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.

Image: AntonioGuillem

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Want to Roll Your Student Loans Into Your Mortgage? Here’s What to Consider

It can be a good option for some people, but for others it's just trading old debt for new.

It’s a question as old as debt itself: Should I pay off one loan with another loan?

“Debt reshuffling,” as it’s known, has garnered a bad reputation because it often amounts to just trading one debt problem for another. So it’s no wonder the news that Fannie Mae would make it easier for homeowners to swap student loan debt for mortgage debt was met with some caution.

It’s awfully tempting to trade a 6.8% interest rate on your federal student loan for a 4.75% interest rate on a mortgage. On the surface, the interest rate savings sound dramatic. It’s also attractive to get rid of that monthly student loan payment. But there are things to consider.

“One thing we stress big time: It worries me, taking unsecured debt and making it secured,” said Desmond Henry, a personal financial adviser based in Kansas.  “If you lose your job, with a student loan, there is nothing they can take away. The second you refinance into a mortgage, you just made that a secured debt. Now, they can come after your house.”

The Cash-Out Refinance

The option to swap student loan debt for home debt has already been available to homeowners through what’s called a “cash-out refinance.” These have traditionally been used by homeowners with a decent amount of equity to refinance their primary mortgage and walk away from closing with a check to use on other expenses, such as costly home repairs or to pay off credit card (or student) debt. Homeowners could opt for a home equity loan also, but cash-out refinances tend to have lower interest rates.

The rates are a bit higher than standard mortgages, however, due to “Loan Level Price Adjustments” added to the loan that reflect an increase in perceived risk that the borrower could default. The costs are generally added into the interest rate.

So what’s changed with the new guidelines from Fannie Mae? Lenders now have the green light to waive that Loan Level Price Adjustment if the cash-out check goes right from the bank to the student loan debt holder, and pays off the entire balance of at least one loan.

The real dollar value savings for this kind of debt reshuffle depends on a lot of variables: The size of the student loan, the borrower’s credit score, and so on. Fannie Mae expressed it only as a potential savings on interest rates.

“The average rate differential between cash-out refinance loan-level price adjustment and student debt cash-out refinance is about a 0.25% in rate,” Fannie Mae’s Alicia Jones wrote in an email. “Depending on profile [it] can be higher, up to 0.50%.”

On $36,000 of refinanced student loan debt — the average student loan balance held by howeowners who have cosigned a loan — a 0.50% rate reduction would mean nearly $4,000 less in payments over 30 years.

So, the savings potential is real. And for consumers in stable financial situations, the new cash-out refinancing could potentially make sense. Like Desmond Henry, though, the Consumer Federation of America urged caution.

“Swapping student debt for mortgage debt can free up cash in your family budget, but it can also increase the risk of foreclosure when you run into trouble,” said Rohit Chopra, Senior Fellow at the Consumer Federation of America and former Assistant Director of the Consumer Financial Protection Bureau. “For borrowers with solid income and stable employment, refinancing can help reduce the burden of student debt. But for others, they might be signing away their student loan benefits when times get tough.”

Risking foreclosure is only one potential pitfall of this kind of debt reshuffle, Henry said.  There are several others. For starters, the savings might not really add up.

Crunch the Numbers. Alllll the Numbers…

“You don’t just want to look at back-of-a-napkin math and say, ‘Hey, a mortgage loan is 2% lower than a student loan.’ You’ve got to watch out for hidden costs,’ Henry said.

Cash-out refinances come with closing costs that can be substantial, for example. Also, mortgage holders who are well into paying down their loans will re-start their amortization schedules, meaning their first several years of new payments will pay very little principal. And borrowers extending their terms will ultimately pay far more interest.

“We live in a society where everything is quoted on a payment. That catches the ears of a lot of people,” Henry said. “People think ‘That’s a no brainer. I’ll save $500 a month.’ But your 10-year loan just went to 30 years.”

There are other, more technical reasons that the student-loan-to-mortgage shuffle might not be a good idea. Refinancers will waive their right to various student loan forgiveness options – programs for those who work public service, for example. They won’t be able to take advantage of income-based repayment plans, either. Any new form of student loan relief created by Congress or the Department of Education going forward would probably be inaccessible, too.

On the tax front, the option is a mixed bag. Henry notes that student loan payments are top-line deductible on federal taxes, while those who don’t itemize deductions wouldn’t be able to take advantage of the mortgage interest tax deduction. On the other hand, there are caps on the student loan deduction, while there’s no cap on the mortgage interest deduction. That means higher-income student loan debtors who refinanced could see substantial savings at tax time.

