When Home Buying Seemed Hopeless

Ethel stood in front of me, a pile of papers in her hand and a disheartened look on her face.  “Do you think there’s anything you can do for us?  I’ve just about lost hope of buying our home”. 

This was a rare feeling for Ethel who was a strong woman of faith.  Peace and hope were second nature to her, but her bank had just called and told her that her mortgage was being declined.  She and her husband had planned on moving into their new home that weekend – everything she owned was already boxed up – and now the whole plan was crumbling around her without warning.  This disappointment had her wondering if a home purchase was God’s will for her after all. 

Ethel’s Realtor had also been surprised by the news, but he wasn’t one to admit defeat easily.  Instead, he sent Ethel to me, hoping that we could make a miracle happen.  Not only did we need to find out what went wrong with the previous bank and fix it, we also needed to help Ethel find down payment assistance.  The home buying process had been more expensive than expected causing her down payment money to be absorbed with unexpected costs.

A miracle was what was needed, and a miracle was what was given.  We found the flaw in the other bank’s thinking and re-arranged her financing plan to work around it.  We enrolled Ethel in IHCDA’s down payment assistance program and got her the funds needed to cover the unexpected shortage.  It wasn’t easy and all parties had to work together, but a month later, Ethel and I met up for a much happier occasion – the moment when her Realtor handed her the keys to her very own home.   

We Should Be So Lucky – Understanding the 3.8% Real Estate Tax

Have you gotten the scary emails talking about a 3.8% real estate tax taking effect January 1^st?  I have.  It’s easy to be freaked out by these emails because they make it sound like this 3.8% tax will work like a sales tax, meaning the seller of a $100,000 home would pay a $3,800 tax on the sale.  That’s not how it works, though.  Let me share some key points about it to clarify:

1. If your total income is less than $200,000 ($250,000 on a joint tax return), you will not be impacted by this tax.
2. Even if you make more than the $200,000/$250,000 amount, you still will be excluded from this tax if your gain on the sale of your house is less than $250,000 for a single filing or $500,000 for a married filing jointly filing.
3. If you have to pay this tax, it’s only paid on the gain above that $250,000/$500,000 amount and it’s paid when you file your tax returns, not when you actually sell the home.

So how does this play out in real life?  Let’s look at an example.  If you are a married couple selling a home and you make $250,000 or less per year combined, this won’t impact you.  If you make more than $250,000 but you selling the home for no more than $500,000 more than you paid for it, this won’t impact you. 

But….if you and your spouse make over $250,000 per year and you are making more than a half million on the sale of your home, then you might pay some more taxes because of this new law.

Yea - We should all be so lucky.  Overall, this isn’t going to impact many people in Michiana, so I wouldn’t invest much time in worrying about it. If you are one of the people that it actually impacts, you’re probably better of just being grateful that the real estate market has treated you so very very well. J

Why I Love Ruoff Home Mortgage

Alisa is buying her first home through Ruoff Home Mortgage and was scheduled to close tomorrow.  Earlier this week, Alisa made a boo-boo.  Not an intentional boo-boo.  Not even a really big boo-boo.  Never-the-less, it was a boo-boo and it broke some of the rules that need followed for mortgage lending these days.

Now, I’ve been a mortgage lender for over a decade.  I’ve worked at a few places.  I’ve talked to a ton of other mortgage lenders.  I know this boo-boo and I know what it typically does to the mortgage process.  It typically stops everything dead it its tracks and – best case – gets the mortgage closing delayed by a week or more.

So, Alisa made a boo-boo and told me about it yesterday afternoon.  Did I mention she was scheduled to close tomorrow?  Yep, she was scheduled to close tomorrow until the brakes got hit with the ‘oh crap’ aforementioned mortgage rule breaking boo-boo.

So, why do I love Ruoff Home Mortgage, you ask?  This is why.  When the boo-boo hit our radar, Ruoff Home Mortgage fixed it.  Fast.  We told Alisa what we needed from her and she got it to us this morning at 9:30.  It was to the mortgage underwriter by 10:00.  The underwriter reviewed it immediately and approved the file by 12:00.  The auditor reviewed it by 1:00 and it was in closing by 2:00. 

Alisa not only WAS closing on her mortgage tomorrow, Alisa IS closing on her mortgage tomorrow.  All because Ruoff Home Mortgage gets that these are people’s lives we’re dealing with and is willing to do whatever they possibly can to make things work for our customers.

So, I love Ruoff Home Mortgage.  If you work with us, I bet you’ll love us too.

Beware the Soft Credit Check

Most home buyers know that a mortgage lender pulls there credit report at the beginning of the home buying process, but did you know that the mortgage lender pulls it again right before closing?  They do – it’s called a ‘soft credit check’ - and the results of it can cause you to lose your mortgage approval just days before buying your home.

The Soft Credit Check

A soft credit check is a credit pull that your mortgage lender will typically do in the last couple of days before the closing on your home purchase.  This type of credit pull does not impact your credit score, but it does show the mortgage lender if anything has changed on your credit report since you initially applied.

Mortgage lenders are looking for things that might make them change their mind about financing you.  These things could be items that make the credit score lower or items that make the debt higher.  Either situation could cause the mortgage to be declined at the very last minute, causing a great deal of stress and heartache for the home buyer, seller and Realtors.

