Here’s a Quick Way to Move Past Being Denied- Find Another Lender!

Heres a Quick Way to Move Past Being Denied- Find Another Lender- 150x150Settling on the first lender that you come across is never a good idea. Only by shopping around can you find mortgage loans with lower interest rates and attractive terms. You will have to look at all the characteristics of the mortgage loan in order to find the one that suits you best or you may end up spending more than you have to.

Looking at mortgage offers and finding a lender which can give you the best interest rate and terms on a mortgage loan is important when trying to become a home owner. But even more important is finding a lender who is willing to give you a mortgage loan, especially if you have a low credit score. Every lender has its own qualification requirements, which can differ greatly from one lender to another. Factors such as your credit score, debt, income, and the area in which the property is located in all have a large influence on whether you are going to be approved for a mortgage loan and how much you are going to have to pay.

Lenders may advertise low interest rates and lenient approval standards, but you will probably have an unpleasant surprise once you apply for a mortgage and find out that the advertised rates are reserved for those with perfect credit scores and high incomes.

Why Will Some Lenders Deny your Mortgage Application?

Most mortgage loans already have their requirements established by the government agency that is backing the loan. Government-backed loans are associated with these agencies: Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), and the United States Department of Veterans Affairs (VA). The fact that the loans are backed by these government organizations is not considered enough of a guarantee by lenders, so they have their own, stricter requirements.

One of the loan requirements that can result in a mortgage application denial is your credit score. The Federal Housing Administration can guarantee mortgage loans for buyers with credit scores as low as 500, but most lenders will deny all applicants who have a credit score that’s lower than 600. Also, most lenders have special requirements for those who don’t have a perfect credit score. For example, borrowers with a credit score that is under 680 may be required to provide additional documentation related to their financial situation.

In order to qualify for the FHA Streamline Refinance, you must pay your mortgage on time for 12 months without missing a payment. But the lender who will refinance the loan will have additional requirements, such as checking your credit score and income.

Fortunately, not all lenders have the same requirements, which means that you can easily be approved by a different lender, or even get better terms on your mortgage. Generally, smaller lenders and credit unions seem to be more flexible than large lenders, especially if you give them reason to believe that you are not a high default risk, even if some aspects of your financial situation are not in good shape. Mortgage brokers can also help you find a mortgage loan if you think you can’t do it on your own. They charge a fairly large fee, but it may be worth it, especially if you have a strong feeling that most lenders will deny your application.

Thinking of Buying a Home? Ask Yourself These Questions First!

Thinking of Buying a Home-Ask Yourself These Questions First- 150x150Low home prices and interest rates might seem very attractive to you, and you might want to buy a home before these prices and rates start going up. However, your financial situation might make it difficult for you to buy a home at the advertised price, while paying a low interest rate. Interest rates that are advertised by lenders are usually reserved for home buyers with stellar credit score, so you might end up paying significantly more on your loan than you were expecting to.

Many first-time home buyers are so blinded by the low interest offers advertised by lenders, that they forget all about the large down payment needed in order to avoid paying for Private Mortgage Insurance, and about the fact that their credit score will have a big impact on the interest rate that they will actually be paying. Here are a few questions that you should ask yourself before thinking of buying a home.

Is This a Good Time for You to Buy a Home?

Buying a home is very expensive initially. If you wish to receive better rates and not be required to pay for Private Mortgage Insurance, your down payment will have to be at least 20 percent of the total loan amount. That can mean several tens of thousands of dollars for an average priced home. Besides the down payment, you will have to pay for inspections, and various closing fees, which can come up to a few thousands of dollars, as well. There are several alternatives to making a large down payment, but you will probably end up having to spend more elsewhere, and maybe end up spending more than you would have on the down payment.

You might think that the large initial cost is the only expensive part of buying a home, but you also need to keep in mind that you will have to pay tax on your property and homeowners insurance. The upkeep of your home can also be very expensive, but this depends on many factors. Your home might need an expensive roof, plumbing or electrical repair, unexpected expenses that might take you by surprise.

Do You Have Good Credit?

You can probably qualify for a mortgage loan with a less than good credit score, but you will have to pay a much higher interest rate. A perfect credit score will most likely guarantee you the best current mortgage rates, but anything less and you will start to see those rates climbing. The difference won’t be that high, unless your credit score is lower than 700, but, over time, you will feel the difference in your wallet.

If your credit score is lower than perfect, you might want to take a little time to try and improve your credit score before getting a mortgage loan. You can start by paying off other debt, and making sure that all your payments are on time.

Is Home Ownership for You?

Some people buy a home and end up feeling that they have made a mistake, that renting was better for them. Being a home owner comes with larger responsibilities, like taking care of the house, making repairs and maintaining it. Sure, you can hire someone to do it for you, but hiring someone for every little task will become very expensive, so you’ll be better off learning how to do most minor repairs and maintenance work yourself.

