Topics with no videos – Rent 2 Home Challenge

*Welcome

Title: Hey Hey Future Home Owner!!!

Welcome to the Future Homeowner’s Community!!!

I’ve left you a message!!! Click Here

Meet Your Instructor, Netiva “The Frugal CrediTnista” Heard

I am a credit expert, author, speaker, and IL realtor with over a decade of experience helping people just like you claim the keys to their new home. I have an MBA in Business Management and Finance, and certifications in the credit and real estate industries.

I’m also someone who’s personally overcome more than half a million dollars in debt, experienced foreclosures, repossession, bankruptcy, liens, and poor credit. And I’m a homeowner. So if I can claim MY KEYS, you better believe you can too!

So, if you’re a home buyer who’s experienced similar setbacks, do not get discouraged! My and my #HomeTeam of real estate and mortgage experts will walk you through the steps to achieve your home ownership dreams.

We only ask that you are patient, you do the work, and you are fully active and engaged during our time together.

Remember, our Facebook Community/Study Group is Secret, so only you, me, my #HomeTeam experts and your fellow classmates can see posts and documents.

I am so excited to get started! And i hope you are too 🙂

Title: Course Objectives

The Rent 2 Home Challenge was created to assist you in creating an individualized home buying action plan outlining steps you can take to qualify for a mortgage that includes:

Reviewing your current financial situation to determine your ability to qualify for a mortgage at this time
Creating a budget to meet your financial goals
Establishing a housing affordability range for a home purchase price or mortgage limit
Obtaining and reviewing your current credit report from three reporting bureaus
Identifying the right lending program and making application.
Identifying programs that may assist you in purchasing a home (down payment programs)
Assessing your housing needs for property selection
Reviewing educational materials on topics such as using a realtor, selecting and inspecting a home, financing a home through the mortgage process, preparing to move, and life as a homeowner.
AND MORE!

Title: Pre-Work

Prior to starting this course, please pull your credit reports from all 3 credit bureaus.

You can do this at: www.annualcreditreport.com for all 3 credit bureaus, pay for a credit report from each credit bureau’s website, individually (transunion.com, experian.com, equifax.com/freetrial).

Pull your FICO credit scores.

If you are not able to obtain a credit report from one of the above mentioned sources; pulling your reports (and) scores from a credit monitoring site is okay.

Create a ‘Where Am I Now’ budget

This is a budget where you are not analyzing for improvement; you’re simply putting your numbers down to see where you are.

You’ll calculate all of your income from all sources, and subtract all of your expenses.

Expenses: Gather the past 3 months of credit card, banking, etc statements to ensure your numbers are accurate.

We’ll discuss ways to create a realistic budget that will allow you to control your finances, and stay focused on your financial goals. For now, however, create your budget based on what you are making and have been spending now.

You can find a budget worksheet in our online community. If you’re not on Facebook, you can download it here: Where_Am_I_Now_Budget._Debt_List.xlsx

See you inside!

~ Netiva “The Frugal CrediTnista

*Module 1: In Loooove With Homeownership!

Title: Why we LOVE Homeownership 🙂

There is nothing like the having a place to call ‘Home’.

It is all types of awesome-sauce both emotionally and financially.

Emotionally, there’s nothing like having a place that’s all yours, to decorate as your own, to raise your children in, to being able to build a nest egg/investment for years to come; and to kiss lining the pockets of your landlord goodbye!!!

Financially; there’s the ability to build equity, have the ability to pay less than you’re paying in rent, long-term tax credits, tax deductions and more!

When done right, when it’s planned for, home ownership is priceless.

However, there are times when renting may be the better decision for you (you’re probably shocked I said that, but I wouldn’t be me if I lied to you!).

Making the decision to transition from renter to home owner can be both scary and a little stressful, especially when considering the costs associated with purchasing your new home.

In this Module we will discuss several things to consider to make the right choice for you.

If the figures scare you, don’t worry 🙂

I’ll break this down into bite sized pieces, as well as show you how you can accomplish your goal of Claiming the Keys to Your New Home!

Title: When It’s Time To Pause…

Your Home Is Your Castle!!!

I could tell you about all the awesomey sauciness that comes with owning a home; however, there are times when homeownership may not be for you just yet if…

1. You plan on moving from the area within the next few years. Buying is a long-term strategy, with some significant up-front costs. Plus, it’s easier to move out of a rental than a home you own—selling is just as complex as buying.

3. You need flexibility. Buying is best for people whose lives are fairly stable. If one of your main priorities is being able to quit your job at will to pursue a passion or goal of yours, then maybe home ownership will feel more like a trap than a step in the right direction. That’s the last thing you want.

4. You expect your income to decrease soon. If you’re planning to return to school or quit your 9 to 5 to pursue entrepreneurship, you might not want to lock yourself into a mortgage. If you’re willing to pursue a property that’s more modest and within the range of your projected lower income, then please proceed. Just thoroughly map it out first :).

5. If you hate your job. One of the things that lenders look for is stability. If you know you’ll be leaving your job soon (or layoffs are coming) I’d avoid purchasing a home for now.

6. It will cost you far more to buy than to rent (a common choice for those in California and New York/New Jersey). Run those numbers,using online calculators. In some markets, home prices have risen so dramatically that you can still rent for much less than you can buy—even after you factor in tax deductions and inflation. If that’s the case, you might be better off renting and investing elsewhere.

It’s best to consider these things now; because once you’ve closed you’re locked in until you sell, rent it out, or foreclose. And who wants the latter?

Next, let’s explore the cost of purchasing a home…

Title: Costs

Buying a house means some new expenses beyond the purchase price. A first-time homebuyer should plan to drop some cash for:

down payment
loan principal, loan interest, taxes, and insurance (PITI)
up-front costs,
closing costs, and
recurring ownership costs.

The exact amounts of these expenses depend on you, the house you buy, the location of the home, and the type of mortgage you get. But even if you can’t forecast specifics, understanding that these figures exists and what drives them will save you some headaches beforehand.

This course is about preparation, right?

Here’s a quick look at some expenses that come along with home ownership:

We’ll cover some methods & popular programs to assist with down payment & closing costs a little later on in the course.

For now, let’s prepare our finances so that you can get approved for your new house :).

Title: Module 1 Assignment: Am I Ready to Buy Worksheet

We have a short assignment for you to complete today. This task is to help you figure out if you’re ready to buy a home.

(Keep in mind — you can and should work through each assignment in this course, even if you’re not ready to buy a home this very second. This task is just to give you an idea of the responsibilities of home ownership.)

DOWNLOAD THE WORKSHEET BELOW

If you have more “yes’s” than “no’s” when filling out the worksheet, you may just be ready to buy a home sooner than later!

Remember, even if you plan to stick to renting for a while, you can still go through this course to digest the information you need before buying.

Congratulations! You’ve completed Module One! Pretty painless,right? 🙂

Have Questions? Post them to our Study Group here!

* Module 2: Getting Started – How Much Home Can I REALLY Afford?

Title: Module 2 Workbook

Please Download for Module 2’s assignments 🙂

Title: What Lenders Analyze to Approve You

When lenders review your financials for home ownership they primarily look at 5 key factors –

Income, Debt-to-Income Ratios, Credit, Down Payment/Reserves and Assets.

For Income, lenders want to see how you get paid and will decide what portions of your income they can use to qualify you for a loan. If you are a regular 9-5p, W-2 employee, with no income fluctuations do to overtime or bonuses; you’re good. A lender will simply ask for bank statements, taxes and paycheck stubs. If you have a part-time job, are self-employed, or commission-based etc., you’ll need additional paperwork. I’ll cover this more in the Qualifying Income section.

For Debt; lenders want to make sure that your monthly gross Qualifying Income is considerable higher than your monthly fixed expenses. This is more commonly referred to as your debt-to-income ratio.

We’ll discuss Credit, Down Payment/Reserves & Assets quite extensively in the upcoming weeks.

For now, let’s go over Qualifying Income & Fixed Monthly Debts 🙂

Title: Qualifying Income

In this section of Module 2 we’ll learn what Qualifying Income lenders review to approve you for a mortgage.

This module is about getting down to biznazz! LOL

A lender wants to know if you have enough money to cover your mortgage payments and other debt.

Reporting your income is a little more complicated than you just writing your gross income for the year down on a your mortgage application.

Instead, lenders consider a much larger picture, including your income trends over several years to ensure you are purchasing a home you can truly afford.

Your task for the Qualifying Income section of Module 2 is to:

Watch the video that follows on qualifying income
Write down your monthly gross qualifying income in your Module 2 Workbook

Title: Summary: Qualifying Income

Income For Qualifying For Mortgage

All income for qualifying for mortgage needs to be documented income and mortgage lending guidelines have specific guidelines when it comes to income qualification.
Cash cannot be used to qualify for a mortgage. All income for qualifying for mortgage needs to be verified with the IRS.
Income that can be used as income for qualifying for mortgage are hourly income, salaried income, social security income, pension income, disability income, child support income, alimony income, part time income, over time income, bonus income, and self employment income.

W-2 income

Home loan applicants who are W-2 full time wage earners can qualify for a mortgage.
Salaried wage earners income will be qualified by taking the salaried wage earner’s annual income and dividing it by 12 months.
Hourly wage earners income will be calculated by multiplying the hourly rate by 40 hours and multiplying it by 52 weeks and dividing it by 12. Monthly gross income will be used when qualifying income for mortgage.

Part Time, Over Time, And Bonus Income

Part time income, overtime income, and bonus income can be used as income for qualifying for mortgage as long as there has been a two year history of the borrower getting part time income, overtime income, and/or bonus income and it was not declining income. A verification of employment will be required.

A verification of employment can be either a verbal verification of employment or a written verification of employment or both. A written verification of employment is done at least once during the mortgage process and a verbal verification of employment is normally done prior to a clear to close. Verbal verification of employment can also be done more than once by lenders to make sure that the borrower is still employed.

Social Security Income, Pension Income, Disability Income

Social security income, pension income, and disability income can be used as income for qualifying for mortgage. In most cases, these types of income can be grossed up as long as they get a net check and is not taxed.

Child Support Income And Alimony Income

Child support income and alimony income can be used as income for qualifying for mortgage as long as the likelihood for the next two-three years can be documented.

Self Employment Income

Self employment income and income from 1099 wage earners can be used as long as they have a two year history of steady self employment income and/or 1099 income. Two years of tax returns with all schedules are required in order for the mortgage loan underwriter to analyze the self employment and/or 1099 income.

Declining Income

Declining income and irregular income can become a big issue when it comes to income for qualifying for mortgage. Mortgage lenders want to see consistency in income. If a borrowers income was less one year but the following year the income was more, then there is no issue. However, if the borrower’s income is less the most current year, then the lesser income will be used and that year’s 12 months average will be used to calculate income. If the borrower’s income was less the older year and more the most current year, then the average of 24 months will be used for income qualifying for mortgage. If the borrower’s most recent year of income has been significantly less than the older year, then the mortgage loan borrower’s income may not be able to be used to the significant irregularity in income and a good letter of explanation needs to be be provided.

Title: Here’s an example of the information your lender will see when your data is ran through an Automated Desktop Underwriting System. The system is updated from beginning to close of contract.

There’s a PDF attached to this topic

Title: Pre-Planning Income (Reference) –> Rental Income Log (if applicable)

This form is only applicable if you receive Rental Income and want to determine how much of it can be calculated into your Qualifying Income.

Title: Debts

In this section of Module 2, you’ll learn which debts lenders will use when qualifying you for a home loan.

Lenders want to know if you can afford the expenses you have now, on top of the mortgage payment you’ll have in the future. The comparison of your Monthly Gross Qualifying Income to Fixed Monthly Debts is known as your Debt-to-Income Ratio.

In the Pre-Work section of the course, I asked you to create a “Where Am I Now” budget. On that budget worksheet is a debt list.

You’ll need to pull out that list for this section.

Watch the Debt Video in Module 2 that follows. It will help you determine which debts from your list will be considered by a mortgage lender when qualifying your for a Home Loan.

Title: Summary: Fixed Debts

Remember, lenders use the debt-to-income or DTI ratio to compare your debt to the amount of gross Qualifying Income you bring in each month.

To calculate your DTI, divide your monthly fixed Debt payments by the total gross monthly Qualifying Income from everyone in the household.

The equation is:

Monthly fixed debt payments / Gross Qualifying Income = DTI ratio

Here are a few more key points from the video above:

Lenders use the debt from your credit report along with what you write on your mortgage application to calculate DTI. It’s up to you to make sure what’s on your credit report is accurate. If not, you’ll have inaccurate DTI ratios.
Your total amount of debt doesn’t matter as much as your ability to comfortably make your minimum monthly payments. This means if you have debt from student loans, you should be okay as long as your monthly fixed minimum payment amount is considerably lower than your gross monthly income.
There are two types of DTI ratios.
- Front-end DTI ratio: Only compares your estimated home expenses or P.I.T.I. (loan principal, interest, taxes, and insurance) to your income.
- Back-end DTI ratio: Compares ALL of your monthly debt payments including your estimated housing expenses.
For an FHA Loan:
- A front-end DTI ratio of 28% is preferred.
- A back-end DTI ratio of 43% is preferred.
- The maximum front-end ratio you can have for an FHA Loan is 46.9%; you’ll need credit scores above 620.
- The maximum back-end ratio you can have for an FHA Loan is 56.9%; you’ll need credit scores above 620.
USDA Loans cap at a DTI ratio of 41% and VA Loans require a DTI ratio of 43%. (These are also government-backed loans that we’ll talk about next week.)

(We’ll discuss what an FHA Loan is in more detail next week. For now, know an FHA Loan is a government-backed mortgage that allows you to put as low as 3.5% down.)

For Conventional Loans, lenders typically focus solely on your back-end ratio.
A back-end DTI ratio for 36% is preferred for Conventional Loans
- The maximum is DTI is 45%.
- (We’ll explain the aspects of a Conventional Loan including the pros and cons of it next week.)

If your DTI ratios are too high, you can fix the situation by:

Resolving debt disputes
- Reducing your mortgage expense (i.e. choosing a more affordable home)
- Reducing your monthly debt payment obligations by paying off some debt
- Increasing your Qualifying Income

Next Task:

If you haven’t already done so during the pre-work assignment, write down your monthly fixed debt payments today!
If you didn’t write down your gross monthly qualifying income from the previous assignment, make sure to do that today as well.
If you have questions, post them in our Study Group here.

Ready for your next assignment? (I’m picturing you emphatically saying yes and jumping up and down,LOL)

Let’s Go!!!

Title: DTI Assignment: Putting It All Together

For the last two sections of Module 2, you’ve been learning the two key factors that lenders consider when qualifying you for a mortgage: Qualifying Income & Fixed Monthly Debts

You have also learned how to calculate your debt-to-income ratios.

For this assignment, you’re going to put those two assignments together and calculate your Debt-to-Income Ratio!

I’m going to teach you to calculate both your front-end AND your back-end DTI ratios.

Ready????

First:

1. Take out your monthly qualifying income assignment

2. Review your Debt List form the pre-work assignment and select the Fixed Monthly Debts discussed in the video (car note, student loan payment [remember 1% rule], credit cards, personal loans, etc)

Remember, fixed debts are monthly and recurring. Do not include rent,utilities, groceries and other variable expenses. Those will be accounted for as depicted in your Module 2 Workbook.

Later you’ll:

3. Divide your fixed monthly debts by your monthly qualifying income

4. Make tweaks to ensure your DTI is within the mortgage-approval range

To further assist you, I’ve left two examples on how to do this below. 🙂

Example A: Mary

Qualifying Income: Mary makes $45,000 per year or $3,750 gross qualifying income per month.

Debt: Her total fixed monthly debt payments are $1,200. Mary believes she wants to go with an FHA loan that has payments of $1,100 per month.

FHA Loan debt-to-income ratio maximums: Front-end maximum – 46.9%; Back-end maximum – 56.9%

Mary’s front-end DTI (remember, the front-end DTI ratio is just considering the mortgage payment): $1,100 per month P.I.T.I. (principal, interest, taxes, insurance) / $3,750 income = 29% GOOD!

Mary’s back-end DTI (remember, desired housing expenses + other monthly debt payments): $2,300 ($1,100 + $1,200) / $3,750 = 61% NOT GOOD!

Adjustments: Mary won’t qualify for an FHA mortgage with her current back-end DTI ratio being so high. She decides to bring down her desired monthly housing payment to $1,000, and reduce her fixed payments to $900 per month by creating a strict budget to pay off some of her debts. It took roughly 5 months, but with these changes, Mary’s total monthly fixed debt payments (including the mortgage) is now $1,900.

Recalculate back-end DTI: $1,900 / $3,750 = 51% PERFECT!!!

Let’s do another scenario!

Example B: Daryl

Qualifying Income: Daryl makes $80,000 per year or $6,666.67 gross qualifying income per month.

Debt: Daryl’s fixed debt payments are $4,800 per month. He wants to go with a conventional loan and believes he can afford a $2,300 mortgage payment per month.

Conventional loan DTI maximums: Conventional loans focus on the back-end DTI ratio. The maximum DTI is 45%.

Daryl’s back-end DTI Ratio: $7,100 ($2,300 mortgage + $4,800 other debts) / $6,666.67 gross income = 100+% THIS IS TERRIBLE, he would spend more than he earns!

Adjustments: Daryl will need to greatly reduce his $4,800 monthly debt payments to obtain any mortgage loan. His percentage difference is: 100+% – 45% = 55%.

Recalculate: Daryl plays around with the numbers and determines that he needs to reduce his P.I.T.I. by $800 and monthly debt payments by $3,400 per month in order to meet the 45% threshold. He’ll need to reconsider how much house he can afford, and work to create a strict budget and debt elimination plant to make home ownership a reality.

Now, it’s your turn!

Calculate your debt-to-income ratios — both front-end and back-end using the worksheet in Module 2 and a calcultator.

Remember, front-end DTI is your desired monthly mortgage payment divided by Qualifying Income.

The back-end ratio is the desired monthly mortgage payment plus your other fixed monthly Debts divided by Qualifying Income.

If you ratios are too high; determine how you can make adjustments to either your Qualifying Income, Debts, or desired Mortgage Payment Amount — just like in our examples.

Title: DTI Assignment: How Much Home Can I Afford?

The DTI calculation gives you a general sense of the Loan Type and the monthly payment you can get approved for.

Using the How Much Home Can I Afford worksheet in your Module 2 Workbook, consider how much you want your Monthly Mortgage Payment to be; and if it’s financially realistic..

Notice, unlike mortgage lenders, I did not have you calculate this based off of your Gross Qualifying Income, but your NET.

Why? Because you don’t bring your Gross Income home!

Your Mortgage Payment, however, will be paid out of your Net Income, not your gross.

Therefore, I want you to see how much home you can afford based on the amount you actually bring home each month!

After you’ve completed the worksheet, proceed to my next handy dandy tool that i have for you 🙂

Title: My Home Affordability Calculator

The Home Affordability Excel Calculator is a great tool that allows you to play around with the numbers in order to determine how much home you can afford – notice I didn’t say how much home you can qualify for? Why? Because a lender is not in your day-to-day life and has no clue what your expenses and lifestyle choices are outside of what you put on our mortgage application! That’s your job and I’m going to teach you how to do it :).

Using this calculator you can determine the monthly payment you can afford and what your ‘real’ total home loan amount should be.

For this assignment, download and Excel calculator below.

There are instructions for how to use this calculator on the “help” tab at the very bottom of the Excel spreadsheet.

If you have any questions,simply post to our Study Group and we’ll be there to help you out!

Have Fun!!!

For our next assignment, we’re going to use our Home calculations to do some house hunting!

Get Ready!

Attached is a calculator to determine what your ‘real’ home loan amount should be.

Excel Home Affordability Calculator: R2H-Home_Affordability_Calculator.xlsx

Some mentioned the above calculator wasn’t cooperating 🙂 Here’s an alternative one that I love as well:

Alternative_Home_Affordability_Calculator.xlsx

P.S.

Yes, I know that there are online calculators that can assist you with this assignment. I don’t like to use them as much because they do not account for the increased debt ratios that lenders allow. This means they’ll use a 28% front ratio for your housing debt; and a 36% back ratio for all of your debt, which is pretty low. If you want to use them, I’ve listed my favorite websites below, but don’t get discouraged if the calculator states you can only afford a $50,000 house (which is why I prefer the excel worksheet better).

Here is a list of my favs:

SMART ASSET

BANK RATE

NERD WALLET

Title: DTI Assignment: Research Your Home Community

After you’ve estimated how much home you can afford; determine your NEEDS & WANTS for a home, beginning with the attached worksheet; be realistic; most people move at least three times after home purchase during their lifetime.

