area.” However, there are some general guidelines:

• You must be a first-time homebuyer*
• Income level is low or moderate
• The home is your primary residence
• The home is in a “target area” determined by the census
• The down payment assistance is used with an approved mortgage loan
• You work with an approved mortgage lender for the program

*You can be a repeat home buyer if you haven’t bought a property for, at least, the past three years.

How to apply for down payment assistance?

To apply for DPA, you first start by researching what programs are available in your state, county, and city. HUD has a list of programs by state. Reach out to those programs if you have any questions that aren’t covered in your search. And then, find a mortgage lender that works with that program.

Is down payment assistance a good idea?

If you are a first-time homebuyer with a low- or moderate-income level and shaky credit, you may want to seriously consider your options using a down payment assistance program. It is important to be vigilant and conduct thorough research on each program to find the right one for you. Your mortgage lender can also be a great source of information on certain programs. All in all, if you meet the general requirements for DPA, then you should be looking into what your options are and get one financial step closer to owning a home.

You can also reach out to Hero Home Programs™ for more information about these programs.

The following blog post Is Down Payment Assistance a Loan? was originally published to https://herohomeprograms.com

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Can You Buy a House With Bitcoin?

The housing and financial industries are an ever-changing world and the rise in cryptocurrency has started a purchasing trend like no other. Professional athletes, like NFL tight end Sean Culkin, have converted entire salaries into bitcoin. This demonstrates the growing popularity of cryptocurrency and the new money trend of the 21st century.

With the rise of cryptocurrency, many are wondering what they can spend their crypto-cash on. From everyday small purchases to large investments, there is a lot you can do with cryptocurrency. But can you buy a house with Bitcoin?

What is Bitcoin?

Bitcoin (BTC) is a digital currency that has no centralized authority and is not backed by any bank or government. There is no thing as a physical ‘Bitcoin’, as it is more just a ledger of transactions that anyone can see, known as a blockchain. Bitcoin is one of the most popular cryptocurrencies there is. If you are interested, you can learn more about Bitcoin here.

There are other cryptocurrencies, with perhaps Ethereum (ETH) being the most popular alternative to Bitcoin. Another well-known cryptocurrency is Litecoin (LTC), which is seen as a later version of Bitcoin.

Can Bitcoin be taxed?

Bitcoin can be taxed, depending on the country. For example, in the United States, cryptocurrency is considered property and is subject to capital gains tax in the eyes of the Internal Revenue Service (IRS). This means that if you are a U.S. taxpayer, you have to report bitcoin and other cryptocurrency transactions on your tax return. Given that cryptocurrency is considered a form of property and not as money, it is taxed similarly to stocks.

How do you purchase a home with Bitcoin?

The first home ever purchased entirely with cryptocurrency was in 2017 in Texas. In a matter of minutes, the closing was done, and the transaction was completed with Bitcoin.

When purchasing a home using Bitcoin, the two parties must agree on the transaction, and both buyer and seller must have Bitcoin accounts. The transaction, once completed, is irreversible and cannot be undone. Some considerations are needed when looking to buy a house using cryptocurrency:

• The seller and their representatives need to understand the options and methods of cryptocurrency.
• The price is highly volatile, given that cryptocurrency is not backed by any tangible product.
• There can be a lot of risks involved for the seller, especially in a 1031 exchange.

Benefits of using cryptocurrencies for home buying:

Buying a home is a huge investment and not one to be taken lightly. There are a lot of benefits to using Bitcoin and other cryptocurrencies when purchasing a home. For one, it can be like a cakewalk moving through the process, along with saving you a lot of stress. Some benefits include:

• Less paperwork, which helps the environment
• Minimal settlement time
• Secure and proof of ownership
• Minimal transaction fee
• Some sellers are interested in investing in cryptocurrency and may offer a discount
• Fewer fees due to the absence of intermediaries

Challenges of using cryptocurrencies for home buying:

Just as there are benefits, there are also challenges that can come with buying a home using cryptocurrencies like Bitcoin. Despite having existed since 2009, there is still hesitancy amongst the general public to jump into the world of Bitcoin. Some challenges of using Bitcoin to pay mortgages include:

• The volatility of the price is extremely high
• Contract default risk is high due to cryptocurrency price volatility
• Some sellers may not accept cryptocurrency for the purchase of their home
• U.S. income tax liability to convert cryptocurrency to USD

There is a helpful table that compares Bitcoin transactions to standard USD transactions for purchasing a home here. The table also compares the different ways you can buy a home using Bitcoin and the pros and cons of each method.

Where can I buy a house with Bitcoin?

It can be difficult to find a place that lists what houses accept Bitcoin like a traditional real estate website. This can complicate a rather seamless process. Add on the stress of moving and packing, it can be a lot to try and find the right home.

Here are some websites to get you started on your search:

• Propy
• CryptoRoof
• BitHome
• Bitcoin Real Estate
• Realtor--Bitcoin

If you are just starting your home-buying journey, it is important to remember that things can change on a dime. The right home for you will pop up eventually, so it is important to stay optimistic and have hope.

Turn your Bitcoin into a tangible investment.

When it comes time to buying a home, you can consider cryptocurrency as a payment option. It is a great way to implement the money you earn through Bitcoin and other cryptocurrency services into larger life ambitions, goals, and dreams. The changing world of cryptocurrency has already gained a steady trend in availability and interest. And with services like Bitcoin, you can achieve things that were perhaps not possible with traditional money spending power.

If you are ready to start your home buying journey, reach out to specialists at Hero Home Programs. They work hard to save you thousands of dollars on the home buying process. From discounted vendors to local grants, they can help you attain your homeownership goal.

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What Is a HARP Loan?

