Important Facts You Should Know About Lending

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?

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?

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.

Ask the “Mortgage Man”

Grant Money for First Time Home Buyers!

Is it possible to have another incentive better than what is currently available? We have a program called the First Front Door. This grant is offered to first time home buyers ( buyers who haven’t owned a home in the past 3 years), under certain income limits, to be used to enhance their down payment. For every $1 down payment paid by the buyers, this program offers an additional grant of $3 to a maximum grant of $5,000. This may or may not have to be paid back. There are certain income limits and restrictions, but you don’t have to pay anything back if the property is occupied for the first 5 years of ownership. It is a nice way to minimize the savings required to buy a home.

In addition to this grant, the normal incentives of seller assist can be applied to the closing costs, making this program affordable to may different first time home buyers. The grant funds are limited and are given on a first come first serve basis, until the funds are depleted. They anticipate that they will be exhausted sometime in April.

It is a great program for anyone that needs that extra cash, especially on properties that won’t meet USDA or FHA property requirements. Perhaps the well and septic don’t meet the minimum property requirements, or repairs necessary to pass the property for FHA/USDA financing. This is a fantastic alternative while monies last.

Andy Williams

President

(484)-695-5972

NMLS #118317

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.