How to Get a Mortgage With Bad Credit

Finance

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Mar 13, 2014

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By: Michele Lerner

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If you have a credit score that’s considered fair, poor or even bad, you may be assuming that qualifying for a mortgage is out of the question. While that’s true for some would-be borrowers who need to improve their finances as well as their credit, there are some mortgage options for homebuyers with less than perfect credit.

Your Credit Profile

Mortgage lenders rely heavily on your credit score to evaluate your qualifications for a home loan because your score indicates how you have handled credit in the past, which serves as a predictor of your future repayment pattern. According to Credit.com, excellent credit gets a score of 750 or above; good credit, 700-749; fair, 650-699; poor, 600-649; and bad credit is a score under 600.

Rather than guess at your credit profile, you need to request your free credit report and pay a small fee to get your credit score from www.annualcreditreport.com. Fix any errors and take steps to improve your score with improved financial behavior before applying for a mortgage loan. A lender can help you determine which steps will boost your credit score fastest, but depending on your situation it could take at least several months or even a year before you can push your score high enough to qualify for the lowest interest rates on a conventional loan.

Loans for Borrowers With Poor Credit

In the thick of the housing boom borrowers were approved for home loans without providing documentation of their income and assets. Subprime lenders approved loans for borrowers with low credit scores, although they often charged higher interest rates to those borrowers. Since the housing crisis, the majority of subprime lenders went out of business, but, depending on your circumstances, you may still qualify for a home loan.

The most commonly used loan product for borrowers with lower credit scores is the Federal Housing Administration’s loan program. The FHA insures lenders against potential default and requires a minimum credit score of 580 or above for a loan with a down payment of 3.5%. Most lenders, though, require a credit score of 620 or 640 and above to approve an FHA loan. In addition to your credit score, you will need to provide full documentation of your income and assets and meet the lender’s debt-to-income ratio, which is typically a maximum of 41% to 43% of your monthly gross income that goes toward the minimum payments on all of your revolving and installment debts.

The downside of FHA loans is that they have higher mortgage insurance requirements than conventional loans. The mortgage insurance payments must be made for the entire life of the loan unless you make a larger down payment. However, FHA mortgage rates are comparable to conventional loans regardless of your credit score, so you won’t be stuck paying a higher-than-average mortgage rate.

Special Programs for Credit Challenges

The financial crisis and recession hurt a lot of consumers who lost their homes and jobs. If your bad credit is a result of a personal financial hardship rather than your own mismanagement, you may qualify for the FHA’s “Back to Work” program, which allows borrowers to qualify for a home loan more quickly after a period of unemployment or reduced income.

The only way to know with certainty about your ability to qualify for a mortgage is to meet with a lender who can go over your individual financial circumstances. There is no charge to consult a lender, so even if you are not ready yet to get a loan approval, you can still benefit from a lender’s advice about how to prepare for a loan application.

A Majority of Today’s Homebuyers are looking for New Homes

By Dennis Walsh

A national survey finds that a majority of homebuyers want to include brand-new homes in their search. At the same time, a small percentage of real estate professionals have the training, market knowledge and builder relationships to professionally support their clients in the new-homes arena. As a result, the majority of brokers and agents are professionally meeting the needs of only 46 percent of today’s homebuyers! Are you overlooking one of the most powerful keys to maximizing real estate success?

Can you imagine Lowe’s or Home Depot advertising this message: “We’re here with everything you need to meet 46 percent of your home improvement needs.” They might even add, “For the other 54 percent of your home improvement needs, you’re on your own. Good luck.”

It’s not only hard to imagine, but this would be a business model clearly destined for failure.Yet, as crazy as that might sound, this is not too far off from the message many brokers and agents are sending prospective homebuyers. I’m not suggesting anyone is doing this intentionally, but consider the following facts to better understand this reality.

A national survey of active home shoppers across 25major metropolitan areas conducted by BHI Inc., a consortium of 32 of America’s largest home builders, found:

• 19 percent are determined to buy a brand new home and will not consider resales.
• 35 percent want to explore both new and used homes in their search.
• 46 percent are focused on searching the inventory of resale homes only.

