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Important Facts You Should Know About Lending

Pennsylvania Re

1. If I put down a certain amount of money on a house, I won’t need to show any income in order to qualify for a mortgage. FALSE

In the state of Pennsylvania, in March 2011, the governor of Pennsylvania outlawed “no income or stated income loans.” All mortgages in the state of Pennsylvania require income verification going back 24 months.

2. If I put down 30% or 40%, my credit score and credit history do not matter. FALSE

Although the interest rate will not increase if a down payment of 40% or more is provided, an underwriter for a lending institution will still scrutinize the payment history and usage of credit in determining a borrower’s ability to pay a mortgage.

3. It only takes two months to establish credit. FALSE

If alternative sources of credit are not used in determining a borrower’s ability to repay a debt, it takes seven months on a credit card or any other type of installment debt that is newly established, to create a score on our credit bureau system. It may show a payment history but not enough to generate a score.

4. Is it true that no credit is better than bad credit? FALSE

It is required to have a credit score in order to purchase a house and obtain a mortgage. There are some exceptions where they will allow alternative sources of credit such as rental references, utilities and cell phone bills to determine a borrower’s willingness to repay a loan. If not, a buyer must show a positive history.

5. Shouldn’t I charge up the new card and pay it off to show a good credit history? FALSE

When we pull credit reports, we see the final balance on the last billing cycle. If you charge it up and pay it off, all we see is the card appears maxed out. This brings the scores down. The proper way to get the highest score possible is to use the card for a small item once per month. This shows minimal use of consumer debt, which brings the scores higher.

6. Is my Credit Karma score the same as the one you pull? SOMETIMES

What most people don’t realize is that Credit Karma shows consumers what their score will be when they are applying for credit cards.  That system shows a different algorithm which is used in determining a borrowers credit profile.  Most consumers don’t have access to the same scoring system used for mortgages. It doesn’t mean that we lowered your score when running your credit, it just means that the scores aren’t the same in the two systems.

Could This Be Another Housing Bubble on the Horizon?

 Source: Google Images (Pinterest)

We all remember 2008, but do you know what events led to the housing crash? There were a few fundamental issues that caused the sudden housing market correction. The first issue was that there was an oil rise per barrel. This raised the cost of gasoline as a trickle-down effect causing a consumer scare or fear of gas prices increasing to upwards of $5 per gallon. The gas price scare caused long distance commuters to rethink their plans of moving into neighboring states, particularly New Yorkers and North Jersey residents from moving to Pennsylvania. As this phenomenon occurred, homeowners weren’t able to sell their homes. This caused demand for housing to fall, and thus house prices started to decrease.

With the initial need for housing years earlier, and rising home prices, lenders came up with creative types of financing to keep up with the strong consumer demand. Adjustable-Rate Mortgages with rising rates, No Doc loans (where buyers didn’t have to provide income documents to qualify), and low credit scores loans. Sometimes requiring little to no money from potential borrowers made home ownership affordable to almost anyone. Although, this influx of new buyers impacted the market and fueled the frenzy of ownership, these loans proved to be unsound. Initially, these unconventional types of financing didn’t have a negative effect. As new buyers were finding it difficult to keep up with the monthly payments, most were able to sell their homes quickly to get out of their debt, and some even made a profit. The increase in prices masked certain hidden fundamental issues. In particular, those who had questionable mortgages, were the first ones affected by the diminishing demand for housing. With a sudden lack of buyer demand, home values started to decrease. The house of cards collapsed and there was a flood of foreclosures entering the market when consumers couldn’t keep up with the payments. The current housing market going into 2021 seems similar in some ways but is yet quite different.

Due to many changes in lending, all loans require sound lending decisions, with more conservative underwriting standards. This has increased the high quality buyers in today’s market. The interest rates are at an all time low with many mortgages below 3%. (Rates were over 6% in 2008). Oil and gas prices are on the lower side, and the US Government has put stop gap measures in place to keep the economy stable. With no unforeseen catalyst changing in the near future, this housing market doesn’t appear to have a looming bubble to cause it to collapse.

Is It Possible to Include Upgrades Into My Mortgage When Buying a Home?

Mortgage Upgrades

We all know how highly competitive this Real Estate market has become, especially after the COVID-19  Pandemic began. Buyers in our area of eastern Pennsylvania have seen a shortage of available homes on the market. Adding to the shortage of homes is an increasing demand for New York City residents moving out of the city and into surrounding states. This demand has driven prices of homes upward due to numerous buyers bidding up the home values in order to beat out the competition. With more buyers paying cash or doing conventional financing, the chances of buyers receiving any assistance towards their closing costs, and/or financing 100% or using another sort of FHA/USDA/VA government financing vehicle to secure their home, are slim to none.