Do you owe more to your house than it’s worth? Having negative equity in your home can be disheartening. After all, you have worked so hard to have a place of your own, and then you feel like your payments aren’t even going anywhere.

Oftentimes, people end up in these situations due to high interest rates on their home loans.

Previously, the solution that many Americans took advantage of to get out from under their high interest rate was applying for a HARP loan. The HARP loan, or home affordable refinance program loan, began in 2009 after home values decreased during the 2008 recession.

The HARP loan allowed homeowners to refinance their homes at lower interest rates, making their mortgage payments more affordable and getting them out underwater. Though the program ended in 2018, more than 3.4 million Americans took advantage of the HARP loan while it was in existence. You can learn more about the history of the HARP loan here.

Eligibility for a HARP loan

The HARP loan was targeted at homeowners that had a loan-to-value ratio of at least 80%. These homeowners had a hard time finding traditional refinancing because of the lack of equity in their home. Traditional refinancing options have various requirements, but most of them require you to have at least some kind of equity. HARP allowed homeowners to circumvent this requirement.

Though homeowners didn’t have to have equity in their home, there were some other requirements to qualify, including:

• Having a Freddie Mac or Fannie Mae mortgage that closed on or before May 31, 2009
• The original loan must have had a loan-to-value (LTV) ratio of at least 80%
• The borrower could not be delinquent on their mortgage payments with limits to one late payment in the previous 12 months, and none in the past six months

Surprisingly, there was no minimum credit score required. These requirements made it easy for this loan to help millions of Americans and were a lifesaver for many until its ending.

Why and how did the HARP program end?

The HARP program was supposed to end in 2016 but was extended through 2018, where it expired on December 31st. The main reason for it to come to an end was that fewer and fewer people nationwide qualified for the program.

During 2018, before the HARP program expired, it was estimated that fewer than 38,000 homeowners qualified. Those homeowners only resided in 10 states. With not enough people who needed assistance, there was no longer a need for the HARP program.

Of course, things have changed since 2018, and with those changes, new programs have replaced HARP.

Programs that replaced the HARP loan

1. Fannie Mae High LTV Refinance Option (HIRO)

The Fannie Mae High LTV Refinance Option, or HIRO, provides refinancing to existing Fannie Mae mortgagers who are paying on time but have a high loan to value ratio that doesn’t qualify for traditional refinancing options. Fannie Mae requires that the borrowers must benefit from the refinancing by either:

• Reduced principle and interest payments
• Shorter amortization term
• Lower interest rate
• A more stable loan such as moving from adjustable to fixed-rate interest rates

Features of this program include:

• Transferable mortgage insurance
• Simplified documentation requirements for easier application
• Various underwriter options

How to qualify for HIRO

In addition to being in a high LTV situation, there are a few other requirements for the HIRO loan, including:

• Having an existing Fannie Mae mortgage closed on or after October 1st, 2017.
• The loan must be 15 months old.
• Current with their payments with no 30-day late payments in the most recent six months, and no more than one 30-day late payment in the past 12 months. Any history of payments more than 30 days late will disqualify you.
• The mortgage must not have been previously delivered as a DU Refi Plus™ or Refi Plus™ mortgage.

Interestingly, the mortgage may be refinanced more than once under this program as long as all the requirements are still met.

Freddie Mac Enhanced Relief Refinance Mortgage (FMERR)

Like the HIRO loan, the Freddie Mac Enhanced Relief Refinance Mortgage, or FMERR, offers a refinancing option for existing Freddie Mac mortgagers who are on time with their payments but have a high LTV ratio that doesn’t qualify for traditional refinancing options.

Features of this program include:

• Conventional 15-, 20-, or 30-year fixed-rate mortgage are eligible
• No program expiration date
• All occupancy types are eligible
• Lenders do not have to comply with standard waiting periods after derogatory events.

How to qualify for FMERR?

In addition to the loan being a pre-existing Freddie Mac mortgage, you must have these qualifications:

• It must be seasoned for at least 15 months.
• For adjustable-rate mortgages, the maximum loan to value ratio is 105%
• You must have applied for your mortgage after November 1, 2018

HARP vs. the alternatives

Though it seems that these alternatives have similar requirements as the HARP loan, there are actually a few differences. For one, HARP was only able to be used once. These programs can be used for an unlimited amount of time. However, keep in mind that you will not be eligible for either of these programs if you have used HARP.

In addition, the loan age requirement didn’t exist with the HARP loan. With HIRO and FMERR, the loan must be at least 15 months old. The age requirement is actually a good thing because it prevents loan churning. Loan churning is when a lender encourages multiple refinances to make more money, which isn’t always in the borrower’s best interest.

Similar to HARP, there are no LTV maximums for HIRO or FMERR. Though these alternatives are more based on the LTV ratio and have different minimums.

How to apply for HIRO or FMERR?

There is a relatively easy process to apply to HIRO and FMERR. However, you’ll want to make sure you prepare and do your research. Here are our recommended steps to applying:

1. First, contact the home-buying and refinancing specialists at Hero Home Program. They will be able to either
   • Assist you directly or
   • Refer you to a vendor who offers discounted rates for the following steps.
2. Determine if your loan is Fannie Mae or Freddie Mac. You can do this by looking at your loan paperwork or by using the loan lookup tool on each of their websites.
3. Get an appraisal of how much your home is worth.
4. Determine how much you owe on the house through your lender
5. Calculate your LTV.
6. Use the HIRO and FMERR eligibility guides to determine if you qualify based on your LTV.

HIRO and FMERR are great alternatives to HARP

Overall, HIRO and FMERR are great alternatives to HARP. They provide an opportunity for those who normally wouldn’t qualify for refinancing a way out from negative equity. If these programs sound like something you would like to learn more about, reach out today.

