How to Get a Mortgage With Bad Credit

Get a Mortgage With Bad Credit

While a 20% down payment and a great credit history are commonly recommended for buying a home, there are still ways you can be approved for a mortgage without them. The secret is finding your personal strengths as a potential homebuyer and overcoming your weaknesses.

Good and Bad Credit for a Home Loan

Getting a home loan with bad credit can be daunting. But even credit scores traditionally thought of as “bad” won’t stop you from being approved for a mortgage.

Credit Score Scale for Mortgage Approval

740–850 Outstanding
720–740 Great
700–720 Good
680–700 Mediocre
620–680 Less than perfect, but still approvable for a home loan
550–620 Needs improvement before applying
300–550 Unlikely to be approved for a home loan

If you have a score lower than 620, it’s unlikely you’ll be approved for a home loan. Take some time to improve your credit by paying debts on time before you apply for a loan. And while you may be approved for a mortgage with a credit score between 620 and 680, such a score will affect your loan program and pricing.

Effects of Bad Credit on a Home Loan

Your credit score determines two major things for a mortgage company: the loan program and pricing.

Loan Programs

There are various types of loan programs, including conventional, Federal Housing Administration (FHA), and Veterans Affairs (VA) loans. There are advantages and disadvantages to each of them. But unless you’re a US veteran or service member, or married to one, you won’t have access to VA loans.

Conventional loans are best for borrowers with good to outstanding credit, but if you have a large down payment, you might be approved for one even with bad credit. On the other hand, FHA loans are accessible to people with less-than-perfect credit scores, but these loans tend to come with higher expenses.

Pricing

When it comes to pricing, your mortgage interest rates will most likely be higher than those of someone with good credit. You may also face additional premiums and more expensive insurance.

Your credit history is another determining factor in whether your loan will be approved or not. Derogatory items, or negative indications on your credit report, such as patterns of previous credit delinquencies and balances on closed-out accounts will negatively affect your mortgage loan approval.

Lenders will look at credit scores first to determine which home loan you’re eligible for. Next, your complete credit overview, including credit history, will be taken into consideration to determine what the lender will look for in the underwriting process. This is when the lender tries to figure out what happened in your credit history and why, as well as if there’s a chance credit issues will occur again in the future.

Overcoming Common Credit Red Flags

These derogatory items will be a cause of concern for lenders—but may not be total deal breakers:

  • Patterns of Delinquencies: Lenders can work around a record of late payments, but they’ll likely require you to have a larger down payment and lower debt-to-income percentage.
  • Student Loan Late Payments: A late federal student loan payment within the past 12 months will make approval less likely for an FHA because government financing doesn’t take kindly to delinquent federal debt.
  • Mortgage Late Payments: Lenders usually overlook one late payment in the past 12 months, so long as you can explain and provide necessary documentation.
  • Foreclosure: After a foreclosure, it takes 36 months to be eligible for a 3.5% down FHA loan and 48 months for a no-money-down VA loan. However, it takes seven years to qualify for a conventional loan approval, no matter the size of the down payment.
  • Short Sale: Mortgage eligibility after short sale is 36 months for a 3.5% down FHA loan and 24 months for a no-money-down VA loan or a 20% down conventional loan.
  • Bankruptcy: With normal Chapter 7 bankruptcy you have 24 months until you’re eligible for a 3.5% down FHA loan and 48 months for a VA loan or conventional loan.

To determine which red flags to overlook, lenders use investor overlays. These are the guidelines mortgage brokers and banks follow to prevent potential mortgage losses.

Investor overlays vary from lender to lender, so while one lender might not approve your loan because of poor credit and a minimal down payment, another may in some instances. The key is to find a lender with minimal overlays who can work with your situation.

Not sure where to start looking for a mortgage? At Credit.com, we offer a helpful list of mortgage rates from lenders in your area.

Homebuying Takeaways

First, know your credit score. Obtain a copy of your free annual credit report to help you select an appropriate lender, and monitor your score for free through Credit.com’s Credit Report Card.

Second, gather documentation to explain your credit challenges. If you can explain derogatory items in your credit history to a lender, you’re more likely to receive a mortgage.

Finally, be very specific when speaking to a potential lender. Don’t be afraid to share every detail of your needs and concerns. You’ll save yourself a lot of headache later by finding out up-front if they have any investor overlays that could prevent them from lending to you.

