Can I buy a home if I had a bankruptcy?

The short answer to this question is YES!  Different loan programs will force you to wait for a number of years before you can buy a new home.  For example, if you had a Chapter 7 Bankruptcy, FHA will allow you to purchase a home 2 years from the discharge date of your bankruptcy.  Conventional financing will require you to wait 4 years from the discharge date.

Can I buy a home if I had a foreclosure or short sale?

YES!  You will have to wait for a period of time from the foreclosure or short sale.  Both will require you to wait for 3 years.  The 3 year waiting period begins the date the home sells, not the date the bank takes your home.  Conventional financing will force you to wait 7 years from that sale date.

Can I buy a home with zero down payment?

Yes.  There a number of programs that allow you to buy a home without a down payment.  Rural Development (RD), Veteran’s Affairs (VA), Conventional lending and FHA have programs for this.  They all depend upon your credit score and the entirety of your application, but the programs are available right now.

What is a bi-weekly mortgage?

Mortgage payments are always due on the first day of the month.  Many people are paid from their employer every 2 weeks (bi-weekly).  The premise for a bi-weekly mortgage is for a person to pay half of their mortgage payment every 2 weeks, or every time they are paid.  It is a convenient way for a person to budget their mortgage payment.  Also, since a person is paid 26 times per year when they are paid bi-weekly, they will make 13 payments on their mortgage in a year instead of 12, paying off their home sooner.  On a 30 year loan, paying bi-weekly will pay off the home in about 23 years.

What is Private Mortgage Insurance (PMI)?

PMI is an insurance policy on a loan that insures the lender from losing money in the event the borrower does not pay their loan and the bank has to foreclose.  The premium for this insurance policy is paid for by the borrower, usually as a portion of the borrower’s monthly payment.  PMI is required on a loan if the borrower has less than 20% to put as a down payment on the loan.  There are some loans that do not require PMI when the down payment is less than 20%.  However, there will usually be a higher interest rate or an additional fee to compensate for the lack of PMI.

When can I delete the PMI from my loan?

The Homeowner’s Protection Act of 1999 spells out three instances when PMI can and/or will be deleted from your loan.  1) At any time after you have made 24 payments you can call your servicer to request to delete your PMI.  The servicer will require an appraisal to determine value.  The new appraised value will be used and if your balance is 75% or lower, they will allow you to delete the PMI.  2) When your loan balance reaches 80% of the original appraised value or purchase price, whichever was less, of the original loan terms, a borrower can contact their mortgage servicer to request to have the PMI deleted.  The servicer at that time may still require you to order an appraisal to determine the true value but most likely will just delete the PMI.  3) When your loan balance reaches 78% of the original appraised value or purchase price, whichever was less, of the original loan terms, per the schedule amortized payments the PMI will automatically be deleted.  For a 30 year loan, this is typically about 9 years into the loan.

What are the plusses and minuses of an FHA loan versus a conventional loan?

FHA loans are more lenient on borrowers with blemished credit.  The wait times from the time of a bankruptcy or foreclosure is shorter for FHA versus conventional.  There are also additional areas in underwriting that are more lenient than conventional.   Also, the down payment requirement of FHA loan is only 3.5% versus 5% for conventional.  However, the mortgage insurance for FHA loans is more expensive than conventional loans, and the mortgage insurance is never able to be deleted.  It remains on the loan for the life of the loan.

What does “local” mean when referring to mortgage loans?

Some mortgage lenders, such as the one I work for now, tout the benefits of having “local underwriting” or “local servicing”.  This means that the processing and decision making of approve or deny for the loan is made in the same office as the loan officer works.  This is very beneficial to make the loan process much faster.  Also, a local underwriter understands the nuances of the local market.  Every property is different and so are the cities, towns and areas home loans are made.  A local person understands the differences factors of the local market.  Lenders that don’t offer local underwriting will have a loan officer in your town but that loan officer has to send your file out of town or even out of state to ther person that makes the approve or deny decision.  This adds time and complexity to that decision.  Local servicing means after your loan closes you will make your payment to the lender who closed your loan.  Many lenders, even if they have local underwriting, will “sell” your loan to an out of state lender after it closes and you make your payment to them.

Should I refinance?

