Mortgage & Finance

Can I buy a house? The two biggest obstacles to buying a home are the Buyers credit score and the lack of a down payment. Credit scores can be improved but it takes months and sometimes longer. If your score is not high enough to qualify for a loan you should begin taking the steps to repair it. The credit reporting agencies web sites have tutorials. Be very cautious about using any company that offers to repair your credit for a fee, most of them are scams. Regarding the down payment, the minimum required is 3.5% of the sales price for an FHA Loan. The money can be gifted under some circumstances but it is best to save for it yourself. Closing costs can be paid by the Seller provided the home appraises for the sales price. You will need a pre-approval letter from a lender prior to making an offer to purchase a home.

Banks are not easy to work with these days. I seriously believe that they do not want to make 30 year loans at 4% and are doing everything they can to say no. Self employed persons will have an extremely difficult time getting a mortgage even if you have owned several homes in the past. Buyers who make a significant part of their income from profit sharing, bonuses or commissions will also have a difficult time.

There are hundreds of financial calculators on the Internet to help you figure out what a monthly payment would be on a home purchase. Below is a link to a simple monthly payment calculator. Remember this is principal and interest only. You would still need to add for property taxes and Homeowners insurance. If you put less than 20% down, you will also have a monthly payment for mortgage insurance (PMI). There are tax advantages to owning a home which off sets some of the monthly cost. It is too difficult to explain in writing so you would need to call me or a Mortgage Lender for answers.

Mortgage Calculator

Since all loan approvals are credit driven and your interest rate is determined by your 'FICO Score' checking your credit report in advance is a good practice. The following link will give you a free copy of your credit report on-line in just minutes. A 'FICO Score' is a number between 300 and 850, which is assigned by the credit reporting agencies (there are three). The better your credit history is, the higher the number or score. The higher the number, the lower the interest rate. The best rates require a minimum score of 740, with 680 being the minimum standard. Loans can be obtained for lower scores at a slightly higher cost or interest rate. FHA will often lend with a 600 score. When qualifying for a mortgage loan, the bank will use the middle FICO Score and not the average. If two people are getting the loan, the bank will use the lowest middle score of both borrowers.

Effective in 2004, all individuals living in the United States are entitled to a free copy of their credit report each year (Congress has been hard at work). I suggest you follow this link and learn more about your rights, as well as protecting your identity. The credit report does not include your FICO score but you can pay a small fee to get it (it is only necessary to pay the fee to one of the three agencies since your score will be very similar with all of them). The site is somewhat complicated because the three credit reporting agencies require slightly different information. Be sure to read the instructions carefully and not 'wing-it' or you will not be successful. Married couples should obtain reports individually.

https://www.annualcreditreport.com/cra/index.jsp

I do recommend that you use a local mortgage broker (see below for one of my favorites) rather than an out of state or virtual lender. They are often times far more difficult to deal with, and do not save you any money! We have had more problems with the big four banks than with local and regional banks.

Following is a list of the documentation a Lender may need in order to process your application:

Last two years W-2's (tax returns if self-employed)
Current pay stubs
Last 3 months bank & investment statements
Proof of Social Security & Retirement Income
Evidence of child support received for last 12 months
Rental agreements for all rental properties
Divorce decree(s)
Bankruptcy papers
Landlord's name, address & telephone number
Gift funds, name and address

Inspections: Oregon Property Buyers Advisory

The following link contains the Oregon Property Buyers Advisory. It is designed to assist home buyers in understanding the different types of inspections that are available. It also explains (in layman's terms) the laws governing real estate transactions in Oregon, and explains many of the clauses found in the Earnest Money Agreement.

I especially like the links to everything from crime stats to utility information. This really is a MUST READ for all home buyers. It is a 16 page PDF document that can be printed.

Oregon Property Buyers Advisory