No credit score? There’s a new automated home loan option for you

Not having enough credit history for a credit score doesn’t necessarily mean you must go through a drawn-out manual underwriting process to get a home loan. If you have a history of making housing payments on time and references, you could benefit from a new automated process from Freddie Mac, a quasi-public agency that purchases mortgages.

Starting in June, borrowers without credit scores can see if they’re eligible for purchase mortgages or no-cash-out refinance transactions on one-unit owner-occupied homes. Lenders will be able to use Freddie Mac’s automated assessments to quickly approve your loan with greater confidence that Freddie Mac will purchase it. Loans will still be evaluated against Freddie Mac’s credit requirements, but the automated process should allow lenders to more efficiently serve borrowers.

6 must-do’s before buying a home

Buying a home is a huge investment. For most people, it is the largest purchase they will ever make. Before you jump into the wonderful world of homeownership, however, make sure you are prepared. Learn about credit score requirements, mortgage options and other must-do’s as a first step.

Have a checklist

Whether you are a first-time buyer or an experienced owner, buying a house requires a “preflight check,” in the words of Barry Zigas, director of housing policy for the Consumer Federation of America.

Read on for Bankrate’s 6-item checklist, including tips on the types of savings you need, plus advice about what matters beyond purchasing a home at its resale value.

  1. Strengthen your credit score – email me @ admin@mycastlemyhome regarding credit repair
  2. Figure out what you can afford
  3. Save for down payment, closing costs
  4. Build a healthy savings account
  5. Get preapproved for a mortgage or provide proof of funds from your financial institution on their letterhead.
  6. Buy a house you like

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What’s the point of mortgage points?

09/30/2016 | Author: Editorial Staff

If you’re financing a property purchase, you’ve probably come across the term points or discount points. Although there are other meanings, most often these terms refer to prepaid interest, with one point equal to 1% of your mortgage loan.

Lenders offer borrowers the opportunity to purchase points on their mortgage, which means you’re paying up front to lower the interest rate of your loan. Here are some questions to ask when deciding whether you should buy points:

How long will you live in the house?
You usually benefit more from points the longer you stay in the property. That’s because the savings you realize on each monthly payment will accumulate and eventually offset—hopefully exceed—your points payment.

Can I afford points?
You need to provide a downpayment and cover the closing costs to secure a mortgage. Do you also want to pay for points?

How much will the rate come down?
Each point costs 1% of the loan amount, but the interest-rate reduction you receive varies from lender to lender.

A Nontraditional Loan: Is Seller Financing the Right Move for You?

You’ve found the perfect home. The seller agreed to your offer, but then something goes wrong. Maybe you can’t qualify for a mortgage, you haven’t saved enough for a down payment, or the mortgage appraisal assesses the house substantially lower than the agreed-upon price. It can happen—and if it does, you may not be out of luck.

The seller can always agree to seller financing. It will allow you to buy the home, but there are some considerations you’ll need to take into account before you agree to the financing.

What is seller financing?

Seller financing is when the owner finances the purchase of his home for the buyer. With a seller-financed home, the owner accepts the role of the traditional lender. The seller can finance the entire mortgage if his personal economic situation allows for a large loan, or he can lend the difference between the buyer’s approved mortgage amount and the price of his home. The buyer repays the owner monthly with interest.

Typically, an owner-financed mortgage is repaid in full within a few years on the assumption a buyer can refinance the home with a traditional mortgage after regaining financial footing.

Benefits to seller and buyer

Seller financing can work to the benefit of both buyer and seller.

Advantages for the seller:

An owner trying to sell his home in a soft market may offer seller financing in order to entice a buyer and enable the buyer to close the deal.
Seller financing can be an interest-earning investment.
Because he’s financing the purchase, the seller might be able to obtain a higher purchase price or sell the house without doing repairs.

Handing Over the Keys to A New Home

Advantages for the buyer:

If your credit history limits the amount you can qualify for, seller financing can help you buy a more expensive home.
If you can’t qualify for a traditional mortgage, the seller may be willing to finance the entire home.
You may get a lower interest rate and may not need to purchase private mortgage insurance.
Do your homework

Both buyer and seller should do their homework before agreeing to seller financing. The seller should evaluate the buyer’s credit history as thoroughly as a conventional lender would. The buyer should fill out a credit application with employment information and credit references. The seller must do his due diligence to ensure the buyer will be able to make the monthly mortgage payments.

A buyer should double-check to make sure the house is legally owned by the owner who’s offering the financing. You must know if the home is owned outright or if a mortgage or other liens exist on the home. You should also research the market to make sure you’re getting a good deal and have a home inspection done before accepting financing.

Legally binding transaction

Hire a lawyer familiar with seller financing to ensure the sale goes smoothly for both buyer and seller. The lawyer will help negotiate and write the contract so that it’s legally binding. A lawyer will also ensure the home is used as collateral for the loan, so the seller can foreclose if a buyer defaults on the mortgage payments.

There are quite a few financial implications involved with seller financing. Calculating an interest rate, figuring out an amortization period, and documenting the loan take time and knowledge. Using the services of lawyers, real estate agents, and tax experts with experience in owner financing will help a seller-financed transaction go smoothly.


These loan programs can help you buy and renovate that fixer-upper

It’s tough out there right now for first-time homebuyers. Even though home sales are rising, the share of first-time buyers fell in 2015, according to data from the National Association of REALTORS®. Part of that is the difficulty of saving for a downpayment and strict financing requirements, but in many areas, the inventory of appealing, entry-level homes is limited.

Where there is a dearth of updated or move-in-ready homes for first-time buyers, some will consider buying a fixer-upper. If that’s you, make sure you know what your options are for financing the purchase and renovation of your first home. While using a traditional mortgage to purchase the home and financing the renovation separately is an option, there are loan products that combine the cost of the home and the renovation in one payment.

The Federal Housing Administration’s 203(k) program allows homebuyers to finance $5,000 to $35,000 in renovation costs as part of their mortgage. Many of the same rules and restrictions that apply to typical FHA-insured single-family residential mortgagesalso apply to 203(k) loans, but there may be more fees charged by the lender for additional services that are part of the 203(k) process. The value of the property must fall within FHA limits for the area, as well. With this program, the money is held in an escrow account and released as the work is completed. Like other FHA products, insurance is required throughout the life of the loan. Interested buyers can find a lender using HUD’sonline tool.

While the 203(k) program is limited to primary residences, FannieMae’s HomeStyle Renovation mortgages can be used for one-unit second homes or investment properties. HomeStyle mortgages are more like traditional mortgage products in terms of requirements for downpayments and private mortgage insurance, where mortgage insurance can be dropped after a set amount of equity in the home is reached. The amount buyers can borrow through the HomeStyle program depends on either the post-renovation value of the home as determined by an appraiser or the purchase price plus renovation costs, whichever is lesser. HomeStyle loans are also subject to conventional mortgage limits. Unlike the 203(k) program, there is no online tool to find a lender that deals in HomeStyle mortgages.

Work with your lender and your Texas REALTOR® to get the property that’s right for you.