In other words, it’s complicated, so if you’re considering your options, it’s probably wise to consult a financial professional like an accountant who can look at your specific situation to see what makes the most sense. (It’s also a good idea to check your credit before considering any refinancing or debt-consolidate options since it’ll affect your rate. You can get your two free credit scores right here on Credit.com.)

As a clever financial tool used judiciously, a cash-out student loan refinance could save a wise investor a decent amount of money. But, as Henry notes, the real risk with any debt reshuffle is that robbing Peter to pay Paul doesn’t change fundamental debt problems facing many consumers.

“The first thing to take into consideration is you still have the debt,” he said.

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How to Become a Homeowner, Even With Little Income

If you think you can't buy a home because of your income, you may want to think again and look at these options.

The American dream of owning a home can often feel unattainable for low-income families. If you’re among the nation’s low-wage earners, you’re probably struggling to simply make ends meet, so the idea of bringing home enough money annually to qualify for a mortgage, or saving for a down payment, can seem challenging at best. Finding a home you can actually afford makes the challenge that much greater.

As The New York Times recently reported, “affordable” housing is typically that which “costs roughly 30% or less of a family’s income. Because of rising housing costs and stagnant wages, slightly more than half of all poor renting families in the country spend more than 50% of their income on housing costs, and at least one in four spends more than 70%.”

The good news is there are mortgage vehicles that can help — ranging from government-insured loans to programs offered by banks specifically for low-income borrowers. Here’s several options specifically designed so that you too can have a crack at the American dream.

Keep in mind, though, that your credit will still need to be in good standing to qualify for these loans. If you don’t know where your credit stands, you can check your two free credit scores on Credit.com. You can also use these tips to help improve your credit scores before you apply.

FHA Insured Loans

Kyle Winkfield describes Federal Housing Administration (FHA) loans as the gold standard for those with low income or a high debt-to-income ratio.

And as someone who owned a mortgage company for years, Winkfield should know.

“I’m a fan of FHA,” said Winkfield, now managing partner of the Washington D.C.-based wealth management firm O’Dell, Winkfield, Roseman and Shipp. “For the right person, it’s what America is supposed to be. It is supposed to be that bridge to opportunity. And FHA is a manifestation of the American dream of being able to provide for your family and have a better life.”

FHA offers various options for low-income families and individuals. Two of the most notable are its Fixed-Rate FHA mortgage and the Adjustable-Rate FHA mortgage.

FHA’s fixed-rate mortgages are geared toward those who have not been able to save money for a down payment, such as recent college grads, newlyweds or those still completing education. It allows buyers to finance as much as 96.5% of the loan, helping minimize the amount of cash the buyer must have for a down payment and closing costs. In addition, it allows 100% of the closing costs to be paid with money received as a gift — whether from a relative, non-profit or government agency (check out our explainer on down-payment assistance).

The adjustable-rate FHA mortgage, meanwhile, is designed for low- and moderate-income families trying to make the leap from renting to owning. Its key highlights include keeping interest rates and mortgage payments to a minimum. The interest associated with this mortgage may change over the years (you can learn more here about adjustable-rate mortgages, or ARMs), but the most it can increase in a single year is 1% and it cannot ever increase more than 5% from the initial rate.

Freddie Mac Home Possible & Fannie Mae Home Ready

If FHA loans are the gold standard, Freddie Mac and Fannie Mae are the silver option, Winkfield said.

The Freddie Mac Home Possible mortgage allows for minimal down payments — as little as 3% to 5%. And similar to the FHA programs, the source of down payments can be a family gift, employer-assistance program or secondary financing. In terms of annual income requirements, mortgages such as these are generally aimed at those whose income is below the “Area Median Income” (AMI). But Home Possible was developed to assist those in high-cost or under-served areas and therefore allows borrowers to qualify even if they make more than the AMI.

Potentially, the most important thing to know about Fannie Mae Home Ready mortgages is that they allow low-income borrowers to have a co-signer who will not be living in the home. This is a big deal, particularly for single-income households. It means that if your parents, your brother, your sister or anyone else wants to help you get into a home, their income can be taken into consideration when qualifying you for the mortgage. The borrower also is not required to be a first-time home buyer.

