Can I get approved for a 400,000 home loan with a 600 credit score?

November 6, 2007 by 4 Comments

Yes…quite possibly!   The title of this post is a question that was entered as a search that found Mortgage Porter.  Someone could buy a $400,000 home with a 600 credit score if:

FHA Scenario Possibility

  • No late payments or derogatory credit in the past 12 months.  FHA insured loans do not use credit scores.
  • Base loan amount at FHA loan limit (assuming King, Snohomish or Pierce Counties):  $362,790.
  • Just shy of 10% down or a minimum of 3% down plus closing costs with a 6% seller contribution.

With conforming, if the other qualifying factors (income, assets, employment, down payment) are strong, the borrower may still qualify for a mortgage. 

At the very least, if your credit score is 600 and you’re considering buying a home, I suggest contacting a Mortgage Professional to have your personal scenario reviewed.  The higher your credit score, the better your rate may be for a mortgage and a qualified Mortgage Professional should be able to advise you on how to improve your credit rating.

Filed Under: Credit Scores and Reporting, Mortgage

I’m pulling my funds from Washington Mutual

November 1, 2007 by 2 Comments

I opened a new bank account to begin transfering my funds out of Washington Mutual.   I said I was going to do this when they ticked me off the last time…now it’s done!  What did WaMu do this time?

Bloomberg.com reports:

"First American Corp., the largest U.S. title insurer, was sued by New York Attorney General Andrew Cuomo for allegedly inflating home values under pressure from Washington Mutual Inc…

First American and eAppraiseIT “signed over their independence to Washington Mutual,” said Eric Corngold, executive deputy attorney general for economic justice. Cuomo said Seattle- based Washington Mutual is not being sued because of questions over federal jurisdiction.

Cuomo, 49, conducted a nine-month investigation and the evidence against First American is “damning,” he said. It includes e-mails between executives at the appraisal company and Washington Mutual that show Poway, California-based eAppraiseIT “willingly violated” state and federal regulations that call for independent home appraisals."

CNBC’s video from this morning covering this alledged fraud.

Our office has access to eAppraiseIT and we don’t use it.  Although they promise a quick turn around time, I’m not willing to hand over who does the appraisals for my clients.   I completely trust the appraiser I like to use.  If he says the value isn’t there, I trust him.  It’s in the home owners and home buyers best interest.   If this allegation is true, I’m disgusted beyond belief.   

It’s upsetting that First American seems to be getting the brunt of the bad press at this phase and I do hope the appriopriate authorites investigate Washington Mutual regarding this situation.

I’m sure WaMu will not miss my checking and savings account.  I meant to close it a month ago when they insinuated that the current mortgage situation lies most heavily on the brokers.  Honestly, I don’t know how any mortgage broker can keep their personal accounts with WaMu.  They are NOT the friend of my family!

Update 11/2/2007:  Seattle PI reports on WaMu Faulted on Home Loans

Filed Under: Legislation, Mortgage, Predatory Lending

Picking your next mortgage by rate shopping? You might as well be playing Liar’s Poker.

October 23, 2007 by 8 Comments

Poker_2

Rate shopping to select who will be assisting you with your next mortgage is similar to playing “liars poker”.  The Loan Originator who is the most successful at bluffing wins.  The fact is, unless you’re locking in the rate at the moment you’re shopping, you don’t have that rate.  It’s a rate quote–that’s all. Mortgage rates change throughout the day.  They are based on mortgage backed securities: bonds.   Some lenders I work with offer “live pricing” and others issue rate sheets; sometimes we can have several rate sheets offered by a lender during one day.

[Read more…]

Filed Under: Financial Planning, First Time Home Buyer, Interest Rates, Mortgage, Predatory Lending, Refinance, Residential Purchase

Please Don’t Neglect Your Unhealthy Mortgage

October 22, 2007 by Leave a Comment

ErToday I received a phone call from a CPA who was trying to help her clients who have a "toxic mortgage".   She was hoping I would be able to save them…there was a time that I probably could perform a "rescue".   In fact it was just a few months ago before the current mortgage melt down.   Believe it or not, when applied correctly, subprime mortgages could mean the difference of someone being able to save their home assuming they were able to be disciplined enough to keep (or get) their finances healthy.  This family will not qualify for FHA or FHASecure (they don’t have an ARM that’s adjusted).   What they need is a subprime (now known as "non-prime") mortgage to buy them a little time.   Now their time is running out.