Then, start researching neighborhoods that fit that price range and criteria (bedrooms, bathrooms, school districts etc. I can’t tell you how much time this will save you when you begin your home buying process!

1. Look up locations on Zillow, Trulia or Realtor.com (or another search engine). Consider schools (greatschools.org); travel to work, transportation, grocery stores, expressways, etc. Try to narrow down a least 3-5.

2. Contact a realtor, tell them you would like a list of homes in your price range within those areas (best to investigate now!). Please, please, please do not go on any home tours right now; wasting a professional’s time is not cool when you know you are not ready to buy. Instead, ask if they have any open houses coming up; most mid-to-large sized companies keep an open house list.

3. Drive around those areas to see if you truly want to live there. Remember, you are buying more than a home; you’re buying a community. If it doesn’t fit you; cross it off your list. If you see an open house; stop and peak in!

4. Narrow down locations, determine what you will compromise on and what is an absolute NO DEAL when it comes to your new home. This will let you know if you need to save up some more cash for a sizable down payment in order to purchase a home in a more expensive neighborhood – the larger down payment would mean a lower interest rate, a higher loan approval amount and lower payments over the life of the loan.

We’re planning, right? Get to planning what neighborhood your new, affordable home will be in :).

Update your results in your Workbook!

Title: Student Loans & DTI Update

If you have a lot of student loans,this update will make you happy 🙂

In April 2017; Fannie Mae (conventional Financing) announced that it will now accept Income Based Repayment Plan payment as the figure they use in calculating your debt-to-income ratio.

Before this announcement, borrowers using an income-driven repayment plan for their student loans found that because those payments could change as part of the annual plan renewal, the lender approving the mortgage could not use that lower payment when calculating the you debt-to-income ratio.

If a borrower was on an income-driven repayment plan, the lender was instructed to use 1 percent of the balance in place of the borrower’s actual payment amount. But lenders using Fannie Mae underwriting standards can now use the existing payment, except it’s $0.

To put this in perspective, a borrower with $60,000 in federal student loans, an adjusted gross income of $50,000 and a family size of three would have a payment under the REPAYE program – one of the several income-driven plans available – of about $161.

If forced to use 1 percent of the balance in the mortgage calculation rather than the actual payment, that amount would be around $600, easily an amount that can mean the difference between a mortgage and no mortgage.

Rules:

1. The payment amount must show up on your credit report and MUST be more than $0

2. If the payment fails those criteria, the lender will be required to use the 1 percent value.

3. Or, the borrower can then apply for a new income-driven plan plan that pays off the loan in full during the term. Examples of plans that would fit this criteria are consolidation, extended and graduated repayment plans.

Since credit reports can take a month or more to display activity, I strongly advise planning ahead, at least 2-3mths, before applying for mortgages to get your payment plans in place. Then you can confirm the payments are reflected on your credit report or obtain documentation showing the other plan.

Third-Party Payers

Does your employer pay all or a portion of your schooling? Now, Fannie Mae will allow the mortgage lender to exclude those payments from the mortgage calculation as long as you can provide documentation from your employer (or any other 3rd party, even a parent) that they have been making satisfactory payments for at least 12 months.

Paying Student Loans with Home Equity

This last change is probably better news for private student loan borrowers than most federal student loan borrowers. New rules will allow borrowers with enough equity in their home to refinance their mortgage to include funds to repay some or all of their student loans.

While a cash-out option has always been available to consumers with home equity, those cash amounts over and above the amount of the actual mortgage were typically charged fees and sometimes higher interest rates than the mortgage itself. Under the new rules, borrowers will receive the same rate on the amounts used to pay off student loans as for the new mortgage.

There are a few rules to this change. While you don’t have to pay off all of your existing student loans, at least one loan must be paid in full as part of the transaction. Funds are sent directly to the student loan holder, and you can only use this program to pay loans that you, the mortgage borrower, are personally, legally responsible for.

I would NOT recommend this for Federal Student Loans unless you are paying them off in full for a rate much lower than what the government is offering.

Paying off federal loans in general means losing the lower payment, deferment and discharge options those loans maintain, so you’ll want to make this decision while keeping the long term in mind.

* Module 3: Which Loan Type(s) Works Best for Me?

Title: FHA Minimum Approval Guidelines

FHA

Federal Housing Administration Loans or FHA loans are loans guaranteed by the federal government.

With this loan you’re not borrowing directly from the FHA. Instead, FHA-approved lenders (i.e. banks) give you the loan, and the government insures it. If you default on an FHA loan, the FHA insurance covers the lender’s loss.

The FHA has set some minimum eligibility guidelines for this loan. However, FHA-approved lenders are allowed to add on even more stringent rules for approval at their discretion. Stricter lender approval requirements on FHA loans are called “overlays.”

Here’s what you need to know about the FHA loan qualifying guidelines:

Credit Score Requirements:

Lowest Typical Credit Score Range: 580-620

Ideal Credit Score Range: 640-680+

Down Payment Requirements:

580+ FICO Scores: 3.5%

550-579 FICO Scores: 10%+

Seller Contribution Allowance:

Sellers can contribute up to 6% of the sale of the home to be applied towards loan origination fees, credit reporting fees, title charges, homeowners insurance, attorneys fees, inspection fees, and any other third party charges that a home buyer may occur in the home buying process. Borrowers can also use sellers concessions to buy down mortgage rates by buying points.

If there are any overages, it cannot be given to the borrower (you); it has to go back to the seller as profit.

If you have overages; your loan officer should tell you. As soon as they do, make sure you tell them to put it towards buying down your interest rate (points = interest rate) or to pay the up front Mortgage Insurance Premium (look for mortgage payment protection insurance on your good faith estimate/settlement statement)

Debt-to-Income Ratio Requirements:

Front Ratio Maximum: 46.9% if FICO scores are over 620

Back Maximum: 56.9% if FICO scores are over 620

(Front Ratio = Home Expenses – PITI, association dues, etc)

(Back Ratio = Home Expenses + Fixed Monthly Expenses)

If FICO scores are under 620, maximum front ratio imposed by most lenders is 31%, back ratio is 43%

Due to lending overlays, some lenders will cap DTI at 45%, 50%, 55% no matter what the credit scores are. If this is your situation; find a lender that offers no overlay FHA Loans.

Reserve Requirements:

None, however lenders may require them personally; plan for 2 months reserves, which can be in a 401k, savings, checking account as well. Reserves are sourced, meaning the lender will want to know how that money got to be in your bank account; the bank statements will show regular deposits, if you made one lump sum deposit do so a minimum of 4 months before you start searching for a home. Most lenders source funds 3 months and under.

Collections & Charge Offs Guidelines:

FHA does not require collections and charge offs to be paid off; some banks, however, may. They are, after all, lending you the money while FHA is merely insuring it.

Per FHA guidelines if the collections are medical they are completely ignored, and charged off accounts are as well.

With regular collection account, if the balance is over $2,000, 5% of the outstanding balance will be factored into your DTI’s monthly fixed expense; even if the borrower is not required to pay the debt.

So, you will be approved for the loan, not be required to pay the debt; but your DTI will include the debt as one of your fixed monthly expenses, which can affect interest rates, your loan amount, terms and more.

Best case scenario; if you can settle it, otherwise get a written payment agreement with the creditor and have it submitted to the lender’s underwriter.

Waiting Periods to qualify for a home using FHA

Discharged Chapter 7 Bankruptcy – 2 Years

Discharged Chapter 13 Bankruptcy – There is no waiting period; usually has to go throgh manual underwriting if discharge date is less than 2yrs old.

Foreclosure, deed in lieu of foreclosure, and short sale – 3 Years from the date your name was removed from title

Credit Dispute Guidelines

You cannot have any credit disputes on charge off accounts or any non-medical collection accounts with total outstanding balances higher than $1,000.

The dispute would need to be removed from your credit reports in order to proceed with your mortgage processing.

Removing the dispute will lower your scores. To prevent this, work on improving your credit scores early, and work on soaring them higher than the minimum of 580-620 so that when they drop it won’t take you out of the running for obtaining an FHA loan.

NOTE: DIsputes on regular collection accounts with a $0 balances is exempt; you do not have to take it out of dispute. Disputes on any charged off account is not allowed. Credit disputes on medical collection accounts are exempt as well, whether there is a balance or not.

Again, these are the minimum requirements. Lenders can add additional requirements on top of this (overlays) so keep this in mind. This is why we shop around for the best mortgage for us!

Title: FHA Rehab Loan – 203K Minimum Approval Guidelines

FHA 203K – PURCHASE REHAB LOAN

More Info:

This is a great option if you decide to purchase a fixer upper.

There are two different types of 203k loans;

Streamline – limited up to $35,000; you cannot do structural changes to the home or do any room additions. You can, however do the following: kitchen remodeling, bathroom remodeling, basement remodeling, attic remodeling, HVAC, millwork, roofing, siding, windows, flooring.

Full Standard – no construction limit (whoo hoo!!!); here, everything goes -> Room additions, structural changes, literally anything, with the exception of luxury items; i.e jacuzzi, swimming pools, outdoor kitchens, etc.

Mortgage interest rates are generally higher than standard FHA Loans.

Credit Scores

Lowest Typical Credit Score Range: 620

Ideal Credit Score Range: 640+

Down Payment

3.5%

New buyers who haven’t owned a home in 3+ years can qualify for a 3% down payment.

The down payment required is based on the amount of the repaired home.

Example:

If your home cost $120,000 not repaired; and it needs $50,000 worth of work, your down payment would be based on the repaired value of $170,000.

There are more closing costs with a FHA 203k Loan than a standard FHA Loan.

Sellers concessions can still be used to cover all closing costs but not the down payment.

Again, these are the minimum requirements. Lenders can add additional requirements on top of this (overlays) so keep this in mind. This is why we shop around for the best mortgage for us!

Conventional Financing has Rehab Loans as well; however, the approval guidelines are more stringent; most prefer scores over 720 with at least 10% down (although I’ve gotten a few done in the 680s)

VA Construction loans are a bit easier than Conventional; they allow for both new construction and rehab as long as the lender approves the buyer. Most lenders prefer scores over 640.

USDA is also pretty lenient, with minimum scores of 620 required to qualify 🙂

With all 4 loan types; work MUST be done by an approved and qualified contractor.

Title: Conventional Minimum Approval Guidelines

CONVENTIONAL

A conventional loan is a mortgage that is not insured by the government.

Since conventional loans do not have government backing, the qualifying criteria can be more strict at times.

Generally, you need to have a higher credit score, and you need to bring more money to the table when applying for a conventional loan.

What’s the benefit of a conventional loan?

You’re probably wondering why anyone would choose a conventional loan when FHA loans require a low down payment and can be easier to obtain.

One benefit is putting down a higher amount of money upfront will cost you less in the long run when considering interest. You may also pay less per month in P.I.T.I.

Here’s what you need to know about conventional loans:

Credit Scores

Lowest Typical Credit Score Range: 620

Ideal Credit Score Range: 640-720+

Down Payment Requirements

The minimum down payment accepted is usually 5%. New buyers who haven’t owned a home in three+ years can qualify for as low as 3% down payment.

If you put less than 20% down on a conventional loan, you have to pay Private Mortgage Insurance or PMI.

We’ll talk about this next.

Mortgage Insurance

Conventional loan mortgage insurance is not the same as FHA mortgage insurance.

FHA loan mortgage insurance is called MIP or Mortgage Insurance Premiums. Conventional loan mortgage insurance is called PMI or Private Mortgage Insurance because it’s through a private insurer and not the government.

Don’t get these two mortgage insurance types confused.

You can stop paying Private Mortgage Insurance (PMI) on your conventional loan automatically when your loan-to-value (LTV) drops to 78%.

For example:

If you put 5% down on a home, your initial loan-to-value (LTV) is 95%. Why? You have 95% of the home’s value in a loan and 5% is your own equity. Once you pay off enough for the loan balance to drop to 78% of the value, you can stop paying PMI.

FHA loan annual Mortgage Insurance Premium (MIP) is harder to remove. You typically have to pay MIP for the entire life of your loan unless you refinance which can get costly.

Reserves:

Typically 2 Months of P.I.T.I. (depends on Down Payment Amount)

Seller Contributions

Anywhere from two to nine percent of the sales price, depending on your down payment; most lenders want you to have the funds for your down payment; and to use seller concessions towards closing and other settlement costs.

General rule of thumb:

Down payment under 10% – seller concession up to 3%

Down payment between 10-25% – seller concession up to 6%

Down payment 25% or more – seller concession up to 9%

Debt-to-Income Ratios

45%; it can go higher if your credit scores are higher, if you’ve been on your job for a long period of time, have a lot of money saved that is easily accessible, and/or a large down payment.

Collections & Charge Offs

(Straight from the hand book)

If borrower is purchasing a single family residence and will be residing in the property, collections/non-mortgage charge offs are not required to be paid.

If borrower is qualifying to purchase a two to four unit and will be occupying property, if the debt totals more than $5000; it needs to be paid prior to closing. You’ll receive a conditional approval.

If borrower is purchasing an investment property, any unpaid collection and non-mortgage charge off collection accounts that $250+ needs to be paid. Collection accounts totally $1,000+ needs to be paid prior to closing.

Waiting Periods to qualify for a home using Conventional

Discharged Chapter 7 Bankruptcy – 4 years

Discharged Chapter 13 Bankruptcy – 2 years

Deed in lieu or short sale – 4 years

Foreclosure – 7 years

If you had a mortgage that was discharged in bankruptcy, there is a 4 year waiting period.

Credit Disputes

Fannie Mae Desktop Underwriter –

Confirm the accuracy of the disputed account reported on the borrower’s credit report
If it has been determined that this information is accurate, a new credit report with the account no longer reporting as disputed must be obtained
The loan must be resubmitted in the automated underwriting system with an approval

Freddie Mac Loan Prospector –

If the automated underwriting system approved your file with the dispute on there; you’re good to go.

Again, these are the minimum requirements. Lenders can add additional requirements on top of this (overlays) so keep this in mind. This is why we shop around for the best mortgage for us!

Conventional HomeStyle Renovation Loan

You can use one loan to finance your home and its improvements.

Almost any type of renovation or repair is eligible, too, so long as the improved is permanently affixed to the home and adds value.

When you apply; you’ll tell your lender the improvements you’d like to make. Once your home is appraised as part of the mortgage approval process, your appraiser will assign a home value based on what your home will be worth after your upgrades are complete.

The loan-to-value of your HomeStyle® loan will be based on your home’s expected future value and not its value as of today. This allows you to borrow more than your home is worth in order to finance your construction.

Renovations must be completed within 12 months and seller concessions are permitted. This means that home sellers can pay your closing costs if you remember to add it to your contract.

Same Conventional requirements for credit (min. 620) and down payment (5%) and other minimal approval guidelines apply.

Title: VA Minimum Approval Guidelines

The VA loan is a mortgage that’s backed by the Veterans Benefits Administration (VA).

This mortgage program is meant to open doors to homeownership for our military servicemembers and spouses. It’s open to most military, veterans, reservists, and National Guard members, and spouses of members who’ve been disabled or died during active duty.

Like FHA loans, the VA loan isn’t issued by the VA. Instead, the VA insures the mortgages issued through VA-approved lenders.Credit Scores

None. Remember, the VA does not issue loans, they guarantee them. VA does not enforce credit score minimums, but the lenders you obtain your loan from will. Average score ranges between 600-620.

Down Payment

There will be a funding fee to pay at closing, which can be financed in to the loan. Funding fees typically range from 1.5-3.3% of the sales price.and where you are in the military

Seller Contributions

4% of sales price – Seller concessions work a bit differently with VA.

(From the VA Loan Guide)

Seller concessions can include:

payment of the buyer’s VA funding fee
prepayment of the buyer’s property taxes and insurance
gifts such as a television set or microwave oven
payment of extra points to provide permanent interest rate buy-downs
provision of escrowed funds to provide temporary interest rate buy-downs
payoff of credit balances or judgments on behalf of the buyer

Seller concessions do not include:

payment of the buyer’s closing costs, or
payment of points as appropriate to the market

Debt-to-Income Ratios

41%

The VA uses ‘residual income’ that takes into account utilities and other expenses, that are ignored in FHA/Conventional.

Residual income also takes into account where you live, your loan amount and your credit scores.

If your DTI is above 41%, expect your loan to take a bit longer to close due to being reviewed more closely. So that you can get a better idea of what lenders look for on VA loans and how residual income works, I’ve left a Form 26-6393, which is used by lenders.

Reserves

Certificate of Eligibility

In order to be eligible to take out a VA loan you must have a Certificate of Eligibility, or a DD214, which can be obtain through the VA. Your loan officer can order it online as well.

Collections & Charge Offs

Collections must be paid, no exceptions.

Charge off accounts are subject to the lender’s guidelines

Waiting Periods to qualify for a home using FHA

Chapter 7 – 2 years from discharge date; no late payments within those 2 years

Chapter 13 – 12 months of on time chapter 13 payments as long as the trustee approves the new mortgage loan

Foreclosure, deed in lieu, short sale – 3 years

Loan Modification 1 year waiting after a loan modification (contingencies apply)

Credit Disputes

There are no specific guidelines on how to handle disputed accounts. It is usually placed in manual underwriting to see if the account is impacting your overall credit risk. If so, your scores can potentially be downgraded.

Again, these are the minimum requirements. Lenders can add additional requirements on top of this (overlays) so keep this in mind. This is why we shop around for the best mortgage for us!

VA Rehab Loan

The VA allows loans used for new construction as well as loans used to acquire and rehab a property. The process for obtaining a VA construction loan is similar to any other VA loan type. The veteran must have available entitlement and be approved by a VA lender under existing VA underwriting guidelines.

When financing new construction, the veteran must provide building plans and specifications from a licensed general contractor. For rehabs, VA approved home improvements include roof repairs, flooring repair, HVAC systems, bath and kitchen remodels. There are also lenders that will provide rehab loans to make a property more energy efficient.

VBA-26-6393.pdf

Title: USDA Minimum Approval Guidelines

USDA

The USDA Rural Development Housing Program backs USDA loans for homebuyers in eligible rural or suburban areas. This loan is meant to stimulate economic growth.

Be sure to check out the eligible locations before writing off this mortgage option entirely. You may find that you are looking for a home in a qualifying location without even knowing it!

Here’s what you need to know about the USDA loan requirements:

Credit Scores

Lowest Credit Score Range: 640

Ideal Credit Score Range: 650+

Down Payment

USDA home loans offer 100% financing. The property must be located in a USDA-eligible area (map).

Seller Contributions

No limit per USDA guidelines; however most lenders limit it to 6%

Closing cost can also be financed into your loan as long as it appraises out.

Debt-to-Income Ratios

41%

Collections & Charge Offs

Medical collections and non-mortgage charge offs are not included in DTI calculations

If non-medical collections are under $2000 they do not have to be paid; if over $2000, any of the following applies:

a. Payment in full at or prior to closing.

b. Payment arrangements made in writing

c. For each collection, 5% of the balance is included in monthly DTI calculations.

Waiting Periods to qualify for a home using USDA

Chapter 7 & Chapter 13 – 3 years from discharge date

Foreclosure – 3 years

Short Sale / Deed in Lieu of Foreclosure – If you had big issues (determined by the lender/usda) the deed in lieu of foreclosure will be viewed as a foreclosure and you would have to wait 3 years. If your scores are over 640 your underwriter decide if you’re eligible to purchase using USDA in 1 year.

Credit Disputes

A lender will place your file in manual underwriting to determine if the account has to be taken out of dispute. If the account(s) are in dispute and meet the guidelines below, you’re good to go:

1. The account has a zero dollar balance

2. The account is marked “Paid in full” or “resolved”

3. The account has a balance owed of less than $500 and is more than 24 months old

Again, these are the minimum requirements. Lenders can add additional requirements on top of this (overlays) so keep this in mind. This is why we shop around for the best mortgage for us!

USDA Rehab Loan

USDA property that needs updating or repairs.

100% financing for first time and repeat homebuyers
Fixed rate mortgage loan
No maximum loan amount
640+ minimum FICO with relaxed underwriting guidelines
Seller may contribute up to 6% towards closing costs – based on purchase price of home
Ability to finance repairs – the lesser of 10% of the appraised value or $10,000
Appraisal is ordered based on “after improved value”
Repairs begin after closing so there is no hardship or delay of funds for the seller
Just about any work is allowed as long as the max repair amount isn’t exceeded: foundation repair, roof repair, painting, new flooring, cosmetic updating, HVAC repair, etc.
Work must be done by a General Contractor
For most lenders no funds are released at closing however we will be happy to issue a draw once the project commences

Title: Fixed or Adjustable?

When applying for a home loan, a lender will give you a few options on how you want your interest to be applied.

Some options, may sound appealing because they offer a lower payment amount at the beginning of your loan.