“Almost one-quarter of people are sharing a mortgage with someone other than their spouse,” said Ray Rodriguez, regional mortgage sales manager for TD Bank, underscoring the importance of programs like Home Ready. “It could be a parent, a friend, or a domestic partner that they didn’t classify as a spouse. What it shows is that more often than not, people are getting help to buy a home.”

Veterans Affairs (VA) Loans

Developed for military members, a VA loan has several notable benefits, beginning with the fact that there’s no down payment required, eliminating what can be a major hurdle to home ownership.

In addition, VA loans do not require mortgage insurance, which saves still more money. Mortgage insurance is typically needed for those putting less than 20% down on the home, and is either added to your monthly mortgage payment or your closing costs, or both. And finally, credit requirements on the VA loans tend to be less strict..

Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members are also eligible under a variety of conditions.

USDA Loans

For buyers in rural areas, another path to home ownership is provided by the United States Department of Agriculture (USDA), through their Rural Development loan program. Probably one of the most under-the-radar mortgage options out there, it was developed to help moderate-, low- and very-low-income buyers.

The USDA offers a couple of different low-interest mortgages, neither of which require a down payment.

First, there’s the Guaranteed Loan, which is available through approved lenders. Applicants must meet income requirements, which vary by state and by region. In general, however, the borrower’s income for USDA loans can’t exceed 115% of the area’s median income. The mortgage also requires that you live in the home you’re buying as your primary residence and meet citizenship guidelines.

The USDA’s Direct Loan is designed for low- and very-low-income buyers who don’t qualify for the Guaranteed Loan. As its name implies, the Direct Loan is not accessed through an approved lender, but directly from the USDA. It provides help with monthly mortgage payments. The amount of that assistance is determined based on family income and is in the form of a subsidy that lowers what you pay out of pocket. The loans can be paid back over 33 to 38 years, and when factoring in the payment assistance provided, interest rates can be as low as 1%.

Like the first loan, there are conditions that must be met to qualify, including being unable to obtain a mortgage elsewhere, agreeing to occupy the property as your primary residence and meeting citizenship or eligible non-citizen requirements. In addition, you must be without decent, safe housing.

Mortgage Options Provided by Banks

Many banks offer their own programs for low-income borrowers, including well-known ones like Bank of America, TD Bank and HSBC.

HSBC’s Community Works program for instance offers as much as $7,000 in closing cost help, loans for up to 97% of the appraised property value or purchase price (whichever is lower) and flexible lending guidelines to help more people qualify.

Bank of America offers an Affordable Loan Solution mortgage that includes a fixed-rate loan designed specifically for low- and moderate-income borrowers. The down payments for this mortgage can be as low as 3%, but owners can’t own additional properties at the time of closing.

TD Bank’s RightStep program allows for putting as little as 3% down. Borrowers must have a credit score of at least 660 and the borrowing limit is $417,000.

“There’s a lot of options out there and the biggest misconception people have is that they have to put 20% down to buy a home,” Rodriguez said.

Still Other Options

There are also many lesser-known programs aimed at assisting low-income home buyers, often on the state and local level, said Brett Graff, editor of The Home Economist.

In Arizona, for instance, there’s the Home Plus Home Loan Program, in New Jersey there’s the Homeward Bound Homebuyer Mortgage Program, and these are just a few examples.

“There are some great programs out there and the best programs are usually through your state,” Graff said.

One final option worth checking out is the U.S. Department of Housing and Urban Development’s (HUD) Good Neighbor Next Door program, Graf said. Designed to help revitalize certain communities, this mortgage discounts the price of a home 50% and requires only $100 as a down payment. It is available only to a handful of specific professions. Qualifying individuals include law enforcement officers, pre-K through 12th grade teachers, firefighters and emergency medical technicians.

The homes are all located in revitalization areas and sold through HUD. In addition, you must live in the home for 36 months as your sole residence.

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10 States Where Foreclosures Still Reign Supreme

Nationwide foreclosure activity reached its lowest level in a decade but remains high in some areas.

Foreclosure filings in April reached the lowest level since November 2005, according to data from ATTOM Data Solutions.

Mortgages originated in the past seven years have performed relatively well, keeping foreclosure activity down, said Daren Blomquist, senior vice president at ATTOM.

“Meanwhile, we are seeing an elevated share of repeat foreclosures on homeowners who often fell in default several years ago but have not been able to avoid foreclosure despite the housing recovery,” he said.

New Jersey continues to have the highest foreclosure rate in the nation, thanks in part to communities like Atlantic City and Trenton, where many housing units had foreclosure filings.