 

Adding to this pressure are the desires for potential homeowners to secure below market valued properties by buying foreclosures. Since the banks are taking the most competitive offers on bids, there are more cash deals and some limited conventional loans accepted, but with a lot of money down. Temporarily gone are the FHA 203K loan options where the buyer can finance needed repairs into their loan. With the red tape and long time frames required to get these types of loans to closing, fewer banks are accepting offers on these types of mortgages. Is there any other way of getting structural and cosmetic repairs financed into a mortgage, while satisfying a picky seller?

 

When you are ready to buy that home that needs work and make it your dream home, call us anytime! We offer a conventional loan with an escrow for repairs. All we need is an estimate from any or multiple contractors to be financed into the borrower’s loan. It is one loan where we can finance up to 95% of  the combined cost of the home, plus required/optional repairs. The house must appraise for the full value. For example; If a home costs $100,000 as is and the person wishes to add $60,000 to finish the entire house and make it 100% livable, as long as it appraises for $160,000, they can finance up to $152,000. We allow the home owners to have all of the repairs done after the closing on the home. The bank will hold the escrow for repairs and distribute the money periodically as per a prepared agreement mutually satisfactory to both the contractor, homeowners and the bank.

When you are ready to buy that home that needs work and make it your dream home, call us anytime  at (610)-837-1600.

Can It Get Any Better For Our Veterans?

Did you know that with a VA IRRRL loan you can refinance your mortgage with no need to verify income or bank accounts? We only require a phone call to your employer to show you are gainfully employed at your current job.

There is no need for a property appraisal which will save hundreds of dollars. This alleviates the worry of a potentially lower market value or an inspection as to the condition of the property. This loan is the easiest most streamlined mortgage on the market. You can save hundreds of dollars each month, resulting in tens of thousands over the life of the loan. With rates starting as low as 2.25% (APR of 2.539%), we offer Veterans the lowest payments available to them. We have partnered with a large wholesale lender to offer these to you.

Rates will never be this low again, so take this opportunity and call us at (610) 837-1600 and speak with one of our loan officers. We salute and are ready to serve you.

IRS Phone Call is a Scam

I was awakened by a wrong number in the middle of the night, but I missed the call.  Wondering if it was some family member in an emergency, I listened intently as I played all of the unheard  messages on our home voice mail.  I was alarmed at a robotic automated message left from the “Internal Revenue Service”.  I was startled at first by the robotic voice’s nasty undertone.   As I replayed it, it became apparent that perhaps this is some sort of scam. The message threatened that there will be legal action initiated against me unless I call them immediately.  Click here to hear the actual message.  A police officer was scammed and called the number back.  This is interesting as the scammer actually goes into detail to how they take your money. Click here to see the accompanying video. Watch from 1:45 to 5:00.  A former NFL player, who is a radio personality, left his office and did exactly what the scammer told him to do.  He went to many convenience stores and payed thousands of dollars into foreign Pay Pal accounts before realizing that this may be a scam.

After researching this more in depth, I found that the IRS will never call you on the phone.  The most they will do is send you multiple letters.  If you file your tax returns on time, pay your required income tax, you have nothing to worry about.

Does Going With Conventional Financing Avoid Having To Make Required Repairs?

If FHA/ USDA/ VA loans require repairs to be completed prior to closing, why not just switch to a Conventional Mortgage? As long as the buyers qualify, we won’t have to worry about doing any repairs to the home.  Besides, many of these homes are foreclosures, and many banks, Freddie Mac, Fannie Mae, HUD, and others won’t allow the properties to be touched prior to closing.  Wrong! The appraisers have been going through a scrutiny as of late.  The level of responsibility to report accurate and concise information of the homes, has increased exponentially.  Appraisers are being told that they can be held liable for any unreported issues, so appraisers are now required to take pictures of every room in the house, and they must note any unusual abnormalities that can effect the marketability of a home. They must give the home a Quality rating, too.  They are given a rating of  C-1 to C-5. A rating of C-3 is considered average.  When the Conventional appraiser reviews the home, they are still taking pictures and making notations of things like: Stains in the carpet, water stains in the ceiling, holes in the wall, missing molding, broken windows, water in the basement,etc.  Even though none of these is structural in nature, banks are requiring these items to be fixed because they are concerned about safety and soundness issues with the property.  The average quality rating is expected, and anything below that rating requires repairs to be made before the buyer can take possession of the home.  Once these repairs are completed, the appraiser must go back out to the property and reinspect it for the bank.  The appraiser verifies that the Quality rating is up to average. There are two ways that this situation can be dealt with.  Either the buyer does the repairs on a home that they don’t own, which can be time consuming and unacceptable to a seller, or they can apply for a rehabilitation loan.  A rehab loan is one where a buyer obtains an estimate of repairs from a contractor, our bank holds the amount of money in an escrow account.  Once the required repairs are complete, the bank pays the contractor direct for the repairs, or reimburses the buyer once they have been shown that have been completed.  Most lenders can’t do any type of Rehab loans, or they offer the FHA 203K, which is arduous and expensive.  I can do a standard conventional rehab loan, requiring as little as 5% down payment.  Regardless which way you want to go, please know that switching the type of financing to Conventional doesn’t promise any different outcome.