Part of their problem began with working with an unsavory loan originator who is now out of the business.   The LO brokered their loan to a subprime company I would not work with.  (Even though we’re approved with around 80 lenders, give or take depending on the day, I tend to select 5 preferred prime lenders and 3-5 subprime/alt-a…this lender was not on my list of preferred). 

Shortly after closing, their lender informed them that they did not have home owners insurance…they did.  They provided documentation showing their insurance to the lender.    The lender did not respond and instead, ordered insurance for them at a hefty price…jacking up their payment beyond what they can afford.   Now they’re sliding down a very slippery slope and the lender is not cooperating.   They are behind on their mortgage a couple months.  They called out for help too late.   

NOTE:  Other lenders may be more willing to cooperate with homeowners…you need to act quickly and contact your lender if you’re having difficulty with your payment. 

Homeowners:  the very moment you think you may be having trouble with your mortgage or debts, please contact your Mortgage Professional right away.   If you don’t have one, you can always contact your CPA or other trusted financial advisor for a referral.   Please don’t wait until you have a "mortgage emergency"…get help, even if you just have the sniffles.

Trusted Advisors (Real Estate Agents, CPAs, CFPs, etc): Please keep an ear out for your clients who may have adjustable rate mortgages or are may be having difficulites with their mortgage payment.   Even if an ARM isn’t scheduled to adjust for 12 months or more, the sooner someone meets to with a Mortgage Professional to make sure their credit and everything else is in line to restructure the mortgage (if needed), the better for all.

All home owners should meet with their Mortgage Professional at least annually to have a "mortgage check up" or Annual Review.   This is a service that I provide to my clients.  I’ll provide more information about the Annual Mortgage Review in a separate post.   

My point is, the more time you allow yourself to fix a "sick" mortgage situation, the better your odds are of finding a cure.

Filed Under: Debt Restructuring, FHA, Financial Planning, Mortgage, Predatory Lending, Subprime Lending

Conforming Loan Limits will not be reduced through 2008

October 18, 2007 by Leave a Comment

There has been quite a bit of speculation that the conforming loan limit might be temporarily increased before the end of the year to try to provide some relief for the jumbo market (loans over $417,000 for single family dwellings).    OFHEO has announced that the conforming loan limit will not be reduced through 2008. 

In our region, you’re probably reading this say, "Duh! Of course the loan limit shouldn’t be reduced".  Nationally, homes are depreciating.  Our home values have been less volatile than other parts of the country.    Conforming loan limits are set based on a certain percentage of the national home prices. 

"The conforming loan limit is adjusted annually through a calculation of year over year changes to the existing level of home prices based on data from the Federal Housing Finance Board’s Monthly Interest Rate Survey (MIRS)". 

In late November, OFHEO will announce the 2008 conforming loan limits.  There is still a possibility that loan limits may be temporarily increased.   Congressman Barney Frank, Chairman of the House Financial Services Committee, would like the conforming loan limits to be temporarily lifted to $625,000. 

OFHEO is now seeking additional comment on the revised guidance within 30 days of its publication in the Federal Register.

I have a suggestion for OFHEO, why not allow loan limits to be factored on a county basis instead of national?  This system seems to work just fine for FHA loan limits. 

Filed Under: Mortgage

You don’t need 20% down to buy a house: 100% and 97% LTVs

October 17, 2007 by 2 Comments

In light of the tightening guidelines in the mortgage industry, I can understand how a consumer might think they need to save up a hefty down payment to purchase a home.   The fact is, there are many programs available that allow minimum down payments.   Here’s a small sample:

Conventional

Fannie Mae and Freddie Mac both offer 100% loan to value programs with either LPMI (lender paid mortgage insurance) or monthly private mortgage insurance.  Conforming loan limits do apply (currently $417,000 for a single family dwelling).   620 minimum credit score.   These programs may allow gifts from family as well.