I’m sure you don’t find these numbers surprising. In fact, in our extensive travels, we find most brokers and agents feel that a full 60-70 percent or more of home shoppers in their markets want to include new homes in their search. Yet, the same brokers and associates acknowledge that less than 5 percent of all real estate professionals have undergone the specialized training, gathered the market research, and have established the builder relationships necessary to support the needs of this majority of buyers interested in new homes! Armed with this knowledge, I can’t imagine any real estate professional not recognizing that it’s essential to be prepared to fully meet the needs of today’s homebuyers—or a broker consciously ignoring the needs of a majority of prospective customers.

Not coincidentally, some of real estate’s most successful leaders do recognize the importance of new-homes expertise for real estate success:

“New-home business has always been important for resale—there’s clearly a relationship between the two.Our ability to help buyers across both areas attracts more buyers overall,” explains RE/MAX Chairman and Co-founder Dave Liniger. “Builders are beginning to prosper again, so agents absolutely need to make sure they are prepared and arm themselves with education in new home sales."

"I’m very enthusiastic about new homes and urge everyone in real estate to prepare for the boom in new-home sales.” Ron Peltier, chairman and CEO of HomeServices of America, talks about today’s new-homes opportunities in contrast to the recent REO market. “If a sales associate is not knowledgeable in the new-homes arena, they are going to miss out on an even greater opportunity. We all saw how REOs became a dominant part of the business for several years. What’s important to recognize is that new homes are a much bigger opportunity than this — even bigger than it was 10 years ago. There is tremendous pent-up demand, growing household formation and interest rates that still remain historically low. These factors should continue to play out for many years. Together, this adds up to a massive, long-term opportunity.”

Helen Hanna Casey, president of Howard Hanna Real Estate, has grown up in a brokerage always active in new homes. “We expect to see growth in both new-home buyer and builder representation. With today’s tight inventory and growing buyer demand, we need to focus on new homes to satisfy the needs of the market. At the same time, builders are afraid to put up spec homes, which means agents need to apply new sales skills and strategies in this changing market.”

As you consider these opportunities, I highly encourage you to position your company to fully support the needs of all prospective buyers by adding real new homes expertise to your mix of professional services.Get your agents the proper training and you’ll empower them to take their business, and yours, to higher levels of professionalism and success.

New-Homes Market Continues to Play Leading Role in Real Estate Today, and Long into the Future

Views (1511)0 Comments1/27/2014 12:00:00 AMBy Dennis Walsh

Scott MacDonald, real       Scott MacDonald   estate investor, real estate broker and owner of RE/MAX Gateway has received numerous accolades, including a nomination for REALTOR® of the Year and induction into the RE/MAX Hall of Fame and Lifetime Achievement. With over 25 years of experience, MacDonald is highly regarded for his real estate expertise and has participated as a speaker at the RE/MAX International Convention, RE/MAX Broker Owner Conventions, RE/MAX Regional Broker events and RISMedia’s CEO Exchange.

This past November, he took part in my New Home Sales Success session during the NAR Conference. Here’s some of what he shared with the audience.

Dennis Walsh: How would you describe your new-homes business?

Scott MacDonald: Our new-home sales business is pretty diverse. We do MLS input and offer a guarantee buy/lease and interchange program. We also have a relationship with a multi-million dollar new-home sales center in Ashburn, Va., called Brambleton, the 4th best-selling new-homes community in the country. We have a referral agreement with them for when buyers and sellers come in unrepresented and they have a community channel on FIOS where we’re interviewed about current market conditions. We host meetings at their facility and act as a general resource for them. In addition, we’ve hired a team that focuses on infill lots, tear downs and assemblages for smaller builders who used to be affiliated with national builders.

DW: Are you focused on builder representation, buyer representation or both?

SM: On the infill business, we represent the builder, and with our general brokerage, we represent buyers mostly.  

DW: How has new-homes business impacted your overall real estate business?

SM: In the late ‘80s and early ‘90s, I worked with one of the largest developers in the Washington area who did land development, then sold lots to builders who we represented in doing their sales. In turn, I would get the leads on selling their houses and follow-up with people who weren’t necessarily interested in their properties. Now we have an office in Loudoun County, the fastest growing county in the country the last two decades. A majority of what we sell in that office is new homes. Lack of inventory has driven many buyers to new homes, and the desire to be close to DC has spurred the in-fill and tear down market. The new-homes segment drives a great deal of both new and resale home business our way.