Original post here: What Is a HARP Loan?

How to Make an Offer on a House

Making your first offer on the house can be intimidating and even a little bit scary. The process doesn’t have to be either of those things, though. Making an offer on a house can be boiled down to a few easy steps. Let’s examine them.

The process of making an offer

Before ever making an offer, you should have already taken a few steps. The first step is getting a pre-approval to know how much house you can afford and make the offer process go smoother. After your pre-approval, you should find the right house in your pre-approval budget. Additionally, you should have a real estate agent to help you through this process.

Once you are ready, you will take the following steps:

1. Determine what you are willing to offer for the house.
2. Set contingencies.
3. Decide how much earnest money to offer.
4. Write and send an offer letter.

What is the house worth to you?

The first step is determining how much you are willing to offer. How much is the house worth to you? You might have a price point in mind, but be careful not to choose a random number.

There are several factors that go into choosing the price. Some of those factors are:

• Home considerations - Does the house need renovations or repairs? What is the price of similar homes in the area? Is there any competition for this particular home?
• Budget considerations - Consider how much you can comfortably afford. Don’t use the amount that’s listed on your mortgage pre-approval for this amount. Consider the monthly payment that you’d like to pay.
• Market considerations - Your real estate agent should be able to provide you with a comparative market analysis that will tell you whether or not the current market is a buyer’s or seller’s market. Which type of market is currently dominating will determine how much you offer.

When will you walk away?

The next step in making an offer is setting contingencies. Contingencies are reasons you can walk away with your earnest money (money similar to a deposit). These contingencies can often include reasons such as financing and appraisal.

It’s important when making an offer on a home not to put too many contingencies into the offer. If you do put too many contingencies in the offer, it could cost you the house due to the number of obstacles.

Additionally, make sure that you always set a contingency on a home inspection. If a major defect in the house shows up during inspection, your earnest money will be safe.

What is earnest money and how can it help your offer?

If you read our blog “What Is A Good Faith Deposit,” earnest money is similar to a deposit put in escrow to show good faith that the buyer wants to buy the home.

Earnest money can help your offer stand out among other offers because it shows that a buyer is willing to invest some of their own money into purchasing the home. The money is similar to a deposit and is kept in escrow. The buyer may keep their deposit if a contingency is met, but otherwise, the money usually goes towards the home’s down payment.

Why is an offer letter important?

An offer letter contains all of the important parts of making an offer. The letter should be drafted by your real estate agent and should contain the following:

• The new home address
• Names of any adults that will be on the title
• Your offer price
• Your contingencies
• Concessions you’re asking for such as closing costs or repairs
• Anything else you want to be included in the sale. These can include lighting fixtures, window treatments, etc.
• Your earnest money deposit
• Your mortgage pre-approval letter
• The date for expected closing
• The date you want to move in
• A deadline for responding to the offer

How to make your offer stand out

No matter the offer, it’s important that it stands apart from the rest, particularly if this home is your dream home. You wouldn’t want to lose out on it because the offer didn’t catch the seller’s eye.

1. Make the highest bid first.
   Make the highest bid before anyone else can beat you there. Be sure not to submit a “lowball” price because that may be flat-out rejected. Your strongest offer should be the first offer you make.
2. Put down as much as you can.
   Show you are serious about buying the home by making a large down-payment. The larger the down-payment on the home and the larger the earnest money deposit, the more serious you look to a seller.
3. Offer to close quickly.
   Most sellers are on a timeline of their own and time can be even more important than money. Offer to close quickly and meet the sellers’ timeline and you will have an offer that will appeal.
4. Don’t take too long for the inspection. Better yet, include an as-is home inspection contingency.
   An as-is home inspection contingency takes the stress off of the seller because it allows them to sell the house without making repairs. The buyer would still have a contingency allowing them to back out of the offer if the home inspection revealed something they couldn’t live with.

Making an offer on the house starts here.

Making an offer on the house can be a simple process, provided you have a few things underway first. Make sure you are preapproved for a loan and hire a real estate agent. Ensure the agent is a buyers’ agent because they will advocate for you and handle the bulk of the offer letter.

You can make an offer stand out by being sure that it is strong followed by earnest money and few contingencies. You can strengthen it even further by working on the sellers’ timeline and making sure inspection doesn’t take too long.

If you are ready to make an offer on a home, reach out to the specialists at Hero Home Programs. They will work hard to find local and federal grants and rebates and can save homebuyers thousands of dollars with their local home buying vendors.

Original post here: How to Make an Offer on a House

Understanding LP and DU Mortgage

Every time a potential home buyer decides they are ready to purchase a new home, they must go through the process of qualifying for a loan. The qualification process can be complex and difficult to understand. To understand these complex terms, let’s discuss what automated approval is and why it’s so important.

The “Automated Approval” process

Automated Approval is the process by which a lender determines that a home buyer is eligible for the home they want to purchase. The automated underwriting system, or AUS, that the lender submits the loan paperwork to uses a specific set of criteria to determine a home buyer’s eligibility.

If the AUS determines a prospective buyer is eligible, they are considered approved, which is the first step in securing a loan. However, if the AUS determines the home buyer is ineligible because they don’t meet the criteria for automated approval, the loan must be manually underwritten.

Manual underwriting is done by an underwriter who carefully looks over all the paperwork and checks to see if the buyer meets the lender’s criteria. The process is arduous and takes time. It’s critical that the information given to the underwriter is complete and accurate.

LP vs. DU mortgage

To support more home buyers’ desire to purchase homes, congress backed two organizations known as Fannie Mae and Freddie Mac. They buy mortgages, combine them, and sell them as mortgage-backed securities. This process frees up the lender’s capital so they can then lend money to more home buyers.