FHA

The down payment for a FHA insured mortgage is approximately 3%.  Sellers can contribute up to 6% as long as the buyer is investing a minimum of 3% into the transaction.    Gifts from family are acceptable for the entire down payment and closing costs.   Loan limits do apply.   Very competitive interest rates with low monthly mortgage insurance (upfront mortgage insurance is financed into the loan).   FHA mortgages do not use credit scores (it does consider credit history) and do consider alternative credit for borrowers who have not established a credit history.

VA

The original zero down loan created for Veterans.   Sellers can pay all of the closing costs if negotiated in the purchase and sale agreement (also referred to as "double zero down").  Interest rates are very competitive with conforming rates.  There is an upfront VA funding fee that is typically financed into the mortgage.  There is no monthly mortgage insurance.   

To find out if you qualify for one of these programs, contact a qualified Mortgage Professional in your area.   Be wary of any lender who instantly steers you away from FHA or VA financing.  This could simply be a case of them not being an approved lender and therefore they’re not able to offer it.

Regardless of what the underwriting findings are on any of these loans, when you’re buying a home, I strongly recommend that you have a minimum of 3-6 months of savings available in your accounts after closing.   Life happens…even when you own a home and it’s best to have an emergency cushion in the event you need it.

Filed Under: FHA, Mortgage, Residential Purchase

Seattle-King County Third Quarter Foreclosures are Down

October 13, 2007 by Leave a Comment

Property Shark reports that foreclosures in King County are down year over year and are down 24.85% from the previous quarter based on trustee sales.    New_trustee_sales_seattle_2 

Why have foreclosure numbers improved in our region?  Hopefully distressed home owners are contacting their lenders for help before it’s too late.  Banks do not want to own homes and many are willing to work with home owners who are facing difficulties with their mortgage and are possibly facing foreclosure.   Another possibility is that investors are seeking out and buying “pre-foreclosure” homes.

South King County is reporting the most foreclosures for the third quarter.

Neighborhood_trustee_sales_2

Don’t wait if you’re having difficulty with your mortgage payments.   The earlier you take action, the more options you may have. 

Filed Under: Mortgage, Real Estate

Comparing Good Faith Estimates

October 12, 2007 by 5 Comments

Earlier a Mortgage Porter reader contacted me regarding working with their Builder’s Loan Originator.   They faxed their Good Faith Estimate to me to help review their closing cost fees associated with the rate.   You can click on either estimate for a larger view.   Here is the Builder’s preferred lender’s estimate 30 Year at 6.25% (APR 6.4246%):  Scan0002

Here is my estimate 30 Year Fixed at 6.25% (APR 6.442%):

Scan0001_4

When comparing good faith estimates:

  1. Make sure you’re obtaining the same lock periods (in this case, both estimates are for 60 Day Locks) and that you’re getting your estimates at the same time on the same day (I used a rate sheet from October 10, 2007).
  2. Add up all the costs shown in Section 800 of the Good Faith Estimate.   The total cost for the Builder’s GFE is $5200 and my GFE total cost is $4332.60.   This is a difference of $867.40 (my estimate has lower costs).
  3. Ask each LO if they will guarantee the closing costs shown in Section 800.   If they don’t, ask why not and listen hard.   There’s no reason a LO cannot back up the closing costs they promote on a GFE once a borrower is approved and the loan is locked. 

NOTE:  The Builder Lender’s APR is lower than what I’m quoting, yet my APR is higher even though my costs are lower for the same rate.   This is once again evidence why you DO NOT SHOP YOUR MORTGAGE BY APR.

I’m assuming the buyer has signed a purchase and sale agreement with the Builder who is offering a $5,000 closing costs credit if the buyer works with their lender.    They’re charging a 0.25% Discount Fee (shown on Line 802 of both estimates) where I would not.   The buyer should ask the builder’s lender why they’re charging a discount for that rate for 60 days when other lenders are not.   

When you’re receiving a credit from a builder, you certainly want to make sure that you are receiving the full benefit and that it’s not being absorbed by the lender.

Filed Under: Mortgage, Residential Purchase
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