Interested in refinancing but concerned you might have bad credit? First, don’t worry – we offer many mortgage loan problems that don’t require perfect credit to qualify. It may very well be possible to refinance your mortgage even if you have a few blemishes on your credit history.
Refinancing your existing home loan can be an excellent way to move closer to your financial goals. Some of the common reasons homeowners refinance include:
- To lower their monthly mortgage payment.
- To lower their interest rate.
- To move from an adjustable rate loan to the security of a fixed rate mortgage.
- To pay off their home sooner with a shorter term loan.
- To lower monthly expenses with a longer term loan.
- To take cash out for home repairs or renovations.
- To consolidate a second mortgage or home equity loan and a first mortgage loan.
- To take cash out for other, non-home related purposes.
Wondering what you could save by refinancing? Call now to check today’s rates.
How Does Credit Impact Qualification?
Credit history is just one of many factors that go into qualifying for a mortgage. Each home loan program has specific requirements that must be met, which may include things such as the amount of equity in the home, the percentage of monthly income that can be allocated towards mortgage expenses, the types of properties that can be financed, whether the home can be used as an investment property or vacation house, and more.
Credit requirements often come into play as a minimum qualifying credit score, and specific events in the credit history that could disqualify a homeowner from a particular program. For example, there may be a limit to the number of late payments shown on the credit report within the past year. These are often broken down into the number of late payments allowed that were 30 days past due, 60 days past due, 90 days past due, and 120 days past due, with the later payments having a more negative impact. A late mortgage payment will generally be more of an issue than a late payment on another bill when it comes to qualifying for a refinance.
Some of the other credit events that could impact eligibility for a specific program are:
- Short Sale
- Mortgage Loan Modification
- Deed In Lieu
- Tax Liens
The more time has passed since the credit event in question, the less of an impact it may have. In some cases, a bankruptcy one year ago may make you ineligible for a certain program, but a bankruptcy 10 years ago could present no problem.
Credit history and score are not only factors in determining whether an applicant qualifies for a home loan, but may also impact the terms they are eligible for. Some programs allow homeowners with excellent credit to borrower a greater percentage of the subject property’s value, and restrict the amount that can be borrowed to a lower percentage for those with lower credit scores.
Not sure what your credit history looks like? Call to speak with one of our refinancing experts to review your report and discuss mortgage options.
Why Is My Credit Score & Credit History Important?
When homeowners don’t make their monthly payments on time, or worse, go through foreclosure or bankruptcy, it can be very costly for the mortgage lender. As part of the home loan application and approval process, the lender is working to determine whether the applicant is likely to be successful in re-paying the loan over time.
Credit score and credit history are important pieces of information that go into this determination, as how consumers have used credit and loans in the past is often a good predictor of how they will handle new credit accounts and loans in the future.
What If I Don’t Qualify?
If during a consultation with a mortgage loan originator you learn that you may not be eligible for a specific program due to your credit, don’t worry. This alone does not mean you won’t be able to refinance. Here are a few steps you can take:
- Check the accuracy of your credit report.
It’s not uncommon for there to be mistakes on a credit report. There could be late payments showing up for accounts that you’ve always paid on time, or even credit accounts that aren’t yours. This is often seen with common names, or family members with the same or very similar names. Go through your report carefully and address any errors you come across.
- Consider alternate loan programs.
Each mortgage program has its own set of requirements. If you are ineligible for one product there may be another with less restrictive guidelines that you may qualify for.
Talk to your loan originator to discuss the options.
- Work to improve your credit and reapply.
If you don’t qualify for any refinance programs at the moment that are a great fit for your scenario, you may want to take some time to work on improving your credit and reapply when your scores are higher, or some negative credit events are further in the past. Focus on paying every bill on time, every month. Work on paying down balances on credit cards, auto loans, or other loans, concentrating on the debts with the highest interest rates first.
Through this process you may come across credit repair services promising a quick fix. Do your research and watch out for disreputable organizations that could do more harm than good.
Do you have questions about your credit score, credit history, or refinancing in general? Call today – we’re here to help!
Thinking of buying a new home? Congratulations! Whether this is your first house, or you’ve been through this process before, it is an extremely exciting time. With some care and planning buying real estate can be a fun and rewarding experience. Here are the 10 steps to expect that will take you from dreaming about a new home to having the keys in hand!