Fannie Mae uses the automated underwriting system called Desktop Underwriter or DU, while Freddie Mac uses the AUS called Loan Prospector or LP. Both of these systems do similar functions. They are the systems that lenders submit a home buyer’s information to for automatic approval.

Applying for LP or DU mortgages

The process for applying for and obtaining an LP or DU mortgage can seem complex and overwhelming, so we’re going to break it down so that it’s easier to understand.

Criteria and Guidelines

All loans underwritten through Fannie Mae and Freddie Mac must follow certain criteria and guidelines.

1. Debt to Income Ratio (DTI) - DTI takes into consideration a buyer’s current debt and gross income. The sum of their debt is divided by their gross income to create a ratio or percentage. Debts figured into this ratio include credit card debt, other loans, mortgages, etc.
2. Required reserves - Loans require a buyer to have a certain amount of money in the bank to cover all of their expenses. This money is referred to as a reserve. The amount required is dependent on the buyer’s credit, DTI and LTV.
3. Loan-to-Value (LTV) - LTV is determined by the house’s appraised value and the loan amount being asked for. If the LTV is higher than 80%, the buyer may have to pay for PMI or private mortgage insurance until the LTV is lower than 80%. LTV can be lowered by paying a higher down payment.
4. Credit score and profile - A credit report will show the bank whether or not a buyer has any delinquencies or outstanding debts. Additionally, it will show a credit score, which shows a lender how risky lending to the buyer will be.
5. Collateral - Collateral is an asset that can be used to secure a loan. In the case of a mortgage, the collateral is usually the house that is being purchased.

Requirements

1. Tax returns - Lenders use tax returns to determine whether your reported income is accurate.
2. Proof of income - Proof of income is usually two years of W-2’s unless the buyer is self-employed or owns a business. Some ways of showing income for a self-employed buyer include profit and loss statements, 1099 documents, and direct deposits.
3. Bank statements - These provide information about how much money buyers have in their reserves and how long they’ve been saving money for a down payment.
4. Credit history - The lender will need to pull the buyers’ credit report to determine whether or not there are any delinquencies and to verify debts.
5. Rental history - At least one year of rental history showing on-time payments.

How does a DU or LP mortgage work?

The first step to obtaining an LP or DU mortgage is to begin the application with a loan officer. The loan officer will collect information from the potential home buyer. From there, the information is put into a loan origination system, which then submits the information to one of the underwriting systems.

The AUS will review all of the documents and determine whether or not they meet the guidelines set forth by Fannie Mae or Freddie Mac. If they do meet the guidelines, the loan will be automatically approved. If automatically approved, the loan officer will submit the loan for underwriting and will submit the buyer’s documentation along with the loan.

The mortgage underwriter will then submit the information to the AUS again. Depending on what the AUS says, the mortgage underwriter will issue conditions. Once the buyer meets the conditions required, the loan can begin to close.

Should I get an LP or a DU mortgage?

Unless a buyer has the money to purchase a home outright, they should generally get an LP or DU mortgage. Remember that if a buyer doesn’t qualify for an LP or DU mortgage, they will have to go through the process of manual underwriting. This process is lengthy and documents are scrutinized more heavily. It’s easier to qualify for a mortgage with LP or DU.

From beginning to end, an LP or DU mortgage is about purchasing a home with a buyer having a low risk of defaulting on their loan. The loan officers and the underwriters use specific criteria set forth to minimize that risk. The home buyer submits their documentation, it’s processed through LP or DU, and then, if automatically approved, the buyer is one step closer to buying their home!

If you are ready to start the process and qualify for a DU or LP mortgage, reach out to the home buying experts at Hero Home Programs. They specialize in helping homebuyers save thousands of dollars with local vendors, grants, and rebates. They want to see you in the home of your dream and they work hard to help you fulfill that dream.

Original post here: Understanding LP and DU Mortgage

Is “Bad Credit Mortgage Loans Guaranteed Approval” Safe?

When it comes time to purchase a home, finding a lender that gives you the best options is important. Having good credit simplifies the process and allows you to buy a home with a good interest rate, leading to less cost in the long term. However, having bad credit is not necessarily a hindrance to having your own home. You can own the home you’ve always dreamed of!

Explaining the credit scores

Lenders use credit scores to determine how trustworthy a borrower is or how likely they are to pay back the money loaned to them. The higher a credit score is, the more likely they are to loan money to the borrower.

FICO scores range from a low of 300 to a high of 800. How your credit score is determined is based upon a number of factors, including how reliable your payment history is, how many credit accounts you have opened, how old the credit accounts are, and how much debt you have.

Credit Score Chart
Very poor: 300-579
Fair: 580-669
Good: 670-739
Very good: 740-799
Excellent: 800-850

If your credit score is low, it may be beneficial for you to monitor your credit with a credit monitoring service, giving you tips and advice for improving your credit. If your credit is really low and you are struggling to improve it on your own, enlisting the help of a credit repair company can help. Taking steps to improve your credit before purchasing a home will ensure you get a better interest rate, which affects the amount of money you will pay over the life of the loan.

Bad credit mortgage loans with ‘guaranteed approval’

Many times, someone with bad credit is desperate to find a solution to purchasing their own home and they stumble upon mortgage loans that guarantee approval. This is a red flag because, under federal rules, a lender must verify the ability of a borrower to repay their mortgage. There is no guaranteed mortgage loan, whether you have good credit or bad credit.

While there is no guarantee, there are programs that offer bad credit home loans. It is possible to obtain a home loan with bad credit—so, if you’ve been looking around with no luck, don’t give up yet. There are several companies and loan programs available to people with less-than-stellar credit.

