Credit scores have a reputation for being rather complicated and frustrating. Whether or not you understand the details of how they work, it’s important to understand that credit scores determine your ability to take out loans. A bad credit score can prevent you from making important financial decisions. But before you have to worry about getting a loan in St. Louis with bad credit, let’s focus on the steps for establishing good credit.
It’s important to remember that ending up with bad credit is easier than you think. Just a couple of months of missed payments can put your score in a precarious position. For this reason, it’s imperative that you have the correct funds to make your payments on time. One way to minimize uncertainty is by limiting excessive spending and saving little bits of money throughout the month for the purpose of paying off your credit. That being said, mistakes happen. Even if your credit score takes a few dips, it’s possible to bring it back up. In addition to making payments on time, you can keep inactive credit accounts open in the short term to help raise your score. And if you’re looking to open another credit card, think long and hard about whether or not you really need it. If you’ve made some significant mistakes and your credit score has suffered the consequences, you’re not out of options. No matter your credit score, there’s a good possibility that Liberty Lending can still help you qualify for a loan.
Federal Housing Administration Loans, or FHA loans, have requirements that are less strict than other types of loans. Not only are they a great fit for first-time homebuyers, but a helpful loan resource for those struggling with their credit. Although qualifications vary depending on the type of FHA loan, they’re usually available to people with credit scores as low as 500. With flexible monthly payment options, the opportunity for cosigners, and lower down payment requirements, it’s easy to see why this type of loan is ideal for people struggling with low credit. If you’re pursuing a loan and are worried about your credit score, it’s not the end of the world. Here at Liberty Lending, you’ll find experienced mortgage brokers who can work with you to provide the best FHA loan solution available.
Looking for more information? Fill out our form or give us a call at (314) 336-9111 today.
The post My credit score is low, but I don’t want a high-interest loan! appeared first on LL.
An FHA Loan Explained
An FHA is a mortgage that is offered by the Federal Housing Administration (FHA). This particular mortgage is popular among those buying homes for the first time because they, first of all, allow for a lower credit score, and they also are more lenient with the down payment (only 3.5% down). Borrowers will also have to pay a mortgage insurance premium to protect the lender if the borrower defaults.
If borrowers can produce a credit score of more than 580, they will be able to acquire the FHA loan with the 3.5% down payment. The borrower can still qualify for an FHA loan if their credit score is between 500-579, but they will have to put down a 10% down payment instead. Moreover, the lower your credit score is, the more interest the borrower will have to pay.
There was a tremendous amount of foreclosures and defaults in the 1930s, and part of the problem was due to mortgage lenders not having any insurance to guard against borrowers who failed to pay their premiums. Thus, the FHA program was not only created to help these lenders get back on their feet, but it also provided a much-needed shot in the arm for the housing market because it brought people with less-than-perfect credit into the housing market. However, under the FHA program, the government will ensure these lenders so they now have the freedom to lend out mortgages to more people. They have the assurance that their risk of loss will be covered if a borrower defaults on the loan.
Loan Requirements for FHA Borrowers
Are you interested in buying a home with an FHA loan? If you wish to try to qualify for the St. Louis FHA loan that will only require a 3.5% down payment, then you will have to ensure that your credit score is 580 or above. However, as we have covered before, you can still qualify for an FHA loan with a lower credit score as long as you put up a 10% down payment. Just make sure that your FICO is always at least 500 or above.
However, the credit score and the down payment requirements are just two of the hoops you will need to jump through to qualify for an FHA loan. Here is the complete list of things to consider:
FHA borrowers will need to have a steady history of employment. If there are gaps, it is still possible to qualify for an FHA loan as soon as they have been with the same employer for at least the past two years.
Borrowers need to have a valid Social Security number, be a legal resident, and be of the legal age for signing a mortgage in their state.
The minimum down payment for an FHA mortgage will always have to be 3.5 percent, and yes, the money can be a gift from a family member.
You can only utilize an FHA loan if you are going to use the home as a primary residence.
Borrowers must have the proposed property appraised from an FHA-approved appraisal specialist.
