Now that the market is back in full swing, we are encountering problems with loans that can be easily avoided. Here is what I have been seeing:
Power of Attorney: Only a spouse that is a borrower or co borrower can sign for the other spouse and the POA must be approved by the lender PRIOR to scheduling a closing. An attorney, the title company closer, a parent, or other relative cannot be the POA for a borrower.
Water: The water and electric must be on at time of appraisal or else the appraiser will put it on his appraisal and charge to go back out. If your home is vacant and the water is off, you must go out and turn it on for the appraiser. They will not turn it on.
Funds for Closing: These funds must come from a bank account that has been verified by the lender.
Repairs: Generally they must be completed prior to closing and be re inspected.
Home Inspections: Do not give them to the appraiser. If there any issues on it, they will condition for them to be fixed.
Appraisals: Make your deal go smoother. Meet the appraiser at the property and have comps in hand.
Closing Costs: On purchases, they cannot be rolled into the mortgage. In some cases the borrower may select a higher interest rate and receive a credit back from the lender that may pay some or all of their closing costs.
Fixer ups: Lenders do not do those. The house must be habitable. I.e., you should be able to cook dinner, take a shower, and sleep in the house. FHA, VA, USDA require appliances to be in the house and working!
Appraisal Final Inspections: This is for new construction. Once the appraiser inspects the property to see if it is complete, they have 24 hours to turn it in. Then the underwriter can take up to 3 days to review it, so please allow for up to 5 days from final inspection to closing. We cannot hold up a loan if the appraiser states the property is complete. A borrower’s punch list cannot hold up the closing.
Homeowners Insurance: Due to the increasing cost of insurance, lenders now require a quote before they underwrite the file.
HUD’S and Final Figures: These come from the title company after the lender reviews and approves them. They are generally not available till the day before the closing. We give borrowers a realistic Good Faith Estimate of their costs and how much they need at time of application.
HUD Homes: If the borrower is going FHA, they usually do not need a new appraisal. HUD has already done one. You will need to obtain the appraisal from the listing agent.
Credit Reports: One is run at time of application. Lenders have subscribed to a service where they are notified if the borrower’s credit changes during the loan process or they obtain new credit. So we tell the borrower not to buy anything on credit until after they close. Not even a spoon! And lenders cannot give out copies of credit reports. It is against the law. Credit reports are copyright protected by the 3 major bureaus. (sorry I don’t make the laws)
Gift Funds: The big problem here is that we have to verify where the money came from, and that the donor had it to give. So this means Mom and Dad HAVE to supply us with their bank statement showing they had the money to gift. And gift funds must come from a relative or a person who co habitats with the borrower (s). I.e., people in a relationship.
Praying: It helps J
Roommate Paying Rent: Generally we cannot count this as income to help qualify the borrower.
How To Boost Your Credit Score FAST
I think we all know that the higher your credit score, the better chance we have at getting a loan, and on better terms. For example, if your credit score is around 660, you might qualify for a car loan, but at what percentage rate? Maybe 7, 8, or 10 percent. But what if you had a credit score of 760? You might qualify for very low 3, 4 percent--or maybe even ZERO percent financing--saving you thousands of dollars over the course of the loan. So you can see how having a good credit score can be invaluable and a real asset to you financially. It opens doors that would otherwise be closed.
This holds especially true for buying a home. Because of the large dollar amount that you will be borrowing to purchase a home, banks are very critical of your credit history and how you present yourself as a borrower. Did you make payments on time? Did you max out your credit cards? Did you satisfy car loans or let them go back to the bank? Follow these tips to get your score SOARING in no time!
3 Ways to Remove negative credit
1. Obtain your credit report and score. This is the first step in identifying any problems. Your credit score is like a test grade. The higher, the better. It's important to know what your score is so you know where you stand. Generally speaking, a score of 600 or less is bad, 601-660 is fair, 661-740 is good, and 740+ is excellent. You can obtain a free report from several different sources online.
2. Verify bad debt. To do this, find a "fill-in-the-blank" form online for disputing old accounts. Get the name and addresses of the Debt Collection companies, and mail out dispute letters via certified mail. This forces them to provide evidence and ownership of the debt.