Step One: Get Pre-Approved for a Mortgage Loan
It may seem early in the process to be thinking about financing a property you haven’t even identified yet, but getting pre-approved at the start can help set your home purchase up for success. Your Mortgage Loan Officer will ask you questions about your plans for the home, your finances, your employment, and come up with the dollar amount you are pre-approved to borrow, as well as the loan programs that may be a good fit for your scenario.
Ready to Get Pre-Approved now? Give us a call to speak with one of our mortgage experts!
Step Two: Set Your Home Buying Budget & Wish List
Once you know what you are pre-approved to borrow it’s time to figure out how much you are comfortable spending on your new home. Consider the amount needed for a down payment if applicable. (Low and no money down programs may help lower your up-front costs.) Think about your monthly expenses such as your mortgage payment, real estate taxes, and homeowner’s insurance. Look at your existing expenses and factor in saving for a rainy day, long term savings, and other financial goals you may have. When buying a home, it’s important to plan for the cost of home maintenance and repairs as well.
This is also a great time to create a wish list for your new home. What are the features you would most like to have, and what are some “nice to have” items? Think about location, square footage, architectural style, number of bedrooms, number of floors, the yard, and any aspects that are important to you. It might not be possible to find one property with everything on your list, but identifying what matters most will be helpful when it comes time to decide which listings to view.
Step Three: Find a Real Estate Agent
Working with an experienced real estate agent can help the process go smoothly. They will be your advocate every step of the way, negotiating pricing and terms on your behalf. They can highlight potential red flags in a particular property and help identify homes that are a great value, and which might be overpriced.
Do you need a recommendation for a real estate agent? Contact us!
Step Four: Browse Real Estate Listings
This is the fun part! Your real estate agent will likely provide some listings for you to look at based on what you hope to find in your new home, and you can also search available homes for sale. It can be helpful to look at listings for properties that are a little outside your parameters – you might stumble on a great deal that is a bit below your price range, or a dream house a neighborhood or two over from where your search is centered.
Once you find several homes you are very interested in, your real estate agent can arrange showings so you can tour the homes in person. Take notes on each property to help remember what you loved and didn’t like about them.
Step Five: Make an Offer
It might be the first home you see or the tenth, but when you find the property that fits your budget, has many of the features on your wish list, and just feels right – it’s time to make an offer! Your real estate agent will guide you through deciding on a price and terms for your offer, and present it to the seller’s agent. Including your pre-approval letter will strengthen your position, and help give the sellers confidence that you will have no trouble obtaining financing for the purchase.
Step Six: Apply for a Mortgage
When your offer has been accepted and you are under contract on the property you can move forward with your formal mortgage application. You will work with your mortgage loan originator to select the program that will be the best fit for your scenario, such as an FHA Loan, VA Mortgage, Conventional, or Non-QM product. Much of the information will have been gathered during the pre-approval process, but you will be asked to provide additional information and documentation to complete the full application.
Ready to apply for a new home loan? Contact us to get started!
Step Seven: Arrange Homeowners Insurance
To protect your investment in your new home it’s important to have homeowner’s insurance coverage. Depending on your location you may also be required to have, or want to consider specialty coverage such as flood, wind and hail, landslide, and/or earthquake coverage.
Step Eight: Get the Home Appraised and Inspected
To help determine that your home is worth what you’re paying, and is in the condition you are expecting, it’s customary to have the home evaluated by professionals. A residential real estate appraiser will evaluate the property and based on comparing it to other similar homes that have recently sold nearby, determine its current market value. A home inspector will thoroughly investigate the home, looking at the structure, appliances, electrical, plumbing, and hvac systems, and more as applicable. You will receive a report detailing any items that require maintenance or repair.
If any significant work on the property is needed your real estate agent may negotiate with the seller to see if they are willing to cover some or all of the cost.
Step Nine: The Final Walkthrough
Often occurring on the morning of closing, the final walkthrough is an opportunity to take one last look at the home before it becomes yours. You and your real estate agent will tour the property and make sure everything is as it should be and that any agreed upon repairs have been completed. Then it’s time to head to closing!