The first question to ask yourself when deciding to refinance or not is how long will your be living in the home you are considering refinancing.  The general rule of thumb is if you won’t live in the home more than three more years then it is not worth refinancing.  The reason is when you refinance, you will pay fees to do so.  It generally takes 3 years of payment savings to recoup the fees you pay.  For example, let’s say your current payment is $800/month.  The new payment if you refinance will be $700/month.  To refinance it is going to cost you $3,600.  Take $3,600 divided by $100 in payment savings = 36 months before you have saved enough in payment to “break even”.  Now, if you are refinancing from a 30 year loan to a 15 year loan, or doing a “no cost” refinance, this calculation does not work.

What is a “no-cost” refinance?

Some lenders advertise their “No Cost” or “Zero Fee” refinance loans.  In reality, all lenders can offer a refinance with zero fees.  However, there is no such thing as a refinance that does not cost the lender to originate it and lenders do not work for free.  Thus, there is a trade off for the no-cost loan.  Typically the interest rate on the no cost refinance will be higher than on a refinance with full fees to compensate for the cost and lost revenue.  However, a no cost refinance is sometimes the right thing to do, such as when you know you will not be living in the home for very long.  If you can lower your rate by even 1/8% a no cost refinance is worthwhile since there it costs you nothing to do it and thus you do not have any fees to recoup over time through payment savings.

What is an Escrow Account?

An escrow account is a small savings account attached to your mortgage loan.  Every month when you make your mortgage payment a portion of your payment is deposited into this account.  From this account the lender pays your property insurance, homeowner’s insurance and mortgage insurance.  Once per year the lender will re-evaluate how much is being collected to deposit into the account versus how much is being paid out.  Since taxes and insurance can vary, your escrow account will be adjusted and your monthly payment will be raised or lowered accordingly.

What is a Homeowner’s Exemption?

Most taxing authorities, all of the counties in Idaho, give a discount on property taxes if you live in the home as your primary residence.  This is called a Homeowner’s Exemption.  The amount of the discount is generally about 45% of the total tax bill, but it is less on higher priced homes (over $200,000).  If you own more than one home, you only can have a Homeowner’s Exemption on one home.

Can I have a Co-Signer on my mortgage loan?

In short, yes.   They are not called co-signers, but are called non-occupant co-borrowers and they must be related to you.  A non-occupant co-borrower can be added to a loan to assist a borrower qualify for a home if the borrower does not make enough income.  However, a lender cannot add a non-occupant co-borrower to help a borrower’s credit.  All borrower’s credit must stand on their own.

I have Student Loans that are deferred – are those payments counted against me?

Yes and no.  Conventional and RD loans will make you count student loan payments even if they deferred.  FHA and VA loans will let you not count the student loan payments, as long as you can prove the payments will be deferred for more than 12 months from the closing date of the loan.  Thus, if you are still in school and have student loans, and if your anticipated graduation date is more than 12 months away, those payments can be excluded with an FHA loan.  However, if you are out of school and your student loan payments are deferred for financial hardship, the payments will have to be counted.

Can I get a loan on a manufactured home?

The short answer is yes, but there are different rules for manufactured home loan lending than for stick-built homes.  A manufactured home must meet six requirements to be eligible for lending: 1) It must be newer than 1978, 2) It must be on a permanent foundation, 3) It must have been converted to “real property” with the county, 4) It must be a double-wide, 5) It must have never been moved more than one time (the home had to come from the dealer’s lot directly to the site it currently sits on). 6) It cannot have an addition to the home that modified the original structure of the home.

What’s my interest rate going to be on a new loan?

This is a tricky question.  Lenders will often advertise their mortgage rates on their web site or through other media.  The rate they are quoting is based on many factors, such as the amount of down payment, the borrower’s credit score and the type of loan it is (purchase or refinance).  Thus, sometimes the rate you can obtain will not be what you hear advertised.  The only way to know for sure the rate you can get is to call a lender, submit an application and let them pull a credit report.   If you are simply rate shopping between lenders, the rate you are quoted over the telephone may not be the rate you get once you apply.

Can I buy a new home before I sell my current home?

Yes you can.  However, there are some additional requirements.  First, you must be able to qualify with your income to support both the payment on the home you are keeping and the payment on the home you are buying.  Second, there is a rule when you are converting your principal residence to a non-owner occupied residence.  This rule states you must be able to provide documentation that you have 6 months of the future non-owner occupied residence mortgage payment in some sort of liquid asset. This proves you will be able to make both payments for a time before you sell that home or have it rented.