A borrower must have an appropriate front-end ratio. This means that such things as homeowners insurance, property taxes, mortgage insurance, HOA fees, and the mortgage must all no more than 31 percent of their gross income. The good news is that some borrowers can still get approved if they have reached as high as 40 percent. Of course, this might mean extra work for the lender simply because they will have to prove this note is an acceptable risk. Compensating factors must be accounted for when it comes to approval of the loan.
To receive maximum financing, all borrowers must have a minimum credit score of 580. This qualifies them for the 3.5% rate.
As long as borrowers have a credit score between 500-579, they will be able to qualify for an FHA loan with an LTV of 90 percent. They must put down a down payment of 10% at the very least. Your credit-worthiness will be determined by FHA-qualified people on a case-by-case basis.
The good news is that you can still qualify for an FHA loan if you have had a bankruptcy in your past. You must be two years from the bankruptcy and you must have taken steps to reestablish your credit. However, some people who have a bankruptcy that is only one year old can still qualify if they prove they manage their money well and that the bankruptcy was caused by extenuating circumstances.
There is more good news for FHA borrowers who have had a foreclosure in their past. As long as you are at least three years out of foreclosure and established a solid credit history again, you can be considered for an FHA loan. Again, if you want to qualify for an FHA loan and it hasn’t been three years since your foreclosure, you can still possibly qualify if you can prove extenuating circumstances. Please note that if you could not sell your home and had to make an unexpected relocation, this is not considered an extenuating circumstance.
There are also some property requirements that must be met. If your home is appraised and does meet the FHA property standards, then it must either be repaired by the seller, or you must pay for the repairs yourself by the closing date.
Benefits of FHA Loans: A Lower Down Payment and Less Stringent Credit Requirements
The beauty of an FHA loan is that it is very easy to qualify for. You can have less-than-perfect credit or not even have enough for a regular down payment, and you can still qualify for one of these loans.
Can’t afford a 20 percent down payment? You should look into an FHA loan. Has your credit had some hiccups? Apply for an FHA loan. Don’t think you can qualify for private mortgage insurance? An FHA loan might be for you.
If there was the full scope of the advantages of FHA mortgages, it would be a good deal. However, FHA loans can often make selling your home easier. This is due in part to the fact that an FHA mortgage is “assumable.” When you go to sell your home, you can simply have the new owner “assume” your FHA mortgage.
These factors make an FHA home mortgage something worth looking into.
While it can be said that lenders have varied criteria regarding their approval or denial of loans, there are common threads between each. We’ve compiled a handy list of actions and things to be aware of during your mortgage approval process.
We understand that mortgage approval is an intimidating and complicated process which is why we’re here to answer your questions and assist you every step of the way. For more information about loan financing call Liberty Lending Consultants at (314) 336-9111 or visit our website at libertylendingconsultants.com.
In 1944, President Roosevelt enacted a culturally significant and socially valuable law which is still with us today. The Servicemen’s Readjustment Act, also referred to as the GI Bill of Rights, was designed to support servicemen returning from WWII. It focused largely on employment and housing, two of the biggest challenges for veterans.
The VA Home Loan Program was a component of this original bill. Today, it fulfills much the same purpose as it did back then. It helps returning servicemen – many of whom have no savings or investments to come back to – safely purchase homes with less rigorous mortgage requirements. While it may be seventy-five years old, the GI Bill of Rights is still considered one of the most important in American history.
This article takes a closer look at the history of the VA Home Loan Program and its impact on culture and society.
Where It All Started – 1944
After the bloodiest war in history, the US government felt it was vital to show support to servicemen trying to rejoin civilian life. While away fighting, these men had inevitably fallen behind their peers in terms of things like career opportunities and financial investments (particularly in property). They were returning to unemployment, poverty and few chances to change their situation.
Thus, Roosevelt decided to make buying homes easier for servicemen. They would not be subject to the same rigorous financial requirements as others. Instead of offering money to invest, which he feared would not be helpful in the long term, he took away many of the obstacles to ownership.
This is how a St. Louis VA Home Loan (or a VA loan in any other part of the country) works. The VA does not create or offer the mortgages. Instead, they financially back them. Just as a standard home loan requires evidence of collateral in case of default, the VA agrees to step in if the buyer cannot pay. In short, the VA puts up the collateral on behalf of the buyer. This encourages lenders to approve mortgages to servicemen because they’re less afraid of making a loss.