Step Ten: Close on Your New Home!
The most exciting day of the home buying process, the closing is where everything becomes official. You and the sellers will sign several documents completing the transaction, and the sale of the property. After the paperwork is complete, the funds have been transferred, and the deed recorded, you will be the official owners of your new home!
Ready to buy a new home or refinance your existing mortgage but not sure how the process works for freelancers? Not to worry, there are many home financing options available to self-employed borrowers.
Who Is Considered Self-Employed?
When it comes to applying for a home loan, the distinction is generally drawn between traditional income earners and self-employed income earners. Traditional employees receive a Form W-2 from their employer, and that is used to document their income on a mortgage application.
Self-employed borrowers can include:
- Business Owners
- Gig Workers
- Sole Proprietors
- Independent Sales Professionals
Because these individuals don’t have a W-2 showing how much they earn each year, they will need to provide alternative income documentation.
Self-Employed Income Documentation
For most conventional and government loan programs some or all the following documents will be needed to show self-employed income:
- One to Two Years of Personal Tax Returns
- One to Two Years of Business Tax Returns
- Business License (if applicable)
- Business Registration
- Profit and Loss Statement for the Business
- A Letter from the Business’s CPA Confirming its Status
Specialty mortgage programs, many designed with self-employed borrowers in mind, provide additional options for documenting income. These Non-QM loan products may use one of the following methods:
- Bank Statements
Income is shown as the difference between deposits and withdrawals over a period of time on business or personal bank statements.
- Form 1099
For freelancers or subcontractors who receive 1099s showing their income from the businesses they work with.
Have questions about your income documentation options? Give us a call today to discuss your scenario.
Does All Self-Employed Income Qualify?
Because a brand-new business or venture represents greater risk when compared to an established one, many mortgage programs require that self-employed individuals show a two year history in the business to be eligible. This means having two years of tax returns, which generally amounts to more than two years from opening day, depending on when the business return is filed.
Exceptions can sometimes be made if the new business is in the same field that the individual has a long history in as a traditional employee.
What if a Borrower Has Multiple Jobs?
It’s not uncommon in today’s economy to have multiple jobs, perhaps with various compensation structures. For example, a potential home buyer may have a part time job for a large corporation and run their own business on the side. This is no problem for many home loan programs.
The income from the corporate job can be documented with a Form W-2 and the qualifying income from the side business through alternate documentation, with both considered on the loan application. In some cases it could be possible to qualify for a mortgage using only the traditional income. It may not be necessary to document the self-employment income if it is not needed – talk to your loan originator to learn more about this possibility.
Qualifying for a Mortgage as a Freelancer
Though the income documentation is different for self-employed borrowers, the other qualification factors are the same that would be evaluated for a traditional income earner. Some of these may include:
- Credit History and Score
An applicant’s credit report shows how they have handled credit accounts in the past, which can be used to show how likely they are to repay a new home loan as agreed. Most mortgage programs require a minimum credit score to be eligible.
- Equity Position
Some home loan programs require a down payment of ten or twenty percent of the home’s value (or that the homeowner have eighty or ninety percent equity in the home if refinancing.) Others, notably government products such as FHA Loans and VA Loans, have low or even no money down options.
- Other Debts
Existing monthly payments on credit accounts such as car loans, student loans, credit card balances, and other mortgages as applicable will be calculated to determine the amount that can be borrowed with a new mortgage loan.
- Occupancy Type
The requirements may vary if the home will be used as a primary residence, vacation or second home, or investment property.
- Property Type
Financed properties can be single family houses, townhomes, condos, lots and land, manufactured houses, mobile homes, duplexes, and multi-unit properties. Not all programs will finance all property types.
Contact us to learn what you could qualify to borrower for a new home, or what you might save by refinancing.
Mortgage Rates for Self-Employed Borrowers
As a general rule mortgage rates for freelancers and other self-employed individuals aren’t any different than the rates available to traditional employees. Pricing varies by program and the specific scenario. For example, rates tend to be lower on shorter term ten- and fifteen-year loans, when compared to thirty-year loan terms. When borrowing a larger percentage of a home’s value rates are generally higher than when the homeowner will have more equity in the property.
