James Whitener

Arizona Loan Officer

Boosting Your Credit Score To Qualify For Better Rates

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Boosting Your Credit Score To Qualify For Better Rates

The better your credit score, the better the mortgage interest rate for which you should qualify. That can mean thousands of dollars saved over the life of the mortgage. If your credit score needs improving, get started prior to your search for a new home.

Pay Bills On Time
The simplest way to boost your credit score is by ensuring your bills are always paid on time. Nothing harms a credit score more than late payments.

Check for Credit Report Errors
Check your credit reports for any errors. These issues are not uncommon, and can really impact your score. Each of the three major credit card reporting bureaus –Equifax, Experian, and TransUnion –will provide you with a free annual report.

Credit Utilization Rate
Look into your credit utilization, or CU, rate. The CU rate is another big credit score consideration. Your CU rate is the amount of credit authorized versus the amount you use. It’s one reason maxing out your credit cards is not a wise move.

Never allow your CU rate to exceed more than 30 percent of your available credit. In simple terms if you have $1,000 in available credit, never use more than $300. High CU rates are a red flag, as they indicate someone with potential financial problems. For best results, keep your CU rate as low as you can.
Calculate your CU rate by adding up the credit limits on all cards, as well as the balances. Divide the total balances by the total credit limit, then multiply by 100. That amount is your CU rate percentage.

Reduce Your Debt
If you carry credit card debt, pay it down as much as possible. That also helps lower your CU rate.

Avoid Opening New Credit Card Accounts
Do not open new credit card accounts while trying to boost your credit score.   A new account lowers the age of your accounts, affecting your credit history and lowering the CU rate.

Do Not Close Unused Credit Card Accounts
Do you have credit cards you never use? You might think closing them would boost your credit score, but that is not how it works. When you close the account, the amount of credit you have drops. That triggers a CU rate increase.

Refinancing Credit Card Debt
If you have substantial credit card debt, consider refinancing all of it with a personal loan. You should receive a lower interest rate with your balances now merged into a single monthly payment. This also causes your CU rate to go down.

How Long Will It Take?
How long it will take to improve your credit score depends on the severity of your credit problems. Those with serious credit issues may find it takes years to raise their scores significantly, but most people should see improvement within a few months. Then it is time to think about mortgage shopping!

Looking at Home Mortgage Refinancing in 2021

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Looking at Home Mortgage Refinancing in 2021In 2019 many people expected that the home lending market was going to eventually grow more expensive. Instead, 2020 spent its entire 12 months becoming more affordable when it came to financing a personal home, moving in the opposite direction of what was expected. Not only did the loan cost drop break previous records, but it also presented an additional opportunity for homeowners to reposition and take advantage of lower borrowing costs again.

The General Advantages of a Home Loan Refinance

The refinancing of a mortgage has traditionally been three-fold. First, it is a chance to re-negotiate the loan on a home purchase for a lower interest rate, which means more of the borrower’s payment goes to the loan and less to an interest charge. Second, it gives people an option to change the interest rate charged to a shorter payment period, which can also save considerable money. A borrower will pay dozens of thousands less on a 15-year loan versus a 30-year mortgage. Finally, refinancing allows a borrower to tap into home equity to use that cash value to consolidate debt, pay for other big costs, or make renovations to the home without paying out of pocket for them.

Why 2021 Provides a Good Window

By the time 2020 ended, mortgage rates overall were running at all time lows on a conventional 30-year fixed mortgage, an amazing opportunity for the cost of borrowing and probably the lowest possible in 50 years. The dip won’t last forever, as many people have been trying to project, and eventually what goes down also goes back up. Some amount of rising rates is a firm prediction from the National Association of Realtors® for 2021 which has already occurred, and that loan interest rate cost is expected to eventually go somewhat higher by the end of the year if the economy speeds up again. So, the 2021 window for a valuable refinancing opportunity is clearly the beginning half of the year.

Comparing Current Status to “What If”

Obviously, just chasing a mortgage refinance for minimal gain is silly. The amount paid in closing costs can be expensive. However, when the shift can easily be a percentage point difference or more, then it is worth considering. Many people locked in homes at higher rates in the past and are still paying that amount, especially on an adjustable-rate mortgage. Grabbing a fixed mortgage refinance in the current rate environment is definitely worth the work and time, potentially paying for itself in a handful of years or by consolidating higher cost debt into the home loan.

