Don’t Sabotage Your Home Loan!

Here’s the scenario: You’ve found a great house, and you’re excited about the prospect of moving in. You have an agent making sure all the I’s are dotted and all the T’s are crossed to get you to the closing table. It’s just a matter of time.

You drive by the house at least once every couple of days, you peruse the floor plan picturing where everything is going to go, but you just can’t envision most of your old furniture being the right style for the new space. You’ve upgraded your housing, you’re furniture needs to match, doesn’t it? You can just picture it – a living room straight out of HGTV’s Divine Design.

You plan a shopping trip for a new sofa, entertainment center, end tables, lamps…. Whoa! Stop right there!  Your shopping spree could actually keep you from moving into that dream house of yours.

How, you ask?  Well, it all has to do with a little thing called your credit score.

Yeah, I know.  Your lender checked your credit score, and it was stellar.  You think it’s a done deal, and all those financing worries are behind you, right?

Wrong.  Maxing out your credit cards buying new stuff for your house, or financing the furniture through the store could be all it takes for you not to qualify for the loan you thought was a sure thing.

When your loan goes to underwriting at the lender, they’re going to take a look at your financial picture to make sure nothing has changed.

Look.  A consumer credit score is made up of five key components which each contribute a different amount to your overall score:

• 35% comes from your Payment History.  This includes accounts such as credit cards, consumer loans, and mortgages.  Be sure to make your payments on time while you’re waiting to close on your house.
• 30% of your score is figured from the Balance Owed on your accounts.  This is where you can really mess up.  Don’t go putting a lot of new debt on your credit cards.
• 15% is from the Length of  your Credit History.  This would include the length of time since you opened your accounts, the most recent activity, etc.  There’s not a whole lot to worry about here.
• 10% from New Credit.  Don’t apply for any new credit cards or take out any new loans before you close on your house.
• 10% is Types of Credit Used  Such as mortgage, credit, and retail accounts.  If you pay attention to the first four items, you’ll be okay here.

Thanks to RIS Media for this info.

If you’ve gotten far enough along the path to your dream home or your first home, you’ve been disciplined enough to save money for a down payment and to manage your credit wisely enough for a lender to want to lend you money.

Now is the time to be patient just a little longer in order to be able to sit down at the closing table, sign papers until your fingers go numb, and feel the weight of that house key in your sweaty palm.

Don’t sabotage that moment by running up debt between the contract and the closing.

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

Do You Know How to Prepare for Home Ownership?

Here, in a nutshell are the steps every home buyer should take before venturing out to look for a new home.

Decide what you can afford

Generally, you can afford a home equal in value to between two and three times your gross income.  I advise to begin looking at homes in the lower end of that price range.

Develop your home wish list

Then, prioritize the features. For example, which is more important to you – the right school district or proximity to work? A remote master bedroom or a wood-burning fireplace or a large kitchen? A large fenced yard or no yard?

Select where you want to live

Compile a list of three or four neighborhoods you’d like to live in, taking into account the items you put on your wish list in the step above, area expansion plans, and safety. Drive around each one during the day and in the evening to get a feel for the neighborhood and whether it’s a good fit.

Start saving.

Do you have enough money saved to cover your down payment and closing costs? FHA loans require a 3.5% down payment, and closing costs average between 3 and 7 percent of the home price.

Get your credit in order.

Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments. There are things you can do to improve your credit score.

Determine your mortgage qualifications

How large of a mortgage do you qualify for? Also, explore different loan options with each lender you speak with to decide what’s best for you.

Get pre-approved

Organize all the documentation a lender will need to preapprove you for a loan. You will need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

Consider other sources of help with a down payment

Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on programs for first-time buyers, or ask the lenders you talk to.

Determine the total costs of homeownership

This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.

Contact a licensed real estate professional

We at GoodWin Team Realty can help guide you through the process and answer any questions that you might have along the way. And, of course, when you’re ready, we can show you the houses you’re interested in. That’s when you’ve gotten to the fun part!

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

Mortgage Application Checklist

As I stated in an earlier post, getting pre-approved for a loan can go a long way in your negotiating power when buying a home. It puts you in a much stronger position than someone who hasn’t yet talked to a lender, but thinks he can get the financing, no sweat.