In 1944, the VA Home Loan assurance was capped at half the total mortgage amount or a maximum of $2,000. It might sound like a small sum today but typical property prices in the forties stood at around $9,000. To be approved and protected, home loans could not exceed a 4% interest rate cap or a twenty-year term.
There were obviously other requirements too. As the earliest version of the VA Home Loan Program was intended specifically for WWII veterans, all applicants had to provide evidence of military service between September 1940 and September 1945. The government encouraged eligible veterans to apply before 1950 as it could not guarantee receipt of the same benefits after this time.
While the scheme was well-received by policymakers and the general public, it ran into a number of problems after its initialization. For instance, as soon as house prices across the country began to rise, the $2,000 sum guaranteed by the government became less useful. There were also increasing worries about monthly payments due to the twenty-year cap on VA loan terms. Some economists expected the scheme to have a negative impact on the housing market as too many people might apply.
As a response to growing concerns, the government increased the surety amount by $4,000 and amended the maximum loan term. It also gave servicemen a period of ten years (as opposed to the original five) after leaving the army to apply for a loan. This was the biggest change and the most valuable. It enabled the VA Home Loan to become more than just a short term fix. After the forties, it began to establish itself as a respected and honored part of American culture.
Making the VA Home Loan a Permanent Fixture – Fifties, Sixties and Beyond
In early 1950, the government forged ahead with plans to significantly expand the VA Home Loan Program and make it available to more people. It amended the original bill with eight important alterations, most of which focused on extending the long term impact of the scheme’s benefits.
Firstly, the VA surety protection was increased to 60% of the total loan or $7,500 maximum.
The maximum loan term was also increased to thirty years from the previous twenty.
Perhaps one of the most important changes, from a cultural perspective, was the decision to offer VA Home Loans to widows of fallen soldiers. Even if a serviceman died in action, his spouse would still be eligible to receive the same benefits. Later, this clause was further expanded to include servicemen who had died of disabilities relating to their military work.
Congress also introduced new legislation to prevent mortgage providers from shirking the guidelines and continuing to charge servicemen at normal rates. This, essentially, enshrined the loan program in law for lenders too.
Later in the year, shortly after these amendments had been enacted, the Korean War started. It took just two years for the government to fully roll out the loan scheme to servicemen who had returned from this conflict as well. By 1966, the VA Home Loan Program was an all-encompassing system which invited any serviceman enlisted after the Korean War to apply for the same benefits as their grandfathers and fathers in some cases.
The arrival of President Nixon, in 1968, triggered further changes to the rapidly growing and expanding benefits program. By 1971, he had introduced the Veterans Housing Act, a more contemporary incarnation of the original GI Bill. For the first time, there was no deadline associated with VA home loans. Across the country, millions (almost nine million, by some accounts) of veterans rejoiced as the abolition of expiration clauses meant they were once again eligible to apply.
Nixon also made it possible for applicants to withdraw cash from their equity and use the money to settle other types of loans, pay for education fees, invest in home renovations or spend in any way that might improve their wealth in the long term. The variety of viable properties also increased as changes to the law meant veterans could now use their loans to purchase condos and mobile homes, not just traditional properties.
By 1978, the VA Home Loan Program had expanded further still to include loan investments designed to improve properties with energy efficient renovations. Improvements like solar panels were made a legitimate option for eligible property owners trying to increase resale value and double or triple their original investment.
To learn more about VA loan requirements in your area or how to apply for a St. Louis VA Home Loan, visit Veterans United Home Loans or in St. Louis, Liberty Lending.
If you are planning to buy your own home in 2019, now is a good time to start to consider your options for a mortgage.
Say you find a home with a monthly payment that you can afford, but your savings are limited. In this case, it will be very helpful if you can find a loan that does not require any down payment. Maybe you already know that VA loans offer this service, but you may not know that there is another type of loan which offers the same benefit, without requiring that you be a veteran or in service.
A Missouri USDA loan gives you the option of getting into a home without requiring a down payment. Not only that, but USDA loans are usually cheaper than FHA loans for the same amount.
What is a USDA Loan?