Lending Tree

Lending Tree is not a traditional lender. Rather, they are a service that helps people with bad credit find a lender by submitting the borrower’s information to a variety of lenders.

Pros

• Lending Tree boasts a simple four-step process.
• They eliminate the need to look at each lender’s requirements, allowing the borrower to simply compare and contrast their options.
• There is no fee to use their service.
• Potentially better rates because the lenders compete with one another to offer better rates to the borrower.

Cons

• They submit offers to all their lending partners, which leads to the potential of unwanted offers and spam.
• Rates go as high as 29% APR, which leads to a much higher cost for the borrower for the life of the loan.

PNC Bank Mortgage

Pros

• PNC considers non-traditional credit history, such as rental payment history to approve a loan.
• Their website has updated mortgage rates so that a customer is never blindsided by current rates.
• They offer a variety of loan programs including VA and FHA loans.

Cons

• Their application is not available entirely online, meaning it must be completed in person.
• In-person service is unavailable in some states, which means that PNC will not work for everyone.

Wells Fargo Mortgage

Pros

• Wells Fargo has their updated rates posted on their website. They are updated daily.
• They offer a variety of loan programs including FHA, USDA, and VHA loans.
• Their website boasts many educational products including videos and articles that will help you obtain a mortgage and understand the process.

Cons

• Their trust has been eroded because of government scandals.
• New applications for home equity lines of credit have been suspended because of COVID-19.

New American Funding

Pros

• They offer a variety of loan programs.
• You can install their app on your mobile device for convenient mortgage management.
• Their website offers calculators and a variety of other mortgage educational resources.
• Their mortgages are bilingual, making it easier for a native Spanish speaker to purchase a home.

Cons

New American Funding programs are not available in some states, such as Hawaii and New York.

Navy Federal Credit Union Mortgage

Pros

• Navy Federal Credit Union offers loans with no down payment, making it easier for first-time homebuyers to purchase a home.
• They offer a variety of loan services include VA loans.
• They offer an online application for pre-approval making applying for a mortgage simple and easy.

Cons

• The website does not offer customized rates based on your credit score before you apply.
• Their mortgages are meant for military members or their families only.

CITI Mortgage

Pros

• CITI Mortgage offers customizable loan rates on their website based on credit and other factors.
• They offer low down-payment mortgages, which is beneficial for first-time homeowners.
• Their fees and rates are lower than many other lenders.

Cons

• They charge a fee for applying for a mortgage through them.
• They require you to complete the mortgage application with a loan officer, meaning the loans cannot be applied for online only.

FHA Rate Guide

Pros

• FHA loans are easier to apply for because they have less stringent requirements than a VA loan or USDA loan.
• They offer low-credit score FHA loans which allow people with bad credit or low credit to apply for a mortgage with a low down payment.
• Homebuyers can apply for an FHA loan with a credit score as low as 500
• Most banks offer FHA loans.

Cons

Buyers with poor credit scores are still subject to higher interest rates.

Government-backed agencies

Government-backed loans are less risky than subprime loans and they boast lower interest rates and lower down payments. These loans are better for someone who has bad credit and is looking to become a homeowner because the requirements are less stringent than a conventional home loan.

VA Loans

VA loans are reserved for active-duty military members and veterans. These types of loans are guaranteed by the Department of Veteran Affairs. VA loans typically have a lower interest rate and can even be acquired with a 0% down-payment in some cases. These loans are especially beneficial for people with a credit score of 620 or higher, but they can be acquired with a credit score of 580 or above in some cases.

USDA Loans

A USDA loan is a loan that is typically offered to lower-income home buyers that are looking to purchase a home in a rural area. These loans boast a 0% down payment. The credit requirements for a USDA loan are a little bit higher, generally requiring a score of 640. However, there are exceptions, so if you are interested in a home in a rural area, a USDA loan might be a good fit.

FHA Loans

An FHA loan is a government-backed loan through the Federal Housing Authority. The loan is meant for borrowers that have low credit, usually around 580 or above. As long as the borrower can provide a 3.5% down payment on the house, they’ll likely qualify for an FHA loan. The requirements for an FHA loan are less stringent than those for a VA or USDA loan making them a good choice for low-credit borrowers.

It is absolutely possible to find the right house for you, even if you have low or bad credit. There are a variety of tools available for you to increase your credit score. If your credit score is still lower than a conventional loan requires, you can search for a loan that is less risky and government-backed. Another option is to improve your credit score so you can enjoy the benefits of a lower interest rate and better terms for your home mortgage.

If you’re ready to start the home buying journey, reach out to the experts at Hero Home Programs. They will utilize their expertise to find grants and rebates for home buyers, as well as set you up with service vendors at reduced rates. Contact us today and we could help you save thousands of dollars on your home purchase.

Original post here: Is “Bad Credit Mortgage Loans Guaranteed Approval” Safe?

Your Guide to the USDA Loan Process

When you’re looking for a home loan, the options available can feel overwhelming and sometimes even confusing. Many people aren’t even aware of all of the different options available to them. The USDA is a government department that most people don’t associate with home loans, yet they are just as invested in rural development as they are in the food pyramid. We’re going to take a look at the USDA Loan loan process and FAQs and help guide you through the basics of this lesser-known loan process.

What is a USDA loan?

A USDA loan is a mortgage loan that makes home purchases more affordable for those living in rural areas. The loan is backed by the United States Department of Agriculture. Because of the government backing, lenders can offer a lower interest rate to qualified buyers and waive a down payment.

The USDA loan traces its roots back to the Great Depression when then President, Franklin D. Rosevelt, committed to building up rural America. The initial Executive Order that created the branch known today as USDA Rural Development was signed in 1935.

How does a USDA loan work?