Many of my clients have been seduced by this and think: “Oh, I’ll just refinance when the interest rate adjusts on the loan.”

2008-2011 prevented many of my clients from doing just that, which resulted in lots of foreclosures.

I want you to consider how your interest is applied to your home loan from the moment you close on your home and beyond – the present AND the future!

Fixed-rate Mortgages are when your principal and interest payment stays the same for as long as you have your loan. They come in terms of 30 years, 15 years, or 10 years. The benefit of a fixed mortgage is that the payment amount is the same for the entire term of the loan. This helps big time in budgeting; you’ll know exactly what the payments are per month. You will pay a bit more for this stability. Keep in mind, that bump up in interest can protect you in the future if interest rates rise down the road.

Adjustable-rate Mortgages (ARM), are when your payment starts out lower than if you had a fixed-rate loan for a period of time, and then increases when that set time is up. For example, if you have a 5/1 interest rate, the interest rate would be fixed for 5 years and would adjust – up or down depending on the index being used – every year. The index is set by different sources and published by a neutral party. An example would be Treasuries, Libor Rates, Prime Rates. There are many indexes, and the loan paperwork will let you know which index a particular ARM follows.

Many borrowers consider an ARM mortgage because it allows them to qualify for a higher amount. I’ve even known some borrowers who simply refinance into a new ARM as soon as the old one expires to get a lower rate. This is risky! To play the ARM-hop game, your credit scores and savings and debt-to-income ratios must remain on point!

A lot to consider, right?

Don’t worry, we’re here for you!

Grab your Module 3 Workbook and let’s complete the next assignment :).

Questions? Post them to our Study Group!

Title: Loan Type Assignment

Review the guidelines for each loan type. I want you to be clear on the minimum requirements so that you’ll know exactly what you need to do to prepare for your approval.

Once you’ve reviewed them, come back to complete the attached worksheet.

*Module 4: Money Mastery for Home Ownership

Title: Module 4: Money Mastery Workbook

Use this workbook to complete the following assignments.

For your convenience, there are Excel Worksheets available as well, in case you’d like a more editable format.

If you do not have Excel, Google Sheets is free and each worksheet can be uploaded there 🙂

Title: Budgeting Assignment 1: SMART Worksheet

Complete your 12 Month “My Money Goal” Worksheet using your Module 4 Workbook.

If you prefer, here’s an Excel version of the assignment.

If you do not have Excel, this will upload into Google Sheets, otherwise a pdf version is attached as well.

Title: Budgeting Assignment 2: Schedule Money Success

Select a Time, Day & Frequency that you will Master Your Money using the form in your Module 4 Workbook

Title: Budget Assignment 3: Create Your Money Command Center

Money Cannot Grow Where Disorganization Lies

•You’ll create an ongoing organizational system that preps your finances for growth

•Having a place for financial-related mail to be placed

•Having a place and files for financial records

•A calendar of when bills are do and when paychecks/income is received

•This is your household accounting department, no kids allowed!

•Segregate Your Funds – Bill Account, Debt Payoff Account, Home Savings Account, Emergency Fund, Variable/Lifestyle expenses (can be cash).

Supplies, if Money Command Center will be a physical versus a digital one:

White Envelopes

Accordian File

Coupon organizer

Hanging or table top organizer

File drawer

Manilla folders

Folders

Pens

Highlighters

Calendar

Calculator

Stamps

Other

Using the Module 4 Workbook, begin creating your own Money Command Center. Keep in mind this is like your internal, at-home accounting department. It is a MUST if you wish to continuously be in control of your money.

Title: Budget Assignment 4: List & Sort

Using the instructions in the video; review your “Where Am I Now” budget.

Make sure all of your monthly expenses are listed, and sort them according to MUST Expenses – Fixed/Variable; and OPTIONAL Expenses – Fixed/Variable.

Remember to:

•Gather all of your financial records to create a more realistic statement.

3 Months Bank Statements,
3 Months Debt Statements (Credit Cards, Tax Liens, Judgments, Payday Loans, ANYTHING that you are paying on monthly. If you haven’t done so already, pull your credit reports.
Create a spreadsheet of logins/passwords to keep in your Money Command Center.

Title: Worksheets for SWOT Analysis & Action Plan Assignments

Print the following worksheets for the SWOT Analysis Assignment & then Create Your Plan of Action assignment.

Title: Budget Assignment 6: Budget Percentages Worksheets

I’ve left you a few samples to get started based on the different type of budgeting methods we’ve discussed. Ultimately, you want to choose the one that works for you; there isn’t right or wrong one.

Select ONE percentage worksheet. Ask yourself (and write down in the margins on the worksheet):

- What do your percentages look like now?
- Where would you like them to be?

This will give you a target to work towards.

If you decide to keep using the spreadsheet over the next couple months, you’ll simply tailor it to fit your needs/goals/lifestyle; keep reviewing and tweaking; then work on automating it once you have a clear idea of your income, expenses (ALL of them), identified money leaks, items to cut, items to adjust, and have gotten in the habit of sticking to the day/time you’ve scheduled to review your finances.

Title: Increasing Your Income – A Penny Saved…

A Penny Saved is a Penny Earned 🙂

Here is a list of 205 Ways to Save from financial expert Stacey Johnson. He has an awesome blog called Money Talk News that you’ll enjoy.

Here are some tips to earn more income:

Sell Stuff! Although this isn’t an income stream, it is a way of increasing your income for the month in a relatively short period of time. Look around your home for clothing, electronics, furniture, etc. to place on eBay, Craigslist, or Offer Up.
Look up companies to perform surveys, mystery shopping, and focus groups on a monthly basis (check out focusgroups.com and bestmark.com).
Get a 2nd job. This 2nd job can be full or part time, and can be at a physical location or a work-at-home position. Major corporations are now seeing the benefit of hiring virtual and tele-commuting employees (check out thepennyhoarder.com and ratracerebellion.com).
Monetize your current skills. Become really clear on the duties that you perform at your current and past jobs. Think of ways that you can perform those tasks as a consultant or freelancer for additional income (Google is your friend).
Invest in yourself. If there are new skills, certifications or trades that you can acquire to increase your income, make the investment. The payoff should be enough to warrant the investment-expense.
Monetize your passion. Think of something that people always compliment you on or that you enjoy doing and are currently giving away for free. It may be something that you would like to turn into a business one day, if you had the opportunity – it’s time to create your own opportunity. If you’re really good at it and people have expressed an interest, need or desire for it; charge for it. Free does not pay the bills nor does it support your dreams. You can’t cry broke when you’re giving away your gifts for free.*
Make a list of your accomplishments, good deeds and praises (whether via email or in writing, or ask for written testimonials). Include awards that you’ve gotten, and past, positive evaluations received and present this to the authorizing representative in your company; ask for a raise or promotion.
Seek better paying positions in your current company; or outside of your firm.

*If you’re seeking a raise, to find or hone your current skills, start a business to monetize your passion, searching for a new job; I highly recommend Patrice Washington’s Earn More Money Challenge.

Title: Increasing Your Income – Work At Home Companies (WAH)

ADP – This is a payroll company that offers a few work from home opportunities. Be sure to search by keyword. Their work from home jobs is more specialized to specific fields of study.

Aetna – This company offers insurance benefits and more to their clients. Again you would need to conduct a word search to find work from home opportunities.

Asurion – This is a technology company that offers mobile protection service. They hire individuals to work from jobs in the area of customer service.

American Express – We are all familiar with this company. They offer credit card, travel service, insurance, and more. They generally hire individuals to work from home in the area of travel or customer service. They do in most cases require their new hires to have a 4-year degree or specialize experienced in the area of higher.

Cloud 10 – This company now known as Transcom is seeking home-based agents. No phone line needed. This company uses VOIP. If you think you have what it takes as a customer service agent, this may be the place for you.

Cox Communications – Cox offers TV, Phone, and Internet Service. They periodically hire work from home agents. Most of the agents hired to work from home are generally located in AZ, but it never hurts to check out your location. Just do a work search to see what’s out there.

Dell – This is another technology company, but they focus more on the computer side of technology.

Enterprise – This company is the well-known car rental expert. They hire periodically for customer service or reservation specialist.

First Data – Please visit company website periodically for more information. At this time, there is no work from home jobs listed. Use the “word search” criteria to get started.

HD Supply – This is a major supply company. Please visit company website periodically for more information. At this time, there is no work from home jobs listed. Use the “word search” criteria to get started.

Humana – This company is up there with all the other well-known health insurance companies in the industry. Give their website a visit and see what you can find.

IBM – Do you like technology? Please visit the company website and conduct a keyword search to see if you can find a work from home career with IBM.

Intuit – Are you savvy with tax preparation? If so, Intuit generally hires for Seasonal Tax Support and Seasonal

Tax Advisor Specialist – CPA or Enrolled Agent. Be sure to search under the keyword “remote.” For some positions, they do require a 4-year degree. There is also an alternate way to apply for a position with Intuit as Customer Service agent. You would not be a direct employee or contractor for Intuit, but you would be working directly with their clients in the area of tax preparation support. If you would like more information, please comment below or send an e-mail for more information.

Kaplan – Ready to help others kick start their education? Kaplan online university is a great place to start a career. They hire instructors, advisors, tutors, and other positions where you can work alternate locations or from home.

United Health Group – Looking to telecommute? Here’s another great insurance company that focuses on health benefits for their clients. They hire for a range of telecommuting positions/locations. Most positions do require a degree in specialized areas, but it never hurts to take a peek at what this company has to offer.

Kelly Services – Kelly Services is an employment company for many large companies, but the great thing about Kelly Services is now they are partnering with some well-known companies that are looking for reliable people to work from home. When you visit their website type “work from home” keyword search. One of the companies they hire for to work from home pretty frequently is a technical company. If you would like exact company name, feel free to e-mail or leave a comment below.

WAH Companies (WAH Companies That Hire Year Round)

Alpine Access – also known as (Sykes) – Alpine hires customer service and sales agents both in Canada and the United States as “employees“. Their pay rate various based on the opportunity/client. The great thing about Alpine is they offer benefits to their employees. You have the option to work full-time or part-time.

Amazon – Amazon has a unique company structure and ways you can actually earn. When you visit their career section use words like “remote” or “virtual”. These searches are strict to work for Amazon. As I mentioned there are other ways to earn which I will share in another portion of the website. So, look out for the information to be posted soon!

Arise – Arise Virtual Solutions is one of many well-known work from home branded companies. They handle contracts for Fortune 100 and 500 companies in the area of customer service and sales. Arise allows individuals to become their own IBO (Independent Business Owner) or you can sign under an IBO to get started with your work from home career. Arise offers 3 mo, 6 mo, 9 mo, 1 year, or seasonal contracts. Keep in mind your performance also plays a part in you remaining with a particular client. This is a 1099 position, so you would be responsible for your own taxes. They seek agents from US, Canada, and the UK. If you would like to get started visit Arise. Please list referrer “365177“. If you are in need to get signed up with an IBO, please leave a comment below or send me an e-mail.

Convergys – Convergys offers positions in the areas of customer service, sales, and other areas depending on location that allow individuals to work from home. They hire agents as “employees” not “contractors”. They also offer a great benefit package if you are hired and interested in participating their benefits program. Convergys hires in other countries as well. Visit their website to find out more information. Currently in the United States Convergys is hiring in the following states: AL, AZ, CO, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NM, NY, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY.

eDegree Advisor – Help others get enrolled in school. You do not need a corded phone for this opportunity, but you will need hard-wired internet. Pay rate varies. Work part-time or full-time. Minimum of 20 hours required. They are currently not hiring in all states. To see if you are eligible, please click the name above to go directly to the companies website.

HSN– Do you like shopping or do you want to help others with their shopping experience? This company is currently hiring customer service agents in St Petersburg, FL, Nashville, TN, Toledo, OH, and Roanoke, VA. You do not have to live in the cities listed, but you do have to live a certain mile radius from the cities. Please visit their website to see surrounding cities. There is another company that hires for HSN. If you apply for this company, they may assign you to HSN, but there is no guarantee. If you would like information, please e-mail me or leave a comment below.

Intuitive Solutions – Ever thought much about the pizza industry? Well look no further. This company pays per order or per hour whichever is greater to those interested in becoming Customer Service Representatives in the pizza industry. They are currently hiring home agents from UT, MS, GA, NV, WY, NC, TX, SC, and LA to take pizza orders from home.

Leapforce – This company hires independent Search Engine Evaluators. You have the option to register as yourself or under your business name as an evaluator. YOU ARE NOT REQUIRED TO MAKE OR RECEIVE ANY INBOUND OR OUTBOUND CALLS. This opportunity is all online. Pay various.

LiveOps – Become an independent work from home agent in the area of customer service, sales, finance, and more. LiveOps hires individuals to work as independent agent so you must have your own tax id. There is a background check required as with most work from home companies. There background check the last time I check was $50. The background and credit checks are conducted by a third party. You do not have to pay for certification course once hired. Pay various.

Sitel – This company hire part-time and full-time inbound call center agents. You would be considered an employee and not an independent contractor. Calls may involve billing inquiries, account or product inquiries, product or service orders, installation scheduling or technical product trouble shooting. See company website for their great benefit package.

Sutherland Global – This company offers customer service/technical support opportunities. You would be an employee versus a contractor. Benefits are available. A background check will be required. The pay and hours are based on the client assigned. To locate work from home positions visit their homepage. Scroll down the page and to the lower right under “Select Your Region” click “Cloud Source (Work From Home).”

Teletech – This company generally hiring inbound agents to work from home. At this time there are currently no positions open. To find work@home jobs with this company visit their website. Select at the top of the page “Why Join Teletech” and then select “Work@Home.”

Uhaul – Become a customer service agent, Roadside Assistant Specialist, or e-Agent. This company currently hiring in Arizona only at this time. If you live in other states, please check their website periodically for work from home opportunities.

USA Contact Point – This company offers inbound call center services. Train today and start today as a customer service agent. Get paid weekly. Pay is $.13 to $.44 per minute. There’s also opportunity for bonus incentives as a customer service agent or you can take a look at other home-based opportunities this company has to offer in technology, programming, project management, and more. Pay rate various for those opportunities.

Westat – This company offers both work from home and also field positions. If you would like to see what the company has to offer in the area of work from home visit company website and go to the search menu. Under location select “US Home-Based Telephone work.” To find field positions select “Field positions”.

West At Home – This company hires inbound customer service and sales positions

Title: Budget Assignment 7: Make More Money

~ Select a minimum of 2 ways that you will generate additional income on a consistent basis.

~ Implement them in 30 days or less, no excuses!

~ Determine where those funds will be applied – Debt or Savings (adding on additional expenses or spending that money is completely outside of your goal of getting a home. This is NOT an option).

Title: Budget Assignment 8: When You’re Ready, Choose your Software/App & Automate!

Automation makes life so much easier; there is nothing I despise more than manually paying bills.

Automation and a software/app go hand in hand. The alerts form your software keep you up to date on bank account balances, when bills are due, when accounts are low, and so much more.

Automate:

Automation works best when you have separated your bill money from your variable non-fixed expenses (groceries, fuel, etc) in a separate Bill Account. You can set up automation via your bank, where your bank will send money to your creditors each month; or by having your creditors go in and take their own money via your bank account.

I personally do both. Each one is pretty simple to set up; especially the latter.

Just thinking about a company coming in and getting their money from your account can sometimes create anxiety. This is why I had you manually work on your budget first. Once your money is tight; automation is right!

Software/Apps

Here are my favorite software/apps for budgeting; each has a video walk-through on their website:

Personal Capital (my fav)

You Need A Budget (YNAB)

Mint with Mint Bills

Level Money

Calendar Budget

Budget Simple

* Be A Debt Rebel!

Title: Module 4-B: Be A Debt Rebel Workbook

Title: “Should I use my cash to pay down my debt, or save the cash for my down payment?”

This isn’t always an easy question to answer, since the answer depends on lots of variables. But we’ll try to provide some general guidelines. It will be helpful to calculate your debt ratio first, though.

If your debt ratio is more than 56.9% you have no choice. No bank will give you a loan when your debt ratio is already this high. You must pay down your debt first.
If your debt ratio is high but still under 56.9% and paying down your debt would mean that you can’t make your down payment/reserves requirement, keep the cash in your savings account. If you can put down a higher down payment in order to obtain a lower interest rate; do so. With mortgage payments being the highest expense for most Americans, coming in under budget will help pay off your other debts that much faster.
If you’re not going to be buying for at least 6 months, and some of your debt is high-interest (more than 12% interest, like credit cards), and paying down your debt won’t keep you from meeting your down payment/reserves requirement, then pay down at least some of your high interest debt. Pay at least 2-3 times the minimum payment each month, or more.

Getting the largest payment possible

As we saw, the upper limit for the debt ratio is 41-56.9% for all loan types.

The best way to get approved for the upper debt-to-income ratio requirement, is to have a good credit score, put more money down, have more liquid cash available (we’ll discuss this later).

Title: Eliminate Debt Assignment – List & Order Your Debts

You have 2 Excel worksheets that can be downloaded directly to your computer or to Google Sheets.

If you want to see what your debt payoff plan will look like with Avalanche and Snowball; select the appropriate worksheet.

For the Factoring Method, select the Factoring Debt worksheet.

For Tsunami, select the Avalanche/Snowball worksheet and manually enter debts according to the order you’d like to pay them off.

Alright Debt Rebels; Get to Work!

Title: Dave Ramsey Money Plan (Pdf)

* Be A Debt Rebel!

Title: Module 4-B: Be A Debt Rebel Workbook

Title: “Should I use my cash to pay down my debt, or save the cash for my down payment?”

If your debt ratio is more than 56.9% you have no choice. No bank will give you a loan when your debt ratio is already this high. You must pay down your debt first.
If your debt ratio is high but still under 56.9% and paying down your debt would mean that you can’t make your down payment/reserves requirement, keep the cash in your savings account. If you can put down a higher down payment in order to obtain a lower interest rate; do so. With mortgage payments being the highest expense for most Americans, coming in under budget will help pay off your other debts that much faster.
If you’re not going to be buying for at least 6 months, and some of your debt is high-interest (more than 12% interest, like credit cards), and paying down your debt won’t keep you from meeting your down payment/reserves requirement, then pay down at least some of your high interest debt. Pay at least 2-3 times the minimum payment each month, or more.

Getting the largest payment possible

As we saw, the upper limit for the debt ratio is 41-56.9% for all loan types.

The best way to get approved for the upper debt-to-income ratio requirement, is to have a good credit score, put more money down, have more liquid cash available (we’ll discuss this later).

Title: Eliminate Debt Assignment – List & Order Your Debts

You have 2 Excel worksheets that can be downloaded directly to your computer or to Google Sheets.

If you want to see what your debt payoff plan will look like with Avalanche and Snowball; select the appropriate worksheet.

For the Factoring Method, select the Factoring Debt worksheet.

For Tsunami, select the Avalanche/Snowball worksheet and manually enter debts according to the order you’d like to pay them off.

Alright Debt Rebels; Get to Work!

Title: Dave Ramsey Money Plan (Pdf)

*Module 5: Soar Your Credit Scores!

Title: Module 5: Soar Your Credit Scores Workbook

Title: Credit History And Lending

Most lenders require a residential merged credit report (RMCR) from all 3 credit bureaus: Trans Union, Equifax, and Experian.

They will order one report, which will merge all 3 bureau data (thus ‘tri-merge’) to make it easier than reading each individual report. THis tri-merged report will also search public records for liens, judgments, bankruptcies and foreclosures.

When a file goes through Automated Underwriting, the system scans the data on the report to determine the risk the borrower paying on time mortgage payments throughout the life of the loan. That risk is broken down into a 3 digit scores. However, the underwriting system reviews everything – payment history; balance on revolving accounts on a regular basis, how long you’ve been paying on time – the longer the better- and if you pay in full or the minimum payment; etc.

To obtain the best of the best rates and terms, a borrower will need to have excellent credit scores, good stability of employment, sufficient documentable qualifying income, a downpayment of some sort, and possibly reserves.

This is known as an “A” paper loan. An “A Paper” loan (also called a conforming loan or Prime loan) is a loan that conforms to the guidelines set by Fannie Mae or Freddie Mac in order to be sold by the lender.

Selling loans to the secondary market is a MUST for lenders, as it allows them to free up credit to extend to other borrowers. If a loan is not sellable, the lender is not able to make as many new deals as it could to new borrowers,which restricts their profitability and growth.

Conforming loans must meet the requirements regarding maximum loan amount, down payment amount, borrower income and credit requirements and type of properties the borrower is allowed to obtain. Loans that do not meet the credit and/or income requirements of conforming “A-paper” loans are known as non-conforming loans and are often referred to as “B”, “C” and “D” paper loans. Your credit history and financial capacity determine if you are anything lower than “A Paper”

Here are some rules of thumb most lenders follow:

Please Note: Each bank has its own set of rules to decide whether or not to give a person a loan. The criteria given below is meant to be used as a guideline only.