In Missouri, USDA loans are guaranteed by the U.S. Department of Agriculture. But aside from that, what is so special about a USDA loan?
Advantages of USDA Loans
There are several advantages to USDA loans that make them attractive loan options. We will touch on some of them here.
USDA loans do not require a down payment. If you only have a little bit of savings, this will help you to free up resources. The money you would have spent on a down payment can instead go towards home furnishings or a rainy day fund. There are other options for a low down payment, but they can still add up. A conventional loan for $200,000 with a 3% down would have you paying $6,000.
Reduced Loan Costs
When you get a USDA loan, there are both upfront and monthly costs associated with it, called guarantee fees. However, you will still pay less for these than you would for mortgage insurance premiums if you had gotten an FHA loan. There is actually a significant difference. With a $200,000 loan amount, the mortgage insurance premium would be 1.75% for an FHA loan. This would come out to $3,500 upfront. In addition to that, you have an annual premium based on your down payment. If you made a 3.5% down payment, the premium is 0.85%. This will work out to paying $141.67 per month.
Now, compare that to a USDA loan for the same amount – $200,000. USDA loans have upfront guarantee fees of 1% of the loan, so that would be $2,000 either paid at closing or added to the loan. The guarantee fee is just 0.35% of your unpaid balance each fiscal year. So your premium would initially be $58.33 per month, and it would go down as you paid off the loan. This is a much lower monthly payment.
Qualifying for a USDA Loan
Some things will help you qualify for any sort of loan. One of these is to keep your debt-to-income (DTI) ratio low. DTI compares your monthly debts to your monthly income. It allows lenders to see that you can make your monthly payments without straining your budget.
In order to get a USDA loan, you need a median FICO score of at least 640.
Additionally, it is wise to have some reserves set aside so that if you lose your job or have some other kind of emergency, you can still make your monthly payments.
These general tips are helpful, but there are some additional qualifications that relate to USDA loans in particular.
In order to qualify for a USDA loan, you must live in an area that is eligible for them. USDA loans were designed to help develop affordable housing in rural areas. You can get a USDA loan without being a farmer, but you cannot live in or near a major population area. Fortunately, most of the country qualifies for a USDA loan. You can put your address into an eligibility map. Any area not marked by the color orange is eligible for this program.
Another requirement for qualifying for a USDA loan is that you and any other adults in your household cannot make over 115% of the median income. This is household income and includes the income of any adults living with you, even if they are not included in the loan. However, in many circumstances, the cost of childcare can be excluded from this, and if any adults in the household are full-time students, then only part of their income is counted.
A first time home buyer should be like a hawk—surveying the local and regional real estate market. By knowing how the market behaves, a first time home buyer can monitor the selling prices of comparable homes in their area, which thereby allows them to be a bit more knowledgeable when going to look at homes. Web sites such as Zillow can give a first time home buyer a general idea of what’s out there. Real estate listings are also abundant on the Internet, through sites like the National Association of Realtors®. It’s a good idea to create a few Google Alerts for when new homes come on the market—and don’t be shy about picking up those real estate magazines sitting on the rack in the supermarket either.
Timing is everything, don’t hesitate. It’s not rare for a home to sell super fast—especially when cash buyers are involved. According to the National Board of Realtors, “The median time on market for all homes was 48 days in April, down from 55 days in March.” While the general rule of thumb for a first time home buyer is almost always to take your time and not rush, making haste when in the home buying process can sometimes result in getting the home of your dreams. But be aware: this only works if you have all of your ducks in a row and feel comfortable pulling the trigger.
It’s okay to make the acquaintance of local real estate agents or mortgage brokers, even if you’re not ready to pull the trigger just yet. A first-time home buyer shouldn’t be shy about calling and asking for advice about the home buying process. Making friends in the marketplace is a good way to vet the people who may end up helping you apply for a mortgage and may hold the keys to your new home. If you have in fact found a broker and a real estate agent that meets your needs in terms of understanding the process, be sure that these folks are also professional, friendly, honest and courteous people. Another good first time home buyer tip is to ensure that your real estate agent and broker are able to work together. Teamwork is vitally important for a first time home buyer.
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After locating your ideal home, your attention now switches to find the best mortgage so that you can buy that home. One way to make sure the new home becomes yours is to work with a mortgage broker throughout the entire process.