You don’t have to have perfect credit to buy a home. Just be prepared and search carefully for the lender who can make your dream home a reality.

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Why You Should Still Talk to a Lender Even if You’re Not Ready to Buy a Home

A mature couple receives an application at a bank.

If you’re a first-time homebuyer, you might think you’re not ready to purchase a house. Perhaps you’re concerned about your job situation, your previous credit history, or your high monthly expenses. Whatever the circumstances, every borrower and financial situation is unique.

Unless you’re a financial expert, it’s best not to self-diagnose your financial problems. You wouldn’t skip out on the dentist to fill your own cavities, so don’t try to solve your financial troubles yourself either. A loan officer can walk you through your options—and they won’t try to drill your teeth!

When you apply for home loans, mortgage loan officers look at your credit score, credit history, monthly liabilities, income, and assets. These officers see the entire financial picture, not just the investable funds. A reputable loan officer with experience can get you on the right track for buying a home.

Here are three common reasons people don’t want to apply for a mortgage and what you should do if you’re really serious about buying a home.

A Less-Than-Ideal Credit Report

The reality is that mortgage companies are required to pull a copy of your credit report, which includes scores from all three credit reporting bureaus. Your credit report is the most accurate representation of your credit available. Don’t let your messy credit report keep you from talking to a lender. After looking at your credit report, the lender can actually tell you what debts are the biggest drain on your borrowing power so you can start making smart financial decisions to improve your score.

Not Enough Income

Let the mortgage company review your paystubs, W-2s, and tax returns for the last two years. If you were self-employed, let the loan officer look at your tax returns and evaluate your credit to determine what down payment you can afford and what you can buy. The lender can give you an idea of what you need to do to qualify, including how much more money you need to make to offset a proposed mortgage payment. With an action plan and a strategy in place, it may just take you a matter of months to button up your financial picture to qualify.

Too Much Debt

Debt and liabilities definitely impact spending power. Every dollar of debt you have requires two dollars of income to offset it. So for example, if you have a car loan that’s $500 a month, you will need $1,000 a month of income to offset that monthly liability. If more than 15% of your income currently goes toward consumer debt, you’ll have to either pay off debt or get more income—perhaps via a cosigner—to qualify for mortgage financing. Again, let the lender look at your financial picture so they can tell you what it takes to make it work.

If you’re planning to buy a house in the future but aren’t financially ready, talk to a professional. Meet with them face-to-face, provide them with all of your financial documentation, let them run a copy of your credit report, and go through a pre-homebuying consultation so they can either preapprove you or tell you what to do to become preapproved in the future.

Many times, potential buyers are not ready, but having a conversation with a professional—so you know where you stand and where you are going—can be tremendously beneficial. You can also take a look at your financial health with a free credit report from Credit.com.

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How to Choose the Low-Down-Payment Mortgage That’s Right For You

Coming up with 20% down isn't always necessary. Here's what you need to know about lown-down-payment mortgage programs.

Low down-payment mortgage loans have been around much longer than most people realize. The Federal Housing Administration  loan requiring just 3.5% down re-emerged in 2008, but today, loans backed by the government requiring even less down are becoming popular. Here are the different kinds of low-down-payment loans available and what you should know about each.

1. FHA Loans

These are loans insured by the Federal Housing Administration that require just a 3.5% down payment and are incredibly flexible on financial history, credit history, and debt-to-income ratios. It is the most widely known low-down-payment program available in the market, is incredibly popular, and is virtually limitless in terms of the property type, income and location. Learn more about FHA loans here.

2. Conventional Loans

Some conventional loans require just 5% down, and in some cases as little as 3% down based on the per-capita-income in the area in which the property is located.

3. USDA Loans

This loan requires no down payment whatsoever and has income limitations and specific area locations. The program is only available in certain areas that are deemed agricultural by the U.S. department of agriculture.

4. VA

The U.S. Department of Veterans Affairs guarantees loans for up to 100% loan-to-value with absolutely no money down. This is hands down the best program in the low-down-payment arena. The program is available to U.S. military veterans and their spouses only.

5. Down Payment Assistance

Some state-specific programs allow homebuyers to put as little as $500 down to purchase a home. For example, in the state of California, a grant is provided for up to 5% of the loan amount, which can go toward the down payment and closing costs.

