Many Dallas area home buyers are looking to cash in on the potential upfront equity that buying a foreclosure may provide. It goes without saying that there is a large nubmer of foreclosures available in the Dallas area simply because of the slow real estate market coupled with the foreclosure epidemic. Buyers need to know the possible advantages, as well as the potential pitfalls, associated with foreclosure transactions.

First of all, most lenders that are selling foreclosures require a specific bidding process for buyers to submit an offer. This bidding process varies from one lender to the next, but many will publish a specific bidding deadline and then will take the offer they feel is the strongest. Just because one buyer has a higher dollar offer than another does not automatically mean they will be chosen as the winning bidder. Lenders also consider other factors, such as the closing date, the stregnth of the buyer’s credit profile, the amount of closing costs the buyer is asking the seller to pay and also even the type of financing the buyer is choosing to use.

There are definitely some potential advantages to buying a foreclosure, most notably the potential opportunity to have some upfront equity in the property. Many foreclosures are, indeed, sold below “market” value, but often times their overall condition is weighted into the price. This means that a home selling for $20,000 below market might require a significant amount of improvements in order to be brought up to the same condition as other homes in the neighborhood.

Also, there is normally quite a bit of competition, especially among investors, for foreclosures. Some entities, such as HUD, give priority to owner-occupant bidders. Every lender is different, so consult with us prior to making an offer to purchase on any foreclosure property.

Foreclosures will likely continue to be abundant for the next several years in the Dallas real estate market. And while this may certainly present some opportunities for Dallas area home buyers, they should also consider looking at non-foreclosure properties as well. Home sellers who need to sell their home quickly in this tough market are often opting to sell for less than market value in cases where they have enough home equity. So buyers who are of the opinion that they must only look at foreclosures in order to get a home that is below market may be passing up some really good values.

Visit our site for more information for Dallas area home buyers and sellers.

A short sale occurs when a seller can not sell their home for enough to cover the loan balance and the other costs, such as title policy, real estate commission, tax proration and other closing costs. When this occurs, home sellers must either have enough cash on hand to cover the difference or must negotiate an agreement with their lender to sell the home short “short sale” in order to consummate the home sale transaction.

Because of the decline in home values over the last several years combined with the weak housing market in general and also many home buyers’
use of 100% financing, it is not uncommon to see short sales in virtually every market in the United States. Some estimates are that as many as 12% of homes currently for sale in the United States are short sale transactions.

To home buyers, short sales present a number of challenges and risks. However, in many cases, buyers may be able to purchase a home below market value if they are willing to deal with the hurdles that most short sales require.

Here is a list of the advanages and disadvantages of short sale transactions that buyers should take into consideration before bidding on a short sale:

Advantages:

* Some homes sold as short sales may be offered below market price, meaning the buyer may be able to get a better price than they would buying from an individual owner. Since the cost of foreclosure is often in the tens of thousands of dollars, some banks will opt to allow a buyer to sell their home below market verus foreclosing on the property and taking an even bigger loss.

* Short sales do not have the same type of “bidding” process as many foreclosures. Likewise, many homebuyers are not willing to wait several months for the bank to give an answer, so home buyers that are willing to tolerate the potential wait of several months to obtian an answer may not have as much competition from other buyers.

Disadvantages:

* Some lenders may not agree to pay closing costs on the buyer’s behalf.

* The process that lenders take to approve a short sale may take up to several months. During this time, the buyer has no idea if the bank is going to approve the transaction.

* Some short sale properties may be in greater states of disrepair because the seller may have not had enough money to properly maintain the home.

* Once the bank approves the short sale, they may make their approval contingent on a quick close, which may force the buyer to close quicker than they are able.

With all the recent changes in the mortgage programs, many people wonder if it’s still possible to get a mortgage with a 620 credit score. Ultimately, the answer depends on other factors besides just your credit score.

