Buy a home with a Conventional Loan, just 3% down!

The following is courtesy of Michael Lamborn, Mortgage Adviser, Coldwell Banker Home loans.

You know that the down payment is frequently the biggest hurdle for many potential homebuyers – especially millennials – to clear, both in terms of dollar amount and credit score requirements. Buyers looking for a low down payment option have often relied on the U.S. Department of Housing and Urban Development's (HUD) FHA-insured loans that can offer down payments as low as 3.5%. Now, though, buyers have another option – one that allows them to put as little as 3% down.

At the end of 2014, Fannie Mae began accepting conventional mortgages with the more attractive 3% terms. However, it is important for buyers to understand the differences (aside from the 0.5% variation in down payment requirements) between the two programs before deciding on which is best for them. Let's look at the most important differences in terms of short- and long-term costs.

Credit score
A buyer must have a credit score of 500 or higher to qualify for an FHA loan, while a conventional loan requires a minimum credit score of 620. FHA loans can offer more flexibility with credit guidelines – your buyers can get additional insight and detail by speaking with their Loan Officer.

Closing costs
An FHA loan will allow the seller to contribute up to 6% of closing costs, while a conventional loan only allows up to 3% if the minimum down payment requirements are utilized. This can be a considerable benefit for buyers looking to reduce the financial impact of the home purchase.

Mortgage insurance - Very Important!
While the credit requirement is typically higher on conventional mortgages, it brings into play a difference between the two programs in terms of mortgage insurance.

On an FHA loan, the mortgage insurance is a static figure – in January, the FHA reduced the mortgage insurance on 30-year fixed loans from 1.35% to 0.85%. The buyer pays .85% of the loan amount up front at the time of closing – it is added to the principal balance – and then .85% is paid in annual premiums over the life of the loan.

For an FHA loan, the insurance rate remains the same throughout the life of the loan and doesn't disappear until the ratio reaches 78%. However, for a conventional loan, private mortgage insurance goes away when the loan-to-value ratio (the price of the loan versus the value of the house) hits 80%.

Just like the house you are looking to buy, the mortgage program you choose must be the one that feels and fits right in your current financial situation and with future objectives.    Call me and I am happy to connect you with helpful and friendly mortgage advisers who will customize their advice for YOU!

CNN article on the announcement.

More on mortgage and  real estate tips and advice articles on my blog.

Bela Vora, REALTOR®,
Coldwell Banker Preferred - Exton Real Estate.
Office: 610 363 6006; Cell: (484) 947 3127
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5 steps to rebuilding your credit after a foreclosure

A foreclosure can have a significant negative impact on your credit scores, limit your ability to obtain new credit and remain on your credit report for seven years. However, with patience and a plan, you can successfully rebuild your credit so that you are in a position to take advantage of all that a healthy credit rating has to offer. Here are some key steps to take on the road to credit repair.

1. Find out the true impact to your credit. First, be sure you know exactly how your credit was affected. The terms and conditions of foreclosure and short sale agreements can vary in how they impact your credit scores (how they are reported to the credit bureaus and how long they stay on your credit report)
2. Get smart about your credit ratings. Educating yourself is your best line of defense when it comes to your credit, and a great place to start is with your credit report. You can obtain a free report from each of the three top reporting agencies (Experian, TransUnion and Equifax) by visiting annualcreditreport.com, a site authorized by the federal government. Your credit report can give you insight into why your foreclosure happened so that you can take steps to prevent a re-occurrence (look in the "Public Information" section of your report). It's also a good idea to review your report to ensure it has no errors and that there are not any old debts still on record after being paid off.
3. Pay your debts on time. Your goal is to create a positive payment history to show lenders you are being financially responsible. Additionally, paying down high balances can positively impact your credit score since your "credit utilization," or your debt-to-credit ratio, comprises 30% of your credit score.¹
4. Know what not to do. It may seem smart to close open credit accounts. That's not necessarily the case and could even hurt your score. Closing credit accounts, even those you have not used for some time, can suggest to lenders that you are closer to being "maxed out" on your credit than you truly are.
5. Use credit cards to rebuild your credit. That may sound counter intuitive, but consistently paying off a balance each month has a positive impact on your score. If you're unable to obtain a regular credit card, you may want to consider a secured card, offered by many banks and credit unions. In simple terms, you'll be required to deposit a certain amount of funds with the creditor – and in return you'll receive a card for a line of credit in that amount. Using these secured credit cards responsibly over time can also accrue to your benefit and help rebuild your credit worthiness.

While repairing your credit can take time, it is an achievable goal. Be patient, develop a concrete plan and stick to it. The more disciplined you are, the more progress you can make.

More real estate tips and advice articles on my blog.

Bela Vora, REALTOR®,
Coldwell Banker Preferred - Exton Real Estate.
Office: 610 363 6006; Cell: (484) 947 3127
Website  |  Facebook  |  Blog  

How long will these incredible mortgage rates last?