6. One-Percent Loans  

Some lenders are starting to offer mortgages for as little as 1% and, in some cases, even no money down with grants that need not be repaid. These loans are backed by Fannie Mae, and the lender bears the risk. You can bank on income limitations and needing good credit scores for such programs.

Keep in mind that the better the loan program you have, and the more down payment you have, the better your chances of getting into contract. Plus, most of the low down-payment loan programs available in the marketplace today, except for FHA and a traditional 5% down conventional loan, have income limitations. Income limitations mean your borrowing power in a certain geographic area is limited. Whereas, if you could use a 3.5%-down FHA loan or a 5%-down conventional, for example, your odds of getting into contract would be far greater because your borrowing power would be kicked up a couple of notches.

Here Is some homework to consider:

  • Do you have a down payment? If yes, where do those funds come from? Have you talked to your family about the possibility of getting gift funds for a down payment? You might be surprised by how generous your family could be.
  • If your down payment is very limited, get an honest answer from your real estate agent and lender about your ability to perform in this marketplace and what it would take to make you stronger on paper.
  • Get your financial house in order. That means checking your credit scores — you can see two for free on Credit.com. (the better your credit, the more home you can typically qualify for and the lower your interest rate will be), compiling your recent W-2s, pay stubs, and bank statements so you have enough information to provide to a lender.

Do not accept a lender giving you a just a pre-qualification letter. You want to be pre-approved. Any lender that will not give you a pre-approval letter is a lender that is more concerned about their policies than they are getting you into a home.

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Here’s What You Need to Know About Getting a Mortgage With ‘Paper Losses’

If you're tax returns show a net loss, you may have a tough time getting a mortgage. Here's what you need to know.

You probably already know qualifying for a mortgage requires an acceptable credit score, sufficient assets and stable income. All of these show you can support a mortgage payment, plus other liabilities. But what if you have “paper losses” on your tax returns? The mortgage process can get a little trickier. Here’s what you need to know.

You Have Rental Income Losses

On almost every mortgage loan application this can come back to bite the borrower. This is because rental losses usually represent more expenses going out than there is revenue to cover the property. Lenders use a special Fannie Mae formula, which in most instances makes losses look even worse. This is because the expenses are added back into the mortgage payment, then deducted from it over a 24-month period.

It is important to note that, when purchasing a rental for the first time, some lenders use an exception basis. The exception they are going to use is 75% of the projected market rentals. This is to help offset the mortgage payment as long as you are specifically purchasing a rental property.

You Have a Schedule C

This is a biggie. No one wants to pay an excess amount of taxes, especially self-employed individuals. You may be aware taxation is higher for self-employed individuals. So it goes without saying: Every accountant wants to be a hero by saving you money when helping with your tax returns. They could, however, be doing this at the expense of you refinancing or buying a home.

Writing off all your expenses, or worse, showing negative income means the lender has less income to offset a proposed mortgage payment. Even if you own a home already, have excellent credit and have an impeccable payment history, it does not matter. The income on paper is what lenders look at.

You Have Entity Losses

The following scenario is a common one where borrowers pay themselves a W-2 wage along with a pay stub, at the expense of bleeding the company dry. This will become problematic, because there almost certainly will be lower income figures. The same income figures the borrower is trying to qualify with.

Any negative income being reported on personal or corporate tax returns, will hurt your chances of qualifying for financing. As a result, one of these may be an offset, but they are not limited to the following:

  • Waiting until the following year – Depending on the severity of how much income loss there is, you may need to do a two-in-one. This means showing two years of income in one year. This is to offset the two year averaging lenders use when calculating your income.
  • Changing loan programs – This could be an array of different things, but it may mean going from a conventional mortgage to a FHA mortgage for example.
  • Investigating more – You might need to put more money down to purchase a home than you otherwise thought. You would do this if your income is lower than what your purchase price expectations are.
  • Paying off debt – Depending on your financial scenario, paying off consumer obligations is always a smart and healthy approach, and can improve your overall credit scores, even if it requires some of your cash. (You can check two of your credit scores free on Credit.com.)

What should you do if you know you want to qualify for financing and you currently have tax returns that contain losses? First and foremost, consult with your tax professional. Learn what your options are. Once armed with those options, talk to a lender skilled enough to help you understand how much financial power you may have in the marketplace.