There is no perfect formula that applies to everyone, but 2021 has already shaped up to be the year that the majority of homeowners can definitely benefit from, especially given the need for financial reserves and a bit of personal finance reorganization after 2020.  As always, consult with your professional mortgage advisor for details on your personal situation.

 

VA vs FHA vs USDA What’s the Difference?

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VA vs FHA vs USDA What's the Difference?You may have more options than you think when it comes to securing a mortgage for your new home. While many buyers opt for conventional financing, another option or program might be a better choice for you, depending on your personal and financial situation. Learning more about FHA, USDA, and VA loans ensures you get the best possible deal for your mortgage and that you secure the loan that you need for your new home. Here’s what you need to know about these useful mortgage options.

FHA Loans
These are traditional mortgages that are backed by the FHA: when you take out an FHA loan, this government agency is insuring the loan. This makes your loan more appealing to lenders who might otherwise feel your credit or income history is not strong enough. An FHA loan is available to a wide range of buyers and price points and offers a low-down payment, reasonable interest, and other perks that make it worth exploring for your next mortgage. 

VA Loans
If you are a veteran then this program, which offers loans insured by the VA, is a great option for you as they do not require money down so you can buy immediately, rather than saving for years for a down payment. The VA loan is available to those who have served or are serving in the armed forces and is a good option to help you get the home you want with no money down, unlike a conventional mortgage loan.

USDA Loans
One of the most useful and often overlooked loan programs is from the USDA. While this government office offers direct loans, far more people qualify for their insured loan programs. USDA loans are for rural areas, but a surprising number of suburban communities and locations qualify as well. With a low-down payment and interest, this subsidized loan program is well worth it if you plan to live in a rural or suburban area. 

Not every borrower will qualify for the mortgage options above; the USDA has guidelines on income and the home you are interested in. The FHA does not have income requirements, but you will need to prove your income and this option also has a loan limit.  If you do meet the guidelines of any of the above programs, they can help you access the home you want by dramatically reducing your upfront and deposit costs. 

The right loan for you will depend on your income, credit, and the home you’ve selected. Your agent can help you find the home that suits the program you want and make it easy for you to secure the financing you qualify for. Get in touch today to talk about your home buying options and see which loan option is right for you. 

How To Get A Mortgage If You Are A Gig Worker

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How To Get A Mortgage If You Are A Gig WorkerTwenty years ago the economy was putting the dot-com bubble behind it, and people were buying homes. The high majority of folks worked for someone else; they received a paycheck, were given a W-2 from their employer, and filed their income tax returns accordingly.

This also provided easy documentation to loan officers when folks wanted to borrow a mortgage to buy a home. As of 2019 36 percent of workers in 2020 were identified as bona fide gig workers per the federal government, or a bit more than 1 out of every 3 workers. That change translates to mortgage application processes today.

However, house loan processes have been particularly strict since 2009, especially due to how flexible and liberal loan reviews were at the time during the 2000s real estate bubble that ended that year and almost took down the major banking system in the collapse. For gig workers who essentially function as their own small businesses or as independent contractors, there is no consolidated income report aside from income tax filings.

Most have earned their money from multiple sources to make up a full living income. As a result, matching gig income to a traditional mortgage model can be challenging. Here’s what gig workers should anticipate and be prepared to answer as a result.

Definitive Proof of Income

For the gig worker proof of income is practically the same as showing how a small business produces a net profit sufficient to be invested in when asking for a business loan. As a gig worker, you won’t have a W-2 statement that is accepted as universal proof of your income and ability to pay a loan payment. So, you will need to provide a substitute that can be independently verified.

That means your income proof will need to show your bank statements evidencing all major payments coming in as well as matched by your IRS Schedule C and IRS Form 1040 showing how your income is arrived at. Because IRS forms are under penalty of perjury, they are considered a reliable income proof source for lenders. Some lenders may go further and want to see MISC 1099 forms received by clients for the last three years as well. Bank statements can reinforce assets’ availability as well, but they are not a full substitute.

Keep Your Credit Card Debt Nil or Low

Many independent workers ride on credit cards to pay bills in between jobs. Unfortunately, this also inflates personal debt, which mortgage lenders don’t want to see. To be successful with a mortgage as a gig worker, your credit card balances need to be kept as low as possible. You can have other debt, but it is best to be structured like a student loan or car loan. These don’t change from month to month and are predictable, but a credit card balance can grow quickly, creating a lending risk. Pay pending bills, lower the balance, and shift the debt to other financial tools if you can. The less revolving debt (credit cards), the better.

