How Much Cash Do I Need to Buy a Home?

                  One of the most frequent questions from home buyers is asking how much cash they need to buy a home. Answering this question can be complex, as buyers need to determine how much they can afford for a monthly payment, based on their finances, as well as how much savings they need for their down payment and closing costs. Down Payment and Closing Costs When purchasing a home, buyers need to factor in the closing costs and the costs to set up the escrows and other things that are required to buy a home. Typically the largest up-front cost is the down payment, which varies depending on the mortgage used to purchase the home. Some mortgages like FHA loans require a smaller down payment, which can often be as low as 3.5% of the price of the home. For example, when…

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How Soon Can I Buy a House After a Foreclosure?

In my last article, we discussed how soon you can buy a home after a bankruptcy or short sale, and the standard time frames in which you must wait before re-applying for a home loan. Today we will go over deed-in-lieu of foreclosure and foreclosures, and your waiting periods in their wake. Buying After Deed in Lieu of Foreclosure A Deed-in-Lieu of Foreclosure may happen when a homeowner realizes they aren’t financially stable enough to keep their house, and subsequently offers to deed their property to the lender. If the lender accepts, they in return forgive the homeowner’s debt and waive the right to pursue them for further payments. This situation is rare, but not unheard of. If you find yourself in this way, and would like to apply for a conventional home loan, you will need to wait four to seven years depending on your specific case. You may find…

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How Soon Can I Buy a House After a Bankruptcy or Short sale?

Since the financial crisis of 2007, it seems like everyone knows at least one person who’s pocketbook was hit hard resulting in the loss of their house, or the need to file for bankruptcy. Maybe that person is you. You’ve been through some tough times lately; You’re not alone. Now that you are getting back on your feet, you may be asking yourself, “When can I buy a house again?” Let’s discuss your options for buying a new home after bankruptcy or short sale. Buying a New Home After a Bankruptcy The definition of filing for bankruptcy is the legal proceeding in which an individual is unable to pay their outstanding debts. There are two types of bankruptcy; Chapter 7 and Chapter 13. Chapter 7 bankruptcy occurs when an individual files a petition, their assets are evaluated and used to pay back some of his or her outstanding debt, and…

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Down Payments and Gifts: Part 2

In my last post, Down Payments and Gifts: Part 1, we discussed what a down payment is, how much you might need for a down payment, and how the type of loan determines how you can use a gift. In this post, we will explore the definition of a gift in the world of mortgages, what paperwork you’ll need to verify a gift, and the overall rules for gifts for all loan types. What is considered a “gift”? Let’s say Aunt Judy gives you $50, and Grandma and Grandpa Smith give you $1,000 for your college graduation. Can you use both as gifts towards a down payment on a house? Absolutely! It’s just that the $1,000 probably requires a little documentation. Look at it from a lender’s point of view. When they examine your accounts, they want to be sure that all of the money in there is yours. If…

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Down Payments and Gifts: Part 1

Whether it’s in a jar labeled “Future Home” or in a special account at the bank, you’ve been saving your pennies for a down payment. Go you! But how much do you have versus how much do you need? Are grandma and grandpa giving you a chunk of change for your graduation towards the down payment too? Before answering these questions, let’s take one small step back in order to define some terms. What is a down payment? The definition of a down payment is the initial payment made when something is bought on credit. For our purposes, that something is a house. The money you use for a down payment is the foundation for the equity you’ll build in your home over time as you make mortgage payments. Equity is the total amount of money you’ve paid towards owning your home. For example, if you made a $15,000 down…

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Pre-Approval for FHA and VA Home Loans

For many home buyers, one of the first steps towards owning a new home is pre-approval. But what does that even mean? Is it important to get pre-approved? What will you need to get pre-approved for a home loan? These common questions and others are what we will be exploring today. What is pre-qualification? Don’t confuse pre-approval and pre-qualification. Pre-qualifying for a mortgage is based on financial information you verbally provide a lender to determine a general mortgage amount for which you might be approved. Pre-qualification does not look at your credit report, does not verify any financial information, and therefore does not carry nearly the same weight as being pre-approved. However, it can be helpful to get pre-qualified as it costs nothing to do, can be done within minutes, and can help steer you towards the right type of mortgage (Conventional, FHA, or VA). What is pre-approval? Pre-approval happens…

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Credit 301: What is Bad Credit and How do I fix it?

In our last post, Credit 201: FICO Credit Scores and Improving Credit, we went over what a FICO score is, what impacts it, and started exploring how to improve your credit score. This final mini-course will go into much more detail about the term “bad credit” and how to improve your credit score. Welcome to Credit 301! What is Bad Credit? The short answer is there is no such thing. A bad credit score is only as bad as what it keeps you from doing. If a lender decides to grant you a home loan despite your low credit score, you probably won’t feel like you have “bad” credit after all. We at Academy Mortgage can do FHA loans with a FICO score as low as 580. Even so, there are some general ranges you can refer to when figuring out where your credit score falls on the spectrum. 750+ …

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Credit 201: FICO Credit Scores and Improving Credit

In our last post, Credit 101: Understanding Credit for Home Buyers, we discussed some basics about your credit and where to find your credit reports for the purpose of understanding why having good credit is so important when applying for a home loan. This next mini educational course will go over what a FICO score is, what impacts it, and start exploring how to improve your credit score. Welcome to Credit 201! What is a FICO credit score? FICO stands for Fair Isaac Corporation, who developed the first credit scoring system back in the 1950s. FICO is now the official name of the company, but they still generate THE credit score lenders refer to when deciding on your eligibility for a loan. Conversationally, “FICO score” is synonymous with “credit score.” However while all FICO scores are credit scores, not all credit scores are FICO scores. It is important to make…

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Credit 101: Understanding Credit for Home Buyers

It’s not uncommon for people to start caring about their credit score when they are looking into making a big purchase, such as their first house. And if you discover that your credit isn’t as good as you thought it was, it can make your home-buying process that much more of a challenge. Lucky for you, I have more than 25 years of experience as a lender guiding new home buyers through the brambles of credit towards their goal of owning a home. However in order for me to help you improve your credit, you need to understand it. My plan is to give you a mini educational course. Welcome to Credit 101!   What is credit? Credit is the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. There are four types of credit that…

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5 Differences between FHA and Conventional Home Loans

There are many different types of home loans out there these days. It’s hard to figure out where to start. I’d like to save you hours of scanning the Internet by breaking down the fundamental differences between the two most common types of home loans: FHA and Conventional. 1. The Basics Let’s start with some basic information. By definition, A Federal Housing Administration (FHA) loan is government-backed, while a conventional home loan is not. This means that if you default on a conventional loan, your lender has no guarantee for repayment. If you default on an FHA loan, the FHA insures that the lender will be repaid in full. Because of the FHA home loan’s guarantee, the underwriting process may take longer and there are additional FHA requirements, such as a health and safety inspection. The wait and additional requirements can be worth it, though, if an FHA home loan…

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