However, the vast majority of all lenders are now requiring at least a 620 minimum median credit score to get any type of mortgage. If you are lucky enough to find a bank to approve you for a mortgage with a credit score of less than 620, you will definitely pay a higher interest rate. It would certainly be advantageous to raise your credit score to at least a 620 prior to applying for a mortgage.

There are three main types of loans available: FHA, VA and Conventional. Conventional Loans (meaning those eligible for purchase by Fannie Mae and Freddie Mac) typically require a minimum credit score of 620. Furthermore, Fannie Mae requires higher interest rates (between .125% and 1%) for credit scores below 680. The amount of the rate increase ultimately depends on both credit score and the amount of down payment. FHA loans may have some adjustments as well, although there is no specific criteria outlined by FHA in this instance. The score adjustments vary from one lender to the next. We at www.4bestrate.com work with a variety of lending sources to offer you the best possible rates and service available for FHA buyers.

The mortgage insurance on FHA loans is typically less expensive than for Conventional loans as well, so FHA is usually the loan that makes the most sense for borrowers with credit scores in the 620 range.VA loans have very similar underwriting guidelines and interest rates as FHA loans, so they are a great choice for qualified veterans with a 620 credit score. VA loans also are available with no money down, and since FHA loans now require a minimum down payment of 3.5%(as of January 1, 2009), veterans will definitely find VA loans more attractive than any other loan option.But as I mentioned above, there are other requirements to get a mortgage besides just having a certain credit score.

For starters, all lenders (FHA, VA and Conventional) require buyers to have a minimum of three trade lines (meaning open and active accounts, such as a credit card, car loan or other type of finance account) in order to consider an applicant for loan approval. This is another area where FHA and VA are more flexible than Conventional loans because they allow a buyer to use non-traditional credit references, such as utility bills and insurance payments, to meet this guideline. However, if more than one late payment exists on any of these accounts in the last 12 months, the loan will typically be denied. That’s why aspiring home buyers with a limited credit history should consider secured credit cards as a way to build a good credit history. Secured credit cards can be obtained by almost anyone, regardless of credit, because they are secured with a savings deposit.In addition to the minimum credit requirements, lenders will also look at your debt-to-income ratio, as well as your income and employment history for the last two years.

Reduced documentation (stated income) loans are not available with any of these programs anymore, and may not make a comeback for a while. Buyers who recently graduated from college or who took time off to have children may still be eligible without a solid two year work history. Retirees and individuals with other documented sources of income may also still qualify without actually having to be employed. FHA typically likes to see that buyers are spending no more than 40-45% of their gross income on debts, and the conventional loan guideline is 38%.

And lastly, there are some situations which may disqualify a buyer from getting a loan. These include:Chapter 7 Bankruptcy – Must be discharged for two years to obtain an FHA loan.Chapter 13 Bankruptcy – Must have at least a one year satisfactory payment history to be eligible for an FHA loan.Foreclosure – Must be over three years old. Five years for Conventional loans (two if a short sale)Consumer Credit Counseling – Must have at least a one year satisfactory payment history. Conventional loans may require less than one year in some cases.

Perspective home buyers that have a credit score in the 620 range should take extra steps to ensure their credit score does not drop any lower. Virtually all lenders will not loan to anyone with less than a 620 credit score.

Monitoring your credit report and score in the months before you plan to apply for a loan IS CRITICAL to insure that you will not blow your chances of qualifying because of some minor change in your credit file. Even a small collection account of less than $100 or one late payment can plunge your credit score by dozens of points. And if this happens in the middle of the loan process, the result can be hundreds or thousands of dollars in lost earnest money and inspection fees.

Homewood Mortgage is an aggressive FHA lender that specializes in helping clients with less than perfect credit. If you want to know what you need to do to qualify for a mortgage, call Homewood Mortgage today at 972-387-9215 or APPLY ONLINE. Rates are at 52 year record lows and won’t stay this low forever!