Boost the Down Payment

Having a larger down payment works wonders in any mortgage application. The traditional amount is 20 percent of the price of the home you want to buy. If you’re in that range, great. If not, save more. Talk with your lending professional to find out about lower down payment options as well. Don’t forget your closing costs. In some cases, those can be contributed by the seller of the home. Once again, your lending professional will be able to give you the best advice for your situation.

Be Realistic

Finally, don’t apply for a mortgage well beyond your income level and savings. You’re just wasting a lot of time and setting up for a disappointment. Focus instead on having a sizable down payment, documented income, and a home price well within your combined payment range. This will bolster your application and resolve a lot of concerns that otherwise get a denial.

Talk with your real estate and mortgage lending professionals for details based on your personal situation.

What Are The Most Common Mistakes Homeowners Make When Refinancing?

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What Are The Most Common Mistakes Homeowners Make When Refinancing?There are lots of people who are looking to take advantage of low interest rates to refinance their homes. This provides homeowners with an opportunity to save tens of thousands of dollars over the life of the loan. It could also allow homeowners to access equity to finance a home renovation or shave years off their mortgage. On the other hand, there are also a lot of people who make mistakes during the refinancing process. What are some of the mistakes that everyone should make sure they avoid?

Avoid Saying Yes To Loan Forbearance On A Mortgage

First, try to avoid mortgage forbearance if you can. If homeowners decide to pursue mortgage forbearance, they might have a bit of extra cash on hand because they will be able to skip a few payments. On the other hand, this could signal that the homeowner has issues related to his or her cash flow. As a result, homeowners might not get the best offer possible when they apply to refinance their mortgage down the road.

Always Check The Credit Score Before Applying

Next, homeowners should always check their credit scores before they decide to apply for a refinancing opportunity. It is not unusual for people to have mistakes in their credit scores. Nobody should have to pay for someone else’s financial mistakes. Homeowners have to remove these inaccuracies from the credit report before they apply for a refinancing opportunity. That way, homeowners have access to the best terms possible.

Check The Estimate Before Agreeing To A Refinance

Finally, homeowners also have to check the estimate before they agree to a refinance. Even though there are opportunities to save a lot of money, there are other fees involved. These could include points, origination fees, and other fees that could be included in closing costs. Homeowners have to be ready to pay these costs if they are going to refinance their loans.

Avoid These Mistakes When Refinancing

These are a few of the most common mistakes people make when they go through the refinancing process. By avoiding these mistakes, homeowners can place themselves in the best position possible to save money by refinancing their loan to more favorable terms.

Approved With Conditions: What Does It Mean?

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Approved With Conditions: What Does It Mean?Applying for a home loan might not be the most exciting part of purchasing a home; however, many homeowners need to go through a lender to purchase a home. It is exciting to hear that the approval letter has gone through; however, it is also possible for someone to see that they have been approved with conditions. What does this mean?

What are some of the most common reasons why someone might have conditions?

It Could Just Be Standard Procedure

Sometimes, people see that they have conditions to meet as a simple part of the approval process. For example, someone might be missing standard paperwork. It is the job of the underwriter to make sure that the lender is not taking on too much risk. Usually, this simply means that the loan requires some additional paperwork to be made final. Applicants need to gather this paperwork as fast as possible so the loan continues through the process. If there is a seller waiting, it is critical to jump on this immediately to prevent the offer from falling through.

What Are The Most Common Conditions?

There are several conditions that people might have to meet in order to finalize the loan approval process. For example, some people may need to provide letters of explanation, documenting anything that could be related to questions in the file. In other situations, a large deposit could require a letter of explanation as well. That way, the lender knows that someone has not taken a cash advance or opened another line of credit to cover the down payment. In other situations, proof of employment could also be listed as a condition of approval. Lenders want to make sure that applicants are going to keep their job after they purchase the house. Finally, earnest money proof could also be required. This is simply a copy of the earnest money check itself. It is critical for applicants to provide this paperwork quickly in order to finalize process.

Try To Meet All Requested Conditions As Quickly As Possible

It can be frustrating to see that a loan has been approved with conditions. Fortunately, a lot of these conditions are relatively easy to meet. Homeowners that are requested to provide proof to finalize the application process should try to do this as quickly as possible.