Buyers with Credit Scores Below 620 are Financeable

Does your lender finance anything below a 620/640? FHA/VA/ USDA loans are all regulated by the government. They don’t truly have minimum credit scores, but lenders have what is called overlays. http://www.thetruthaboutmortgage.com/what-is-a-lender-overlay/ These overlays are a set of rules specific to each lender. Most lenders sell their mortgages in large pools to investors. These investors set minimum credit score requirements for loans that they will purchase from these lenders. Since each lender has different investors, there are different minimum score requirements per lender. I deal with many different lenders, and I have a very reputable one who will go as low as a 550 score on all three types of mortgages: VA,USDA, and FHA. Other lenders are required to receive approvals from an automated software system specific to the type of loan requested, in order to close and fund these types of mortgages. My lender underwrites the loan manually, which means that they don’t have to receive an automated approval through any of the government software systems. This allows me the ability to finance many more ready, willing, and able buyers. In order to finance any of these buyers with sub 620 scores, they are required to provide 12 months rent checks evidencing they’ve paid all of the payments on time. The lender will not accept rent receipts, money orders, or letters from a landlord/apartment complex. In addition, the buyer will have to furnish 12 months checks or a printout from at least one utility company to evidence timely payments. The most common types are cable, internet, cell phone, electric, heat, and car insurance. Any of these will work, and the lower the score, the more utility references we may require. If you know of anyone who may fit the description of a buyer who is capable of owning a home please have them call me. I will give them an answer within 48 hours one way or another.

3 Day Mandatory Buyer Review of Hud-1

Is this another way of slowing down our turnaround times? It is bad enough that the government enacted so many lending changes in the past few years, much too late to avoid the kinds of loan fraud which were prevalent in the mid 2000’s. Now they are continuing to find more red tape that slows down the lending process. They changed the good faith estimate, requiring that the lenders would have to eat any fees being over charged to the buyers at settlement. This was a novel idea which kept the predatory lenders from using bait and switch tactics to take advantage of consumers. They required licensing for individual loan officers, mandatory continuing education, testing, criminal background and credit checks. All of these have been effective in eliminating the less than desirable loan officers from continuing to originate loans. Why are they requiring a minimum of a 3 business day review of the HUD-1? As of August 1, 2015, there is a mandatory 3 business day review in which a buyer can cancel their contract to buy a home after receiving a copy of the HUD-1. This is an example of an overkill. Any discrepancies at closing fall within the 10% tolerance, meaning that the lender or loan officer will have to absorb any additional lender charges incurred by the buyer. Since the fees cannot be changed from what the borrower was shown at the time of application and/or within 3 business days from the date of application, there is no need to delay the closings an additional 3 business days. Many lenders take until the day of closing to do the final preparations of closing papers. They wire the monies needed, and email the papers to the title company within 24 hours of the closing. With these changes, they will have to have everything to the title company at least 4 business days before the closing so that the title company will have the time they need to complete the final HUD-1 and get it to the borrower. This is doing nothing to help anyone, because the culprits who changed the fees at closing are long gone, and only the remaining experienced and reputable loan officers remain. All this does is provide another reason why the government agencies are too late to act, and often overreact to problems. Tack on another 3 days to your real estate contracts!

Satisfying Judgements on Your Credit

Have you ever heard of someone paying their judgment and it still is being shown as unpaid? This is a common occurrence. Creditors are eager to take your money, but they have no incentive to go to the trouble of removing the judgment, or at least showing it as being paid. Once you pay them it is too late to negotiate with them. They can still continue to show the judgment as being unpaid for up to 10 years! If a potential home buyer is attempting to purchase a home, and a judgment shows as being unpaid, even if the lender is willing to give a mortgage, the title company can’t get clean title for the borrower without proof the lien is paid and satisfied in the courthouse. You owe it to yourself to follow these simple steps if paying off an old judgment: 1. Contact the creditor who filed the judgment against you. ( Don’t call the magistrate or courthouse) 2. Get a bank or cashier’s check for the entire amount owed, made payable the plaintiff. 3. Set up a time to meet with the creditor at the courthouse in the county in which it was filed. 4. Pay them at the same time they go to the clerk of courts to file the “Satisfaction Piece”. By following these simple steps insures that your lien will show as satisfied anywhere from 30-90 days after it is filed.

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LOCATION

100 W Main St 1st Floor, Bath, PA 18014

Phone: (610) 837-1600
Fax: (610) 837-1616
NMLS # 113984

HOURS

Monday – Friday, 9AM – 4:30PM. After hours by appointment.
Saturday, By appointment
Sunday, By appointment