How Disputes on Your Credit Report May Impact Obtaining a Mortgage

October 20, 2011 by 1 Comment

Reviewing your credit report and disputing information that is being wrongly reported about you is your right under the Fair Credit Reporting Act. Obtaining your credit report and making sure that it’s accurate is financially responsible and your duty to protect your credit. And the Federal Trade Commission provides you tips on how to dispute items on your credit report.  Did you know that lenders may not accept a credit report where it indicates there is a disputed item? 

It doesn’t matter if you have perfect credit or a low loan to value, Fannie Mae and Freddie Mac guidelines are forcing lenders to provide a credit report without disputes. I’ve recently had transactions where the borrower doesn’t recall disputing anything and the debtor doesn’t have record of the dispute yet this “dispute” needs to be removed from the credit report or the lender/bank will not accept the loan. This is one reason why anyone considering a mortgage for refinancing or purchasing a home should obtain a copy of their credit report very early on. It can take a great deal of time to have disputes removed if a borrower does this on their own.  

The other option is for a “rapid rescore” which whittles down the process to days. The irony in this is that rapid rescore is not free and it is the credit bureaus and reporting agencies who profit when this service is done – I really have a problem with this when my client and the creditor state there are no disputes of record yet somebody has to pay to have these items quickly removed to accommodate a closing date. Often times, the lender absorbs the cost of the rapid rescore however this eventually drives up the overall cost of doing business and eventually, the consumer pays.

In my opinion, this is something that Fannie Mae and Freddie Mac need to change pronto. Well qualified borrowers should not have to go through these hoops or have their mortgage denied. A simple written letter of explanation signed by the borrowers and possibly the creditor *should* suffice instead of requiring the credit report not show any sign of a dispute. Apparently back in 2009, Fannie was reviewing their policy however, I’m not aware of any significant changes.  

If our government wants to help the housing industry and our economy, this practice needs to stop now.

Filed Under: Credit Scores and Reporting, First Time Home Buyer, Rant Tagged With: , , , ,

The Low Down: Comparing FHA to Fannie Mae Homepath Mortgages

September 13, 2011 by Leave a Comment


EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you. 

If you’re thinking about buying a home with minimum down payment requirements in the greater Seattle area, you may be considering a property that is owned by Fannie Mae and eligible for the Fannie Mae Homepath Mortgage or using an FHA insured loan which most properties qualify for.  When home buyers contact me about a Fannie Mae Homepath mortgage, they often ask how it compares to an FHA insured loan. Both are great programs and the benefits may vary depending on credit score, down payment and the type of property.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Homepath, Residential Purchase Tagged With: , , ,

Shallow Credit can leave you in the Deep End when Qualifying for a Mortgage

August 5, 2011 by 2 Comments

Shallowcredit When in comes to qualifying for a mortgage, lenders are generally looking for borrowers who have established a history of paying their obligations on time. Ideally this would consist of four accounts that have been open and used for the last one to two years.  When someone does not have active accounts, or when their accounts are all new, their credit history appears “shallow” to some lenders. [Read more…]

Filed Under: Credit Scores and Reporting, First Time Home Buyer Tagged With: , , ,

How much can Sellers contribute towards Closing Cost?

May 12, 2011 by 10 Comments

If negotiated in your purchase and sales agreement, a Seller may agree to chip in towards some or all of your bona fide closing costs, prepaids and reserves.  They cannot contribute towards your down payment.  The amount the seller can contribute varies depending on the program type and the amount of home buyer’s down payment. The percentage is based on the sales price and if the credit exceeds the closing cost, the mortgage originator can often use it towards discount points to buy down the interest rate.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Underwriting and Qualifying, USDA, VA Mortgage Loans Tagged With: , , , , , , ,

Fannie Mae’s HomePath Program

October 15, 2010 by Leave a Comment

EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you.

Fannie Mae’s HomePath program is available to purchase qualified foreclosed homes (owned by Fannie Mae) with expanded conventional guidelines, competitive mortgage rates and often times, with special incentives.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, First Time Home Buyer, Homepath, Investment Property, Residential Purchase Tagged With: , , ,

How to Buy a Seattle Home with $10,000

April 28, 2010 by 2 Comments

NOTE: Mortgage rates quoted in this post from April 2010 are outdated and no longer valid. For a current mortgage rate quote for a home located anywhere in Washington, please click here. Also, other programs available since this post was published. 

I recently had someone getting ready to buy their first home ask me if $10,000 would be enough for a down payment.  If she had served in the military, she could possibly qualify for a zero down VA loan; this was not an option for her.  USDA loans also offer 100% financing but the area she’s considering is not classified as rural. 

