Saturday, October 26, 2013 - Article by: Sean Young - New American Funding -
If You Can Afford to Rent, You Can Afford to Own
The cost of renting in many areas is now greater than the cost to buy.
Unfortunately, we hear myths on the news that mortgage loans are impossible to obtain unless you have perfect credit and a large down payment.
Truth is, thats not at all the case.
Assets: One of the biggest myths out there is that you have to have 20% down to buy a home. In reality there are many programs and options all the way down to $1,000 and in some cases even $0.
FHA:3.5% minimum down payment Down payment can be 100% gifted by a family member.
CHFA SmartStep: $1,000 minimum Down payment can be 100% gifted by a family member.
CHFA Advantage: 3% minimum down payment with no mortgage insurance
Metro Mortgage Assistance:$0 down they grant you 4% towards your down payment and closing costs.
VA:100% financing $0 down (must be VA eligible)
USDA: 100% financing $0 down (must be in a USDA rural area)
Earnest money may apply in all cases and in some you may be able to have this refunded to you at closing. Call me and I will go over all of your options.
Credit: Your credit may better off than you think. There are many options, some even people with no credit score at all, by using alternative credit such as cell phone, rent, car insurance, utilities, cable, storage etc.
No Credit Score: FHA will allow this if you can get one major trade line like rent for 12 months and two minor trade lines like cell and cable. All need to show a good pay history for a minimum of 12 months.
580 to 620 Credit Score: FHA, even with a 1 x 30 day mortgage late in the last 12 months. If you have 60 day or beyond you will have to wait until a year has gone by since your last late.
620 is also the minimum credit score needed for CHFA SmartStep.
640 Credit Score and Above: 640 is the minimum score required for the Metro Mortgage Assistance Plus 4% Grant Program.
You will also have many FHA options available at a 640 credit score and above.
680 Credit Score: This is the minimum score needed for 3% down CHFA Advantage with no Mortgage Insurance loan.
VA and USDA: 640 is usually the minimum score needed.
Note: The lower the credit score the lower your debt to income ratio will need to be and the likelihood of a higher interest rate. Call me for details.
Income: If you are currently able to pay your rent on time each month, then you are most likely able to qualify to pay a mortgage.
Job History: If you are a W2 employee most loans will ask for a two year employment history. They will want to know every place you have worked for in the last two years.
Debt to Income Ratio: The Debt to Income ratio or DTI is all of your monthly payments that show on your credit report and your new housing payment. They take the combined debts and divide it by your gross income before any taxes are taken out.
For Example: Lets say gross income was $2,800 and below were your debts.
Credit cards: $55.00 per month
Car payment: $225.00 per month
New housing payment: $1,000 per month
Total $1,280.00 divided by gross income = 45.71%
Can You Use a Co-Signer? FHA will allow a co-signer and they dont even have to live there. They can be what is called a non-occupant co-signer.
This comes in handy when you need extra income to qualify. However, you cant use a co-signer to help improve your credit score. The lender will always use the lower of the two credit scores when qualifying.
CHFA, Metro Mortgage Assistance and VA do not allow for non-occupant co-signers.
USDA can if its a direct USDA loan.
Rent vs Own Calculator: Click this link and run your own rent vs own payment scenario. this will give you a good perspective on the many benefits of purchasing over renting.
The Benefits of Mortgage Interest: Most people forget the benefits of being able to have a mortgage interest write off.
Always check with your tax professional, because I am by no means any tax professional, but a simple way to give you an idea of what your possible tas write off will be each year is to take your loan balance times your interest rate then times that by your tax bracket.
Loan balance: $200,000
x the interest rate: 4.5%
= $9,000 x (your made up tax bracket) of 20% = $1,800 per year.
In this scenario you are actually making an extra $1,800 per year or $150 per month by having a mortgage intrest write off.
Everyones situation can be different of course, yet there are many options available and one might be the right one for you.
The process is actually very easy and I always say Its easy to get a loan as long as you can document everything you say and do.
First Step: Call me at 303-521-7169 or fill out an online applicatio nto get pre-qualified today.
We will then go over what options you have available. And dont worry, if for any reason you dont qualify for something today, I will tell you what you need to do in order to qualify in the near future.
Worst Case: You will have a plan of action and a game plan to qualify later.
Best Case: You will get pre-qualified & be one step closer to owning a home.
Take the first step, call or apply today!
Mortgage Loan Officer
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