3. Dispute the Debt with the Credit Agencies. This is critical. The credit agencies--Experian, Trans Union, and Equifax, all have built-in dispute resolution departments designed specfically to help consumers maintain accurate credit reports. Tell them either on-line or over the phone about the debts and that you're disputing the debt. They will follow up on your behalf and in many cases get it removed from your record.
6 Ways to IMPROVE the credit you DO have
1. Make your payments ON TIME. This is the most obvious advice, and the advice your father gave you when you were a kid, but it still holds true. Especially car payments and credit cards. Put your other utility payments or cell phone bills down the list if you have to choose which to pay first.
2. Keep the balances LOW. One of the biggest ways to improve your score is to keep the total balances on ALL accounts below 30% of the max. This shows that you can manage your debt responsibly.
3. DON'T close old accounts. It might seem like a good idea, but one of the factors is LENGTH of debt. A long track record of on-time payments looks good. So try to keep accounts active, open, and in good standing.
4. Obtain a SECURED Loan. Can't get a loan on your own because of bad credit? Go to your bank and ask for a secured credit card or a personal loan. This is done by placing a fixed dollar amount, say, $500, into a bank account. You then draw against that $500 (credit card) or get the $500 back instantly (secured loan). You make monthly payments and pay off the debt. In the case of the loan, you get the $500 back at the end of the payoff, and the same is true of the credit card if you close your account.
5. Make sure you have ENOUGH credit. Sometimes not having enough credit can hurt you. If you've sworn off credit cards because you think they're bad, you're half right. But the truth is, you will have a hard time getting a good credit score without enough good credit history. A rule of thumb is you should have about 5 lines of good credit, with a mix of credit cards (lines of credit) and installment loans (auto loans/personal loans, etc.).
6. Don't apply for credit too FAST. While it's important to have good credit, try not to open up new credit accounts too fast one after the other or it will appear that you're trying to charge like there's no tomorrow. This has the same effect of maxing out your credit--very damaging to your score. Wait at least 6 months between applying for credit.
HOW DO I START INVESTING IN
The buy and hold and rent strategy has made millionaires of many, many people. It’s a strategy that works. Here’s how to do it.
You have to first get a solid feel for how much you'll be able to charge in rent for the type of property you're thinking of buying. So you first want to research rental listings in your area. Use the newspapers and drive through the neighborhoods in which you are interested. Call owners of property for rent ask questions about the property. Talk with a competent Realtor to find out what the rental market is like. Don't even think of buying until you're confident you understand how much renters are paying.
Then it's time to start looking at properties for sale. When you do, you'll need to come up with a realistic, conservative (i.e. on the low side) estimate of what you think you could charge in rent for the property you're considering. (If you can't, go back and look at more rental properties.)
Use a competent Realtor to help you in your home search. He/She should be able to provide you with information on home prices in the neighborhood. Your goal is to buy the property at a discount to improve your cash flow on the property.
Once you've found a property and made your rent estimate, you then need to work out your monthly costs: mortgage, upkeep, taxes, insurance, etc. If you can't cover these costs with your estimated rent, you’ll have a negative cash flow. Ideally, you want to make sure you have "positive cash flow" (i.e., rent minus expenses equals more than $0).
If you calculate zero or below, you might still make money if the property appreciates in value, but with the recent run-up in prices, you certainly can't count on that happening. History has shown that property values and rents both go up. Many people use an average estimate of 5% per year.
You'll also want to talk to a tax advisor to find out what impact this rental income has on your return. If set up properly, rental property should have a positive impact. But you'll want to know all of the tax angles before you buy. You may have to pay a fee to a tax expert for this. But it could save you thousands of dollars in the long run. (Consider it a tuition payment in real estate school.)
Make sure to ask as many questions as you want at every stage. No question is too basic. To get a loan, you'll have to show enough income and assets to meet the lender's minimum requirements. But it's not their job to decide whether you can really afford it or whether the property will make money for you over the long term.
If you've gotten this far, take a deep breath and re-check everything again. Don't buy until you're satisfied you understand every detail.
If you are like most people your own home is probably one of the best investments you have ever made. My advice is buy one more! Just get started. Most people never start and let opportunity pass them by.