Top Soft Credit Check Problems

So what kind of things could cause you to lose your mortgage approval at the last minute?  Here are the most common ones:

·       Higher monthly bills – some time people make multiple purchases around the time that they get their mortgage.  They buy new furniture, a new vehicle or some other financed item.  This could make your debt compared to income too high and you could become ineligible for the mortgage because of it.  Even co-signing for someone else’s loan during this period can cause you to be declined.

·       Higher credit card balances – Even if you don’t take out new debt during the mortgage process, racking up the balances on your existing credit cards can cause your credit score to drop to a point where you lose your mortgage approval.

·       Late payments – a lot is going on when buying a home and it’s easy to let something slip.  Even one small late payment can cause your score to drop significantly, though, causing your mortgage to be declined.  If you have loans on your credit report that are technically someone else’s but that you co-signed for, their late payment can have the same effect on your credit score.

·       Hard Inquiries – soft inquiries like this one done by your mortgage lender don’t impact your credit score but hard inquiries do.  Hard inquiries are credit pulls done by companies when you apply for new debt.  These inquiries indicate that you might be stretching yourself financially, and your credit score could drop because of this, causing your mortgage to be declined.

So what should you do to avoid losing your mortgage approval at the last minute?  The best course of action is to do NOTHING related to your credit during the mortgage approval process.  Don’t apply for any new debt.  Don’t increase the balances on your credit cards.  Don’t co-sign for anyone.  Don’t fall behind on any payments.  Basically, just keep your credit as it was when you applied for your mortgage originally.  Doing this will help you avoid the risk of losing your mortgage approval right before the closing on your new home.

Your Credit Score - and Introduction to FICO and Credit Scoring

I love to read.  Fiction, non-fiction, magazines, cereal boxes, it doesn't matter.  If it's in writing, I want to read it. 

My FAVORITE type of books, though, are business books.  I have a passion for my work, and anything that can help me improve and give a better experience to my clients thrills me.

So...while on vacation last week I read a captivating book entitled "Your Credit Score - How to Improve the 3-Digit Number that Shapes your Financial Future".  I've had a working knowledge of credit scores, the FICO Score in particular, for years, but this book took my credit score knowledge to a whole new level. 

What we need to realize is that our credit score impacts many areas of your life, from interest rates to insurance premiums, from housing to employment options.  Because of this, understanding how FICO and credit scoring works can make a huge difference in the quality of our lives.

Plan on seeing future blogs here about credit scores in general and and how your credit score can be improved.  For today, though, let me share some credit score and FICO basics.  Attached is a link to a video I made about FICO earlier this year.  It provides a nice background to understand what credit scoring is and how it can impact your mortgage options.  Enjoy!

Mortgage Credit Certificate Program for Indiana First Time Homebuyers

Are you a first time homebuyer in the state of Indiana?  Are you looking for special first time homebuyer mortgage programs in Indiana that might offer you savings over the typical unimaginative mortgage options offered by most mortgage lenders?   If so, then you should learn about Indiana's Mortgage Credit Certificate program offered by Indiana Housing and Community Development Authority (IHCDA).  The Mortgage Credit Certificate offers an annual income tax credit for the eligible first time homebuyer in Indiana.  To learn more about the IHCDA requirements and benefits, please watch this video.  To have me review your information and see if you qualify for this mortgage program, please apply for a free mortgage pre approval at www.SouthBendHomeLoan.com.

Buying a Home with No Down Payment

Let’s face it – it can be hard to save money.  We’d like to think that all home buyers can set money aside for the down payment on a home purchase, but some people just can’t make that happen.  Does that mean they shouldn’t be allowed to buy a home, though? 

VA, USDA and IHCDA all say “Of Course Not!”.  Each of these entities has an option in place to let a person buy a home now, even if they don’t have savings set aside for a down payment.  Here are the highlights of what they offer:

·        VA – VA is a term used to reference loans guaranteed by the Department of Veterans Affairs.  If you or your spouse is a Veteran, this can be an excellent option.  It offers a great interest rate, no monthly private mortgage insurance (PMI), and no down payment.

·        USDA – USDA stands for the United States Department of Agriculture.  Among other things, the USDA guarantees mortgage loans made in rural areas.  That guarantee allows for 100% financing on these homes.  The interest rates are great too, and the PMI is cheap.  To see if a property is USDA eligible, just enter the address on USDA’s website:  http://tinyurl.com/69aafc.

·        IHCDA – my favorite option is the Next Home program by IHCDA.  IHCDA stands for the Indiana Housing and Community Development Authority, which is a government branch that focuses on promoting home ownership in Indiana.  Their premier program, the Next Home loan, provides 3.5% in down payment assistance to the qualified buyer using FHA financing and 3% to the buyer using Conventional financing.  That contribution covers the entire down payment needed with both loans. 

So what is all this telling us?  It’s telling us that HOMEBUYERS HAVE OPTIONS.  Just because a buyer doesn’t have money in the bank right now, it doesn’t mean they can’t buy a home.  They just need to be working with a lender who can explore all the options out there and find one that will work for them.

To learn more about any of these options, feel free to drop me an email or give me a call (lori.hiscock@ruoff.com, 574-707-0196.  I'd be happy to help you take the exciting step into home ownership. 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.

Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.

Ohio Mortgage Broker Act License #MBMB.850220.000

The Florida Office of Financial Regulation License #MLD1182