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Archive for the ‘Refinancing’ Category

Credit Score Requirements Ease for Some

By: Amanda Johnson

Tight lending guidelines have weighed on the U.S. housing market during its ongoing recovery. Most lending institutions during the past two years raised their credit score requirements to as high as 650, making it nearly impossible for many people to obtain a loan.

Wells Fargo made it a little easier for homebuyers this past year, when the lender lowered its credit score requirements on FHA mortgages.

“Under its new policy, Wells Fargo will accept borrowers with credit scores of 500 to 579 if those borrowers can make a down payment of at least 10%,” said Robert Lentini, a mortgage expert who blogs for the website thetruthaboutmortgage.com. “For borrowers with credit scores of 580 to 599, borrowers must put down 5%. Borrowers with credit scores of 600 or higher can make a 3.5% down payment.”

Quicken Loans, Inc. adapted similar policies— dropping to a minimum 580 FICO score. “There are folks who have steady incomes and a solid payment history but were temporarily affected by the economy or a life event in some way. These challenges can lower their credit score significantly,” said Quicken Loans Inc.’s Chief Economist Bob Walters in a company statement. “We believe that a credit score, on its own, is not the sole arbiter of a person’s credit worthiness. This change will open up credit to a significant group of people and allow them to again have access to purchase or refinance a home.”

Such developments have been welcome news to FHA Commissioner David Stevens, who earlier this year urged lenders to lower their minimum credit score requirements to help the real estate industry as a whole. Stevens said that stringent requirements have constrained home sales by as much as 20% over the past year.

Amanda Johnson can be reached at 573.449.6200. Prudential Vision Properties is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

Real estate consumers today can find ample value in distressed homes – properties that are under a foreclosure order or up for short sale. In many cases, however, “distressed” speaks more for the condition of the homes than their recent financial histories, as they’ve sat empty for extended periods and have been subject to vandalism and theft.

Those considering homes in need of repair and renovation should consider a 203k mortgage, which enables homebuyers to finance both the acquisition and rehabilitation of the property with just one loan.

“FHA 203k purchase loans are the perfect financing vehicle for homeowners seeking the value proposition offered by REO homes,” said David Wind, president and board chairman of White Plains, N.Y.-based Guaranteed Home Mortgage Company, in a company statement this June. “Home buyers’ ‘perfect’ home can be purchased in less than perfect condition with a single-close loan product that allows repairs and remodeling.”

There are two types of 203k loans: the 203k streamline and the full 203k. The 203k streamline is the most popular among homebuyers and lenders.

“The maximum allowable in repairs is $35,000 under the 203k streamline and it does not allow any structural repairs to be done to the home, unless [the repairs are] a result of an unforeseen circumstance,” explained David Krushinsky, a certified mortgage planning specialist for Mesa, Ariz.-based AmeriFirst Financial Inc. “The full 203k allows structural repairs and will allow the buyer to exceed the $35,000 in home repairs. Both loans allow up to $1,500 in swimming pool repairs.”

Contractors chosen to perform repairs must be licensed, bonded and insured, and they usually must provide the lender with a resume and two client-reference letters.

“After the close of escrow is when all the rehabilitation work begins,” said Krushinsky. “Funds usually aren’t released immediately so it’s important for your contractor to start work in a timely manner. Typically, if they’ve been in business, they have existing relationships with vendors so they can order materials and begin work. If not, the project may take longer than anticipated.”

Since the 203k mortgage is based on the home’s potential value after repairs — not its existing value — you can be approved for a higher loan amount. The mortgages also carry long-term-fixed rates, are insured as soon as they fund, and include escrow accounts for the scheduled repairs.

Loan amounts are capped according to local FHA limits. Only owner-occupied properties of one to four units qualify for 203k mortage financing; homes also must be at least one year old.

Dan “Bingo” Bingenheimer can be reached at 573.449.6200. Prudential Vision Properties is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

How do you know if refinancing your current mortgage is the right thing for you to do?

The short answer that I have always believed is that if you are able to cut your interest rate at least one percentage point and are going to stay in that home for several more years, it MIGHT be worth it to refinance.

One of the best explanations that I have seen is from USAA Mortgage. It is an exercise that you can do to come up with the number$ to make a decision that is right for you. Here is what they said:

Refinancing Example Current Loan Refinance

Loan Balance $200,000 $200,000

Closing Costs n/a $7,000

Rate 6.50% 4.75%

Years Left to Pay 27 30

Principal/Interest Payment $1,315 $1,043

Monthly Savings $272

Break-even Estimate 25.7 months (2.1 years)

In this example, if you were only planning to stay in that home for two years, it might not be the best thing for your pocket book to refinance.

But there are reasons to refinance other than lowering the interest rate. Some things to consider:

Shorter term – pay off loan faster

Longer term – lower monthly payments

More customer service oriented lenderARM vs. Fixed

Just remember that there is more to consider than an interest rate – all lenders are not created equal. Watch out for hidden fees (and not so hidden fees). Make sure that those fees are reasonable.

And remember that there are a lot of people trying to refinance right now, so the processing time may be longer than you would think – lenders are going to process the new home purchases first, because they have a time constrain that your refinance does not have.

So take a look at it and see if it will make financial sense for you and ask questions until you feel comfortable that you understand the pros and cons.

To speak with a Prudential Vision Properties agent today, call 573.449.6200 or email us at Info@PrudentialVision.com.

The short answer that I have always believed is that if you are able to cut your interest rate at least one percentage point and are going to stay in that home for several more years, it MIGHT be worth it to refinance.

One of the best explanations that I have seen is from the USAA Mortgage, and it is just an exercise that you do to come up with the number$ that you need to make a decision that is right for you. Here is what they said:

In this example, if you were only planning to stay in that home for two years, it might not be the best thing for your pocket book to refinance.

But there are reasons to refinance other than lowering the interest rate. Some things to consider:

• Shorter term – pay off loan faster
• Longer term - lower monthly payments
• More customer service oriented lender
• ARM vs. Fixed
  

Just remember that there is more to consider than an interest rate – all lenders are not created equal. Watch out for hidden fees (and not so hidden fees). Make sure that those fees are reasonable.

And remember that there are a lot of people trying to refinance right now, so the processing time may be longer than you would think – lenders are going to process the new home purchases first, because they have a time constrain that your refinance does not have.

So take a look at it and see if it will make financial sense for you and ask questions until you feel comfortable that you understand the pros and cons.

Jim Jones can be reached at 573-529-6904. Prudential Vision Properties is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.