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5 Things to Know if You’re Trying to Get a Mortgage With Bad Credit in 2017

hopping for the right mortgage lender is key to getting the best loan terms, especially if you have less-than-stellar credit.

Believe it or not, your credit doesn’t have to be stellar to get a mortgage. Many banks and lenders will extend a mortgage to applicants with at least a 640 credit score. However, not all lenders are created equal — and, even if you can score a home loan, bad credit is going to seriously cost you in interest.

What Credit Score Do I Need to Get a Mortgage in 2017?

There are two main types of mortgages: conventional and Federal Housing Administration, or FHA, loans.

Some lenders will offer conventional mortgages to consumers with a credit score of just 620. Other lenders will go even lower, but the process for getting that mortgage will be difficult and involve thorough explanations of your credit history.

For FHA loans, some lenders will go as low as 580, with just 3.5% in equity. However some folks can get a new mortgage or even do a cash-out refinance with a credit score as low as 550 — but there’s a catch. You’ll need at least a 10% equity position. This means you need 10% down when buying a home or 10% equity when refinancing.

Keep in mind, though, not all lenders will extend a mortgage to someone with a bad credit score — it has to do with their tolerance for risk. (From an underwriting perspective, poor credit indicates a higher risk of default.) The more risk a bank is willing to take on, the higher your chances of getting approved with a not-so-hot score. You can see where you currently stand by viewing your two free credit scores on Credit.com.

Here are some things to keep in mind if you have a low credit score and are shopping for a mortgage.

1. It’s a Good Idea to Rebuild Your Credit

If you are looking to increase your credit score to have an easier time getting a mortgage, you’ll need to be able to clear the 620 mark to see any significant difference. Hitting that threshold (and beyond) will likely make better mortgage rates and terms available to you, plus keep you from going through the type of scrutiny a lower tier credit score bracket often requires. You can generally improve your credit score by disputing errors on your credit report, paying down high credit card balances and getting any delinquent accounts back in good standing.

2. Down Payment Assistance Will Be Hard to Come By 

Down payment assistance programs are currently quite scarce. Beyond that, to be eligible for down-payment assistance, a borrower would typically need at least a 640 credit score. You can expect this across the board with most banks and lenders. It is reasonable to assume you are ineligible for assistance if your credit score is under 640.

3. Previous Short Sale, Bankruptcy or Foreclosure Are Subject to ‘Seasoning Periods’

If you have one of these items on your credit report, it’s going to impact your ability to get a mortgage. There’s typically a three-year waiting period — also known as a “seasoning period” — before you can qualify for a mortgage after you’ve been through a foreclosure or short sale. The waiting time after a bankruptcy is two years. Note: There are some loan programs that have shorter seasoning periods. For instance, VA loans can get approved at the two-year mark following a foreclosure.

4. Higher Debt-to-Income Ratios Make it Harder

It’s no secret that FHA loans allow debt-to-income ratios in excess of 54%. In order to be eligible for this type of financing, your credit score should be around 640 or higher. That’s not to say your credit score of 620, for example, will not work. It’s almost a guarantee, though, that if your credit score is less than 600 you’re going to have a difficult time getting a loan approved with a debt-to-income ratio exceeding 45%.

5. Cash-Out-Refinancing Is On the Table

This is a big one. If you already own your own home, you could use your equity to improve your credit. How? You could do a cash-out refinance with your home. This would allow you to pay off installment loans and credit cards, which often carry a significantly higher rate of interest than any home loan. Wrapping them into the payment could end up saving you significant money, and it’s still an option for borrowers with lower credit scores. (As I mentioned earlier, some lenders will do a cash-out refinance for borrowers with a credit score as low as 550, so long as they’re in a at least 10% equity position.) However, if this is something you’re considering, be sure to read the print and crunch the numbers to determine if you’ll come out ahead. Cash-out re-fis require you to pay closing costs and your bad credit might not merit a low enough interest rate to make this move worthwhile. You’ll also want to make sure the new monthly mortgage payment is something you can handle.

Remember, just because you can technically get a mortgage with bad credit, doesn’t mean it’s the best move for you. You may want to improve your standing, lower your debt-to-income ratio and bolster your down payment funds before hitting up the housing market. Still, it can be done and if you’re currently looking for a home loan, be sure to ask prospective lenders or mortgage brokers lots of questions to find the best deal you can get. To help you through the process, good credit or bad, here’s 50 full ways to get ready for your house hunt.