Homebuyers that are sitting on the fence trying to decide whethoer or not to take advantage of the record low mortgage rates should know that higher rates may be on the way soon. At the present time, buyers with low credit scores are still be able to get mortgages, but many lenders have imposed credit score increases for those with less than perfect credit. Some additional credit score increases may be on the way soon as well.

The current rate adjustments for some popular loans are described below. The amount of the rate adjustment depends on what type of loan you are looking for.

There are two main types of mortgage loans: Government-insured loans and Conventional Loans. FHA, VA and USDA loans are all government-insured loans. Conventional loans are those purchased from banks by Fannie Mae and Freddie Mac. Conventional loans have very specific interest rate adjustments based on a variety of factors, including credit score, loan to value ratio, COMBINED loan to value ratio (in the case of a first and second mortgage), property type and occupancy of the property. Government loans, on the other hand, do not have nearly as many rate adjustments. In some cases, lenders will charge higher rates for higher risk factors.

CONVENTIONAL LOANS

Currently, Fannie Mae has a matrix of “loan level price adjustments”, which are basically adjustments to the yield of mortgages based on two main factors-credit score and loan-to-value ratio. The qualifying credit score is the borrower’s middle credit score from the three credit bureaus. Loan to value ratio means the amount of the loan compared to either the property value on a refinance transaction, or the sales price on a purchase transaction. For example, a borrower putting down 5% on a purchase has a loan-to-value ratio of 95%. And a borrower refinancing a $95000 mortgage on a home valued at $100,000 also has a loan-to-value ratio of 95%.

Fannie Mae announced on December 29th of 2008 that the loan level price adjustments would be increasing effective on all loans delivered to them after April 1, 2009. This has made conventional loans less competitive compared to their government counterparts like FHA, VA and USDA. Of course, FHA has loan limits of $271,050 in the Dallas / Fort Worth area, so this may not be an option for buyers looking for homes priced above this level.

Here is an example of how the new adjustments will affect the points paid on a $100,000 mortgage (click the image to view larger size):

These dollar amounts represent the amount of discount fees (points) that a borrower will have to pay in order to obtain a “par” rate. An alternative to paying these points is to “premium price” the rate, meaning accept a higher rate and have the lender pay the discount fee. Since the premiums paid by lenders varies greatly, there’s no way to know exactly how much higher that rate will be without consulting a mortgage lender and having them do a complete loan pre-approval, including obtaining a three bureau credit report with credit scores. Here’s an estimate of the average rate increase to expect:

$500 cost – Rate is typically .125% to .25% higher.

$1000 cost – Rate is typically .25% to .5% higher.

$1500 cost – Rate is typically .375% to .625% higher.

$2000 cost – Rate is typically .5% to .75% higher.

$2500 cost – Rate is typically .75% to 1% higher.

$3000 cost – Rate is typically .875% to 1.25% higher.

AND IN ADDITION to these adjustments, there are others for additional risk factors, such as:

• Home equity loans (cash out)
• Property Type (condos and two unit properties)
• Adding an interest-only feature
• Occupancy of the property (primary residence, second home or investment property)

GOVERNMENT LOANS

Up until recently, many types of government loans were available on credit scores of less than 620. These days, lenders not only require a minimum credit score of 620 but also impose higher rates for buyers with credit scores of less than 660 in many cases.

IN addition to these adjustments, some in the industry expect that FHA will come out with some additional rate adjustments to buyers with low credit scores at some point. It was also recently announced that the FHA minimum reserve requirement had dropped below the Federally mandated level of 2%. At some point, Congress will have to figure out how they will replenish this deficit. Loan level price adjustments, as well as possibly higher premiums for mortgage insurance, are certainly a possibility.

Aspiring homeowners should give us a call today to discuss their options. There are many different ways we counsel homebuyers on how to increase their credit score prior to qualifying for a home loan. Today’s mortgage rates are near record lows primarily because the government is purchasing mortgage-backed securities. However, this program is slated to end in March of 2010. With the threat of increased rate adjustments and the ending of this program, home buyers that delay purchasing a home may be missing out on the lowest rates in two generations.