DW: How will your approach to new-homes business change this year?

SM: I plan to get more aggressive with our guarantee buy/lease program for builders. An example of the need for this is found at NVR, one of the largest home builders in the country, who just reported a 19 percent cancellation rate. NVR takes contingent contracts and our program is situated ideally to mitigate this problem for them.

DW: Are you changing your approach as the new market emerges?

SM: Funny you should ask. We just opened an office in Arlington located three miles from DC in order to work the tear down/in-fill market.

DW: What are some of the current trends in your market?

SM: Buyers are migrating to large planned developments where elementary, middle and high schools are strategically located in the neighborhood. They also have shopping, restaurants, entertainment and multiple “health” options like a gym, pools, jogging trails, etc. Other buyers are moving closer to DC and opting for location over amenities. 

DW: How about design trends?

SM: Further out, bigger is better. Closer in, the focus is functional floor plans with no wasted space. One thing we’re lacking is first floor master bedroom options, which builders are moving to accommodate. People still like the two-story foyer, but they’re less excited about the two-story family room. 

DW: How do you market yourself in the area of new homes?

SM: We visit new-home sites and drop off brochures. We also meet with builders at their sales meetings to discuss our program. When they come to our meetings, we reverse market them by finding out where they’re looking for land, where they’re located and if they’re open to utilizing our program. When we come across potential lots worthy of subdivision, we take the properties to them. Additionally, we network with local New Homes Guide reps to get in front of builders.

DW: What strategies do you have in place to grow your business success?

SM: Not only are we going to bring on more builders to market our program to, we’re also going to find more tear down/assemblage opportunities and continue to grow our relationship with the Brambleton New Home Sales Center. We’re also going to get more aggressive with our guarantee buy/lease program.  

DW: Any other advice you’d like to offer?

SM: As our success in the new-homes arena demonstrates, there’s almost unlimited opportunity, but it’s essential to arm yourself with the knowledge and expertise to serve both builders and new-home buyers professionally. I became a Certified New Home Specialist™ in 2007 and encourage everyone in real estate to take advantage of this educational opportunity. The new-homes market is growing quickly and will continue to play a major role in real estate long into the future.

13 Rules Great Landlords (Almost) Never Break

13 Rules Great Landlords (Almost) Never Break

by Brandon Turner

1.) Always Screen

Being a landlord is like gambling. At any moment, there is a chance that your tenants are going to destroy their property … and your financial future. However, you can increase your odds by simply screening out the bad apples.

2.) Require a Security Deposit

If you are having trouble filling a unit, don’t waive the security deposit – lower the rent. The security deposit is designed to give the tenant incentive to clean up after themselves and without it… they won’t.

3.) Enforce the Due Date

A tenant will walk all over you if you don’t enforce a late fee when they pay late. You might feel like “the bad guy” but at least you won’t be the “broke guy.” Do yourself, and your tenant, a favor: charge a late fee and train the tenant to pay on time.

4.) Never Rent Out a Dirty Unit

Don’t be a slumlord. Come on, people.

5.) Turnover Units Quickly

Vacancy sucks – because you are not getting any rent. A broken toilet or water heater may cost you a few hundred bucks… but an empty unit can cost you thousands. Get your maintenance people in and out quick to minimize turnover costs.

6.) Treat Tenants with Dignity

There is a difference between authority and value. As a landlord and the owner of a property, you have the authority to make the rules. However, your value is no different than theirs. Keep this in mind and treat your tenants with the same dignity you treat everyone else.

7.) Stay Current with the Accounting

Oh, how easy it is to get behind on the paperwork. However, as most business owners know … this can be a death sentence if you let it get behind. Set aside a few hours every month to carefully document your spending, income, and other aspects of your business. Your future self will thank you (and be wealthier because of it.)

8.) Plan Ahead for Expensive Fixes

You are crazy if you don’t plan ahead for expensive repairs and problems. They are going to happen. The water heater will go out. The carpet will need to be replaced. The parking lot will need to be re-paved.  Be sure to set aside money each month for this!