A few other factors that can impact pricing include the applicant’s credit history and score, occupancy type, property type, if the loan is a fixed rate mortgage or adjustable-rate loan, and current market conditions.
Interested in applying for a new mortgage as a self-employed borrower? Call today for a quote for current mortgage rates.
Considering buying a new home? It can be very fun and exciting to browse through listings of homes for sale and imagine one day living in your dream home. The biggest concern for many would-be home buyers is related to saving the funds needed for a down payment. It is often the largest roadblock on the path towards homeownership. Here are a few tips for clearing this obstacle and successfully purchasing a new home.
Tip #1: You may not need a large down payment.
First time and even repeat home buyers are often surprised to learn that many mortgage programs don’t require you to put a lot of money down. For example, with an FHA Loan you can buy a home with as little as 3.5% down. This is a huge savings when compared to the ten, twenty, or even twenty-five percent required by some mortgage programs. This smaller down payment amount can be saved much more quickly, meaning you could buy a home sooner than you may have thought possible.
Additional benefits of an FHA Loan include:
- Perfect credit is not needed to qualify.
- More flexible requirements, meaning more borrowers are eligible for financing.
Qualifying veterans and active-duty members of the US military may be able to buy a home with no down payment at all. VA Loans offer 100% financing for purchase mortgages. This makes it much easier to buy a new home – a wonderful benefit for our nation’s heroes who have served.
Wondering what you could be approved to borrow with a low or no money down home loan? Give us a call today!
Tip #2: Create a home buying budget.
Whether you are saving for a small down payment for an FHA Loan or determine a conventional loan or alternative program is a better fit, having a plan can help you reach your goal sooner. To make a budget that will allow you to increase your savings start by tracking all your spending for a month. Look at all your regular bills such as:
- Rent or existing mortgage and housing costs.
- Transportation expenses – car loan, auto insurance, gas, public transit.
- Utilities and cell phone.
- Debt payments – student loans, credit card balances, personal loans.
- Childcare or pet care.
- Alimony or child support payments.
- Medical insurance.
Then look at what you spend each month including everything you put on a credit card or pay cash for. Some of your spending categories might be:
- Groceries and dining out.
- Entertainment and shopping.
- Gifts and charitable giving.
Sort through the budget to find areas you could cut back on for the time needed to save for your down payment. Maybe you’ll reduce the number of times you eat out or get takeout each week. Maybe you could trade that morning visit to the coffee shop for brewing a cup at home, knowing it will get you into your new home that much faster.
Here are a few other ideas for non-necessities you might trim from your budget to help you save:
- Trade movies out for movie night at home. Make it fun by picking a theme and inviting friends.
- Cut back grocery spending. Challenge yourself to a “clean out the pantry week” which saves money and food waste – win win!
- Stop buying new clothes. Go to the back of your closet to rediscover items you may not have worn in a while. Have a special event that requires a fancy outfit or specific gear? See if you can borrow something from a friend or rent for less than buying new.
- Cancel an expensive membership to a gym or workout studio and get outside to run, walk, or bike ride. At home workouts are a great option also. Missing the camaraderie of your gym buddies? Ask a friend to join you!
Have you saved for your down payment and are ready to get pre-approved? Get started now.
Tip #3: Find big opportunities to save.
Saving $5 on a latte here and $15 on a yoga class there will add up more quickly than you might think, but if you’re hoping to buy a house soon you might want to fast track your savings. Evaluate your budget for some large savings you can cash in on to see that down payment fund really grow.
A few things to consider are:
- Skip the vacation this year. Opt for a staycation where you are a tourist in your own town. Bonus points for visiting free places such as parks and outdoor areas. You can also search for local discounts at attractions near you.
- Hold off on buying a large ticket item such as a new car or re-furnishing a room. Work to save up for the new home first.
- Rent is often one of the largest expenditures on the monthly budget. Could you save by adding a roommate for a period of time?
Tip #4. Stay motivated.
Create a visual reminder of your goal to help keep you on track. Print a photo representing your dream home and place it in a spot you’ll see every day, such as on your refrigerator, bathroom mirror, or desk. Regularly check in to see the progress you are making as further motivation to stick to your budget and keep saving for that new home.