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What You Really Need to Know About Today’s Mortgage Lending World

You're not going to be able to skip steps in the mortgage lending process. Here's the reality of what it takes to get a mortgage.

Are you trying to qualify for mortgage financing? Telling your story to a lender without providing thorough financials and pulling credit is a recipe for disappointment.

The mortgage industry is a bureaucratic environment. Consumer protection and compliance remain supreme with mortgage lenders and banks. Financial institutions are under tight scrutiny from the Consumer Financial Protection Bureau and as a result, must be specific about what they can and cannot do in regard to credit decisions. Loose underwriting in the mortgage industry was blamed for helping cause the financial crisis in 2008. The pendulum has swung 180 degrees and, as a result, getting a mortgage these days requires playing by the rules.

Consumers, on the other hand, want information quickly so they can make a decision. Unfortunately, mortgages do not work like that for the lion’s share of mortgage loan applicants. If you’ve had financial difficulties, and you think you may not qualify for financing, you might go to a lender thinking, “I don’t want to waste your time so, I am only going to provide the bare-bones information and then you tell me if you can do the loan.” Any lender who says they can make a loan based on bare-bones information is doing you a disservice (here’s a quick guide for understand mortgage lingo).

No moral lender has the ability to give you a “what if” scenario without seeing your entire financial picture. This includes your financial documents and credit report. Based on this information the lender can tell you the exact loan amount you qualify for, the purchase price you qualify for, what is hurting or helping your file, how your cash-to-close comes into play and how your file can be put into a workable loan with a chance of closing.

But I Don’t Want to Pull My Credit

If you don’t want to pull your credit because you don’t want the inquiry, you’re out of luck. The lender is required to pull your credit to decide whether they can put together your loan. Keep in mind: Credit reports are not transferable between financial institutions, so you can’t use one lender’s reports to take to another.

A credit pull will show up as an inquiry on your credit reports and could have a temporary impact on your credit scores. In most cases, though, as long as you’re not shopping for other forms of credit, applying for a mortgage does not adversely affect your credit score (if you don’t know where your credit stands, you can check your absolutely free credit scores right here on Credit.com).

Why Can’t I Just Find Out the Terms Up Front?

You may not want to provide your full financial documentation until you know what a lender can offer. It doesn’t work that way. Rates, fees, the loan amount, the loan program and the entire basis for the loan can change based on your financial supporting documentation. A lender requires these documents and a credit report to give you numbers they can actually deliver on.

But I Just Want to Know About Loan Programs & Rates

The lender needs to evaluate your income, credit score, liabilities on your credit history and financial profile to tell you what you qualify for now, and what you could qualify for in the future. Again, the lender needs a full financial picture to tell you what you can borrow.

But I Was Already Denied Once Before

Not all lenders have the same appetite for risk. One might make your loan while another could refuse. Some banks have more aggressive underwriting. As a result, you have to provide financials to get different scenarios run for your financial profile.

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What You Should Know About Mortgage Paperwork

Yes, mortgages come with a lot of paperwork. Here's how to make it easier on yourself.

Getting a mortgage is every bit as arduous as you might think. While lax mortgage lending standards helped pave the path to the financial crisis a few years ago the pendulum has swung so far the other way in 2017 that getting as simple as a 30-year fixed rate loan is incredibly complex given the amount of paperwork and disclosures required.

Here is what you should expect if you plan to buy a home in 2017 or beyond.

Communication

What this means to you, as a homebuyer, is to trust your lender and expect the mortgage process, in terms of the paperwork, to be thorough. The mortgage process could be compared to an airplane ride. No ride, destination, flight attendant, captain or any aspect of each individual flight is the same. Every flight is different.

Every loan is different as well. If you have ever been on a flight and experienced turbulence, that turbulence is the equivalent of a lender coming back and asking you for documentation, even though you already provided it at the beginning. Asking you for documentation a handful of times is normal.

Remember, a good lender can do a thorough job examining your financials before you go house hunting. This will ensure you can get a loan at a good rate while intercepting future issues that may arise. Before you go to a lender for pre-approval, you’ll want to check your credit scores to see if there are any issues or errors weighing down your scores that you can quickly fix. You can get your two free credit scores on Credit.com.