9.) Keep Your Business and Home Life Separate

If you allow your business life to bleed too much into your personal life, you are always going to be stressed. Don’t let your tenants come to your house to pay rent. Don’t leave your family dinner to take care of a tenant who got locked out. Keep it separate, and treasure your home life.

10.) Document Everything

As you grow wealthier through real estate investing, you become a target for law suits. Often times – the winner of a law suit simply comes down to “who was the most organized.” So document everything you can, especially problems, to make sure you are covered in case anything happens.

11.) Hire a Professional

There are a lot of people who claim to know how to fix things. However, don’t just hire your friend’s neighbor’s cousin because it’s convenient. It may be easy, but it won’t be easy to clean up their mistakes and failures later on. Hire the right person for the right job.

12.) Plan for Property Management 

Whether or not you plan to manage yourself is irrelevant. When you invest in real estate, always calculate your numbers as if you were going to use property management. After all, when you grow … you will no longer be able to manage yourself, and if you don’t have property management factored into your numbers, you won’t be able to afford them when you need it.  If you do plan to manage yourself – great… but pay yourself what you would pay someone else.  I’ll say it again: always calculate your numbers as if you were going to use property management.

13.) Create Systems

Finally, always think of ways you can streamline your business to run smoother. By creating systems, you allow yourself to grow and prosper without getting bogged down in the day-to-day stuff. It’s not bad to be a part of that system, but make sure you are a “replaceable” part for optimum flexibility in the future.

Conclusion

As I said before, following the rules is important.

These rules have been tested and proven to work by millions of landlords who have come before, so don’t fall victim to the easily-avoidable problems.

Stick to the rules, and you’ll become the great landlord you want to be.

Did I miss any? Let me know below in the comments!

13 Rules Great Landlords (Almost) Never Break by Brandon Turner

10 Home Maintenance Tips for Spring:

Spring is right around the corner....after a long, dark winter, spring's bright sun and warm winds are, well, a breath of fresh air. The only downside? All that sunshine spotlights your leaf-filled gutters, cracked sidewalks and the dead plants in last year's flower beds.

The following is a checklist to help you target the areas that need maintenance so you can get your chores done quickly, leaving you time to go outside and play in the sunshine.

·  Check for loose or leaky gutters. Improper drainage can lead to water in the basement or crawl space. Make sure downspouts drain away from the foundation and are clear and free of debris.

·  Low areas in the yard or next to the foundation should be filled with compacted soil. Spring rains can cause yard flooding, which can lead to foundation flooding and damage. Also, when water pools in these low areas in summer, it creates a breeding ground for insects.

·  Use a screwdriver to probe the wood trim around windows, doors, railings and decks. Make repairs now before the spring rains do more damage to the exposed wood.

·  From the ground, examine roof shingles to see if any were lost or damaged during winter. If your home has an older roof covering, you may want to start a budget for replacement. The summer sun can really damage roof shingles. Shingles that are cracked, buckled or loose or are missing granules need to be replaced. Flashing around plumbing vents, skylights and chimneys need to be checked and repaired by a qualified roofer.

·  Examine the exterior of the chimney for signs of damage. Have the flue cleaned and inspected by a certified chimney sweep.

·  Inspect concrete slabs for signs of cracks or movement. All exterior slabs except pool decks should drain away from the home's foundation. Fill cracks with a concrete crack filler or silicone caulk. When weather permits, power-wash and then seal the concrete.

·  Remove firewood stored near the home. Firewood should be stored at least 18 inches off the ground at least 2 feet from the structure.

·  Check outside hose faucets for freeze damage. Turn the water on and place your thumb or finger over the opening. If you can stop the flow of water, it is likely the pipe inside the home is damaged and will need to be replaced. While you're at it, check the garden hose for dry rot.

·  Have a qualified heating and cooling contractor clean and service the outside unit of the air conditioning system. Clean coils operate more efficiently, and an annual service call will keep the system working at peak performance levels. Change interior filters on a regular basis.

·  Check your gas- and battery-powered lawn equipment to make sure it is ready for summer use. Clean equipment and sharp cutting blades will make yardwork easier.

Home sales cooled in January

Central Ohio Housing Report - January 2014

• Posted: 2/21/2014

Home sales cooled in January

A combination of frigid temperatures and low inventory resulted in fewer central Ohio home sales in January. The 1,337 sales last month was 8.3 percent lower than January 2013 (1,458) according to the Columbus REALTORS® Multiple Listing System (MLS).