A USDA loan can be acquired by those with the appropriate qualifications for both 15 and 30-year payback schedules. There are no official limits on the mortgage amount. This amount is determined by income and fair market rates in your location.

Some advantages of USDA loans include:

• No down payment required
• Guaranteed fees
• Competitive interest rates

Disadvantages of USDA loans include:

• Location-specific (not all areas qualify)
• Extra red tape and/or waiting times

This is a government-backed loan, so while there are advantages in the lower rates, you do have to meet several factors to qualify and may have to wait a bit longer for processing than conventional loans.

Different types of USDA loans

Guaranteed loan

A guaranteed loan with the USDA is a loan offered by a local lender but is at least partially insured by the USDA if the buyer defaults on the loan. This allows lenders to offer modest loan terms to lower-income individuals that don’t have the best credit scores. To be eligible for this kind of loan, the buyer’s adjusted household income cannot exceed more than 115% of the median income in their desired designated rural location.

Direct loan

A Direct USDA loan is when the USDA funds the borrower directly. They become the lender, rather than a bank. These loans are offered only to qualified low or very-low-income families.

Home improvement loan

These loans are offered to low-income Americans to assist in home renovation or repair. This loan may be combined with grants that don’t need to be repaid.

Applying for a USDA Home Loan

Eligibility and Requirements

To qualify for a USDA guaranteed loan, you must meet the following requirements:

• Be a US citizen or a US non-citizen national or qualified alien
• Demonstrate a willingness to meet credit obligation in a timely manner
• Agree to use your home as your primary residence
• Purchase a home that meets all criteria set by the USDA
• Have an income that qualifies as “low” income or below in your intended purchase area
• Not have been debarred or suspended from participating in other federal programs

To qualify for a USDA direct loan, you must meet the above qualifications PLUS:

• Lack of access to safe, sanitary, and decent housing
• Are unable to secure loans from any other source on reasonable terms that you are able to meet

The USDA loan process

Prequalify with a USDA-approved lender.

The first step in the USDA loan process is to prequalify. Your lender will review your financial history, work history, and credit to decide whether you are qualified for a USDA home loan.

Apply for pre-approval.

Once you’ve been deemed eligible for the loan, you then must apply for pre-approval. Your lender will look over the same documentation as before to determine the mortgage amount they feel comfortable lending to you. Make sure to ask questions and read all documentation.

Find a USDA-approved home.

The next step is to go house hunting in a USDA-designated area to find an affordable home that meets your needs.

Sign purchase agreement.

When you find the house that’s right for you, it’s time for your lender to complete a final review and sign to associate the mortgage with the property.

Go through processing and underwriting.

The loan will be processed at this point, including the final USDA approval of the property. Again, make sure to read all paperwork and ask any questions that you may have about the process.

Close your loan.

This is the point where you sit down to sign all of the final paperwork. Typically it will only be a few days after this point that you can move into your new home.

How long is the USDA loan process?

When working with a lender for a USDA loan, you will typically find that the process takes four to six weeks. A backup of files because of high volume could cause this period to be extended, but this is rare.

While not available to everyone, USDA-backed loans are an excellent resource for those who have low to very low income and want to purchase a home in rural areas. The USDA home loan program can open up new possibilities for those who may not otherwise have access to safe and affordable housing.

If you’re ready to start your journey to homeownership and have considered a USDA home loan, reach out to the experts at Hero Home Program. They work tirelessly to find local and federal grants to assist with your home purchase and also work alongside local vendors who will help you save money on your home purchase.

Original post here: Your Guide to the USDA Loan Process

Importance of Bank Statements for Mortgage Applications

When you apply for a home loan, you find yourself combing through a lot of financial documentation—tax returns, pay stubs, bank statements, and the like. But why all the scrutiny? The short answer is that mortgage lenders have strict standards for lending money because they aren’t out to lose money. They want to be sure that any payee will not default on their home loan because of lack of funds.

While lenders are careful about how they lend money for their self-interest, this caution is beneficial to the home buyer as well. A buyer doesn't want to lose their house because of any miscalculation in available funds.

Why do mortgage lenders want bank statements?

Bank statements are an important piece of accessible assets. A bank statement is a monthly (or sometimes quarterly) summary of your banking activity. Even with other documentation, a lender will want to analyze this information to determine several things. They want to know that:

• you have a regular income that comes from a known source
• you have enough available for at least a few months of mortgage payment
• the money you have has been building for a period and not just a recent deposit

These markers indicate that the money in your account is not laundered money or from a fraudulent source. It also shows that the buyer is not using another loan to qualify for the mortgage.

Mortgage lenders require bank statements to be provided over a period of time. They will scrutinize these documents to ensure that the potential payee is a good risk and will be able to make prompt and regular payments on their home loan.

The twelve-month bank statement will be examined for “sourced and seasoned” income, which refers to monies from legitimate sources and have been present for a period of time. This may be required if there are red flags in the sixty-day bank statement.

A sixty-day bank statement is the standard period examined. Lenders will make sure that there are no overdrafts or bounced checks and that the money looks good. Even a five-dollar overdraft can disqualify an applicant, depending on the lender.

How do lenders verify bank statements for mortgages?

Each mortgage lender has its own process for document verification. Some work with physical documents, while some will manage them electronically. Expect that your lender will follow up with your bank to validate the statements after you’ve provided them.

They will check the account for what is called “proof of deposit.” This is a determination that enough money has been deposited or has accumulated in the account to cover the property’s down payment the applicant wishes to purchase.

If you have received a gift of money from a family member to help qualify for a mortgage, realize that this will also be scrutinized. This gifted money for a down payment must be thoroughly documented through transferral of funds, typically with a statement or withdrawal and deposit slips. Remember, large amounts quickly deposited cause red flags.