Time

Time is not on your side when purchasing a home for two reasons: You might have a fee for every day you don’t close on time, which could be as much as $100 per day. If you close three days late, that’s $300 in the seller’s pocket. The other reason is your interest rate lock. If you don’t close on time, it might cost you as little as $500 or as much as a few thousand to extend your rate lock commitment to the investor.

Time is also not on your side because there is an expectation your lender and Realtor have that you to provide documentation to them within 24 hours. This means your answer to the request made Monday asking you for a paystub is expected by Tuesday, no later than Wednesday. Delays in the process can be costly and stressful, especially if everyone is counting on the transaction to close by a certain day and it doesn’t due to failure to receive documentation in a timely manner.

The best two things you can do for yourself when purchasing a home are one, get the needed documentation to your professional in a timely manner, and two, expect to be on call for each day of your 30-day purchase contract. Going into the transaction with those expectations up front will help ensure your transaction closes on time.

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Is a 50-Year Mortgage a Good Move?

Sure, it will keep your monthly payments low, but it will end up costing you a lot in the long run. Here are the pros and cons of a 50-year mortgage.

Are you looking to afford a new mortgage? A 50-year mortgage may be an option, but here are some things to consider when looking at a long mortgage term.

These loans are not bought and sold by Fannie Mae or Freddie Mac. They are smaller banks and portfolio lenders that offer unique financing and, as a result, will charge an additional premium. You can expect your interest rate and fees to be above market. By above market, we mean at least three quarters of a discount point higher in rate than the Freddie Mac mortgage market survey. This type of loan effectively is an interest-only mortgage that is similar to the interest on the loans that were available before the financial crisis.

The 50-year mortgage is pretty much what it sounds like — your loan is amortized over 50 years, similar to the way a 30-year, fixed mortgage is amortized over 30 years. At the end of the loan term, the loan is paid in full. A 30-year, fixed-rate mortgage typically translates to paying double the amount of money you originally borrowed. With a 50-year mortgage you will pay almost four times the amount of interest on the amount originally borrowed. Yes, such a loan term would be incredibly expensive — the cost of having a lower monthly mortgage payment.

Are You Biting Off More Than You Can Chew?

If you are comparing a 30-year mortgage to a 50-year mortgage, you might be trying to purchase more than you can handle — not a prudent move if you’re trying to take on something affordable. While the mortgage payment might be affordable, it would also be an incredibly expensive financing vehicle. For all intents and purposes, this is practically an interest-only mortgage

Interest-only loans can be beneficial for a consumer who has big liquidity in the bank, excellent credit and is otherwise sophisticated in mortgage finance, while looking for cash flow. (Don’t know where your credit stands? You can get your two free credit scores, updated every 14 days, right here on Credit.com.) For everyone else, a 30-year fixed rate mortgage is substantially less expensive than its 50-year counterpart.

If you were thinking about this type of financing, you may want to reconsider and speak with a professional — someone who can guide you on what type of income may be needed to qualify for the purchase of a home.

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This Common Mistake Can Kill Your Mortgage

If you're thinking about buying a home, you'll want to avoid this common mortgage mistake.

In order to qualify for a mortgage, you need to show your lender that you have a down payment and access to funds for closing. This money needs to come from documentable sources prior to moving it from your bank account to your escrow account. Unfortunately, a lot of people don’t do this, which can end up creating unnecessary challenges during the underwriting process.

Lenders are going to require at least 60 days of asset documentation from each source that your money comes from. This is required because your mortgage lender will need to verify that the money promised does exist and is eligible for use.

Let’s say you’ve put your money into escrow and, as requested, are doing your best to document the movement of money from the account going to escrow. This entails providing a bank statement specifically showing the money leaving your account and the money being accepted by escrow through an EMD (earnest money deposit).

If you can’t get a bank statement, though — say it’s the middle of the month and new statements are not out yet — the next best thing is to get a bank printout confirming the transaction and confirming the amount of money remaining in the account. (There are literally dozens of other things you also should be thinking about during the home buying process. Here are 50 ways you can get ready for buying your home.)

How a Bank Printout Can Help You Close

The bank printout must show the date of the transaction and the current timestamp of the printout, confirming that the money has been moved prior to the printout date. If the bank printout does not have this information, it will automatically halt the closing process of your loan and delay your loan contingency removal or extend your close of escrow date.