“A” Credit	This means:You have not been late on a mortgage or rent payment in the last two years.You have not been late on a car payment in the last two years.You have not been more than 30 days late on a credit card payment more than twice in the last two years.You have had no collections (other than a small medical collection) or any judgments in the last two years.Your credit score is good to excellent, perhaps 680 or better.An A-Paper borrower must have at least two months mortgage payments in “liquid reserves.” This can be in a checking, savings, investment, or even retirement accounts at any financial institution.
Sufficient Income	This means:Your total mortgage payments per month are equal to 30 percent or less of your gross monthly income.Your total payments per month (not including insurance, utilities, food) are equal to or less than 36 to 41 percent of your gross monthly income.You must be able to prove your income. Examples: tax returns, bank statements, pay stubs.In order to count your full income, you must have been employed in the same line for work for the last two years.
Stability	Although credit and income are the biggest two deciding factors on whether or not to give someone a loan, stability plays a part. Good stability means:You have been in the same line of work and/or job for 2 or more years.You have lived in the same house or apartment for more than 2 years.
Down Payment	You cannot buy a house without making a down payment. Typically you need to have saved up an amount equal to 3.5 percent of the price of the home at the minimum – and this is for an FHA loan) to qualify. Some loan programs even allow the down payment and/or closing costs to be paid for through a monetary gift from a relative, such as the FHA program.

The decision whether or not to give you a loan is not dependent on any one of the above factors alone, but on all three. For instance, if you have excellent credit, but no verifiable income, no one will give you an “A” type loan on a new home (and perhaps no loan period, in today’s market). You may still be able to get a loan with less than “A” credit, but the application process will be harder and the interest rate (and points) will probably be higher.

Again, this is just a guide; do not let this discourage you. I’ve sold plenty of homes to persons with scores as low as 565 and they simply refinanced 12 months after closing with scores improved by 100 points.

Title: “The Basics” Login Info

Watch Soar Your Scores- Understanding the Basics Video First

Soar Your Scores! Understanding the Basics

Coupon Code: rent2home

Title: Credit Assignment 1 – Identify. Sort. Rank. Plan.

This is an easy to use Excel spreadsheet to being tracking and logging your credit information.

Title: Personal Information – Your 1st Dispute

Why should your Personal Information be your first dispute?

1.You’ll be able to see right away if your information has been merged or compromised. If there is more than 1 social security number or date of birth obviously something is amiss. If there’s an address listed that you’ve never lived at before or a name that clearly isn’t yours, this can instantly be a red flag.

•Credit Bureaus will never seek out any information that is reflecting on our credit reports. All of your personal information is reported to them from companies that we have done business with or have completed an application for credit with. So, if it’s reported on your credit report; there’s an account or inquiry tied to it as well.

2.If you’ll be searching for a home or car or some other major purchase where they’ll need to review your credit history; multiple addresses and names can cause your report to either not produce a credit record at all; or to pull up partial information. This causes your application to be flagged for manual underwriting for potential fraud.

3.Think of how the credit bureaus conduct their investigations on disputed items; they will first match your dispute against what is already in their database before approaching the company furnishing the information on your credit report. What are they checking the accounts against??? Your Personal Information! By removing those older addresses and names that are no longer relevant you increase your chances of a more thorough investigation being conducted from the very beginning.

Although none of your personal information gets factored into your credit scores, disputing it first to increase your chances of success while disputing is of the utmost importance!

Title: Credit Assignment 2 – Your Personal Data

Your Personal Information – addresses, name, employer – can be disputed online or via mail.

Review the Personal Information section of your credit reports, log any errors, variations, or obsolete information using the “Personal Data Form” in your Credit Workbook.

Feel free to dispute these items online at this point, which is my preference, it’s quick and it allows you to receive results back faster so that you can start disputing your other accounts.

If you prefer to do so via mail, or didn’t pass the security questions (it happens); I have a couple templates for you to personalize.

Remember, it’s a template, use it as such 🙂

Equifax	Experian	Transunion
Information Services LLCP.O. Box 740256Atlanta, GA 30374	National Consumer Assistance CenterP.O. Box 4500Allen, TX 75013	TransUnion LLCConsumer Dispute CenterP.O. Box 2000Chester, PA 19022

Please have the following information on hand to complete your dispute:

Your Credit Report Confirmation/File Number
Social Security Number (Copy of Card) or Current address (Utility Bill & Photo ID – Driver’s License or State ID)
Date of birth

Title: Credit Assignment 3: Dissect Your Reports

Using the List of Common Errors Guide, go back and review all of your negative items to identify any inaccurate, incomplete, inconsistent, or untimely information. Using a yellow marker, highlight each negative listing on a copy of your credit report. Review each negative account and with a red pen, go back to see if you notice anything that is inaccurate, incomplete, is not yours, or that’s past the 7 year reporting limitation.

An inaccuracy – something about the account that is not true, i.e. the account isn’t yours or the balance is wrong.

Incomplete account – when the account is missing information, such as payment history, a high credit limited, etc.

An inconsistency – when the same information on the credit report contradicts itself, such as a listing showing 12 thirty-day late notations when the listing only shows 4 months reviewed.

Untimely – means it’s past the 7 year reporting limitation.

Unverifiable – if any entity (credit bureaus, collection agency, original creditor, etc.) cannot prove that an item is yours, with proof, it legally cannot remain on your credit report.

Using the “List Negative Accounts” worksheet under Credit Assignment One; log the accounts that you’ll be targeting in the order of how negatively it is impacting your scores.

Identifying negative items on your reports are easy. Identifying the errors reporting on those reports; not so much.

If in doubt, post to the group, tag your accountability partner, initiate/participate in Q & As 🙂

Remember to include as much information regarding the account(s) as possible, inclusive of attaching photos.

Common_Errors_Found_on_Credit_Reports.pdf

Statute_of_Limitations_by_STATE.pdf

Title: Credit Assignment 4: Start Preparing Your Dispute Letters!

Here, you’ll take the accounts you’ll be targeting first and prepare your dispute letters. You won’t be mailing them off until your Personal Info dispute letters come back; just preparing.

Remember my caution: Any items that are close to being past your statute of limitations you will LEAVE ALONE, especially if it’s over $1000; the chances of you being sued for a judgment is pretty high.

On the following sections I’ve left tips and sample letters to further assist you.

Please use the group to post any questions, concerns, obtain direction, or simply to fact check something prior to sending a letter off.

As far as letter structure; I sound exactly like a normal person would. Keep this in mind as you view the templates, all the laws quoted is ignored in the bureau’s automated systems. Only start quoting laws when a dispute situation escalates and you want to send something to each bureau’s legal department prior to suing them in small claims court.

I will be posting additional info in the group based on your inquiries, in addition to doing ‘hotseats’ to ensure we’re all on the same page as far as how to soar our credit scores.

Equifax	Experian	Transunion
Information Services LLCP.O. Box 740256Atlanta, GA 30374	National Consumer Assistance CenterP.O. Box 4500Allen, TX 75013	TransUnion LLCConsumer Dispute CenterP.O. Box 2000Chester, PA 19022

Please have the following information on hand to complete your dispute:

Your Credit Report Confirmation/File Number
Social Security Number (Copy of Card)
Date of birth
Current address (Utility Bill & Photo ID – Driver’s License or State ID)
Company name of the disputed item (from your credit report)
Account number of the disputed item (from your credit report – will be a partial number)
Reason for your dispute (such as, it is not your account; you have paid the account; etc.)
Any corrections to your personal information (address, phone number, etc.)

Ready?

Read the following document on how to write a dispute letter, and get busy 🙂

How_to_Write_a_Dispute_Letter.pdf

Sample_Completed_DIspute_Letter.docx

Title: My 6 Strategies for Tackling Public Records

NOTE: You want to send that letter mentioned first. The bureaus will give you a hard time with a public record even if it’s legitimately inaccurate.

One: The very first thing you want to do is review your public record for errors – the dates, the courthouse name, the responsibility of the debt; the attorney’s name; the status – everything!!! Make sure that it’s 100% accurate and 100% complete. I encourage you to pull your personal records as well so that your review is thorough.

Two: If everything looks legit; challenge the public record with the courthouse, or with tax liens the IRS. You have the right to ensure that everything that is reporting on your credit report is 100% verifiable. You also have the right to ask for documentation on any public record that is in your name. Write or visit the courthouse where the public record is reporting (or the local IRS office if it’s a tax lien) and request the paperwork associated with it.

Three: Compare that paperwork to the information reporting on your credit report. Is it correct? If not, it needs to be removed. If the public record is wrong, the information on your credit report is wrong and only accurate information can report in your credit files.

Four: Next go after the actual public record itself. Look to see that if the public record itself is valid. Is your name correct? The account numbers to your account? Is the original creditor correct? Your address? Were you served properly? The balance being collected on? Remember, once the public record is formerly challenged the burden of proof is on the creditor; not you. This applies to tax liens as well. If you find any inaccurate information; it can be grounds for vacating the public record when formally challenged.

Five: Removing the public record will in some cases not get rid of the debt. In some cases, it will need to still be paid. Working out a payment arrangement for the debt and negotiating that the attorney ‘stand still’ when you contested is another tactic. This means that when you challenge the validity of the public record with the courthouse, the creditor’s attorney will not respond. Their lack of response will result in the judgment being vacated. This works best when you pay an account in full. For tax liens; the IRS has a Fresh Start Program where you can pay the lien or make regular payments towards the tax debt via auto withdrawals and they will remove the lien from your credit reports upon approval.

Six: We’ve covered Tax Liens and Judgments; the sixth Tactic focuses on bankruptcies. Many are under the impression that if they remove the bankruptcy listing from their credit report; all will be well. This is not true. The accounts that were discharged in bankruptcy that are still reporting on your credit report are just as damaging. So, before you use any of the tactics above to remove a bankruptcy; first review the accounts that were discharged in your bankruptcy to ensure they are listed with $0 balance due and the verbiage IIB; instead of the negative reporting that existed before. Your goal is to find as many inaccuracies in the items that were discharged in bankruptcy, dispute for removal prior to going after the bankruptcy itself. Tackling the accounts prior to the bankruptcy will increase your chance of an inaccurate bankruptcy being deleted.

Frugal CrediTnista Tip:

Since the credit bureaus obtain our information on public records from 3rd party data vendors, freezing our credit reports with these vendors is a good tactic. The steps for this is to A. Remove the address associated with the public record IF it is not your current address, B. Go to the data venders that frequently report public record information to the credit bureaus:

Lexis Nexis, Sage stream, ARS.

With Lexis Nexis, you can call over the phone, ask for a Full File Disclosure FIRST, then request a security freeze. If they won’t do both on the same day; get the FREEZE FIRST and the Full File Disclosure second.

LexisNexis Consumer Center, P.O. Box 105108, Atlanta, GA, 30348

Phone: 888-497-0011

Sagestream and ARS can be done via fax or mail by visiting their website. (Got this tip from Doctor of Credit)

SageStream:

Go to their official website to retrieve their mailing address or fax number
Send a certified letter or fax requesting your IDA report be frozen
Make sure to include the following necessary information:
- First and last name
- Social security number
- Date of birth
- Primary phone number
- Address including ZIP code
Two of the following forms of identification:
- A copy of a state-issued drivers license or state identification card.
- A copy of a “recent” cable, utility, or phone statement with an address matching the address provided in Step 1. “Recent” is defined as no more than 60 days old from the date of IDA, Inc’s receipt of a written request.
- A copy of a SSN card.
- A copy of a birth certificate.
- A copy of a U.S. passport (picture page only).
- A copy of a voided consumer check with an address matching the address you provided in Step 1.
- A copy of an Alien Registration Card.

For those living in Pennsylvania it’s not possible to fax in your request for this report to be frozen.

Freeze Advanced Resolution Services, Inc (ARS)

ARS is a subsidiary of Visa and they don’t have a dedicated website (which is really in violation of the FCRA as contact information is supposed to be clearly displayed and available to the general public).

Here is their contact information:

5005 Rockside Road, Suite 600
Independence, OH 44131 or fax: 216-615-7642
Send a certified letter or fax asking for your credit report to be frozen
Include all of the following information
- First and last name
- Social security number
- Full address
- Primary contact number
- Your signature
Two forms of identification:
- A copy of a state-issued drivers license or state identification card.
- A copy of a U.S. passport (picture page only)
- A copy of a SSN card
- A copy of a birth certificate
- A copy of an Alien Registration Card
Sample Letter

To Whom It May Concern
I’m writing to you to put a security freeze on my credit report. Under the Fair Credit Report Act you’re required to comply. My information is clearly shown below:
- Full Name: <First Name>, <Last Name>
- Social Security Number: <SSN>
- Current Address: <Current Address>
- Previous Address: <Only Include If You Moved In The Last 2 Years>
- Primary Contact Number: <Primary Contact Number>
I’ve included the following two documents that verify my identity:
- <Name of document one>
- <Name of document two>
After this credit freeze has been filed, can you also please send me written confirmation to the address listed above.Kind regards,<First Name>, <Last Name><Signature><Date signed>

NOTE:
If you’re interested to see what’s actually in your credit report from each of these credit reporting agencies, you also have the right to see a copy once per year. You shouldn’t have any issue requesting this alongside your credit freeze.

Title: My 8 Steps to Tackling Collections

An excerpt from my book: STOP HIDING! 10 Proven Strategies for Facing Debt Collectors Head On!

Step One: Google the Company. You always want to know who you’re up against. Are they known to violate FDCPA guidelines? Are they known to sue at the drop of a hat? Are they known to settle right away? Are they known to remove items from credit reports with payment? All of this information can be found on various credit forums such as myfico.com, creditboards.com, creditinfocenter.com, debt attorney blogs, consumer rights attorney blogs.

Step Two: Check Your state’s SOL. If it’s a newer collection, they will have more leverage and you may need to settle the account if they can properly validate the debt (especially if it was assigned). If it’s past or very near your SOL you have the upper hand, and the ability to walk away completely. Simply send a letter pointing out the debt is past SOL and to cease and desist all communications with you. I’ve listed links to each state’s SOL in the Appendix Section.

Step Three: Review your Federal and State Collection Laws. An educated consumer is a powerful consumer! Adjust your validation letter to include both federal and state requirements (Google (your state) Statute of limitations on debt)

Step Four: What your next step should be depends on how you became aware of the collection item.

Via Your Credit Report – Were you notified of the debt via a dunning letter? If not, no collection activity should take place prior to notifying you of your 30 day right to dispute. Is the account reporting correctly? Is the balance correct? The dates? The status? Send a verification letter disputing whatever aspect of the account is reporting inaccurately for deletion. Wait 30-45 days for a response.

If you’re not sure if any of the information is reporting inaccurately, send a validation dispute letter using the address listed on your credit report. If you cannot find the address on the credit report, Google the company, they will typically list their address or fax number to send a validation letter to on their website. If that fails, the BBB website has pretty accurate info. Wait 30-45 days for a response.

TIP: Over 70% of the time I send the validation letter first, and send a verification letter to the credit bureaus 2-3 days afterwards. Letter to credit bureau; keep it simple: I’m not familiar with this account, nor the company reporting. I will need the company, amounts, dates, and every aspect of the debt – whether reporting or not – verified so that I may compare it against my records. If you can let me know who provided this information to you specifically, and how I can reach them that would be great.

Collection Agencies cannot verify a debt once they receive your request for validation letter. Therefore, if the credit bureaus ‘verify’ the account, one of them violated your consumer rights – the collection agency or the credit bureaus for failing to conduct a reasonable investigation.

If credit bureaus ‘verify’ the debt; send a copy of the verification to the collection agency, and state you are filing a report because they are continuing collection activity prior to legally validating the debt with you. SAME DAY; send a letter to credit bureaus requesting method of investigation, and include that they could not have possibly contacted the collection agency, as required by law because the collection agency hasn’t responded to YOUR validation request yet. Basically they lied and violated the FCRA; you can file a complaint while simultaneously requesting a deletion.

Via a Telephone Call – Inform them to send the details of the debt in writing, do not admit to anything over the phone, do not answer any questions regarding knowledge of the debt, your income, employment or payment arrangements regarding the debt. Provide them with your name, address, and request that they send you everything in writing. Record any violations that may occur, heck, even record the phone call if you can! If you continue to get phone calls after you request that they send the details in writing, create a call log to record how many times they called you. Follow the instructions detailed above. Your main objective is to get it in writing.

Via a Dunning Letter (initial letter informing you that they are over the account now) – Look over the account in detail, check for violations as described on my YouTube Video. Send a validation dispute letter. Wait 30-45 days for a response.

Step Five: Review response using the information above. Keep a running tally of any possible violations. Was full validation provided by the original creditor? Validation documentation should NEVER come from the collection agency; all documentation should be on original creditor’s letterhead/forms. The collection agency should be giving you what the original creditor gives/gave them. Determine if: You should send another letter giving them a second attempt at validating the account? Should you send a letter telling them to cease and desist all communications and collection activities until the account has been validated according to federal and state regulations? Should you send a dispute letter to the credit bureaus to get rid of the account? Should you send a letter to the original creditor to see if they have any information regarding the account? This is totally up to you; there is not wrong step.

Keep Plan B (settling the debt) in mind, especially if it’s a newer account or if it has been fully validated, such as in the case of assigned debts. If you decide to pay, examine the amount owed to ensure it’s accurate, determine the amount you’ll pay and negotiate based on that, get payment arrangements in writing (fax/email/mail) prior to payment.

Step Six: If violations have racked up, send collection agency (and original creditor if assigned and/or credit bureaus) a letter detailing the violations – federal and state – that have occurred, in addition to punitive and actual damages as well. State your case and what you want – deletion of account and inquiries from credit reports, an affidavit from a company executive that all personal information and records pertaining to the debt have been removed from their files. Wait 30 days for a response.

Step Seven: Get Legal (sue) for violations of FDCPA, FCRA, and punitive damages (Collection Agency AND Bureaus liable)

Step Eight: Settle the court case outside of court if the deal is good; if not go to court.

Debt Collector Script

Collector Communication Log

How_to_stop_calls.doc

Sample Validation Letter 1

Sample Validation Letter 2

Pay-To-Delete_Tips_with_Sample_Dispute_Letters.pdf

For assigned collection accounts only: Lesson_3_-_KNOCK_OUT_Letter.docx

Here are some sample dispute reasons you can use for your Collection disputes, if applicable:

• Collection account is inaccurate because I’ve paid the balance in full (Please see the proof attached). I am requesting that the item be removed from my credit report immediately.

• Collection account is inaccurate because I have never had an account with this company and they have failed to validate this debt in accordance with FDCPA. (Please see the proof attached). I am requesting that the item be deleted from my credit report immediately in accordance with the FCRA.

• Review this collections date of opening I feel it’s not a 100% correct. Please remove this collection from my credit report.

• Can you please review the responsibility and current amount of this collection? I do not believe it’s a 100% accurate and remove this item immediately from my credit report.

Credit Bureaus Reasoning

• Please do a complete investigation on account name, number, type and terms because it does not match my records. Delete and Discard this account from my credit report immediately please.

• Can you please review the financial obligation without a contract and I have a feeling it is violating the Fair Credit Reporting Act. The company has failed to validate the debt in accordance with the FDCPA. Please delete this collection in accordance with the FCRA.

• This item is in dispute because I believe the date of last activity and date of opening is not a 100% accurate. DELETE this account for its mistakes.

• The following items do not seem to have the correct status date, opening date and last activity date. Please review and remove this account from showing on my credit report.

• Please run a full investigation on the date of opening, date of first delinquency and status date I don’t think it’s 100% accurate. Please and remove this account for its inaccuracies.

• I would like you to review account status and account comments they seems to be inaccurate. Please remove this account for its inaccuracies.

• The following items do not seem accurate: account name and account number. I don’t think it’s 100% right. Please remove this item immediately.

• I am requesting investigation date of opening, date first reported, date of first delinquency and date of last activity. I have a feeling it is violating the Fair Credit Reporting Act, so please strike this account in accordance with the FCRA.

Title: My Tips for Tackling Late Payments

The effects for Late Payments on our credit scores:

FICO says a single 30 day late will only require 9 months to rebound from.

A 60 day late require the 36 month mark.

A 90 day late will affect as long as it remains on the file.

For disputing purposes; focus on the 90 day late over anything else, it’s hurting you the most.

If the account is still open, and there are multiple late payments, offer to bring the account current in exchange for deletion of the late payments. If they refuse to delete all remember the above statement; ask to have the 90+ days late, leaving the 30 & 60 day notations.

Another option for an open account (meaning not charged off), is to offer to sign up for automatic drafts in exchange for a removal of late payments. This works best for accounts that are 60 days old or less.