An FHA loan will currently allow her to buy a home with as little as 3.5% of the sales price.  Until this summer*, sellers can contribute up to 6% of the sales price towards allowable closing costs and prepaids (*in a few months, this will be reduced to 3%).

So how much with $10,000 buy?  How about a sales price of $285,000.   Here’s how that pencils out.

$285,000 x 3.5% required minimum down payment = $9,975.  This is the buyers minimum required investment if utilizing an FHA insured loan.   A parent can gift funds towards this amount, but the seller cannot.

The rate (as of writing this post 4/28/2010) for an FHA insured 30 year fixed mortgage is 5.000% assuming we’re closing in 30 days (APR 5.620) and priced with zero points to help keep the closing costs down.   Pricing the loan with zero points means that you’re asking the seller to contribute $2,750 less than they would if your rate was priced with a point (1% of the loan amount).  This may make your offer more acceptable.

Based on this scenario, if the Seller contributes $5,500 towards allowable closing cost and prepaids, you’ll wind up needing approximately $10,000 for your down payment and remaining closing costs.

I did use 6 months for property taxes, which will vary depending on when your first mortgage payment is due.  And I used 15 days of prorated interest which is based on closing in the middle of the month.   Closing towards the end of the month reduces the prorated interest (your cost)…of course the trade off is that you don’t own the property until it’s closed.

The total monthly payment, including PITI and mortgage insurance, is going to be around $2,000 (depending on interest rate, taxes and home owners insurance).  My scenario has a payment of $1981.  

In addition to your down payment, you may be required to have reserve funds after closing of at least two months proposed mortgage payments.  Based on this scenario, that would be around $4,000 in the bank (stocks, 401k, etc) after closing. 

Also of note, your first payment will not be due until the month after closing unless you close on an interest credit.  This is a great opportunity to “pay yourself” by putting that mortgage or former rent payment into your savings account.  Owning a home does come with expenses…some not always planned.

If you are interested in buying a home located in Washington state, I’m happy to help.   Please contact me or apply on-line by clicking the tab at the top this page.

Filed Under: FHA, First Time Home Buyer, Residential Purchase Tagged With: ,

15 Days Remaining for the Home Buyer Tax Credit

April 15, 2010 by Leave a Comment

NOTE: this is a post from 2010 and this tax credit is no longer available.

If you are planning on taking advantage of the home buyer tax credit, either as a first time home buyer or a "repeat" home buyer (aka "long time resident"), you have fifteen days to be in a binding sales contract with mutual acceptance.    This means that both you and the seller have ironed out the negotiations which can sometimes take a few days to agree on…so in reality, you probably have less than 15 days unless you submit the "perfect" offer to the seller and they decide to accept it with no counter offers.

If you are hoping to claim the home buyer tax credit, you should check in with your mortgage professional to make sure that your preapproval is still valid.  In the Seattle-Bellevue area, listing agents and sellers expect a preapproval letter to accompany the purchase and sale agreement before they will consider the offer. 

Preapproval letters may expire if your paystubs, bank statements or credit report are outdated.   The terms stated on the preapproval letter should match with the terms of the offer being presented to the seller.  Mortgage rates have been volatile and if your debt to income ratios were "pushed" to the limit, you may or may not be qualifed for what you once were.

If your offer is countered past April 30, 2010 because you didn't have all your ducks in a row with your lender, you may not qualify for the home buyer tax credit.

And before you try to get into a mutual contract before the deadline–it's a good idea to make sure that you actually qualify for the tax credit.  

You may be disqualified from the home buyer tax credit if:

  • the government has deemed you make too much money–modified adjusted gross incomes up to $125,000 for a single taxpayer, or $225,000 joint, qualify for the full credit.  Those with MAGI up to $145,000 for a single taxpayer   and $245,000 joint qualify for reduced credit.
  • if the purchase price is over $800,000 (better write that offer for $799,950 if your income qualifies).
  • if the home being purchased is not going to be your primary residence.
  • family members are not eligible (you cannot buy the home ancestors or dependents)
  • if the contract is accepted after April 30, 2010
  • if the transaction is closing after June 30, 2010

Remember, I'm your mortgage expert for homes located in Washington.  I am not a tax expert–please consult your CPA or tax advisor for more information.

Filed Under: Current Affairs, First Time Home Buyer, Legislation, Residential Purchase

Did You Know that FHA Mortgages are Assumable?

April 14, 2010 by 2 Comments

One benefit of FHA insured mortgages is that they are assumable to qualified buyers.  This means that if you have an FHA insured mortgage at today’s low rates and you’re selling your home during a higher mortgage rate environment, being able to offer a lower rate to potential buyers could provide a distinct advantage over other competing listings. [Read more…]

Filed Under: FHA, First Time Home Buyer, Residential Purchase Tagged With: , ,
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