Bela Vora, R3ALTOR
Coldwell Banker Preferred - Exton
Office: 610 363 6006; Cell: (484) 947 3127
Website  |  Facebook  |  Blog 

Mortgage calculator does the math....

The mortgage forecast from most reliable sources is that mortgage rates will be increasing over the next year.  By next Spring, 5.5% is a very likely projection.  

What does this mean to home buyers who are waiting to buy their dream home?  Let’s look at some math…

For a mortgage amount of $350,000…which is about an average home value in Chester county 

-At the current average rate of 4.5% the note payment is $1773.40

-At the projected rate of 5.5% the note payment is $1987.26

So…what does a $213.86 difference in payment mean to mortgage amount/buying power?

$42,208.

By simply waiting to buy for a year - the house value you will be able to afford is reduced by 42k!  

How to maintain or improve your credit score - Do's and DOn'ts

Renters who would like to become home buyers often find improving their credit scores a big challenge.  No need to pay credit agencies big money ...here are some common Do's and Don'ts in Credit

DO:
1. Pay your bills on time. Delinquent payments and collections can have a major negative
impact on your score.
2. If you have missed payments, get current and stay current. The longer you pay your bills on
time, the better your score.
3. If you are having trouble making ends meet, contact your creditors or see a legitimate credit
counselor. This will not improve your score immediately, but if you can begin to manage your
credit and pay on time, your score will get better over time.
4. Keep balances low (1-9%) on credit cards and other revolving credit. High outstanding
debt can affect a score.
5. Pay off debt rather than move it around.
6. Re-establish your credit history if you have had problems.
7. Opening new accounts responsibly and paying them off on time will raise your score in the
long term.
8. Note that it is OK to request and check your own credit file. This will not affect your score, as long as you order your credit file directly from the credit reporting agency or through an organization authorized to provide credit files to consumers (such as myFICO). 

Credit scores explained for first time home buyers.

Thinking of buying real estate?  First time home buyers have concerns about their credit score...WHat will the lender find when they run the credit report?  What really determines your credit score?

Hope this helps....

Understanding residential real estate appraisals

Any home purchase that requires a mortgage, needs an appraisal.  The lender orders it and buyer pays for the appraisal, an opinion of value from an independent third party - the appraiser.  The idea is for the lenders to reassure themselves, that the property is worth the purchase price.

A while back I had written a blog about how to determine the market value of your home - based on recent, local, comparable sales.  The appraiser does exactly that, and puts forth his opinion of value.  It is only an opinion of value - because 2 appraisers could value the same property at the same time, and come up with two widely differing values/opinions.  While the criteria is pretty objective, there is  huge subjective component, in that the sale comps picked, and adjustments done for important home features like finished basement, backyard patio, pool etc.  Final values could vary widely within a neighborhood based on how appraisers value upgrades.

Mortgage news - rent vs buy?

An interesting article on Bloomberg.com.

Two Deutsche Bank analysts believe that falling home prices and rising rents have contributed to biggest cost savings for homeowners relative to renters in atleast 2 decades!  While one understands the non-monetary benefits of owning a home, the charts show advantages of owning vs renting in numbers as well.

For more information on the article and to see the chart that displays fourth quarter figures for 2002-2011, visit Bloomberg.com

More real estate tips to help you make your real estate decisions.  Please share below your own analysis on rent vs buy.

Bela Vora, REALTOR®, 
Coldwell Banker Preferred - Exton
Office: 610 363 6006; Cell: (484) 947 3127
Website  |  Facebook  |  Blog 

USDA loan to buy real estate

The United States Department of Agriculture gives special home loans for rural development.  You may have heard of it as a  USDA loan, which requires no down payment.  Yes - you can buy real estate without any equity contribution even today!  However, home buyers looking to avail themselves of this loan must qualify on two counts.  The home should be in the eligible rural area and the borrower must qualify based on their annual family income as well.

Check whether the home would qualify by clicking on this USDA eligibility map for PA.  The ineligible areas are shaded, so if your home falls in the unshaded area - you may qualify for a 0% down USDA loan.  The maximum family income for eligibility ranges from $78k - $93k approximately, depending on the county.   The neat thing about this loan is that apart form a great interest rate, the PMI for a USDA loan is much smaller than FHA's PMI.   There are some upfront fees though, which can be added to the total amount borrowed - allowing the buyer to borrow up to 103% of the home's value.  Your mortgage advisor can help you further, with your specific real estate transaction.

The Applecross development in Downingtown qualifies for USDA rural loans.  While it is great to take advantage, financial prudence says it is better to have some cash reserves before considering home purchase. Food for thought...

For more information on financing your real estate transaction, call Bela Vora

Bela Vora, REALTOR®, 
Coldwell Banker Preferred - Exton
Office: 610 363 6006; Cell: (484) 947 3127
bela@belavora.com
Website  |  Facebook  |  Blog