For closed accounts that were brought current after isolated late payment(s); a Goodwill Letter may work.

Goodwill Sample Verbiage:

I was shocked when I reviewed my credit report and found several late payments on [Late Payment]. I am not sure how this happened, I believe that I had made my payments to you when I received my statements. My only thought is that my monthly statement did not get to me or the payments were misapplied.

I do ask in light of the good standing relationship we have that you remove this 30 day late from my credit report. I do not believe it is accurate and would rather not have to spend more time than necessary for both of us to resolve this situation.

I appreciate your help regarding this and look forward to keep having the positive experience that I have had with you in the past .

Another option is to send the creditor a verification letter. This is where you request specific information to see if the creditor can provide DOCUMENTED PROOF that the late payment(s) occurred.

Things to ask for in a Late Payment Verification Letter to the Original Creditor:

1) Original Note to ensure the accuracy and legitimacy of the date the account was opened, account number, and terms of the interest and penalties that were originally agreed to.

2) Payment History of the account for the entire duration of the note to review the application of payments to their proper destination

3) List of charges and fees especially those assessed after the charge off status on the account

4) Date of actions taken on this account including but not limited to the dates of the statements being sent, correspondence sent to me regarding the delinquent payment, and any written correspondence regarding this account.

5) List of the dispute instructions sent to you by the credit bureaus from my dispute created on [Date of Round 1 Dispute].

6) Proof of delivery of all statements and notices. This includes all statements, notifications, and notices. Included with this proof is the date the correspondence and the date it should have arrived to me.

7) Any and all address change requests that have been processed for my account since the date it opened.

Goodwill_Deletion_Request.doc

Good_Will_Letter_3.doc

Title: The Rebuild: Breaking Down the FICO Pie

Payment History – 35%

•When rebuilding your credit scores, this area has the biggest impact on your scores. Payment History looks at how you are currently paying your credit accounts and how you have paid them in the past. Fortunately, FICO will place more emphasis on newer payment history than older ones. So, if you want to improve your scores in this area:

•Locate any errors that are reporting on your negative accounts and dispute for a deletion.

•Pay EVERYTHING on time, this is extremely important.

•If you currently have late payments reporting, get current right away. Being that FICO scores your recent payment activity more heavily; those late payments will affect your scores less and less as they get older. In some cases, people have been able to recover from a 30 to 60-day late payment in as little as 4-6 months.

•Keep in mind, paying a collection, charge off, or judgment will not remove it from your credit report. Lenders do like to see these accounts at $0 when you are applying for a home loan. Always Google your state’s Statute of Limitations on Debt prior to making a payment on one of these accounts and try to negotiate for a settlement rather than full payment. If you can negotiate a deletion that would be a super nice bonus.

•If you are having financial difficulties and project that you’ll be late making a payment, contact your creditor ahead of time to see if they have any hardship programs that you qualify for. You want to avoid any recent derogatory reporting on your accounts.

Amounts Owed – 30%

•This section of your scores looks at how much of your available credit you have left in comparison to your debt. Credit cards hold the most weight in this area. Here’s an example:

•Credit Card 1: $1000 credit limit, $900 balance (1000/900)

•Credit Card 2: $1000 credit limit; $80 balance (1000/80)

•Credit Card 1 is what you don’t want! You have used up 90% of your available credit.

•Credit Card 2 is what you do want. Your debt-to-credit ratio is at 12.5%; anything under 25% of your available credit limit is ideal.

•To improve your credit scores in this area:

•Keep your credit card balances super low

•If they are already high, work on paying them down immediately

•Don’t close any unused cards after you pay them off until all credit card balances are at $0, closing them prematurely can drop your scores. FICO scores each individual account’s debt-to-credit ratios as well as all of your accounts combined. If you close the account, it may increase your total debt-to-credit utilization.

Length of Credit History – 15%

•This area looks at when your oldest account was opened – the account’s status can be opened or closed – and the average age of all of your open accounts. The best way to improve your credit scores in this area is to keep your quality, older accounts open. Likewise, do not open a lot of new accounts in a short period of time, this will shorten your average age of accounts. Here’s an example:

•Mortgage: 10 years old

•Credit Card 1: 14 years old

•Credit Card 2: 5 years old.

•The average age of your open accounts: 10+14+5 = 29÷3 accounts = 9.67 years old. If you open up a new account, the average age of your credit will be 10+14+5+0 = 29÷4= 7.27 years old.

•This area affects those who have been managing their credit for a short period of time the most.

Credit Mix – 10%

•This section looks at how well you manage different types of credit accounts. Most people have a mixture of credit cards and installment accounts (home loan, personal loan, car loan) reporting on their credit reports.

•Generally speaking, having and paying credit cards and installment loans on time will improve your credit scores. I would not, however, open an account simply to create a good credit mix. FICO scores Credit Mix the least of all five scoring sections. In most cases, opening a new account to simply ‘mix it up’ is not worth it.

•The Frugal CrediTnista Tip: Credit improvement takes time, but it’s definitely worth it! The money you save in interest alone is enough of an incentive to take the time to improve your scores long-term.

•If you are reestablishing your credit and need to open a credit card, use the Credit Card Comparison Worksheet that follows.

New Credit – 10%

•When you complete an application for new credit you are giving that company permission to review your credit information; this will result in a hard inquiry being reported on your credit reports. Applying for too many new accounts can drop your credit scores, especially if it’s within a short period of time.

•The exception is when you are applying for a car, home or student loan. FICO allows you to apply with as many companies as you like as long as it is done within a 30-day timeframe. Each application will count as one inquiry.

•When you pull your own credit reports, however, your credit scores will not be negatively affected.

•Do not be discouraged from applying for new credit. Just make sure that you apply as needed, and not ‘just to see’ or to obtain a 10% discount at your favorite retail store.

•Open new accounts responsibly, and make sure you pay on time and keep balances low.

Title: 7 Tools to Increase Your Scores in 30 Days!

Thing to remember:

The tool that will work best for you will be contingent upon what is reporting on your credit report.

Your Payment History is the most important component of your credit score. It includes both negative – collections, public records, late payments etc. – and positive items – accounts paid on time both open and closed. While reviewing your report, if you notice you have more negative items reporting than positive items, then Credit Repair would be beneficial to you. You want to make sure that every account negatively reporting is 100% accurate, 100% complete, 100% timely (not past reporting limitations, and 100% verifiable.

Determine what items need to be removed and what items need to be updated so that it reflects more positively.

Techniques that work to improve your Payment History: Goodwill Letters, Paying your accounts on time (you get additional ‘points’ for bring an account that was in a late payment status to a positive, timely status), Pay or Settlement in exchange for Deletion (works best for collection accounts), and Pay or Settlement in exchange for an update (works best for late payments reporting and charged off accounts with original creditors).

Being able to remove the negative item(s) from your report as if they were never there, is a great way to boost your score in roughly 45 days or less. Length of Age – This is the age of your credit history. I once read that FICO loves antiques when it comes to older, positive credit accounts :).

If you have a relatively short credit history, then an Authorized User tradeline might help. This is when a family member or friend adds you to one of their older credit card accounts that has low balances and high credit limits throughout the entire payment history; NO you will not get a card, simply all of their good payment history on that account. It’s a great way to give your credit some age. There are some companies that sell authorized user accounts as well, this can be quite expensive and they do not keep you on there forever. They remove you from their accounts within 45-120 days. Therefore, this route is best used when you have plans to purchase something major and you need a good score boost (purchasing a home, car, etc). This can boost your credit scores anywhere from 15-50 points depending on the type of card you are added to; the older (and higher limit to balance) the card the better.

Some popular companies: Boostmyscore.net; Call Credit Pro; Superior Tradelines (I have another gentlemen that I use if you are interested in going this route, it can be pricey, however.

Credit Mix -If you have a mix of different types of accounts reporting on your report this is great. It shows potential lenders that you are good at successfully handling different types of credit. There are 2 types of accounts – installments, which are cars, homes, personal loans, etc. – and revolving, which are credit cards, lines of credit, etc. If you review your report and see that you only have credit cards or only have installment loans, adding the account type that you are lacking can boost your score. I’ll admit, initially it won’t have a positive impact, but in time with at least 2-3 payments it definitely will. You’ll get a boost for having a new credit type, paying on time, and if it’s a revolving account, you’ll get points for keeping your charges below 20% of your credit limit.

New Credit – The only thing positive about this category is when it gives you extra points from bring a late account current. Other than that, a new account will cause a hard inquiry, which will drop your score a bit. The amount varies, but it’s only 10% of your score, with timely payments it will boost much higher than the drop from the inquiry.

The Area to Focus on For A 30 Day Turnaround: AMOUNT OWED!

Successfully mastering The Amount Owed category can boost your score in 30 days or less. This is because creditors submit information on our accounts with the bureaus on a monthly basis, sometimes more. So, if we are able to make changes that positively impact this area, we will see the results as soon as our creditor updates it. Amount Owed accounts for 30% of your FICO score, so it’s right up there with Payment History. Most of this category is based on your debt-to-credit utilization, which is how much of your credit limit you have spent.

Credit Cards hold the most weight here! As an example, if you have a $1000 credit card limit and you’ve spend $900 of it, your utilization is 90%, which is waaay too high! Ideally you want your charges to be below 20% of your total credit limit. Using the $1000 credit card example above, that would be $200 and below.

Keep in mind utilization is calculated two ways – per card/account, and the average of all of your accounts. If you have accounts that are over the 20% threshold, here are the 7 tools that I use to soar scores up to 50 points in 30 days:

1. Work on a debt payoff strategy to bring the utilization percentage down, yes this can happen in 30 days or less with a good, solid spending plan – DO NOT CLOSE ANY ACCOUNTS UNTIL THE BALANCE OF ALL YOUR ACCOUNTS (credit cards) ARE AT $0.

2. If you know your utilization will be high due to a vacation or unexpected charges you had to make on the card, Pay Before the Statement Date. If you do this, the high utilization will not report on your credit.

3. Ask for a credit line increase. This will increase your credit limit. If you increase your credit limit, then the utilization will decrease. Using the example above, the credit card limit is $1000, the charges are $900. If you obtain an increase to $2000, your utilization is now 45% versus 90%; still high but MUCH better. You’ll see a boost in your score as soon as the creditor reports your updated account information, which in most cases is less than 30 days.

4. Transfer the Balance. If you obtain a card with a 0% interest rate for 12mths or more, you’ll achieve 2 things.

(A) More Credit, so just like above, you’ll be increasing the amount of available credit in the average utilization calculation.

(B) You have an opportunity to transfer your other credit card debts over to a new card, which means you’ll be paying 0% interest on it and can pay it off faster. (Make sure to review the terms in full, paying careful attention to the fees involved in transferring the balance(s) over. You can also transfer the balance by obtaining a personal loan to pay off the cards either partially or completely. You’ll be able to immediately bring down your utilization, and thus increase your score. Just make sure the numbers make sense. You wouldn’t want to have a 9% credit card, and obtain a 15% personal loan just to boost your scores. My personal preferences are Prosper (min. credit scores of 650 req’d, affiliate), Lending Club, Avant, Springleaf (watch the interest rates!, min. credit scores of 550 req’d, affiliate), One Main (again watch the interest rates, min. credit score of 600 req’d).

5. Adding accounts that are not reporting.

In some cases, we have credit accounts that are subscribed to report to the credit bureaus and they have not made it to our reports yet. Calling or writing a letter to add these accounts can greatly improve our scores. You can also add rent to your credit by going to Rental Kharma. They will add 2 years of your rental history to your report, and your timely rent payments moving forward. I’ve seen increases between 25-50 points utilizing this option, please read the terms prior to enrolling, I know it only reports to Transunion for now.

6. Adding a Seasoned (older than 5yrs) Authorized User Credit Card Account will decrease your utilization as well. This option is great for improving the age of your credit history and lowering your debt-to-credit utilization.

7. Open A New Account. By applying for another credit card account you immediately improve your utilization. I’ve had clients with super high utilization apply for an increase on their current credit cards and apply for new forms of credit to reduce their utilization; thereby increasing their scores. If you are not able to get approved for an increase or another card with a large enough credit limit consider a Merchant Account.

Merchant accounts allow you to have large credit limits reporting to your credit and have super lenient approval requirements. You can only use the cards on their online store, but the mere appearance of them on your credit report is great for your utilization. Here are 2 merchant accounts that I am affiliated with, FDIC insured, super easy approval guidelines.

The key is to keep these type of cards for 11 Months so that you won’t have to pay the annual fees again, if you have to keep it longer and it’s helping your scores, great. BUT make sure to continue to use it for the positive credit reporting while you make strides to pay down debts, and/or rebuild using better forms of credit:

You can click on the name of the cards for additional info on their website. MyJewelersClub: Reports to all 3 credit bureaus, up to $5000 credit limit reporting, processing fee of $99, minimum order of $100 on first order, 50% payment required on this order. I tell my clients to charge ONCE, pay it off, and never charge on it again for the 11 months that they keep it. The only reasons for denial are active bankruptcy that has not been discharged, unpaid child supports and excessive IRS tax lien(s).

Down2Shop: Reports to all 3 credit bureaus, between $1100-$6500 credit limit, $125 processing fee, minimum of 500 Equifax FICO score needed, first charge can be as low as $5. (more info found at cards.mnhcreditsolutions.com)

NOTE:

Fingerhut is another account that I use often. Initially it reports as an installment account, but with good payment history they will increase your credit limit and switch it over to a revolving credit card account. Super easy to get approved. If you need to add a revolving line of credit to your account and it’s difficult to get approved for a traditional card through your bank, Capital One, Barclay, etc; consider a no-credit check secured card. These are good ‘gateway’ cards that will allow you to build positive credit history that can open the doors to better forms of credit. I have three cards that I recommend to my clients: OpenSky; USAA Secured Amex, First Progress (3 Options: Platinum Elite; Platinum Select & Platinum Prestige). Hopefully you find this information helpful! I have personally used each and every one of the methods described above to assist my clients. Feel free to share with anyone it can be of assistance to.

If adding on new cards, it’s important to understand their terms and to select cards that you know you will be qualified for.

For my clients who will be purchasing in the next 3-4 months, I have them obtain 2 secured no-credit check credit cards to avoid any inquiry pulls.

Understanding_Credit_Card_Terms.pdf

Cards_to_Match_Your_FICO.pdf

Title: Credit Resources

*Go Get Your Money!

Title: Sources for Down Payment Assistance

There are two major costs that most buyers consider when purchasing a home: Down payment costs & Closing Costs.

Closing costs include loan origination fees, credit reporting fees, title charges, homeowners insurance, attorneys fees, inspection fees, and any other third party charges that a home buyer may occur in the home buying process.

With closing costs, home buyers can ask the seller to contribute towards these costs, which helps quite a bit. Sellers cannot, however, contribute towards downpayment costs, and this is why we’re covering down payment assistance programs.

There are 3 primary sources for down payment assistance, most require you to be a first time home buyer. According to the U.S. Department of Housing and Urban Development (HUD), a first-time buyer is someone who has not owned a primary residence in the previous three years

Most programs have limitations on the location of the home, assets, income, household size, how much the buyer must contribute, there are some for specific career industries (i.e. teachers, police officers)

1. Federal Government The U.S. Department of Housing and Urban Development (HUD) awards billions of dollars in assistance to home owners each year. The American Recovery and Reinvestment Act of 2009 included over $13 billion for housing-related programs. More than $10 billion of that was awarded to state and local agencies. This means that HUD is not giving funds directly to individuals, but instead have made funding available through your state, groups (usually non-profits) and specific organizations. Your job is to find them.

The HOME Investment Partnership Program is one of the grants that the federal government provides to each state. Many states award these funds to non-profits within their state for the sole purpose of providing assistance to low-income residents for rental expenses and down payment assistance, typically the conditions for approval are based on income, location of the home and being a first time home buyer.

The amount of the grant and the terms for approval varies per state.

Some popular ones are loans that are forgivable if you state in the home for a certain period of time; so if you plan on moving anytime soon; pay particular attention to this specification.

You can do an internet search to find more about this program in your state, or your bank or other mortgage lender should have information about it.

State Housing Finance Agencies These organizations are vital to your search and are not difficult to find. Every state has a housing finance agency (HFA). You can Google your state and the words “housing finance agency” and yours should pop up. This is a phenomenal place to start, as your local office can provide free counseling and housing educational courses specific to that down payment assistance program(s).

City/County Specific Programs Researching your city’s offerings is also a great place to start; especially if you live in a big city. Again, Google is your friend; you may find some on the HUD/State websites during yoru search as well. Make sure to include your county during your search,

Private Non-Profit Organizations There are some really good charitable organizations that help people buy their first home. These groups often work with or through your state and local government housing agencies and their approved lenders. So, again, it is important to start with your state’s housing agency. The Corporation for Enterprise Development is a national group that helps low- to moderate- income families establish assets and buy their first home through a matched savings account program. They also offer financial education programs and job training or assistance with a small business. These programs are offered through partnerships with banks and credit unions so be sure you are dealing with an approved lender. You can check the HUD website to find a list of these lenders.

2. Down Payment Assistance Programs: If you still need help with your down payment. You may get a separate loan (besides your mortgage) that you don’t have to repay until you sell the property. Special programs offer more assistance to teachers and other staff of “high priority” schools (as designated by the state). These are great because, combined with the lower FHA requirements, they may allow you to buy a home with little or no money down.

3. Mortgage Credit Certificate Tax Credit Program: The MCC is a certificate you must apply for in order to get an extra tax credit on your income tax return. It reduces your monthly homeownership expenses and might help you qualify for lower up-front costs to buy your home. You apply for the MCC through your lender during the home-buying process, so be wary of any other person or group who claims they can get you this certificate if you pay them a special fee. Start with your local government housing agency and confirm your lender is officially qualified to help you take advantage of all available assistance programs.

Title: Rich Uncle

Have a rich uncle or really giving parents? Any funds given to you for the purpose of purchasing a home (outside of down payment assistance programs) are called ‘gift funds)

Home buyers can get up to 100% gift funds to purchase their home. However, there are strict rules and regulations First, gift funds can only be used for down payments and closing costs.

Home Buyers cannot use gift funds for reserves that is required by mortgage lenders (Reserves is one month’s of principal, interest, taxes, and insurance, also referred to as P.I.T.I.).

Reserves needs to be the home buyer’s own funds and cannot be gifted. Accounts that can be used for reserves includes IRA retirement accounts, 401k retirement accounts, savings accounts, CD’s, and investment securities accounts. Reserves will be verified during the loan approval process, and again before closing.

The person giving you the funds will need to complete a form, provided by the lender, that states the funds were given to you for to put towards your down payment and/or closing costs. They have to confirm that the funds are not a loan and you do not have to pay them back.

(Whether you really have to pay them back is not enforced at all, but the letter is required to be signed).

There are some additional requirements as well, such as 30+ days worth of bank statement from the individual providing the funds, a canceled check, proof of the funds leaving the gifter’s account and being deposited into the home buyer’s account; to name a few. If any of the steps the lender demands are skipped or not done properly, you will NOT be able to use those funds for your approval.

In some cases, lenders do not like to deal with gift funds. This is primarily because the Automated Underwriting Systems often gives an automatic denial. If you have the proper credit scores, credit history, and DTI requirements, lenders are more amicable to work with.

If your scores, history and DTI is a bit off, a work-a-round that some of my lenders use, is to have you added on the the benevolent uncle, parent, etc.’s bank account. Once you’re added on as a joint user of the bank account, you can get 2-3 month’s worth of bank statements printed out for the teller to sign, date and stamp. The person gifting you the funds will also need to provide a signed and dated letter that you have full access to the account.

I’ll admit, most of my clients don’t like this :). What I typically do is have the person gifting them the funds to put it in their bank account for 61 days. The funds will then be ‘seasoned’. This basically means the funds are yours, there’s no need to ask any questions and the Automated Underwriting System won’t give you a denial. Pre-planning is key right?!

FHA Home Purchase With No Down Payment Or Closing Costs

If you are purchasing a home in a state where property taxes are paid in arrears, you’ll receive a tax credit to apply for next year’s tax bill.

The tax credit is usually applied to all of your costs, and what ever is left over, if anything, is what you’ll need to bring to the closing table.

This applies to states who pay taxes in arrears only.

Here’s an example:

In Illinois taxes are paid in March and August for the previous year, so homeowners will pay 2016’s taxes on their March 2017 and August 2017 tax bill.

If you purchased a home in February of 2017, the seller will credit you taxes from 2016 to the date of closing. Why? Because they owned the home during this time, not you, and therefore they are responsible for paying taxes during this time.

This credit can be used to reduce your overall, which includes your down payment, potentially resulting in very little to no down payment/closing costs having to be paid by you.