Perhaps you have already heard of mortgage brokers from family or friends that have previously taken out mortgages in order to buy their homes.
Even so you may still be wondering what a mortgage broker does, and what they can do from the mortgage advisors who work for banks.
To assist you in understanding what mortgage brokers do, and how it makes taking out a mortgage here are 5 frequently asked questions and answers to them.
1. What is a mortgage broker?
A mortgage broker acts as a go between that uses links ith several different banks in order to find you the best deal in terms of interest rates. Mortgage brokers have good links with several banks so that they can assist all of their customers.
Mortgage brokers are qualified and licensed financial experts who process and gather mortgage claims as their profession. They will check your credit history and all relevant documents in order to apply for mortgages on your behalf.
As soon as you have agreed to apply for a specific loan, your mortgage broker will coordinate with the lender, the real estate agency, and the titleholder until the process is completed by you moving into the property.
2. How is a mortgage broker paid?
Usually, mortgage brokers are paid by the borrower or the lender, but never by both. Generally, they will receive a fee worth between 0.50% and 2.75% of the total mortgage loan.
Borrowers can decide to pay the mortgage broker fee themselves, and that is known as borrower paid compensation.
In the coastal areas and the most popular cities like New York and Los Angeles the fee tends to be 0.50%. An upper limit of 2.75% was introduced by the federal government in order to promote sustainable mortgages.
The limit for fees and points that brokers can charge is 3% in order to deter the irresponsible mortgage lending, which led to the last housing crash.
3. What makes a mortgage broker different from a loan officer?
Basically a loan officer works for, and is paid for by a single bank or lender, whereas a mortgage broker tends to work with several banks. Brokers are then paid by the lender that offers the loan (unless paid by the borrower).
4. Is a mortgage broker right for me?
A mortgage broker is the right option for many home buyers. Mortgage brokers will save you both time and money because of their links with several lenders.
As mortgage brokers apply for loans for you, they will work out the best rates, costs and over all deal for you.
Aside from money, a mortgage broker will also save you time by smoothing out the process and making sure that the lenders, solicitors, and the real estate agents do everything right and on time. They will shorten the time it take you to move into your new home.
Mortgage brokers just like lenders charge different fees, so compare fees before picking a broker. All brokers will save you time, and some will cost less than others.
Compare the interest rates and fees charged by different lenders, estate agents and mortgage brokers. Such comparisons could save you substantial amounts of money on possibly the most expensive item you will ever buy.
5. How do I chorse a mortgage broker?
A good method for chosing a mortgage broker is to seek advise from family and friends if they have used any brokers recently. Make sure that whoever is offering advise has used the service themselves fairly recently.
Ask for advise from your real estate agent, chances are high that they have mortgage brokers who they prefer to deal with. Your agent will trust some brokers more than others and recommend their favorite ones to you. Remember you can still pick another broker, you do not have to go with their recommendation.
Do not go with the first broker you see details for, or the cheapest one. Instead interview at least three mortgage brokers to find the one you think will deliver you the best service.
You can also check their license to see if they are in good standing with the state licensing authority. Online review and also the Better Business Bureau can provide useful reviews and information about the good or bad reputations of local brokers.
The post 5 Facts About Working With a St. Louis Mortgage Broker appeared first on LL.
It doesn’t take much to feel out of your depth when it comes to buying a home. Slick realtors and TV show tycoons are just itching to trick you and stick you with the bill—preferably with a hefty fee tacked on for them! But all of this can be avoided if you know your homebuyer’s rights!
The post Know Your Homebuyer’s Rights and Don’t Get Left Out! appeared first on LL.
At Liberty Lending Consultants, our unrelenting commitment is to help as many mortgage customers as possible achieve their financial dreams while helping them save money on their closing costs. As a St. Louis mortgage broker who has helped thousands of consumers over the years, it is our unwavering mission to help provide a funding solution for all your residential or commercial lending needs. No matter what the current interest rates are, Liberty Lending Consultants will make sure you receive the mortgage rate you deserve. That’s why thousands of consumers in trust us when buying their first or second home, their commercial or investment property or when closing on a refinancing loan.