Finding the Right Home Loan for You
The real estate market has recovered and home values are not at the level they were before the crash of 2008. Interest rates remain historically low and help to continue to make home buying affordable. I have had several clients share that they believe we are headed for another real estate crisis because of the rising price of homes.
Lenders, however, are being very diligent in making sure borrowers are very well qualified before lending so they can purchase a home. The 2010 Dodd-Frank legislation is also in place to make sure the lending practices of the past will not reoccur. Lenders are not just looking if a borrower can afford to buy a home, they are wanting to make sure they can sustain it. If you have not gone through the loan or refinancing process, in the last few years, you will notice a big difference with tighter guidelines.
There are many great loans in the market, regardless of the tightening rules, including those that make it easy and affordable for a buyer to get one, and not to mention again, the low interest rates.
It is a great time to buy a home and if you wait for a year or more you could miss a great opportunity. There are many loan products available, Fannie Mae and Freddie Mac have introduced 97% loan so the borrower only needs 3% down payment. These loans require higher credit scores than the popular FHA loans which will qualify borrowers with credit scores as low as 580 with 3.5% down payments. The Fannie and Freddie loans have lower costs involved than the FHA loans do.
Arizona has some great loan programs that offer down payment assistance. Home in Five is a grant that offers up to 4% of the loan amount, which is determined by credit score. Buyers that are in public service roles can receive ever more incentives.
AzHFA Home Plus is another grant that offers up to 5% of the loan amount in down payment assistance. The household income must be below $92,984 and the home must be less than $371,936. Pathway to Purchase is a grant that offers up to 10% towards the down payment, capping at $20,000. The household income must be below $92,894 and the property must be located in an approved area and the cap on the house price is $371,936. Laveen is one of the approved areas.
Compass Bank offers a conventional down payment assistance program with up to $4,000 down payment assistance in areas of moderate income.
There are many other loans available for borrowers with non-conforming situations, such as renovation loans, second mortgages, doctor loan programs, portfolio loans and one-step construction loans. Jumbo loans are for borrowers financing loans over $600,000 with creative options and great rates. I have even seen loans available for purchasing land. Lenders that specialized in lot and land loans were hit hard when the market crashed, many of these loans were defaulted. Lot and land loans are a risk, but there are lenders offering them again.
Homeownership is available for the large number of families that experienced hardship during the housing recession. A foreclosure will have a waiting period of seven years for a conventional loan, three years for an FHA, two years for a VA loan. A short sale will require four years to get a conventional loan, three years to get FHA and there is no waiting period for VA loan. A Deed in Lieu of Foreclosure requires four years for conventional financing, three years for FHA and two years for VA. A Chapter 7 Bankruptcy requires four years for conventional, two years for FHA and VA. A Chapter 13 will need two years from completion or four years from judge’s dismissal, two years from discharge on FHA and VA. There are loan products available without a waiting period for some borrowers with a short sale. Many lenders offer coaching and counseling to help repair your credit and get your credit situation in shape, so you can qualify to buy a home in the future.
Some Do’s and Don’ts when applying for a mortgage: do keep original bank statements and pay-check stubs, income taxes and important financial paperwork. Provide your earnest deposit from you own personal bank or acceptable gift funds. Provide all documentation of your current home sale including sales contract, closing statement, employer relocation documentation, and any re-location documentation. Let your loan officer know if you have had any recent pay raises, promotions, transfers, or change of pay status.
Be aware a new credit report will be pulled prior to close of escrow. Don’t open or close any asset accounts or transfer funds between accounts without asking your loan officer. Do not deposit any money outside of your payroll deposits particularly cash without notifying your loan officer. Do not change jobs or employer without inquiring with your loan officer. Do not make major purchases such as a car, furniture or appliances, this could impact your qualifying amount. Do not open or increase any liabilities, including credit cards, student loans, or other lines of credit during the loan process because it could negatively affect your qualifying amount.
The bottom line is, it is a great time to purchase a home and there are a variety of great loans available. It is important to consult with a great loan officer and real estate professional to determine the best loan for your situation.
Carlie Back is a resident of the South Mountain District and a local real-estate agent with Keller Williams Realty. E-mail her with aquestions, comments and suggestions at email@example.com