However, you’ll still need to show that you have 3.5% down payment of the the home’s sales price in their bank account prior to closing. A lender will not rely – and neither should you – on the tax credit you’ll received as apart of your verified funds/reserves.

Some lenders will not allow the buyer to walk away with funds from a tax credit or a seller concession. If that’s the case, buy down some points on your loan, I wouldn’t just give the closing costs contribution back to the seller.

Research how your state pays property taxes to see if this is something you’ll benefit from!

Title: Down Payment Programs by State

There are 3 reputable databases to search for local down payment assistance programs. Please do not limit your search to these 3 sites.

HSH.com

DownPaymentResource.com

Hud.gov

Looking for new construction? There are also programs in new-home communities directly from the builder, they’re usually built in to the builder’s incentives. In most cases there are additional assistance, so make sure you ask; they will not always volunteer.

Title: Using Employer Retirement Account Funds

Some borrowers have money just sitting in their retirement accounts! *yes I’m being sarcastic :)*

When some of my clients needed additional funds, their 401k has come to their rescue.

If you plan on using your retirement 401k, 403b, etc funds, plan ahead of time!

Find out the steps you need to take to qualify to gain access to those funds and the provisions of what they will allow as far as having access to your money.

Those who are over 59 1/2 typically have no problems gaining access to their funds, those that are over 59 1/2 will most definitely have stipulations.

You will be able to gain access to your retirement funds via a loan or a withdrawal.

The benefit of a loan is that you’ll get an incredibly low interest rate, so you’ll be paying yourself back with interest. Another benefit, is that the loan is tax free (as long as you pay it back on time).

The con to taking out a loan is that the monthly payment may be used in calculating your debt-to-income ratio, so keep this in mind when running your numbers!

A withdrawal comes in two forms: regular and hardship.

A regular withdrawal is just like it sounds, regular 🙂 There are no questions asked on what you need it for, what you plan on doing with it, etc. The hardship withdrawal is a special withdrawal because it allows you to gain access to your funds for a specific reason, which can include purchasing a home.

The difference between getting a hardship withdrawal and a loan is that with a hardship withdrawal, you can only borrow funds that you personally contributed, and not funds that have been matched by your employer.

Usually, a loan will be offered before a hardship withdrawal. This is because the IRS views hardship withdrawals as a last resort option.

Withdrawals are taxable!

Further, if you are under 59 1/2, withdrawals may also face a 10% early withdrawal penalty.

Keep this in mind while planning.

Title: Down Payment Programs courtesy of Down Payment Resource TV

The video was recorded for realtors, however it has some really good information on the various types of down payment funds that are out there that I felt every home buyer should know 🙂

With Youtube video

Link: https://www.youtube.com/watch?v=l4HhGE5KSsk&feature=emb_logo

When you are seeking free money, you are truly seeking money.

You will need to set aside a weekday, during government hours – after 9a and before 3p preferably, and get to calling.

One resource is the Catalog of Federal Domestic Assistance

It lists all of the Federal programs available to State and local governments, federally recognized Indian Tribal Governments, Territories (and possessions) of the US, domestic public and private profit and nonprofit organisations and institution, specialized groups and individuals.

Then get to calling 🙂 You may get the run around but be pleasant and end each conversation with: “Do you have a referral person or agency that can assist me?

Here’s the link: https://www.cfda.gov/

*Liquid Cash!

Title: Types of Assets Allowed

Allowable types of assets*:

Earnest Money Deposit (the money you provide the seller’s realtor after the seller has accepted your offer).
Checking/Savings/CD/Money Market Accounts
VOD
Business accounts
Stocks
Bonds
IRA/401k and other retirement accounts
Gift Funds/Gift of Equity
Sale of Assets
Seller contributions

Unaccepted types of assets:

Cash on hand
Undocumented funds
Sweat equity
Unsecured borrower funds
Illegally obtained funds

*Lender will want to see a minimum of 60 days worth of statements

Title: TIPS!

To Do’s

– Move money into a checking or savings account the second you start looking for a property. This will allow those funds to meet the ‘seasoned’ requirement, which means the lender will not require sourcing (asking you a lot of questions and for paperwork to find out where hte money came from; this slows down your approval/closing process BIG TIME!).

– Get a VOD, or Verification of Deposit from your local bank that provides the overall balance of your account, and your average balance based on two months. This is better than providing bank statements, which may show payroll and other information that you may not want to disclose. Even if the mortgage company initially asks for bank statements, a VOD should suffice.

– You may also use retirement accounts, but lenders typically only consider 70% of the total, so factor that in to ensure you have enough to cover reserves. (This varies per lender)

– If you plan on using business accounts for assets, you’ll likely need to be the 100% owner. Although if you own only 50%, some lenders will accept a CPA letter stating what percentage the borrower has access to, and that the use of those funds won’t affect the business negatively.

– If you sell personal assets, make sure you save receipts to prove the source of funds. Acceptable items usually include automobiles, coins, art, and antiques.

– Generally you can use money from a joint account for reserves and down payment, but you’ll typically need to provide a letter from the other account holders explaining that you have full access to the funds.

– If you have any recent large deposits (usually defined as one that exceeds 50% of your total monthly income) in your accounts, they may be scrutinized and/or unavailable for underwriting purposes depending upon their size.

Remember: Make sure assets are in personal accounts and seasoned long before applying for a mortgage!

*Loan Process

Title: “Mortgage Borrowers’ Rights”

As a borrower entering into a loan agreement with a lender, you have the following rights:

•The right to shop for the best loan for you and compare the charges of different mortgage brokers and lenders

•The right to be informed about the total cost of your loan including the interest rate, points, and other fees.

•The right to receive a Good Faith Estimate of all loan settlement charges before you agree to the loan and pay any fees.

•The right to know what fees are not refundable if you decide to cancel the loan agreement.

•The right to ask your mortgage broker or lender to explain exactly what the mortgage broker will do for you.

•The right to know how much the mortgage broker is getting paid by you and the lender for your loan.

•The right to ask questions about charges and loan terms that you do not understand.

•The right to a credit decision that is based not on race, color, religion, national original, sex, marital status, age, or whether any income is from public assistance.

•The right to know the reason if your loan is turned down.

•The right to ask for the settlement cost summary at least one day prior to closing.

•The right to choose the title insurance company.

Title: What to Bring to Your Loan Officer

Many people ask if you should look for a realtor or a loan officer first, honestly the two go hand in hand. A good, experienced realtor will not take you out to see houses without being pre-approved for a loan first. They can perform their job more efficiently that way. They’ll know how much home you can afford, what range your property taxes should be within, and can better select neighborhoods that fit both your criteria and your pre-approved budget. So, if you choose to select a realtor first, they will provide you with a list of lenders to get pre-approved with. You are not limited to this list. Remember, check loan products with a mortgage broker, banker, regular retail bank and if you wish an online banker. You have 30 days, use it to your advantage.

Here are the documents your lender will need (more documents may be requested during the underwriting process):

30 days of paycheck stubs
Contact information for 2 years of employment history
2 years of signed federal tax returns including W-2s and all schedules
If self-employed, 2 years of tax returns and all schedules signed by your tax preparer
If self-employed, year to date profit and loss statement
Alimony/Child Support (if you want to include it,if it’s inconsistent or will end soon, leave i off)
60 Days of checking and savings accounts where your reserves and down payment is held
60 day retirement account statements (i.e. IRA/401K), if you plan to use those funds to prove assets/reserves. You only need to disclose the statements of the funds that you will be using.
Copy of current state ID/driver’s license
Social security cards for all borrowers
Copy of permanent residency alien card, if applicable
Contact info for current landlord, if applicable (you may be asked to provide canceled rent checks proving you’ve been paying your rent on time for the past 12 months)
Contact info for realtor, home insurance agent and real estate attorney
Letter signed and dated stating that you have not opened any new credit accounts within the past 90 days (yes some lenders will require you to do this)
Information about current debts, including account numbers and monthly payments (if info conflicts on credit reports, they ask that you provide proof of this information)

If you’re buying with someone else, both of you will need to give the lender every item on this checklist—at a minimum

If you currently have a mortgage on your property:

Current mortgage statement(s) for all properties
Current property tax statements for all properties
Current homeowners insurance declarations and invoice for all properties

MAKE COPIES OF EVERYTHING, DO NOT GIVE ORIGINALS TO THE LENDER!!!

After you have found a property and your contract has been accepted by the sellers, you will need:

Copy of the home purchase contract
Copy of earnest money check
Copy of Home Inspection (only some lenders ask for this
Copy of home appraisal
Copy of home owner’s insurance (closer to closing date, you’ll need a full year of home owner’s insurance paid in full)
Other requested documents, i.e. letters of explanation, signed gift letter etc.

When you are going to closing, you’ll need:

Two legal forms of ID, one with a picture of you on it
Certified funds for the amount the lender states you’ll need for closing (certified check, cashier’s check, money order)

DON’Ts

Do not send blurring illegible documents, have quality copies or your loan process will be significantly delayed
Do not send screenshots of your bank statements, lenders will not accept those
Do not send just one page or a summary page of anything, lenders need to see ALL pages of the documents they request
Do not white or black out any data, especially account numbers and social security numbers; I see this most often on W-2s, tax returns and pay stubs
Always send exactly what is requested, for example, some lenders ask for 3 months of bank statements, send that!
Don’t bother getting irritated by the amount of documents, sometimes the same documents, that you’ll have to send over and over again; it’s apart of the process :).

Title: Referral Questions

The best place to obtain a great loan officer is through a referral. In some cases, a lender will give you a list of their references to contact to validate their stellar customer services and worth ethic.

Here’s what to ask the mortgage broker’s references. You can add any other questions that interest you, for example, whether the person tried to negotiate the broker’s fee down.

Name of mortgage broker:

Name of reference:

Date:

1. How did you choose the mortgage broker? Did you know the broker before you worked together?

2. What kind and size of loan did you get? Are you happy with it?

3. Was the broker responsive? Did the broker return calls and emails promptly, follow through on promises, and meet deadlines?

4. How long did you look?

5. Did the broker give you a variety of options?

6. Did the broker allow you to lock in your interest rate for either 30, 45, or 60 days prior to the closing?

7. Are you happy with the loan you got?

8. Did the broker help you coordinate other details of your purchase, like working with the title company or insurance agents?

9. Did the broker keep you up to date, and explain everything in terms you understood?

10. What was the best thing about working with this mortgage broker?

The worst? Would you work with the broker again?

Title: Mortgage Comparison Worksheet

This is a spreadsheet to compare up to 4 different loan types.

What I love about it, is that you can compare interest rates, and upfront costs, whcih allow you to see the overall costs of your loan :).

Title: Sample Letters of Explanation

Sample Letter Scenario – Large unsourceable deposit

April 22, 2015

To Whom It May Concern:

I am writing to explain the deposit of $6,700 in my Hometown Bank Account on 6/3/2014. I deposited the funds received for the sale of my 2013 Nitro Z Boat to Tom Smith on June 2, 2014. I no longer have a receipt for the sale and the company that transferred the title is no longer in business.

Sincerely,

Borrower (and spouse name if joint application)

When the lender has concerns with items on your credit report

Kate Smith

123 Main Street

Suburban Florida 12345

Monday January 26, 2015

Re: Kate Credit Report – Letter of Explanation for Late Payments & Inquiries

To Whom It May Concern:

I would like to take this opportunity to provide written explanations for the following items noted in my September, 2014 Credit Report:

1.Hinsdale Bank & Trust- Auto Loan #270762144: Credit report noted 1, thirty-day late payment in October, 2014. This late payment was due to a bank processing error. Please reference the attached letter dated June 13, 2013 from Hinsdale Bank & Trust Company.

2.HSBC NV- Menards Credit Card #541336500162: Credit report noted 1 late payment in April, 2014. Account is a Menards credit card that my apartment manager in Indianapolis uses. She utilizes this card as petty cash and she is solely responsible for paying the monthly statements. In April, 2007 she forgot to pay the monthly statement. This was the only time it occurred, and I have had a lengthy discussion with her informing her that this will be unacceptable going forward and must not happen again.

3.1st Chicago –Conventional Construction Real Estate Loans #11100112004261 & Loan #11100112004415 & Loan #11100112005071: Credit report noted multiple thirty-day late payments from March 2014 to September 2014. I have never been late with any of these loans. I have had numerous construction loans with this bank. The previous loans I had with them always had interest reserves associated with them and payments were made directly by the bank. I have attached a couple of letters from First Chicago Bank & Trust (formerly Labe bank) attesting to this explanation.

4.Capital One Bank-Credit Card #412174263672: Credit report noted 2, thirty day late payments in January and February 2014. Please understand that I receive a large amount of junk mail, credit card offers, etc. This credit card was rarely, if ever used, however every month they sent me temporary checks for cash advances which I would immediately dispose of without even opening. Apparently, one of these mailings contained the statement for the annual membership fee of $45. Very rarely using this card and assuming it was once again “junk-mail”, I disposed of this mailing without even opening it. Once I discovered that there was an outstanding $45 balance, and that I missed two months of the minimum payment of $10 each, I immediately paid by phone the $45 balance as well as the $29 late fees.

5.Peoples Energy/Gas-Utility Company: 6 items noted in credit report. Please keep in mind I live in Spring Hills, IL which is serviced by Nicor Gas. Peoples Energy/Gas is the utility company that services ABC Apartments, the complex I own on the Southside of Chicago. At this complex all buildings are tenant heated and the tenant is responsible for payment. I buy gas wholesale through Vanguard Energy for the hot water and common areas. The situation that occurred was that some tenants that lived at Southgate that I either evicted or that left prior to their lease expiration, did so without satisfying their outstanding Peoples Energy/Gas bills. Peoples Energy found out who the building owner was and started contacting me to advise that I was responsible for the outstanding gas bills. Please note that in Illinois the landlord is not responsible for any outstanding tenant utility liabilities. These outstanding items were given to a collection agency (Harris), and that is where it remains. I did satisfy a couple of these items to try to clear some of them up, but that only led to them attempting to collect additional outstanding bills. At that point I refused to pay any further. My attorney has been working on this situation for several years.

6.Shell/Citi Credit Card #513068957: Credit report notes 1 late payment in March 2014. Please note the credit line on this card is $750. I allow my father to use the card as well as myself once in a while. While I was on vacation, I asked my father to pay the March statement, which he forgot. Once I got back into town and found out it went unpaid, I paid it immediately.

7.SST/JPMC Auto Loan #17687153: Credit report notes 1 late payment November 2012. I originally had an auto loan with Oak Brook Bank, Oak Brook, Illinois. Oak Brook Bank originally provided me with 12-months of payment coupons to submit my monthly statements with. Unknowing to me, SST/JPMC bought the loan from Oak Brook bank. Once again, receiving a lot of junk-mail I received a letter from SST/JPMC and not knowing who they were I assumed it was a solicitation, leading me to throw out the envelope. Afterwards, Oak Brook Bank notified me that they sold my loan to SST/JPMC and I began making my car payments as directed to them.

8.MB Financial: This item does not show up on my credit report. I cosigned for a used 2005 Dodge Ram pick-up truck for my brother-in-law Jimmy Smith. Jimmy received auto financing through MB Financial. In June 2012, Jim traded in the 2005 Dodge for a 2007 Dodge pick-up truck at Champion Dodge in Skokie, Illinois. Jimmy financed the truck with Harris Bank and once again I co-signed for the new vehicle. Champion mailed the payoff check to the incorrect address. In Illinois a car dealer has 21 days to send in payment on a trade-in to the lien holder. In addition to this mistake by Champion, it was also found out that the payoff was higher than they originally quoted and then put a stop-payment on the check. MB Financial then called me as the co-signer advising that they did not get the payment. I explained to MB that the 2005 Dodge was traded in to Champion Dodge and we no longer owned it. This was a major factor in my declining credit score. I ended up paying an additional $4,000 to Champion Dodge to cover the shortfall in the payoff amount. I am expecting a letter from Champion Dodge shortly, explaining the situation. My attorney is working on getting this taken care of.

Thank you for your consideration. If you should need further explanation or if you should have any questions do not hesitate to contact me.

Best regards,

Kate Smith

Notes from loan officer Dan Lord

Be as specific as you can and use actual dates and dollar amounts.

If the letter is describing a late payment or financial issue, describe the steps you have implemented so it won’t happen again.

For instance, you can describe the late payment of medical bills and then follow up by saying this debt has been entirely repaid and you have kept up with all new credit obligations since that illness.

Understand, Letters of Explanation only help Lenders make decisions for marginal applicants; they are not going to be a replacement for Borrowers with insufficient credit or income to qualify for a loan. In essence, they provide the Lender with a more complete picture. If you have any concerns about writing these letters, always ask your Loan Officer for guidance.

Title: Example of Loan Estimate

Here is an example of a Loan Estimate, which outlines an estimate of the key terms of your the mortgage – interest rate, closing costs, mortgage terms. It must be provided to you 3 days after a lender has approved you for a loan.

Just because you received the Loan Estimate, does not mean you are obligated to take the loan. You will receive this for every loan you are approved for, and its a great way to compare different loan products.

Please note that this is an example document and should be used for informational purposes only.

SampleClosing_Disclosure_No_NMLS.PDF

NOTE: The following can cause the 3-day requirement to restart per the Consumer Financial Protection Bureau:

The APR increases by more than 1/8 of a percentage point for fixed-rate loans or more than 1/4 of a percentage point for adjustable loans. But this is not new. Such rate changes have required a three-day notice since 2009.
A prepayment penalty is added to the loan terms.
The basic loan product changes, such as moving from a fixed-rate to an adjustable-rate loan or to an interest-only mortgage.

Title: Example of Closing Disclosure (CD)

The lender must provide a Closing Disclosure (CD) to the borrower that details the final terms of the mortgage including interest rate, closing costs and mortgage features at least three business days prior to the close of the mortgage.

With your attorney, prior to your closing, you should compare the Closing Disclosure with the Loan Estimate (LE) provided by the lender when your loan application was approved to make sure your actual interest rate and closing costs did not increase significantly in comparison to the Loan Estimate.

The variances are typically minor, however, if you do see significant discrepancies between the two, ask your lender for a detailed, breakdown of what happened.

You have every right to cancel the mortgage if you are not satisfied with the lenders explanation and the discrepancies cannot be resolved.

You can cancel your mortgage at any time before you sign loan documents and you are free to work with a different lender.

Please note that this is an example document and should be used for informational purposes only.

SampleClosing_Disclosure_No_NMLS.PDF

Title: Resource: HUD’s Looking for the Best Mortgage

*The Home Buying Process

Title: Intro

Hey Hey Future Home Owner!

Although, the purpose of this course is to prep your finances for home ownership, I couldn’t complete the course without adding this information to help you along your journey to claiming those keys as well :). Can’t help it, it’s the Realtor in me!

Hopefully, you find this info helpful; we’ll have a Q & A with a fellow Realtor as well to bring this info home.

~ Netiva

Title: Choosing A Realtor

Woooow; you did a lot of work to get to this point! Budgeting, paying off debts, soaring your credit scores, working to save up your closing costs and down payment; CONGRATULATIONS!!!

Guess what? You’re just getting started. Next, you’re going to hire your right hand wo/man to help you through this next phase, which many have said is emotionally draining!

It’s time to find a Realtor.

NOTE: I often use the word Realtor, but you may find labels differ depending on where you live and who you hire.

A real estate agent is anyone that is licensed by your state to sell property there. A broker is someone who has met additional licensing requirements to hire agents to work under them. A Realtor is an agent or broker who is a member of the National Association of Realtors® who have to adhere to a detailed code of ethics on how they treat their clients and other brokers/agents.

All of the above are instrumental in helping to make the entire home buying experience worthwhile, ensuring your transaction goes smoothly and ensuring you get to claim those keys within the timeline established on your real estate agreement.

Realtors. Work. HARD!

For that reason, don’t waste their time. You will not be paying a Realtor so all that driving around and researching properties is done for free until the day the checks are cut at the closing table (more on that later).

One of the most insulting things you can do is to have a Realtor driving you around, opening up properties, etc. “just so you can see it”. Our jobs are not a hobby.

Research locations ahead of time, and visit properties via Open Houses to see what style and features work for you; THEN sit down with a realtor.

Many ask “Who should I go to first, a Realtor or a Loan Officer?”

Answer: Doesn’t matter. Ideally a loan officer, however, if you visit a Realtor first, they will provide you with a list of loan officers to get preapproved with, while they obtain additional information from you on the location and features of the property you desire.

Both a Realtor and a Loan Officer are key in your journey to Claiming Your Keys :).

Title: Choosing A Realtor – What to Look For

When selecting a Realtor, referrals are best 🙂

One hundred percent of my business is by referral only. If a Realtor has a history of being bomb.com; it took hard work, consistency and time to make it happen. You want this type of Realtor on your side.