A seller will think twice about accepting an offer from a buyer who hasn’t even approached a lender. In fact, most sellers these days will insist that at least a pre-qualification letter from the lender accompany any purchase offers. Sellers aren’t willing to take their home off the market while waiting for you to arrange your financing, and you can’t blame them.

So, what records is the lender going to want from you? Most or all of the information below. So, go dig out the boxes of old tax returns and bank statements. Looks like you’re going to need them.

Income and Assets

Pay stubs for the last 30 days
For the past two years: names and addresses of each employer and W-2s
Statements for each bank, mutual fund, and/or investment account for the last three months
Estimated value of personal property and furniture

If you have made any large deposits to your accounts: explanation and source for deposit
If large deposit was a gift: signed gift letter (lender can supply), copy of gift check, copy of deposit receipt

If you own more than 25% of a business: corporate or partnership tax returns

If self-employed: tax returns for the last three years (with schedules), Year-to-Date Profit and Loss Statement prepared by an accountant

If you own rental property: tax returns for the last two years and current rental agreements

If you are retired: pension award Letter

If you receive Social Security: social security award letter

If you are counting child support as income: copy of divorce settlement, copy of twelve months of cancelled child support checks

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Debts

Names, addresses, account numbers, balances and monthly payments on all current loans
Explanation of credit report anomalies, including: late payments, credit inquiries in the last 90 days, charge-offs, collections, judgments and/or liens
Bankruptcy filed within last seven years (bring a copy of your bankruptcy papers)

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VA Loans

Copy of DD Form 214, Report of Separation

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Miscellaneous

Photo ID and proof of social security number
Residence addresses for the past two years
If applicable, a copy of your divorce decree
If you are not a citizen, a copy of the front and back of your green card

I know it’s a lot of information, but it’s necessary in order for the bank to ensure that you can pay the loan back.  Call me, and I can help you through it!

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

How Do I Know If I Should Refinance?

Thanks to my associate, Marshall Graham, a lender with Aulds, Horne, and White for the following information to help you decide whether refinancing is right for you in your situation.

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The question whether to refinance or not can seem overwhelming to most. After all, we’re speaking of your number one asset! How does one know when the right time to refinance is? The mortgage industry is notoriously popular for statements such as, “My cousin Vinny said that you shouldn’t refinance until a 2% reduction in rate”. My intention is to shed some light into the mystery question, “When Should I Refinance?!”

The answer cannot be summed up as easily or as blatantly as a 1% or 2% rate differential. Why? Because a 1/8th of a percent increase in the rate of a $10 million commercial loan is a lot bigger deal than a $50,000 residential loan! The size of the loan plays a very important role in determining the rate spread necessary. The following chart, based on loan size, may be used for quick reference:

$300,000 – 3/4%
$200,000 – 7/8%
$100,000 – 1%
$75,000 – 1.5%
$50,000 – 2%

Obviously, if two people at work are discussing whether to refinance that have two completely different loan sizes, the general statement of a 1 or 2 percent differential would be mathematically skewed. The client with a loan size of $300,000 with a 1.5% rate differential would far exceed the benefit of a refinance than a client with a $50,000 balance, because many of the closing costs associated with conducting the loan are fixed, not based on loan size.

The amount of closing costs plays a key factor in determining whether or not to refinance. After all, it wouldn’t make sense to try to lower your payments $40 if your costs to do so were $9,000. It is here that one can determine a financial break-even point. The break-even point, which is defined as how many months and/or years must one reside in the property for it to be cost effective to refinance, is calculated by taking the total amount of closing costs and dividing that figure by the estimated payment reduction.

Break Even Point = (Total Closing Costs/ Estimated Payment Reduction)

The break-even point calculation assumes that only one variable is changing within the equation; the client is not moving from a 30yr to a 15yr term etc. Typically, we are finding our clients breaking even in 7 to 12 months.

Another important facet of refinances is based on the length of time one plans to remain living in the home. If a person plans on selling his or her home in 4 months, he or she definitely should not refinance. If you plan on staying in the property, (even one month) longer than the break even point, than you SHOULD refinance.