This method can be used for both your down payment and funds for cash to close. This is to provide authenticity for your account and to show clearly on paper that the account is yours and the money is yours to use. Banks and lenders require this information to be clear cut and “in your face.” Never assume that “common sense” will be enough.

Documents & Other Items You’ll Want to Avoid

Providing any of the following items in lieu of the bank printout will not work:

  • A bank statement with someone else’s name on it
  • Bank statement in trust
  • Pictures of bank statements taken from a smartphone or snapshot application
  • Bank printout with no timestamp and date

In addition, the bank printout and timestamp must show the remaining balance that is left in your account. For example, if you had $130,000 in assets and your down payment from this account was $50,000, your account statement should now show $80,000 remaining.

If you are looking to purchase a home, talk to a seasoned loan professional who can walk you through properly documenting the money required to buy your home. Also, take a few minutes to check your credit scores so you’ll know going in what kinds of terms you’re eligible for. You can get your two free credit scores, updated every 14 days, at Credit.com.

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How to Write an Undeniable Offer Letter for Your Dream Home

Want to make sure you get the home you love? Open up with a heartfelt letter to the seller.

Buying a home in a competitive market means you need to have all your ducks in a row. You can be successful by putting your best foot forward before the starting gate. One way to spruce up your offer is to write a love letter to the seller.

All sellers have different reasons and motivations for selling their home. A major life event may have caused them to rethink their life and selling the house makes the most sense. They may have found their dream home or a better rental and need to sell the one you are looking at.

No matter what has happened, the dollar amount you are offering to purchase their home is going to carry the most significance to the majority of sellers. Making a strong offer with the guidance of your real estate agent and having a solid mortgage pre-approval in place is critical for success. Those are the key components required to make sure your chances increase for getting an accepted offer. Still, a stellar offer letter can break a tie between two identical offers — or even sway the owner your way if someone slightly bests your bid. With that in mind, here’s how to craft a killer offer letter for your dream home.

1. Write the Letter Yourself

This letter should come from you, not your real estate agent. The agent cannot convey the emotional attachment you feel toward the home the way you can. If your agent wants to write a companion letter or character profile, that’s fine, but a love letter that comes directly from the prospective buyer will be most meaningful. This letter should be impactful and compel the seller to choose you.

2. Explain Why You Want the Home

The reality is that you do not know the reason why they are selling their home (though your real estate agent may be able to supply some clues) so a good strategy is to give them the reason you want it. Write a letter to the seller appealing to their emotional side along with their financial interest in your offer. Write a genuine letter about why you are interested in buying their home specifically. What about it calls to you? Do you see your family living there for a long time?

3. Be Specific

If you really liked the way the backyard “felt” and you can see your kids playing there or getting married under a well-groomed tree, put it into words. Make the sellers see you in their home. It sounds sappy, but it can appeal to the right people. A letter can evoke pride for a seller in their home and can give them the satisfaction of being able to provide a home for a young family that will create more happy memories there.

4. Get Personal 

Talk about your family. Use this letter as a way to introduce yourself and tell the seller about your long-term goals. Let them know if you’ve been raised in the area and share with them why you think their home is the fit for you and yours.

5. Assure Them You’re a Strong Buyer

A seller will want to know a buyer can make good on their offer, so be sure to let them if you have a steady source of income, what you do for a living and, even, how solid your credit score may be. (You can see how your credit is doing throughout the homebuying process by viewing two of your free credit scores, updated every 14 days, on Credit.com.)

One additional thing you should consider is having your lender call the listing agent in order to confirm your ability to purchase and willingness to perform. This is a bonus that can help push your offer over the top as this confirmation proves to the listing agent and sellers that you are serious and well-qualified. Communication in every real estate transaction is critical and this proactive approach reduces the amount of vetting that the listing agent has to do on their offers.

What’s in a Offer?

Remember all those ducks we mentioned earlier. In addition to your love letter, your offer to purchase someone’s home might include:

  • A cover letter from your agent explaining who you are and why they brought you to their home
  • The terms (total offer price, down payment, etc.) under which you would purchase their home.
  • In addition to that personal and detailed letter explaining why you would be a good fit for their home, you may also want to include a photo of you and your family.
  • A mortgage pre-approval letter from your lender showing you are dedicated to buying their home.

Keep in mind, a stellar offer letter is just one small part of the process. You can find 50 other steps house hunters can take to get ready for homebuying season here.

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