If you are looking for a home that needs less maintenance and has a smaller chance of needing major repairs, then you should look at apartments. You will still be responsible when something breaks, unlike when renting, but it will be fairly low maintenance compared to a house.

Are You Going to Live There for a Long Time?

Like we’ve mentioned earlier in this article, buying a home comes with some pretty high closing costs. If you plan on moving in the near future, you will recover the money that you put down and the monthly payments, but not the closing costs. However, to build equity in your home, you will need to live there for a longer period of time. The monthly payments that you make in the first years will go more towards the interest, so the equity will build up very slowly. Selling your home after a short period of time can result in you losing money.

Becoming a home owner is a dream come true for most people, but it comes with great responsibility, and a large number of expenses. Ask yourself the questions listed in this article before you start looking for a home, and find out if home ownership is for you, or if you would like to postpone it for a few more years.

Student Loan Debt? You Can Still Buy a Home, No Problem!

Student Loan Debt-You Can Still Buy a Home No Problem- 150x150Having children and owning your own home is the classic American dream. Nowadays, there are plenty of obstacles that will stand between you and home ownership, one of the biggest being your student loan. Many student loans are comparable with the cost of a modest home, making it pretty difficult for a recent college graduate to become a home owner. Fortunately, there are some things that the young home buyer, who has recently received his or her degree, can do in order to buy a home before paying off that hefty student loan.

How Do Lenders Determine If You Qualify for a Mortgage?

Most lenders usually look no further than a mortgage applicant’s debt-to-income ratio. Before the recent economic recession, lenders were more lenient with home buyers who had student loans, but the housing market crisis has caused them to tighten debt-to-income requirements, in order to make sure that borrowers are able to pay back their mortgage loans. This, of course, was bad news for most recent college graduates, because having a good debt-to-income ratio with a student loan still being repaid is hard enough as it is.

When analyzing a borrower’s debt-to-income ratio to determine if they qualify for a mortgage loan, lenders typically review the front-end and the back-end debt ratios. The front-end ratio is related to the home buyer’s housing expenses, such as the principal, interest and tax, while the back-end ratio is related to other long-term debt that the borrower might have.

The student debt will, of course, be taken into account, and will affect the borrower in different ways depending on each person’s situation. For example, a single person with a student debt will have little chance of receiving a mortgage loan, a household with two debtors might encounter some difficulty when applying for a mortgage loan, while a household where only one person is in debt will be able to get a mortgage loan much easier.

Becoming a Home Owner with Student Loan Debt

Student life is very different than what you will experience after graduating college. A student’s life usually revolves around studying, mid-terms and parties, so when it is all over, real life might come as a shock, especially because you have to repay the money that you borrowed to pay for your tuition. Big student loans are very burdensome, and entry level jobs often pay just enough for you to be able to afford repaying your debt. Student loans can also have an impact on your credit score, so buying a home becomes that much harder. But there’s some good news, as well. By following these following steps, you can stop student loans from being such a burden, and get yourself on the right path to home ownership.

  • Minimize your student loans. Student loans are designed to help you pay for your tuition and receive the proper education that will later help you secure a good job. Student loans should not be used to pay for vacations or the cost of going out to restaurants or movies. Besides carefully planning your budget, you can also reduce your student loan by working part time or applying for financial aid. Don’t be fooled into believing that you will be able to easily pay off your debt after graduating, and that you can have fun spending a lot of money during college. Before you know it, the fun times are over, and you will find yourself having to face the harsh realities of life, so carefully budgeting and cutting unnecessary expenses is a sure way of making your student loan smaller.
  • Reduce your student loan debt. You may encounter some difficulty in finding a good job right after graduating college, so you should know that you have some options regarding your student loan. One option would be to call your lender and try negotiating your loan or your interest rate. Another option would be to extend your repayments, or even put a hold on your loan payments for a while, until your financial situation improves. Of course, these options will most likely result in having to pay a larger interest rate, so a proper analysis of your budget and future plans is required.
  • Avoid creating new debt. Taking out a new loan or applying for a new credit card while you are planning to buy a home will severely impact your chances of receiving a mortgage loan.
  • Keep making payments on your student loan. The only way to eliminate your debt is by paying it off, month by month, as agreed. Make paying off your student loan a priority and pay even more than the minimum payment required if you can afford it.
  • Find a co-signer for the mortgage loan. Having a co-signer in your situation will help you qualify for a mortgage loan much easier. One of your parents or a relative can co-sign your mortgage loan, which will make them responsible in case you are not able to make your monthly payments anymore.

Buying a home while still paying off your student loan is not as easy as it used to be, but it’s far from impossible. By simply making regular payments on your student loan, you are already at an advantage in the eyes of most lenders. However, before applying for a mortgage you should sit down and have a serious look at your budget and future outlook. Make sure that you will be able to pay off both student and mortgage loans at the same time, as missing only a few payments can have a deep negative impact on your life, and ruin your financial situation for years to come.