Lastly, much discussion is based on at what interest rate and when should one lock in. Personally, I am currently witnessing clients with a $200,000 + balance with a rate at 6.25% who would NEVER even consider purchasing a lottery ticket, not locking in at 4.75% with No Loan Origination Fee, because they are holding off for 4.25%?!? Are you serious? So what I’m being told is , “Marshall, a $188 reduction in my mortgage is not good enough….” Yet if that client continues to pay exactly what he’s currently paying , but instead at a rate of 4.75%, the client would reduce the term by 8 ¼ years! ($2,256 * 8.25) = $18,657. Or, take that $18,657 and invest it at a rate of 5% in the following 10 years, and you just saved $31,909……..the amount of your newborns college education. If the Haynesville Shale has taught us anything, it’s that greed can lead to nothing in the end. An old saying in poker comes to mind, “It’s better to win a small pot, than to lose a big one!”

Marshall F. Graham
Aulds Horne and White
318.869.4444
Marshall.Graham@AuldsHorneWhite.com 

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

DeMystifying Your Good Faith Estimate

Today I have a guest writing for me.  Marshall Graham, a local Shreveport Lender, has written an article that should help explain all the costs associated with a home loan.  It’s called a Good Faith Estimate, and it details the things the lender is charging you to give you the loan.

Okay, this isn’t light reading, but if you’re about to embark on one of the largest purchases of your life that you will be paying off for the next 30 years, it might be worth your while to read.  I want to thank Marshall for generously contributing to the GoodWin Team Realty blog.  Thanks, Marshall!

Why do I have to pay that?

By: Marshall F. Graham
Aulds Horne and White
(318) 869-4444

The recent changes to the Good Faith Estimate (GFE) were implemented to increase borrower disclosure, as well as make things “easier” to understand. Fannie Mae wanted to create a uniform GFE that all lenders could use to simplify the mortgage process, while also discouraging lenders from taking advantage of trusting borrowers. The majority of us within the real estate industry believe that the changes have led to anything but clarity, and have left borrowers asking, “What the heck is that fee for?!?”

Should I Apply for a Conventional or FHA Mortgage Loan?

My friend, Marshall Graham, with Aulds Horn and White of Shreveport has written an information-packed article on conventional versus FHA loans.  The info is of great help to people who don’t know the difference between conventional and FHA loans and which would be best for them in their situation.  Loans are definitely not one-size-fits-all.  Marshall’s article is rather lengthy, so if this isn’t of interest to you, I apologize.  Guess you’ll just have to skip this post.  But for those who are in the process of trying to find appropriate home financing, please take the time to read the entire article.  It could save you a lot of money.  And Marshall is always available to answer your questions – even if you’re not from Shreveport.  Here we go:

Should I Go Conventional or FHA?

By: Marshall F. Graham
Aulds Horne and White
(318) 869-4444

2009 represented a changing time within the real estate industry, as our understanding of what signified an ideal client for conventional loans changed dramatically. Credit scores that were at one time praised are now considered to be meager at best. 2009 brought about a change within our political arenas in regards to whether home ownership was a privilege or a basic fundamental right, as it was deemed to be over the last 10 years. Federal Housing Administration (FHA) loans by definition were designed to help those individuals achieve home ownership, whom for whatever reason could not go conventional. FHA in its creation was never meant to compete with its brethren Fannie Mae, but existed independently to aide middle to low income families in their pursuit of “the American dream”. The underlying changes of regulation within Fannie Mae has shaken the industry down to its basic core of understanding, leaving most clients asking, “should I go conventional or should I go FHA”?

Interest Rates Are Dropping – How Low Can They Go?

The latest of the 2009 mortgage stimulus efforts concentrates on lowering interest rates.  So there is good news on the home front for those of you who have been trying to decide if now is the time to buy a house.  In plain language, interest rates are expected to drop .25 to .5 percentage points in the next few days and to stay low.  This comes on the heels of the news that the Federal Reserve will buy $750 billion more in mortgage-backed securities and $300 billion in long-term government bonds.

Unfortunately, this won’t help homeowners facing foreclosure or who have no equity in their homes in order to refinance.  It also won’t be any help to buyers who don’t have stellar credit scores (740+ to get the best rates) and 20% of the purchase price for a down payment.

Those it will help are homeowners who aren’t upside down on their mortgage who want to refinance and buyers who have great credit and the required down payment. And don’t forget about the $8,000 tax credit for first time home buyers. A savvy buyer can cash in on the low rates that will be here later this week, then file an amended federal tax return after their home purchase and pocket the net credit before the end of this year.  Call me if you have questions about this.

Spring is in the air, the weather is getting warmer, and there are plenty of houses on the market.  It’s time to buy!

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission