YOU CAN'T MISS WITH CHRIS Call him today!  

MORTGAGE BROKER, CONSULTANT, REALTOR

 

First Timers Mortgage
  Cost and Mistakes

Blemished credit and home payment – One area that may involve extra cost for  persons   getting  a  first    mortgage  is tarnished credit. There is a relationship between your credit rating and the size of your monthly home payment. When your credit is blemished, two things can happen. 
 

One is you may have to pay a higher interest rate which will make the payment higher. Two is you may have to pay twenty percent down, which means you will be borrowing less money and your payment will be lower.  Of course coming up with twenty percent down is likely (but not necessarily) difficult for those with bad or blemished credit. In order to buy a home with ten percent down you need good credit and in order to buy a home with less than ten percent down you need very good credit.

 

If your credit is good enough to put less than twenty percent down, and you are without enough cash to make the twenty percent, then your home payment may get larger. By putting ten or five or three or zero percent down, you will need to buy Private Mortgage Insurance (PMI) which will add this insurance premium into your monthly home payment.   

Are you an acceptable Credit Risk – The lenders will use data and computers to decide whether you are a good or a bad credit risk. The Mortgage Bankers Association in its booklet A Plain & Simple Guide for First-Time Home Buyers says “If you have had credit problems, prepare to discuss them openly and honestly with your mortgage lenders, and come to your application meeting with a written explanation. Mortgage lenders know there are legitimate reasons for credit problems and other financial difficulties. If your problem has been corrected, and your payments have been on time for a year or so, your credit will likely be rated as satisfactory.”

 

Here are some acceptable reasons; marital problems or divorce, major illnesses, uninsured medical bills, laid off or lost job or failure of your business. Unacceptable reasons are things that smack of financial irresponsibility.

In attempting to approve home buyers for the type and amount of mortgage they want, lenders basically look at two key factors: the borrower’s ability and willingness to repay the loan. Ability to repay the mortgage is verified by your current employment and total income. 

Generally speaking, lenders prefer for you to have been employed at the same place for at least two years, or at least to have been in the same line of work for a few years. Chris sees a slight change taking place on this guideline. In today’s fast paced world, younger people are changing jobs frequently. So having two employers in two years (rather than one) is not bad, as long as your employment is steady. Having gaps of time when you are not employed is what is most harmful, rather than length of time for each job.

The borrower’s willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness also is closely related to how you have fulfilled previous financial commitments, thus the emphasis on the credit report or rent and utility bills.

 

Write letters explaining – When you explain these various things, circumstances, factors, bad credit instances, etc, you must present your side of events by writing clearly and truthfully. State all the facts, but give convincing explanations for these facts. It is good to have whatever documentation you can get to back things up. 

 

For example one buyer had missed paying four consecutive mortgage payments. The buyer truthfully explained that this was the first four months of a legal separation preparing for divorce, showed a letter that was sent to the mortgage company at the time to explain to them that this was likely going to happen, and showed court papers approving the separation. This cured what lenders said was a very serious problem in the credit history.