Q:  Why should i consider refinancing my current home loan?

A:  There are several different reasons to refinance your home.  The most popular is to lower your monthly payments and saving on interest expense.  Another is to tap in to the equity of your home with a cash back refinance.  Everyone situation is different.  We’ll tell you whether or not it makes good economic sense for you to refinance.  The numbers wont lie, see for yourself!

Q:  How do i calcualte my monthly payments?

A:  Use our mortgage calculator.  Fill in the blanks with accurate data and click “calculate”.  Find out what your proposed monthly payment is in seconds.  Depending on where you are purchasing will dictate things like property taxes and insurance.  Consult with a good realtor for more information about the property taxes in your area. 

Q:  What is the minimum credit score needed to qualify for a home loan?

A:  The answer to this question has changed frequently over the past year.  FHA loans typically require a minimum FICO score of 620.  There are instances to where you can go down to a 580 with compensating factors.  Conventional conforming loans differ depending on down payment.  A 720 credit score is what you will need with a 5% down payment.  Before you apply for a home loan get a free credit report and see where you stand.

Q:  What can i do with my home equity loan funds?

A:  Anything you want to.  Consolidate higher interest rate debts for lower total monthly payments.  Make home improvements.  Take advantage of potential tax deductibility on the mortgage interest you pay.  Consult your tax advisor to make sure you qualify for interest deduction.

http://www.4bestrate.com Home Loan Education, Mortgage Calculator, Premium credit monitoring with Free Credit Report offers.

When buying a home there are four main players involved and all play a key role in this process to ensure that the closing happens on time. The Borrower, the Realtor, Mortgage Broker and Title Company must all do their part to make it happen.

Lets start with the borrower. First things first. Obtain a credit-checked pre approval before you shop for a home. Get with a good mortgage broker and find out what you can qualify for. Use a mortgage calculator to determine what your monthly payments will given different scenarios. Make loan application as soon as possible and gather together every document requested. You don’t want the closing to be delayed because you took forever to send your loan officer a recent pay stub!

The Realtor must set realistic expectations upfront and throughout the transaction with the listing agent, the seller and borrower in regards to potential closing dates. Under current market conditions and changes in lending disclosure it is wise to plan for at least a 30 day close. Your realtor should provide the Title Companies contact info to your mortgage broker as early in the process as possible.

Your Mortgage Broker should be quick to take a written application and get all of the required disclosures submitted for processing as soon as possible. Here is where you will be provided with all of the various loan product options available to you. Your lender will help you understand timelines and anything that can impact the closing date. The most significant change in lending regulations that is affecting closing dates lies with the Truth in Lending Disclosure. The final APR cannot vary more than .125 from the initial disclosure. The crazy thing about this is that the Good Faith Estimate is what calculates the APR. Should the rename it Good Faith Exact? I don’t think so. It is an estimate for a reason. No one knows exactly what the total fees are going to be until you are well in to the transaction. For example, not all transactions need a survey. Fees vary depending on the loan product. Your APR will change from the initial application. And if it changes more than .125 your lender must re disclose this and you have to wait three days to close. The lawmakers are pretty stupid but these are the facts. To avoid delays lenders are having to scramble the week before closing to make sure that they properly disclose the APR to you. At that point its too late to switch lenders so what’s the point. However, it must be done to make sure you don’t suffer any closing delays.

The title company must gather the title commitment, insured closing letters and uncover any potential breaches of title as early as possible. They must also work proactively on providing a preliminary closing statement with accurate fees to lenders enabling them to issue the Truth in Lending at least a week before closing to avoid delays due to inaccurate APR calculations.

Everyone must work together to make it all come together. Open communication is vital so that everyone is on the same page. Find the right lender and realtor and you will be just fine.

http://www.4bestrate.com Use our mortgage calculator, find the best home loans, protect your identity with our premium credit monitoring and get a free credit report.