Things lenders look for from your bank statements:

• “Proof of deposit” (enough funds for the down payment on the desired home)
• Sufficient funds for the home
• Consistency of funds (aka “seasoned” income)
• Funds are from known sources (aka “sourced” income)

Things that shouldn’t be in your bank statements

• Bounced checks
• Overdraft (even one can disqualify you from some lenders)
• Large undocumented deposits
• Regular payments with irregular activities

Can you get a loan without a bank statement?

While some mortgages may allow you to apply without W2s or pay stubs, bank statements are always required by mortgage lenders. These companies lend large amounts of money to individuals, and they must be sure that each one is a good risk that won’t default on the loan. They must have a full financial picture to ensure that their investment is safe, and bank statements are the best way to determine this.

Understanding that the investigation of bank statements will be a part of the loan application process, take great care when getting ready to apply for a mortgage that your financial house is in order.

Have all required documentation gathered and ready to share with your lender. Know the cost of your “dream home”, and be sure that you have the money to cover the down payment, and to easily pay the monthly mortgage payment. Don’t make any drastic changes to your funds, and be sure to document any gifts you may receive from generous family members. Be very careful to spend wisely, and ensure that there are no overdrafts on your bank account.

Homeownership is a major and important step in life. Approach it with appropriate reverence, and understand that lenders are laser-focused on their own interests.

Although each lender is different in their qualifications, don’t expect lenience. You are an investment to them, and with careful planning, you can be a good risk and able to make your own investment in turn.

Are you ready to make the dream of homeownership a reality? Contact the team at Hero Home Programs™. They work hard to save you thousands of dollars on your home purchase. They can refer you to local vendors, search out federal grants, and help you on your home buying journey.

Original post here: Importance of Bank Statements for Mortgage Applications

A Quick Guide to a Bank Statement Mortgage

A bank statement mortgage, also known by the names self-employed mortgage or alternative documentation loan, is a mortgage that enables an applicant to secure a loan from a lender without using traditional documentation such as W-2s or tax returns. Instead, the applicant submits 1-2 years’ worth of bank statements and a few other qualifying criteria that will be discussed in this article.

What are the advantages of a bank statement mortgage?

A bank statement mortgage is an ideal option for those who might not qualify through traditional methods due to the nature of their income. Advantages of the bank statement loan include the following:

• Pay stubs, W-2s, or tax returns are not required
• Usually have high loan limits
• Often allow for higher DTIs (debt-to-income ratios)
• May be used on a primary residence and also on second homes or investment properties
• An applicant can qualify with as little as 10% down

Different types of bank statement mortgages

Personal bank statement loans

A personal bank statement loan is for an individual applicant who needs this special loan because of an irregular income but can pay on a mortgage. These generally fund primary or secondary homes but may also apply to investment properties.

Business bank statement loans

A business bank statement loan is offered to a business and is meant to fund business-related purchases, such as properties, offices, warehouses, and investment properties.

One-month bank statement loans

These are far rarer than the other two categories of bank statement loans. In some special cases, the applicant qualifies under strict credit and down payment requirements, the bank may grant a loan based on bank statements covering only a month. One-month bank statement loans are not offered by many lenders. It is basically a no-income documentation loan where the bank statement activity is what gets scrutinized. If the bank statement shows unusual activity, such as a large income but simple living, the loan may be denied.

How does a bank statement mortgage work?

While a bank statement mortgage can benefit those who want loans without having to submit tax info or pay stubs, they must have a slew of other information ready to share with loan officers. Requirements change lender to lender, but be ready to submit the following information.

Requirements

• 1-2 years worth of personal or business bank statements
• A credit score of 620 or above (this will vary by lender)
• A two-year history as a self-employed person
• Enough ready cash to cover several months worth of mortgage payments
• Verification of assets (i.e., mutual funds or 401k)
• Letter from tax accountant verifying business expenses and confirming that applicant files as an independent contractor

This information may be uploaded into digital mortgage software or synced with your bank to the lender. They are then approved through a manual underwriting process that can take up to 30 days to process. More complicated cases may take up to double that time.

Who would benefit from a bank statement mortgage?

Certain professions are set up in such a way as to be unacceptable for their workers who are not qualified for conventional or FHA loans because the income reported on their tax returns don’t reflect the true earnings. Deductions and business write-offs can skew the true picture. Those affected by this discrepancy can include freelancers and consultants, lawyers, doctors, small business owners, real estate agents, and investors. Bank statements will give a clearer picture of their true income and ability to pay on a mortgage loan.

Conclusion

A few downsides to a bank statement mortgage loan include the need for a larger down payment and potentially higher interest rates. They are also not offered by every lender. Some small business owners may qualify for conventional loans if they have been in business for over two years and have seen steady growth since. But a bank statement mortgage loan is available to newer small business owners.

A bank statement mortgage loan may also be applied to existing homeowners to refinance their mortgages. This can be a useful option to those who have left the traditional workforce since their initial home purchase but want to take advantage of home refinancing benefits.

Homeownership is an important investment and the best way to build wealth for most Americans. For those whose professions do not allow them to qualify for a conventional loan, or for those who are seeking a lower interest rate on an existing home, bank statement mortgages offer an excellent alternative to assist in the purchase of a home or business property.

If you are ready to pursue your dream of homeownership, reach out to the specialists at Hero Home Programs™ today. Our team is proud to offer access to local grants, rebates, and vendors who will assist you on your home buying journey. On average, homebuyers who use Hero Home Programs™ save thousands of dollars on their journey. Contact us today to learn how we can help you save money on your home purchase.