Here’s a checklist of questions to ask the person referring the Realtor to you (use it as a guide; don’t interrogate them, lol):AgentReferencesQuestions.pdf

Your realtor should have:

Experience. I’m not ruling out new Realtors, especially if they have a team behind them; but they do make mistakes. You don’t have time for that!
You want someone who listens to you. It’s YOUR home, your money, and your needs! An experienced Realtor should do a full Needs Analysis, asking questions similar to the checklist I provided in the Research Your Home Community assignment: Property Type, Neighborhood, Features, Budget, etc
Team Player personality. I’ve been the Realtor who had to work well with butt holes that were loan officers, home inspectors, appraisers, and attorneys. It sucks. But you know who was more important than my wounded ego? MY CLIENTS. I suffered derogatory comments, misogyny, profanity and more. Although I professionally stood up for myself; I held a lot of what I wanted to say so that I didn’t kill the deal for my clients; I wanted them to claim those keys just as badly as they did. That’s what you want!
Client Centered focus. If a Realtor is more concerned about that closing check you need to fire them. The moment you feel you are ‘just another check’, you need to walk. A good Realtor focuses on developing a long-term relationship with you that goes beyond this ONE transaction. You are their main priority. They will educate and walk you through the entire process. If you feel this is not happening, fire them before you are under contract and it’s too late.

Now, if you don’t have the luxury of a great referral Realtor, reach out to local realtors that specialize in the neighborhoods you desire, performing a quick search on Realtor.com or taking a quick drive around the neighborhood should help you out in determining what real estate agency is dominating your ideal area.

Pick up the phone and start interviewing. Here are some questions to help you out:

How long have you been in real estate? Remember, experience matters. I always suggest 3+ years as a FULL TIME Realtor.
How long have you lived in this area? You want to ensure the agent knows the ins and outs of the neighborhoods you’re desiring to live in. There are some exceptions. Here’s an example: If I lived in Savannah and recently moved to Charlotte, but have over 10+ years of experience in real estate; then experience trumps this question. As a skilled agent; I can successfully sell a home in any market. I’m just that good 🙂
Do you have a team, or do you work by yourself? You will not be ruling out solo agents; but when an agent has a team, the response time is better and their team is more available to you in all aspects of the home buying process.
What’s your specialty? I worked with first timers and move-up buyers. If a senior came to me seeking senior living properties, I could have helped, but a Realtor that specialized in that niche would have been more beneficial. For this reason I would have referred her out. You want to work with Realtors that specializes in first timers or 2nd timers. Not someone who sells everything and specializes in nothing. Jack of all trades won’t do here.
How many clients are you actively servicing right now? Why is this important? You want your time! This is also when it’s good to have a team in place. A realtor who is stretched too thin will not be able to give you the time and attention you desire if they are a stand alone agent. This will leave you frustrated and will make the entire process a rocky one. (By the way, be leery if they say 0 clients; this shows inexperience)
What do you expect of me? Ooh this!!! A good Realtor has expectations in areas such as communication, To Dos and To Don’ts; if they are not armed with a list of expectations; I’d be a bit hesitant to move forward with them.
Can I speak with one of your previous clients? I had a list of references at will. If you have a good Realtor, they should have at least 2 who are willing to sing their praises.

Here’s what you will NOT do:

Call the agent on a lawn sign or at an open house to represent you on the home they are selling on behalf of the Seller – They have a contractual agreement with the seller, NOT you! You want a Realtor that represents you and you alone!

Here is a list of additional questions to further assist you in your search for a bomb.com Realtor 🙂

Agent_Interview_Questions.pdf

Title: Searching for A Home

Unlike most buyers who simply hire a Realtor or sit down in front of a loan officer; you are prepared!

You have your pre-approval with your bomb rate; your credit is on point, you have money ready for your earnest money and down payment, you know what price range fits in your budget, and you know what neighborhoods fits both your budget and your lifestyle.

Go ‘head!!!! I’m so proud of you!

Now, it’s house hunting time. Be prepared to see see anywhere from 5-13 homes; maybe even more.

It is very important to be organized and prepared.

For each home you see, you should have:

1. A print out of the home from the Multiple Listing Service from your Realtor showing all the details on the home – features, room dimensions, price, tax information, etc.

2. A checklist to detail your thoughts on the home – pros and cons – this is so important if you see more than 3 homes, because you begin to forget things after about the 4th home. Here’s a checklist to help you out; feel free to add to it to meet your needs: diy_home-inspection-checklist.pdf

3. A pad to take notes

Following is an article written by a blogger colleague of mines from Bigger Pockets that offers more tips on what to look for when touring homes.

Here’s my personal tip: Focus on what cannot be changed: neighborhood, schools, power lines, bus stop outside of your door, loiterers, trashy neighbor’s yard, unkempt lawns and homes on the block,etc.

Also, have a non-compromising list in mind too. What do you just NOT want to replace? For me it was foundation and serious electrical issues; it was just too much to take one. I could replace a roof, windows, flooring, paint, etc with no problem; but foundation issues? They’d have to give that property away!

Key Take-a-way:

Don’t Buy A House – Buy A Neighborhood!

You can determine a good neighborhood by looking at the schools, shopping and churches. If businesses are moving out? If they are, then this is the sign of a neighborhood in decline.

Inspect the Neighborhood

Find out where the stores, schools, parks, public transportation and entertainment are located, then ask yourself these questions.

• Is the house located conveniently to schools and shopping?

• Are there highways nearby?

• Will it be easy to get back and forth to work?

• What is the busy hour traffic like?

Drive through the neighborhood at night as well as during the day.

Is it a quiet neighborhood or a noisy one?
Are there any strange smells?
Is the street lighting adequate ?
How many people are out walking at night?

Following is the helpful checklist from fellow blogger and financial educator Mindy Jensen 🙂

Title: 48-Point DIY Home Inspection Checklist by Mindy Jensen

I am NOT suggesting that you forego a professional home inspection from a licensed home inspector. Unless you ARE a professional home inspector, you should absolutely hire one after you’ve performed this checklist and your contract has been accepted.

No, the purpose of this checklist is to inspect it yourself before you even make the offer.

Why?

Because a home inspection runs between $500 and $1,000. Not the end of the world — and certainly worth it on a home you really want.

But it’s silly to drop that cash on a home inspection only to discover deal-breaker items you could have found on your own.

So this checklist is for you to go over once you’ve decided you like the house and want to make an offer. You don’t need special tools or training — you just need eyeballs, a notebook and pen, and a marble. If you’re feeling ambitious, take a tape measure.

Note: Not all items on the checklist will apply to all homes.

General

Windows: Check that they open and close easily. Any broken panes?
Doors: Check that they open and close completely. Do they stick? Lock? Scrape the floor at any point?
Floors: Any creaking? Obvious unevenness? Place a marble on the floor and see if it rolls to check for slant. (Do the marble test in multiple locations in the house.)
Walls: Any holes?
Trim: Any damage or missing pieces? Animals can be brutal to wood trim, and matching old trim is almost impossible.
Lights: Turn on every light switch to make sure they work. (Note: If the home is unoccupied and the power is turned off, this won’t be possible.)
Stairs: Walk up and down the stairs and touch every spindle on the railing. Do they seem sturdy or wobbly? Do the stairs creak? Are any parts missing?
Outlets: Get a voltage tester at your local big box home improvement store for less than $20 and test every single outlet.
Furnace: Look at the furnace. Are there any stickers that indicate installation date?
Water Heater: Check for water around the base of the water heater. Any stickers on this to indicate installation date?

Kitchen

Cabinets/Drawers: Open every cabinet and drawer, then close again. Do they move smoothly? Does anything prevent any of the doors or drawers from easy use?
Oven: Open and inspect the oven. Does the door open slowly, indicating the springs still work? What is the condition of the oven? Turn on the oven to make sure it works.
Stove: Turn on each burner on the stove. If gas, turn on and turn off before turning the next one on to make sure they all turn on by themselves, rather than catching the flame from an adjacent burner. If they all work individually, turn them all on to make sure they all work at the same time. If electric, just turn them all on.
Fridge: Open the refrigerator/freezer doors. Do they open easily? Note: Do NOT do this if the home is vacant and appears to have been vacant for some time. Trust me on this one. Assume it must be replaced.
Dishwasher: Open and inspect the dishwasher. Do the springs work on the dishwasher door?
Faucet: Run the water in the sink. How is the pressure?
Garbage Disposal: Does the garbage disposal run? (Don’t forget to turn on the water before you test it.)
Cabinet Interiors: Take a good look at the cabinets. Is there adequate storage? Do you have enough drawers? (I once bought a condo that had one drawer in the kitchen. Sigh.)
Microwave: Open up the microwave and take a peek inside. Turn it on to see if it works — but don’t let it run for very long. That’s not good.
Hood: Turn on the range hood fan and light to make sure they work. Peek underneath to check for filth — this is a commonly overlooked area for cleaning.
Stone Countertops: Look at the stone countertop and check for chips and cracks.
Formica Countertops: Check the Formica countertop for chips.
Tile: Check the floor for cracked tiles.
Windows: Open and close all windows.

Bathrooms

Plumbing/Drainage: Flush the toilet. Fill up the sink and tub and then let the water run out to test for backups or poorly performing drains. Check for leaks from all faucets.
Flooring: Any broken tiles?
Toilet: Does it rock or is it solidly on the floor?
Tub: Any cracks or chips?
Vanity: Check the condition. Make sure to open it up and check the inside, too.
Ventilation: Does the fan work? Is there a window? Does it open and close easily?

Bedrooms

Closets: Do closets have doors? Do they open and close easily?
Windows: Open and close all windows.
Flooring: Check the state of the flooring — does carpet have stains, wear spots, etc? Is the hardwood scratched and damaged?

Living/Dining/Family Room

Doors: Any doors? Do they open and close easily?
Flooring: What is the state of the flooring?
Walls: Are there any holes or other damage in the walls?
Windows: Do the windows work? Are they vinyl, wood, aluminum?

Basement

Odor: What does it smell like? An overpowering odor can be mold or mildew.
Walls: Do the walls have any cracks? Small, hairline cracks are not so concerning, but large cracks — especially horizontal cracks — can be an indicator of bigger foundation problems.

Exterior

Sprinkler: Turn on the sprinkler system.
Lights: Turn them on.
Outlets: Test them.
Fence: Walk the fence to check for loose boards and the overall sturdiness of the fence.
Siding: What is the condition of the siding?
Roof: Go to the South side of the house and look at the shingles. The South side gets the most sun, and curling or buckling can be an indication that the roof needs work.
Garage Door: Does the garage door(s) open and close easily?
Lawn: What does the grass look like?
Yard: Are there any dead trees?

A Good First Step

This list is just a starting point for you to look deeper into the home. It isn’t meant to be a substitute for a professional home inspection performed by a licensed inspector — but it’s a great way to really see a house. Sometimes the beauty (or ugliness) of a home can make you overlook items you aren’t excited about repairing.

Use this checklist to determine your offer price, as well as your level of interest in the property. You won’t find everything that an inspector will, but you also can save the cost of an inspection fee if you discover a deal breaker on your own.

Title: You’ve Found Your Home – Let’s Make An Offer!’

When you find the home for you, you’ll know it. It just feels right!

It fits your budget, your neighborhood, matches your top features (notice I didn’t say all 🙂 ); and you can totally picture this being the place you can make your home. Congrats!

Now let’s make an offer.

Your Realtor may ask you: “What do you want to offer?”

Don’t just throw a number out there; make it an educated offer.

Ask your Realtor for a Comparative Market Analysis. This is when a Realtor will find nearby homes that have sold in the area to match the style, number of bedrooms, bathrooms, square footage, etc. of the home you are looking to purchase. They are looking to compare what homes in the area typically sale for.

Let me explain; a seller can list a home for whatever price they desire; it’s the MARKET that determines what the value of the home truly is. The Comparative Market Analysis is a way of determining what the market value is. The market analysis will detail the list price of each property sold, the amount they sold for, the number of days it was on the market, and some calculation on the average sales price in the area over the last 3-6 months.

This data helps you to determine what would be a strong offer. Your Realtor will add additional information, such as the market trends, if it’s a buyer or seller market; if there are multiple offers on the table, how long has it been on the market, if the seller is motivated and looking to close relatively quickly; all of these things are important when planning an offer.

Here’s a summary of how the offer process works:

Your Realtor helps you prepare a written offer.
The seller accepts, counters or declines the offer.
If it’s accepted, you move on to the next step.
If the seller makes a counteroffer, you either accept it or make a new offer — and go back to step 2.
If the offer is refused, you can make a new offer or begin a new round of house hunting.

Again, your agent will do all this work on your behalf.

Sometimes, Realtors will ask buyers to write a personal letter to attach to their offer, to gain an emotional edge over the competition. This works when you are dealing with a seller and not a corporation. So, if you are purchasing a foreclosed, HUD, or corporate owned property, you can forget it. In this case, you truly are a number and they are solely looking at that bottom line.

Your written offer will contain these these elements, among others:

A legal address and sometimes the legal property description
Details regarding the purchase price and terms
The amount and terms regarding earnest money
A mandate that the seller will provide clear title to the property
Details regarding any buyer’s participation in closing costs or other fees, as well as how certain taxes and expenses will be prorated between the buyer and the seller at closing
The date and time of the offer’s expiration
A projected loan closing date
Other state-required provisions or disclosures
Any contingencies that the deal is subject to

Show Me the Money!

When you make an offer, in most cases you’ll be required to submit a deposit — called earnest money — that the seller will hold in escrow as good-faith money. This may be anywhere between 1% and 3% of the total purchase price (if you need to make a strong offer; increasing the earnest money helps). These funds are subtracted from your closing costs at closing.

Your offer agreement should detail under what circumstances you’d have to forfeit the money (for example, in the event you back out of the deal without a valid reason), or returned by the seller (such as in the event your offer is rejected).

This money is not given to the seller, it’s placed in a special account, called an escrow account where it will remain until both parties meet the guidelines detailed in the purchase agreement.

TIP: Get a blank copy of a sales contract during your sit down with your Realtor. Go over the terms and ask questions and become familiar with the terms prior to finding your home and placing an offer. It calms the butterflies 🙂

Title: Your Offer’s Accepted, Now What?

Once you have a contract signed by all parties, the seller has a certain number of days within which to make a full disclosure of anything he knows to be defective on the property. Once you get it, you have a certain amount of time review it and to modify or rescind your offer if you wish. The rescission must be in writing and presented to the seller or the seller’s agent. If this happens in a timely manner, you will get your earnest money deposit back.

Here’s an example of a Property Disclosure Form the seller has to provide to you. It is illegal for a seller to lie on this form. Keep in mind that if the seller has not personally occupied the property in 12 months they do not have to complete this form. Seller_Disclosure_long_form_document_sample.pdf

If your contract says, “This offer is contingent upon (or subject to) a certain event”, you’re saying you will go through with the purchase only if that event occurs. The following are two common contingencies contained in a purchase offer:

Financing. You must be able to get specific financing from a lending institution. If you can’t secure the loan by the date specified by you in the contract, you will not be bound by the contract.
Home inspection. The property must get a satisfactory report by a home inspector “within 7 days after acceptance of the offer” (for example). The seller must wait 7 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure all inspection conditions are detailed in the written contract. Here’s an example of a home inspection report: HomeInspection.pdf DO NOT SKIP AN INSPECTION; IT IS SUPER IMPORTANT.
Attorney. This contingency gives you and the seller more time for an attorney to review the signed contract and to make changes to further protect your interest in the transaction. I NEVER have my clients cross out this contingency. If they do; they are stuck with the contract as-is; you don’t want that. NOTE: If you live in a state where the attorneys handle closings; this clause may not be in your contract. I’ve left a list of states that use escrow agents/title companies, attorneys, etc on the following page 🙂
Appraisal. This is your exit if the property does not appraise out. If a home is under contract for $300,000 and the appraisal comes in at $280,000, then you have the option of walking. The seller has the option of lowering the price, or paying for a second appraisal that’s approved by your lender with comparable properties to justify the 2nd appraisal and the current list price. Ultimately, a lender will only approve you up to the appraised value of eh hoe.

Title: Closings by state

How closings are handled varies state to state, and in some states (i.e. California), it can vary county to county.

Here is a map of who you can expect your closing agent to be based on where you live. The closing agent, is simply the person/entity, that will communicate with your lender in ensuring all of the loan documents and conditions have been met to get the keys to your home 🙂

Title: Preparing for Closing

After your contract has been accepted, you’ve completed your home inspection and are content with the findings (if not have your Realtor suggest seller repairs or a money to fix on your own), your attorney has reviewed all documents, including the home inspection, the property has appraised, now what?

The lender’s work begins 🙂

If you recall from the Four Stages of the Approval Process, you’ll go through Underwriting where lots and lots of paperwork will be reviewed to verify your: income, assets, reserves, debt-to-income ratio, credit score and credit report, liabilities, title work and appraisal for the home you are buying.

Once you are ready to close, however, all of the conditions for your loan have been satisfied, you will be told how much money you’ll need to bring to the table in certified funds (no personal checks or cash allowed), and all of your documents will be reviewed one more time in the Quality Control process. You’ll be told to purchase insurance around this time as well; some lenders will require 3-6 months; where most will want a full year of home insurance to be fully paid, and a receipt submitted as proof.

The Quality Control process is a final review of EVERYTHING. This is why you will not buy anything, do anything that will affect your credit, will not touch your bank accounts, will not spend any of your money, will not switch jobs, because this will affect your ability to close. YES, the lender can pull out if any of the conditions that got you approved for the loan has changed. If everything’s good, a closing date will be scheduled and you’re that much closer to Claiming Those Keys!!!

The Closing Department is a division inside of your lender’s team that prepares your loan closing documents and sends them to the title company.

Be prepared to sign lots of loan documents. This is why I am an advocate of hiring an attorney to review this information with you at closing. Closing documents detail instructions to the title company on how to prepare your Settlement Statement that needs to be approved by the lender.

Once approved (it will go back and forth for revisions, so don’t be alarmed), the lender sends the rest of the necessary closing documents to the title company for you to sign at closing. They vary by lender, but will include your final Settlement Statement, loan application, and all disclosures.

Here’s an example of a blank Settlement Statement; at closing, you and your attorney will ensure that the sales price is the same as what was agreed to on the sales agreement, that any concessions (i.e closing costs, seller repairs, etc.) are included, that your earnest money was properly applied, that your home owner’s insurance was properly listed, that your taxes were prorated correctly, and more:ALTA_Settlement_Statement_Borrower-Buyer_05-01-2015.pdf

Things to Remember:

You can still be denied for a mortgage loan, even after you’ve been pre-approved by the lender. The pre-approval is not a commitment or guarantee. You’ve been conditionally qualified for loan. But you need to stay qualified all the way up to the closing. The less your financial situation changes, the better.
If you withdraw or transfer funds for any reason before closing, your lender will probably ask for a written explanation. They will also want to see a record of the transaction, such as your bank statements.
You will need to bring a cashier’s check with you on closing day. In most cases, the check will be made out to the title or escrow company who is managing the process. The check should cover the exact amount of your closing costs.
A few days before your closing date, you should receive a HUD-1 Settlement Statement. This document will have a finalized list of fees you’re responsible for paying. The cashier’s check (mentioned above) should be made out for this amount.
Your actual closing costs might be different from the initial estimate the lender gave you, when you first applied for the loan. That’s the purpose of the HUD-1 statement. It gives you a more accurate picture of your final costs.
Make sure you have a homeowners insurance policy in place. Your lender will require this. They might even require you to pay the first year’s premium in advance, by setting up an escrow account. The lender may contact your insurance agent before closing day, to verify the policy and coverage amount.
If you make any large deposits into your account, tell your lender about it. It will only help your cause, as far as mortgage approval goes. Provide any documents you have relating to the deposit.

Title: Terms to Familiarize Yourself With

Acceptance– An agreement of the contract terms by the buyer and seller.

Appraisal– The value of a property set by a licensed or certified appraiser.

Attorney approval period– Your attorney reviews and makes changes to the contract, typically within five to seven business days.

Cash offers– In lieu of mortgage financing, cash offers should be confirmed with a letter from your

financial institution stating that money is in deposit to close the contract.

Closing/escrow date– The last day of the transaction process, when the deed is delivered, documents are signed, and funds are dispersed.

Contingency– Can refer to multiple scenarios in which the closing of the transaction is dependent on the outcome of something else. E.g. buyer must sell existing property.

Contract length– 45 days from contract to closing is a good rule of thumb, but inquire about

typical contract lengths in your area.

Earnest money deposit– The money you give the seller at the time the offer is made as a sign of good faith. Earnest money deposits vary. The contract should provide for a refund of the entire earnest money deposit within an agreed period.

