If you're thinking about buying a house or refinancing a loan, you probably know the sobering realities in the mortgage market: thanks to strict federal rule changes in the wake of the housing bust, it can be tough to qualify for a loan.
That's especially true if you don't quite fit the mold — you don't conform to all the underwriting mandates on credit, income, debt-to-income ratio and other criteria. You can handle the payments, but issues in your credit history and application push borrowers “outside the box” that defines Qualified Mortgages, or “QM”.
That being said, a small but growing number of lenders have begun offering mortgages with more flexible terms designed for borrowers that don’t meet the stringent requirements set up by the Consumer Finance Protection Bureau. Borrowers with solid credit scores and/or money in the bank but that student loans or uninsured medical bills push debt-to-income ratios over the maximum that federal rules generally prescribe have programs open to them.
Self-employed borrowers have options, as well as anyone who did a short sale on their underwater home a couple of years ago too recently to meet the four-year minimum wait time prescribed by Fannie Mae or Freddie Mac before you are allowed to obtain a new mortgage.
Borrowers may choose to wait until their credit improves, their job is stable, or the prescribed waiting period is over. But another option for "near-miss" applicants or potential applicants nationwide has begun taking shape: "non-Qualified Mortgage" or non-QM lending. Interest rates are higher than the standard market, but certain programs are being created to help certain borrowers – and that helps the housing market.
In the current market, sellers aren't having any trouble offloading homes. In fact, according to the National Association of REALTORS® , the average home took only 29 days to sell during the month of April, which undercut the previous record of 32 days set last May. The inventory is low, and many homes are getting snatched up before most buyers can even schedule a viewing. As a result, many buyers find themselves watching the market continuously for anything they may be able to purchase.
When buyers are easy to come by, sellers have the ability to be more discriminating and demanding. For this reason, it's important for every serious buyer to have a pre-approval in hand before they begin home shopping.
What is a pre-approval?
A pre-approval is a tentative commitment from a lender to provide you with a loan in a certain amount. This commitment is based on information you provide about your credit, income, other debts and employment history. In most cases, the lender will also check your credit report before issuing a preapproval. When the process is complete, the lender will give you a pre-approval letter that you can show to sellers when you are interested in a home.
What are the benefits of having a pre-approval?
Having a pre-approval gives you an edge over other potential buyers. Some of the benefits of a pre-approval include:
- Showing sellers you're a serious buyer. - Sellers don't want to waste their time with buyers who may not be serious about making a purchase. Having a pre-approval shows the seller that you are ready to make a move.
- Putting the seller's mind at ease. - When your offer is accompanied by a pre-approval letter, the seller knows you will most likely be able to secure the financing you need to go through with the deal.
- Knowing what you can afford. - Too many buyers fall in love with a home only to be disappointed when they aren't able to qualify for the loan. Having a pre-approval lets you know exactly which homes you should view.
With sales happening so quickly, it's likely that the home shortage will continue. Before you start shopping, be sure to obtain a pre-approval to make your offer stand out from the rest.
What to get pre-approved today? Click the APPLY NOW button at the top of the page.
It is a well-known fact that one can take out an insurance policy for almost anything—weddings, body parts, alien abduction, comedy routines, so on and so forth. Insuring a property is more conventional, but many consumers are perturbed by the additional cost, which adds to the already considerable financial pressure of purchasing a home.
There are a few types of insurance generally associated with homeownership, the first being mortgage insurance. “MI” serves to protect lenders in cases where there’s an increased likelihood of the borrower defaulting. Borrowers that put down 20%, then, are essentially required to pay for the risk they pose to their lender. Until a borrower’s loan-to-value ratio drops below the 80% mark, they will continue to pay for that risk. Conventional loans with a loan-to-value ratio over 80% require the borrower to hold private mortgage insurance, which can be arranged by the lender, while those who take out FHA loans will also sort out their mortgage insurance through the FHA.
Mortgage protection insurance is slightly different, as it provides coverage in circumstances where borrowers aren’t able to make mortgage payments due to illness or loss of a job. However, such policies don’t insure against falling home prices or other mishaps that may decrease the value of the property. Their purpose is to serve the lender, not the borrower.
Often confused with MI or mortgage protection insurance, homeowners insurance protects the interests of the borrower. This is the policy that covers falling trees, fires, buffalo stampedes, et cetera and has no immediate connection with the financing process. Technically, homeowners insurance isn’t strictly necessary for those properties outright. Most people don’t, however, and lenders, considering that they often own a good portion of the property thanks to that substantial loan, require borrowers to take out homeowners policies.
JUST ANNOUNCED -
According to KHC:
Effective today, KHC is lowering the minimum credit score requirement on government loans from 640 to 620, and from 680 to 660 on conventional loans. All guides have been updated to reflect this change on KHC's website, under lenders.
The Kentucky Housing Corporation offers Down Payment Closing Cost Assistance, Home Buyer Tax Credit, Housing Counseling and Education and other loan programs that help eligible homebuyers in the state of Kentucky purchase a home.
American Mortgage has been the #1 lender for Kentucky Housing Corporation since 2002. We have assisted more homebuyers with these programs than any other company.
If you would like more information on these programs click the contact us button or the apply now button.
Sometimes borrowers ask, “Why don’t your rates match the ones I see online?” It is easy to quote rates out there, but every borrower should remember that their loan is different, and that often the advertised, or publicized, rates are slightly higher due to a number of factors.
First, the rates in Freddie Mac’s survey (which come out every week) include average discount points paid for the mortgage. But not everyone is willing to pay points: a point is 1% of the mortgage amount, charged as prepaid interest. Many borrowers do not want to pay points, and loan officers agree because unless you’re going to live in your home for a very long time, paying points often doesn’t make sense.
The second reason that your rate might be different than a rate you hear on the radio or see online is that your characteristics mean price adjustments. For example, a credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate. Focusing on LTV, for example, at least a 20% equity cushion (80% LTV) in your home for a refinance, or down payment for a purchase, will help obtain a better rate for a borrower. And if a borrower wants a jumbo mortgage, you will want 25% or 30% down for the best rates.
Property type also influences rates: in the current environment, liens on condos usually carry a slightly higher rate unless you want to put more money down. And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate. And lastly, some lenders have so many loans in process that they will intentionally make their rates slightly higher in order to slow down new business. Your loan officer can help answer questions on the best rate and price combination.
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