“Looks like the historically adverse winter weather conditions have placed a temporary freeze on home sales as compared to last January,” said Milt Lustnauer, 2014 president of Columbus REALTORS®. “Given the demand, this may create a potential back log of home sales this spring.”

The sale price of a home sold in January 2014 was $159,452 which was 7.8 percent higher than last year. The median sale price of $128,000 was up 6.7 percent compared to January 2013.

The average price is the total volume divided by the number of homes sold. The median is the midpoint -- half the homes sell for less, while half sell for more.

Inventory for the last two months has resembled levels last seen in winter of 2000. At 8,284, the number of homes on the market is 7.3 percent lower than last January. Not only has this affected sales, the lack of supply has resulted in a 51 percent drop in pending sales.

That said, 2,175 homes and condos were listed for sale during January, 16.7 percent lower than last year, but an increase of 49 percent from the previous month.

“All the signs of a robust spring are here,” adds Lustnauer. “Interest rates are still hovering under 4.5 percent, consumer confidence is improving, and inventory is increasing.”

According to the latest Housing Market Confidence Index (by the Ohio Association of REALTORS®), 97 percent of central Ohio REALTORS® describe the current housing market as moderate to strong and 84 percent expect home prices to rise over the next year. Additionally 50 percent are seeing a slight increase in the level of interest renters are expressing toward buying.

View the current Central Ohio Local Market Update.
Note: Due to the MLS conversion to a different system in early February, the detailed housing reports usually released are unavailable for January 2014.

Columbus REALTORS® is comprised of over 6,200 real estate professionals engaged in residential sales and leasing, commercial sales and leasing, property management, appraisal, consultation, real estate syndication, land development and more.

Central Ohio Home Building Update

SINGLE-FAMILY MARKET – Central Ohio Year End 2013 from Binns Report

SF Building Permit Activity – Up 17% with 2,996 permits issued vs. 2,556 in 2012. 

Franklin County +11% (1,177)

Delaware County +8% (823)

Fairfield County +38% (199)

Licking County +30% (287)

Madison County +73% (78)

Pickaway County +57% (119)

Union County +29% (313)

New SF Home Sales – Up 14% with 2,304 sales vs. 2,021 in 2012.

Franklin County +7% (1,030)

Delaware County +17% (697)

Fairfield County +9% (158)

Licking County -4% (130)

Pickaway County -5% (58)

Union County +83% (207)

Average New SF Home Price – Up 9% to $282,411 from $259,903 in 2012.

Franklin County +7%

Delaware County +1%

Fairfield County +16%

Licking County +37%

Pickaway County +6%

Union County +9%

Gross Sales Volume – Up 24% to $650,676,063 from $525,264,243 in 2012.

Franklin County +15%

Delaware County +19%

Fairfield County +26%

Licking County +32%

Pickaway County +1%

Union County +100%

SF Lot Sales – Up 11% to 1,338 sales from 1,207 in 2012. 

Franklin County +14% (315)

Delaware County -7% (389)

Fairfield County +1% (155)

Licking County +8% (159)

Pickaway County +43% (53)

Union County +48% (222)

Average SF Lot Price – Up 4% to $70,757 from $67,765 in 2012.

CONDOMINIUM AND MULTI-FAMILY MARKET - Central Ohio Year End 2013 from Binns Report

Condominium Permits – Up 21% to 850 permits from 703 in 2012.

Franklin County -2% (533)

Delaware County +22% (164)

Licking County +1225% (106)

Multi-Family Permits – Up 53% to 4,258 from 2,792 in 2012.

Franklin County +81% (3,943)

Delaware -2% (309)

Condominium Sales – Down 21% to 602 sales from 757 in 2012.

Franklin County -41% (355)

Delaware County +68% (190)

Fairfield County +38% (22)

Licking County +100% (18)

Average Sales Price – Up 17% to $249,397 from $213,159 in 2012.

Franklin County +22%

Delaware County -1%

Fairfield County 15%

Licking County +57%

Condominium Plats – Up 77% to 853 from 481 in 2012.

Franklin County +64% (609)

Delaware County +131% (194)