Local disclosures– Local requirements of disclosure, including certificates of occupancy, that the seller gives to the buyer.

Mortgage commitment– A document by a mortgage lender that commits him to provide a loan at agreed terms and conditions.

Personal property– Usually an itemized list in the contract detailing what is included with the sale, such as appliances.

Possession date– The date when the buyer can move into the property, as agreed in the contract.

Property inspection period– The period in which the buyer can conduct an inspection and receive an inspection report.

Real estate contract– A binding agreement between buyer and seller. It consists of an offer and an acceptance, as well as a consideration of money to make the contract legally binding.

Real property disclosures– Written statements by the seller that discloses any known defects.

Tax prorations– A credit given to a buyer at closing for unpaid property taxes, when taxes are paid in arrears. Prorations should always be more than 100 percent.

Title: Things You Need To Do After Closing On Your House

You have gone through the entire process of buying your new home. MAN did you work for this moment!

Take a moment and relish in it; you deserve it 🙂

You’ve mastered house hunting, making an offer, submitting and signing every last document, doing your final walk-through, and now; the keys are in your hands – WHAT???!!!!

Super exciting!!!

It may seem like your job is over. NOPE; you’re a home owner now; your journey is just beginning :).

Here are a few first steps to take after you have those keys:

Book the movers

Once you have that closing date in hand, start researching movers ASAP. Since most people move in the summers, the quality companies can book up rather quickly.

Put your documents in a safe place

Sounds obvious, but every single piece of that thick stack of paper should go into a safe place. Whether you choose a safe deposit box or a fireproof safe, these documents are proof of the biggest purchase you will ever make. Make photocopies of everything, so that you have easily accessible documents if needed. I personally have copies scanned and saved to my dropbox – just in case.

Change your locks

Change every lock on your home; you never know who the home owners gave a key to. Use this as an opportunity to upgrade your locks to what works for you. You can choose a typical key lock, a lock that requires a four digit code, or even locks that can be opened remotely with a phone app.

Switch the utilities over

This one is easy to forget about, but gas, electric, water and cable all need to be switched over (and phone if you still have a landline). Make the calls at least two weeks ahead of time to play it safe.

Clean

Schedule a deep cleaning. If you have carpet, a swimming pool, a hot tub or a home gym, you’ll want these areas professionally sanitized before moving in.

Make a maintenance list

Remember that Home Inspection Checklist I gave you? Grab that, as well as the home inspection list and make a list of the things that you need to do both in the beginning of your home ownership days and on a regular basis. You may need to start with simple things like setting up your trash pickup and weekly lawn service. Then set up reminders on regular maintenance, like changing filters and sprinkler blowouts. For future repairs on major items, open up a Home Maintenance bank account to begin saving for them.

NOTE: Clean the gutters. I didn’t clean mines right away and when we did check it, it was d-i-s-g-u-s-t-i-n-g! We ended up getting water in the house, so make not of my mistake and check within the first week after closing.

Check your water heater

Your water heater might be fine, but still check to make sure it is at the correct temperature. You want to make sure that your temperature is around 120 degrees. This will prevent scalding or an unsafe temperature. It is a safe and efficient temperature for most homes.

Find the main shut off water valve while you’re at it; never know when you may need to access it.

Check your thermostat

If you are purchasing a brand new home, you may have a top-of-the-line programmable thermostat. Otherwise, think about upgrading to a new one like the Nest. You can program your home’s temperatures to fit your family’s needs, and you can even control it from a phone or iPad.

Change furnace filters while you’re checking out the thermostat.

Measure everything

Before you start moving in the substantial pieces of furnishings, measure. Measure each room’s dimensions. Measure window openings. Measure the height of items such as an island or cabinets. You may or may not need these measurements from day one, but it is much easier to do before your home is full of everyday items.

Think about your exterior

You probably have the beginnings of a lawn, and many new home purchases include landscaping. Make sure that you either have the tools to take care of it, or a service set up to keep it beautiful. If you are going to be responsible for your own yard, basics like a lawnmower, edger, rake, shovel, and a garden hose are important.

Think green

Make sure that you have the most efficient light bulbs for your home. If you are purchasing the last few appliances, think about choosing Energy Star certified pieces. Insulate any exposed pipes. Take these beginning days to choose items that will help your home run efficiently.

Double-check your coverages

You checked off getting homeowner’s insurance because your lender required it. Now, take a look at what’s covered. Make sure that you have enough coverage for both your home and your belongings, and that your deductibles are something that you can live with. Take a good look at whether you need additional insurance, like flood or earthquake coverage. You can often make changes after closing, so don’t think that your coverage is set in stone.

Now, have fun with your new home! Order pizza, and eat with boxes as your table. Let your kiddos run through the empty rooms. Enjoy every moment, knowing that you are taking care of your future!

Hire a Pest Control Company

My clients in southern states often complain about ants, cockroaches and other bugs. In the midwest and northern states, mice and raccoons are a concern. Take care of this BEFORE you move in.

Research security systems

Start looking online about various burglary/security systems, keeping in mind that some systems are better suited to condo life than to single-family-home living. If the previous owners already had a security system and you want to continue the service, you’ll still need to call the company and have the account switched over — and you’ll probably have to spring for new sensors, motion detectors, and a keypad. (Check out SimpliSafe).

Change Your Driver’s License

Every state is different, but some states require a change of address on your license within 10 days of moving. If you are new to a state, you may have to take a written exam and possibly even a driving test.

Check with Your Auto Insurance

Insurance companies are picky about where you live, and prices do change from place to place. Records has moved to many states through the years including North Dakota, Minnesota, California and Florida. She was caught off-guard when Florida required that her car insurance be from a Florida company.

Check with County Officials About Homesteading

You can get a reduction in your assessed value by thousands of dollars – which gives you a discount on your property taxes – by just filling out a form saying you occupy the home you just bought. Some counties give other homestead exemptions like for senior citizens or returning veterans. This doesn’t happen automatically, some states require you to live in your home for 12 months.

Cover the Windows

The former owners might have taken all the curtains and blinds with them. So before your neighbors get to know you real well because they can see through your windows, purchase coverings to give yourself some privacy.

Control Yourself

Don’t spend a lot of money. Implement a self-imposed “spending freeze,” as much as possible. You obviously have to buy groceries, gas for your car, and other necessities. But don’t spend anything beyond that. Keep things as stable as possible until things settle down, and you are used to paying all of the expenses that come with your new home. Do I really have to tell you about my clients who ran up their credit cards, or missed their first mortgage payment because they were trying to fully furnish and decorate their new home? You worked too hard for that!

Personalize

Personalize the mailbox and front doorbell button. Add your name and fresh address numbers, if they appear worn.

Make An Appointment to Visit Schools

Visit the local schools. Let the school districts know your family will be moving to the area soon and you have children who need to transfer to a new school. Your current school district will initiate this process by collecting pertinent paperwork as soon as you tell them you’re relocating.

Then it’s time to relax and enjoy the home of your dreams.

Meet the neighbors

This can be a fun step after you close on your home. Make a point to meet the other people around you. They can be invaluable sources of information about local ‘things to know’, and may well end up being close family friends.

Title: Home Maintenance Checklist

Maintaining a home is ongoing. To help you stay on top of things, here’s a checklist of things to check/maintain in your home by month for the entire year 🙂

*Tips for Buying A Foreclosed/HUD Home

Title: Buying A Foreclosed Property

We’ve already discussed financing your foreclosed home; however, cash buyers will always have the upper advantage, with the exception of HUD and Fannie Mae/Freddie Mac foreclosed homes.

With HUD, Fannie Mae & Freddie Mac, owners who will occupy the property get first dibs. That means no other non-occupying buyers – aka investors – can bid on the property for a certain period of time, to give government agencies, non-profits, and home owners an opportunity to grab it first.

Condition

Buying a foreclosure requires careful budgeting, the right real estate team, and the mental resolve to see the purchase through.

The condition of most of the properties is what throws a few of my buyers off. They are dirty. Some suffer from water/mold damage, roofing damage, electrical issues, plumbing issues and more.

Now, more than ever, you need to determine what type of repairs you absolutely, positively will not do.

Other properties will surprise you. They’ll be right out of the early 1990s but will otherwise be in decent condition.

Inherited Woes

When buying a home in foreclosure you might become responsible for any debt connected to the home; i.e. unpaid taxes, construction loans, home equity lines of credit; etc. I would not purchase one without an attorney so that you can fully understand what risks you are assuming.

Current tenants? If they refuse to vacate the property, plan to dish out extra money for eviction costs. If the tenant happens to be the former owner, I feel sorry for you. I can’t tell you how many disgruntled owners have damaged the property when they were forced to leave.

I don’t want to discourage you from purchasing, I just want you to be aware and plan accordingly.

Financial Rewards

In the best scenario buying a foreclosure will help you invest in an area you would otherwise not be able to afford, and to walk into an investment that is below market rate. That’s always a plus. I purchased homes for less than $40,000; put about $20-$35,000 in repairs and am sitting on $50,000+ worth of equity.

That’s always a plus 🙂

It’s Strictly Business

When purchasing a foreclosure, it’s all about the money. Your lender will be working with a bank’s representative, not the former or current owner of the home. Come with a strong offer the first time. If the numbers make sense they’ll accept your offer (even if it’s below asking price); if they don’t, you’ll be rejected.

There are multiple stages of the foreclosure process, you can get a better deal depending on which stage the foreclosure is in; but keep in mind you’ll be taking on more risks as well.

Let’s go over that next.

Title: 4 Types of Foreclosed Properties

Pre-foreclosure or short sale

During pre-foreclosure, the homeowner still has control of the property. They have usually stopped making payments and have (or are looking to) negotiate with the lender to sell the house below market value. This is called a Short Sale.

You can make an offer to purchase the property, but it has to be accepted by both the owner and the lender.

The lender has to agree to let the owner sell the property for less than the amount they have a loan on it for. Selling helps the seller avoid foreclosing, and helps the lender avoid the costs of foreclosing and selling the property as well.

Typically short-sale homes are in better condition than foreclosed properties because it’s occupied and the owner wants to sell to and must keep the property in decent condition to do so.

If you buy a foreclosure, it’s in as-is condition. Typically, the lender nor the owner will make repairs. You will still do a home inspection for your protection, and can still pull out or re-negotiate the price – if the repairs are too costly.

Auction sale

Homes don’t always sell during the pre-foreclosure stage. This happens a lot when the lender is simply not willing to accept a lower amount for the home, or the owner is unrealistic in their ability to save the home. At this piont; the home goes into foreclosure and is sold at auction.

Auctions are typically conducted by a neutral third party such as a trustee or sheriff. During this stage, the lender cannot take advantage of the property owner in any way, nor can the lender make a profit at the auction.

When the property is sold to the highest bidder, the liens are paid and any overage is given to the homeowner. In most cases though, there is no money left over to go to the homeowner.

Auctions are usually cash only, which tends to limit the amount of people who are able to bid on the property at the auction sale. If you want to see how one works, look them up in your area and visit to see if it’s something that would work for you. This is the riskiest of all stages to purchase, because you usually can’t inspect the inside of the property, or perform an inspection before bidding on it.

NOTE: Be sure to investigate the right of redemption laws in your state, which allow homeowners to reclaim their property within a certain period of time if they pay all past-due amounts and applicable fees. These vary from state-to-state.

You will also want to have a clear understanding of any liens or encumbrances on the home. Make sure there are no surprise claims pending against the home that you may have to deal with after the auction.

Real Estate Owned (REO)

If the property fails to sell at auction it will move into the full possession of the lender and become real estate owned. REO is the most popular method of buying a foreclosure because it’s generally the easiest and safest way.

However, when you purchase a lender-owned property, it can offer the least value and most competition. Keep in mind that the lender acquired the property because no one would bid higher than the amount that was defaulted on.

Note: Now that the lender owns the property it can be sold for any price – even for a profit.

Generally lenders want to move this distressed asset off their books immediately and will price to reflect the market value of the property. For the buyer that means that there will likely be little room for negotiation.

The benefit here is that the lender is usually obligated to clear any additional liens on the property, including back-taxes, so it’s a much safer investment than an auction. Commonly the lender’s agent will also clear and clean the house for sale.

Government owned

This tends to be a slower process and involves more paperwork than other types of foreclosure transactions.

Buying properties from the Federal Housing Administration (FHA),

U.S. Department of Veterans Affairs (VA), Small Business Administration (SBA), Fannie Mae, Freddie Mac, Internal Revenue Service (IRS), or others can save you money. Some of these agencies may assist with financing, but the IRS requires full cash payment for the property.

IMPORTANT: “As is” condition means that you will accept the property in its present condition; what you see now, and discover later, is what you get.

Title: Where to Find Foreclosed Home

Some auctioned and foreclosed homes are listed on the multiple listing service, that your Real Estate Agent has access to

Other homes are listed online. A quick Google search (“Illinois Foreclosed Homes/Auction Homes”) will do.

The absolute best route to take is to work with an experienced real estate agent that specializes in foreclosure home sales. This is not just because they will have better access to available listings, but also because foreclosure transactions are very different from conventional real estate sales. You will want someone that can guide you through all of the twists and turns.

Specialized agents will have a network of contacts from traditional lending institutions, mortgage banks, other real estate agents, and residents living in areas where you hope to buy. Very often real estate agents work directly with banks to handle REO properties.

Foreclosure sale ads from the VA and the FHA are posted in newspapers on a regular schedule. Legal notices of default also run in newspapers.

You can also check online public records and the county courthouse. This is where all real estate transactions for a property in that county are recorded.

What You’ll Need to Do to Close

The most important thing to understand about closing on a foreclosure is that it’s a non-standard transaction and the lender will have their own processes and requirements. This is primarily a protective measure to shield the bank from any recourse by the buyer.

1. Have a preapproval – a loan where you can finance in repairs would be great.

2. Get a professional inspection and a contractor wouldn’t hurt either. I usually do this before an offer is submitted because some REOs won’t allow for contingencies.

3. Run a title search and report. You won’t have to worry about this with VA, FHA, USDA, Fanniie/Freddie Mac; but other REOs you will. If you are not paying cash, you will not be able to close unless this is done anyway.

Keep in mind there will be no seller disclosure requirements, because nobody from the bank has ever lived there.

Ultimately, buying a foreclosure is a complex process that can result in a true bargain when done right or a terrible decision when done carelessly. Even professional investors can end up upside down on these transactions; I know this from experience!

If you’re ready to take the plunge, do your research, speak with a professional, set a budget, prepare, and take it one step at a time. 🙂

Title: Government Foreclosure Property Listings

Fannie Mae – Owned Property Search
Search for properties that have been foreclosed by Fannie Mae, a government established housing corporation.

FDIC: Federal Deposit Insurance Corporation
The FDIC offers properties for sale and auction on their website.

General Services Administration: Office of Property Disposal
The GSA sells real estate throughout the US in both rural and urban, including homes, vacant land, office buildings, Military Bases, subdivisions etc. GSA specializes in real estate that was once used for Federal Government missions and is therefore usually commercial type properties.

HomeSales.gov
These previously owned homes are for sale by public auction or other method depending on the property. Anyone can buy a home for sale by the U.S. Government, but you must work with a real estate agent, broker or servicing representative to submit an offer or bid.

HUD Homes
Website of the US Department of Housing and Urban Development. If you want to buy a HUD home, you need to contact a real estate broker in your area who is authorized to sell HUD homes (most are). Your broker will submit a bid for you.

SBA: Small Business Administration
Listings of SBA acquired properties around the US

The Department of the Treasury / IRS / Customs
Under authority of the Internal Revenue Code, the property described here has been seized or acquired for nonpayment of internal revenue taxes and will be sold.

US Army Corps of Engineers HAP Properties
Locate properties offered by the Homeowners Assistance Program (HAP)

USDA: United States Department of Agriculture
Find pending foreclosures and acquired properties for sale by the USDA

United States Marshals Service
Locate properties seized by the marshals service. Disposing Department of Justice’s Asset Forfeiture Program properties

Title: HUD Bidding Tips

Got these goodies from my instructor in my Real Estate Continuing Ed Classes 🙂

Strategies to Win HUD Homes

1. Try to bid at the end of the month preferably the last Thursday of the month.

2. Uninsured properties tend to go at lower prices than Insured properties.

3. Properties breaking 30 day periods like 30/60/90/120 have the greatest threshold points.

4. If bidding on weekends, bid on Saturday early, for HUD is open and closed on Sunday. Once they accept they never look any further.

5. Always, check off the position of back-up offer. They usually hold at least 30 days.

6. After placing an offer always review the last 2 numbers of your bid acknowledgement, this indicates how many offers were before you. Should you be -01 then reconsider your offer because you may be the only bidder.

7. In a very competitive situation, consider reducing your commission by a small amount like $50 or $100.

8. Additionally, in a very competitive situation, have the buyer pay your commission by utiliziing a “Buyer Broker Agreement” still getting 3-4% commission but the net to HUD is higher thus giving you the edge. (putting $0.00 in as your commission)

9. When reviewing Net to HUD try to round off to attain % positions like over 70% or 80%, etc. (the bottom # as a % of sales).

10. On initial periods, usually the 11th day when bids are open: 91% of net will usually win: 3% closing help, 3% your commission, and 3% asset manager commission.

11. Try to make the net to HUD always end with a 1 or 9.

12. Properties closest to 180 days on market have the lowest threshold.

13. A property that was previously under contract and has thus returned will have a lower threshold.

14. Review the current number of HUD properties that are on the site: High numbers like 500+ will have lower thresholds than counts of 200 on the market.

15. Do not keep bidding the same number when submitting, always increase by at least $500.

16. Bid after 6 PM to assure the property is still available.

17. Properties that have returned to the market due to a failed previous contract have lower thresholds. If they return a 3rd time the threshold will be even lower.

18. Never stop bidding the day you skip could be the day the AM reduces the threshold and a lower bid will overtake yours. The AM never looks back its always the number of the day. You could have offered lets say $100k net today and the threshold is $101k today, yet tomorrow the threshold could change to $97k and you skip the day and an offer of $97.5k comes in and takes it.

19. Make cash Offers on Uninsured HUD Homes. Most properties are available to all bidders are uninsured. This means that they need more than $5,000 in work – or more than 35% of the purchase price. When it comes to cheap homes, 35% is not that much, and you may be able to buy a good quality house at a bargain price.

HUD can’t sell these homes with FHA loans. They know that only a few buyers will go through the hassle of applying for a 203k rehab loan. Therefore, cash offers are best. If you don’t have cash, work with a hard money or rehab lender that can give you a pre-approval letter and close quickly.

20. Respond to HUD’s Counter Offers. In many cases HUD will respond with a counter offer. We suggest that you submit a reasonable, but low offer first – say 65% of asking price. If there are no other bidders, HUD will counter with a number they will accept. The counter offer HUD sends out is the NET amount they will accept, so you have to add the commissions to the net to get the total contract amount. The buyer’s agent may reduce their commission, if that is necessary to make a deal work.Once other bidders get into the game and offer more than HUD’s counter, you may be out of luck. All bidders get the same counter from HUD.

NOTE: You do not have to accept HUD’s counter offer. You can submit a lower bid. As these homes are on a daily bidding deadline, you can submit a new offer every day. If there are no other bidders, there’s a good chance HUD will accept a lower offer or continue to counter.

21. Be Patient and Ready. There are not too many HUD homes for investors. But great deals appear on the market every single month. There is no logic, why some homes are offered at a bargain price and others are overpriced. You just have to watch what’s happening on the HUD home store. An experienced agent will gladly do it for you.

You have to be ready and pull the trigger when the right deal comes around. Over the past year we had almost new condos offered for less than half of their retail value, we saw a duplex in German Village sell for the price of one of the units, and we found rent ready HUD homes listed for only $11K.

Bonus Tip for HUD Investors

These are the deals where you get the lowest offers accepted. Always keep in mind that HUD is a motivated seller. They make mistakes occasionally that you can profit from. But they do not give their properties away just to get rid of them.

HUD is more likely to accept lower offers on homes that fell out of contract before. Sometimes the relisting of a HUD Home triggers a price reduction as well as a change from insured with escrow to uninsured.

*Rent 2 Home Consultation

Title: Next Steps…

Hey Hey Future Home Owner!

I’ve had a few students tell me that they need assistance putting all of the awesome content they’ve been learning into a step-by-step action plan.

My team and I would LOVE to help!

Simply schedule an appointment here, www.SoarMyScores.com, and let us know how we can assist you in Claiming the Keys to your new home.

With over 15 years of experience in the mortgage lending and real estate industry, we’ve developed credit, budgeting, and financial coaching programs, tailored specifically to the needs of future home owners.

So, schedule a time to chat by clicking the link above, II know we can get you on the right track to home ownership 🙂

Chat soon,

Netiva