With some hard work you could be holding the keys before you know it!
Do you have questions about what you need to save for a down payment? We are here to help – call to talk to one of our home loan experts!
For many homeowners their mortgage payment represents their largest monthly expense. Lowering that payment could mean significant savings month after month, year after year, over the course of time owning the home, or until the mortgage is paid off.
Wondering how you could save on your mortgage payment? Here are a few ideas to look into:
Refinance Your Current Home Loan
Depending on the terms of your existing mortgage and other home financing options available to you, refinancing could be an excellent way to lower your mortgage payment. There are a few possible ways to potentially make this happen:
- Refinance into a loan with a lower mortgage rate.
If current mortgage rates are lower than the rate you are paying now, you may be able to refinance and save. Some programs will allow you to roll the cost of the transaction into the new loan, meaning you would have few out of pocket expenses related to the refinance.
- Refinance into a mortgage with a longer term.
If rates are not low enough relative to your current loan to make a significant difference in your payment, don’t worry, there are other options to consider. If you have been paying on your current home loan for a few years, you could save by refinancing into a new mortgage with a longer loan term. Going from 17 years remaining on the loan to 30 years would likely mean a lower payment each month.
Keep in mind that extending your loan term will generally mean you will pay more in interest over the course of the loan, but for some homeowners this tradeoff may be worth accomplishing the financial goal of lower monthly expenses.
- Refinance into a different loan program.
You may also be able to find a lower rate, and lower payment, on a program that is different from that of your current mortgage. Adjustable rate mortgages have an introductory rate for a period of time that is often lower than the rates available on comparable fixed rate loans. A 3/1 ARM (Adjustable Rate Mortgage) will have that low introductory rate for the first three years of the loan term. 5/1 ARMs, 7/1 ARMs, and 10/1 ARMs have introductory periods of five, seven, and ten years respectively.
At the conclusion of the initial period the rate will begin to adjust up or down according to current market conditions. Homeowners choosing this option should understand they won’t have the security of a fixed rate mortgage once their rate starts to adjust, but this can still be a great option to look at in some scenarios. Perhaps you only plan to own this home for a few more years before selling it. Or it’s important to have lower mortgage payments in the short term because one income earner is staying home with young children or going back to school.
Lower Escrow Payments
If refinancing isn’t an ideal option right now you may still be able to bring down your monthly mortgage payment. In addition to the principal and interest portion of your home loan payment, it likely also includes escrow payments.
This means that your mortgage servicer collects an additional amount each month with your home loan payment, and uses those funds to pay your homeowners insurance, real estate taxes, homeowners association fees and other expenses as applicable when these items come due. If you can lower these fees, you could see a reduction in your monthly mortgage payment.
Shop around for a better deal on your homeowners insurance. If you have had the same policy for some time there may be more affordable options available to you without sacrificing coverage. It may also be possible to lower the annual cost by raising your deducible.
Check with your local jurisdiction to see if there are any options for reducing your property taxes. There are sometimes available courses of action for senior homeowners, low income homeowners, properties used as a primary residence rather than an investment property, and more. If the value of your home has decreased over time this could also impact what you are required to pay in property taxes.
Move to a Less Expensive Home
Downsizing to a less costly home can be an excellent way to permanently lower monthly housing costs, and perhaps end up with a sum of money from the proceeds of the sale as well. This is a popular option among homeowners with grown children who might not need a large home any longer.
Making the move to a less expensive property doesn’t have to mean sacrificing square footage. Consider a neighborhood where homes cost less or even a city or state with a lower cost of living, and lower cost of real estate.
Talk to Your Mortgage Lender
In times of economic hardship a lower monthly mortgage payment might ease the financial burden for a short period of time. For example, if you have experienced a job loss or medical issue that is causing you to worry about being late with your mortgage payment, or missing a payment, the best thing to do is contact your mortgage lender right away.
They may be able to lower your payment for a period of time, so you can make up the difference a few months down the road when the situation has improved. Available options will vary by loan program, servicer, and the borrower’s payment history, but the most important thing is to communicate early before any payments are missed.
As you can see there are many possibilities that may be available for reducing your monthly mortgage payment depending on your current scenario and plans for the future.