Original post here: A Quick Guide to a Bank Statement Mortgage

Military BAH Pay Rates for 2021

BAH, or Basic Allowance for Housing, is an allotment of money offered by all military branches to active duty members to cover housing costs for those who do not reside in government housing or barracks. Administered by the Defense Travel Management Office, BAH pay rate will vary on several factors. Still, the amount is calculated to cover 95% of housing expenses with the service member paying only 5% out of pocket. (source)

How much does BAH pay?

A powerful military benefit, the BAH payment rate is directly related to the cost of rental housing in local markets. It is designed to cover expenses if you live in privatized housing and thus changes based on the rental costs found at your duty station. Your pay grade and the number of dependents are also taken into account. If you are stationed in a more expensive area, the amount offered will be higher to allow for this increase. And while the rate itself changes each year, service members are not adversely affected by these changes. When BAH rates go up, it is generally observable, while the opposite is not. When rates drop, individual rate protection is in place to ensure that your own BAH doesn’t decrease if your situation remains the same.

Ways to see a decrease in your BAH

It isn’t often that you’ll see a decrease in your BAH pay. More often than not, the allowance is increased for the cost of living adjustments. But, there are some cases where a service member will see their BAH decrease. These scenarios include:

• Change of location. If you are PCSed to an area with a lower rental housing cost market, your BAH will be adjusted to reflect that change. The decreased amount will go into effect from your report date at your new station.
• You get demoted. If you are demoted, the BAH rate calculator will reflect that change of rank in allotted funds. If you are demoted to a level with a lower rate, this is your new rate. However, if you are promoted to rank with a lower BAH payment, you will not be penalized but will receive the BAH of your previous rank. Generally, those service members with higher ranks and more years of service get more BAH money, but there are some exceptions to this rule.
• Dependency status. Your amount of BAH is also calculated with your dependents in mind. Supposedly a change of circumstances creates a change in status from “with dependents” to “without dependents,'' it will be reflected in the BAH amount. The reduced rate becomes effective at the date of the dependency status change. On the other hand, there is no increase of BAH money for a service person with a spouse and children compared to one with a spouse only.

Basic allowance for housing rates in 2021

As reported by the Department of Defense release, the BAH rates for 2021 went into effect on January 1, 2021. These new rates reflect an increased rate of 2.9% across the board, although some may not see the increase due to cost of living factors in certain areas. You may calculate your personal BAH amount by using the Basic Allowance for Housing calculator available here.

Using your BAH to qualify for a VA loan

Basic Allowance for Housing continues to be one of the most useful benefits the military offers to its service members. Covering one of the largest expenses for any worker (housing), BAH allows those in the military to save money toward eventual homeownership. And extra money flowing into the budget isn’t the only advantage.

In addition to saving a bulk of the money that is usually paid for housing rental, the Basic Allowance for Housing is also a powerful benefit in that it can be used to pay toward a mortgage. Mortgage lenders consider BAH as income for those service members who wish to invest in a home purchase.

Also eligible for VA home loans, service members can take advantage of both of these powerful financial boosters to help buy their first home. Homeownership is the first step to building wealth for most Americans, and BAH income can make this dream possible for military service members.

If you are a service member who is ready to take that next step to homeownership, reach out to the team members at Hero Home Programs™. They will help you find area experts who can assist you with your home buying adventure while saving you thousands of dollars. They also have access to local grants and tax rebates, stretching your dollar even further. They work tirelessly to find a military home loan lender that will use your BHA to your advantage while keeping as much money as possible in your pocket. Contact a Hero Home expert™ today.

Original post here: Military BAH Pay Rates for 2021

Is A FICO Score The Same As A Credit Score?

Is there even a difference between your credit score and your FICO score? Actually, yes! Check out this article to learn more. 

 

Your credit score tells lenders how likely you are to pay your bills on time. The better your credit score, the less risky you look as a borrower. But a “credit score” is an overarching term to describe your overall creditworthiness. 

The 3 major credit bureaus are TransUnion, Equifax, and Experian. Each bureau calculates their own credit scores, so your score may vary between the three different bureaus. 

 

What Is A FICO Score?

 

A FICO score is just one kind of credit score, but it’s the most popular one. Think of it this way: if credit scores were search engines, the FICO score would be Google. 

The name “FICO” comes from the Fair Isaac Corporation. Generally, FICO scores can range from 300 to 850, with a 740 usually considered to be an excellent score. However, there are different versions of FICO scores, with some being industry-specific. These industry-specific FICO scores generally range from 250 to 900.

For example, if you’re applying for a credit card, the credit card issuer will probably look at your FICO Bankcard Score. But if you finance a new car, the auto lender will look at your FICO Auto Score. For purchasing or refinancing a home, mortgage lenders will look at different versions of your FICO scores across all three of the major credit bureaus. 

In addition to industry-specific FICO scores, there are new models of FICO scores that are released throughout the years. For instance, the FICO Version 9 came out in 2014. 

 

Are There Other Types Of Credit Scores?

 

Yes! One alternative to a FICO score is the VantageScore, and there are different versions of VantageScores being released such as 2.0, 3.0, and 4.0. 

Also, some large lending institutions will use their own, customized scoring models to determine your credit score.

All in all, credit is pretty complicated. There are several different types and models of credit scores, with new versions constantly being released. Chances are, you have dozens of different credit scores.

 

What Does This Mean For You?

 

Instead of trying to master the complexity of different credit scores, it’s best to focus on good credit behaviors across all of your finances. These healthy credit behaviors include paying your bills on time, preventing debt from going to collections, and maintaining a strong credit utilization ratio.

If you’re struggling to repair or maintain your credit, then talking to a reputable credit counselor can help you come up with a game plan. When it comes to navigating your credit history or even disputing errors on your report, it may be best to talk to an expert who can negotiate with creditors on your behalf.

Original post here: Is A FICO Score The Same As A Credit Score?