Newer Mortgages Are Performing Well

A shrinking number of U.S. properties started the foreclosure process in April. The 34,085 foreclosure starts for the month are well below the pre-recession average of 77,000.

A foreclosure can devastate a homeowner’s credit. You can see how your mortgage or foreclosure is affecting your credit by reviewing your free credit report summary on Credit.com.

While foreclosures dropped nationwide, many states continue to struggle. Here are the 10 with the highest foreclosure rates.

10. Massachusetts

April 2017 Foreclosure Rate: 1 in every 1,329 housing units

Change from March 2017: Up 25.78% (was No. 19)

Change from April 2016: Up 2.95% (was No. 14)

9. Ohio

April 2017 Foreclosure Rate: 1 in every 1,273 housing units

Change from March 2017: Down 9.16% (was No. 8)

Change from April 2016: Down 23.66% (was No. 8)

8. South Carolina

April 2017 Foreclosure Rate: 1 in every 1,209 housing units

Change from March 2017: Down 14.29% (was No. 6)

Change from April 2016: Down 20.96% (was No. 7)

7. Florida

April 2017 Foreclosure Rate: 1 in every 1,202 housing units

Change from March 2017: Up 3.63% (was No. 9)

Change from April 2016: Down 38.90% (was No. 4)

6. Nevada

April 2017 Foreclosure Rate: 1 in every 1,140 housing units

Change from March 2017: Down 24.80% (was No. 3)

Change from April 2016: Down 33.42% (was No. 5)

5. Illinois

April 2017 Foreclosure Rate: 1 in every 1,083 housing units

Change from March 2017: Down 20.34% (was No. 5)

Change from April 2016: Down 12.98% (was No. 6)

4. Connecticut

April 2017 Foreclosure Rate: 1 in every 956 housing units

Change from March 2017: Up 20.91% (was No. 7)

Change from April 2016: Up 29.22% (was No. 11)

3. Maryland

April 2017 Foreclosure Rate: 1 in every 776 housing units

Change from March 2017: Up 5.68% (was No. 2)

Change from April 2016: Down 29.38% (was No. 1)

2. Delaware

April 2017 Foreclosure Rate: 1 in every 706 housing units

Change from March 2017: Up 21.53% (was No. 4)

Change from April 2016: Down 10.38% (was No. 3)

1. New Jersey

April 2017 Foreclosure Rate: 1 in every 562 housing units

Change from March 2017: Down 11.59% (was No. 1)

Change from April 2016: Up 0.63% (was No. 2)

Image: fstop123 

 

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100K Credit Card Points When You Get a Mortgage? Here’s a Look at Chase’s Latest Offer

Chase_mortgage_offer

[Disclosure: Cards from our partners are mentioned below.]

Credit card signup bonuses usually come with, well, credit cards. But a new offer from Chase touts beacoup points for (wait for it) … getting a mortgage.

Yup, you’re reading that right: Now through Aug. 6, the bank will award 100,000 Ultimate Rewards points to existing Sapphire, Sapphire Preferred and Sapphire Reserve credit cardholders who finance a new home with Chase.

What’s behind the offer? Chase’s being pretty upfront about the fact that it’s courting millennials, who, despite a reported reluctance to sign up for credit cards, displayed a significant interest in the premium Sapphire Reserve Card the bank launched last summer.

“Half of Chase Sapphire customers are millennials, many of whom are looking to buy their first home now or in the near future,” Pam Codispoti, president of Chase Branded Cards, said in a press release.

A Mortgage for Credit Card Points?

Chase’s offer is eye-popping, but right off the bat, it’s important to note that you don’t want to rush into a mortgage just to score credit card rewards points, no matter how lucrative that part of the deal might seem. Home loans are an expensive proposition on the front-end — where you’ll have to cover a down payment, closing costs, possible points and other expenses — and the backend — where you’ll locked into a monthly mortgage payment and paying plenty of interest most likely for the next 15 to 30 years. (Plus, you know, you’ll have a house to take care of and maintenance isn’t exactly cheap.)

Even if you were already looking into home loans, remember, the rate’s really the thing. The allure of credit card rewards points shouldn’t dissuade you for shopping around for the best mortgage deal you can net. (You can get an idea of where your credit might land you by viewing two of your scores for free on Credit.com.)

Per Chase’s website, the annual percentage rate on its 30-year fixed-rate mortgage is 4.094%. That’s competitive. Chase’s big bank counterparts Wells Fargo and Citi quote APRs on comparable 30-year fixed-rate mortgage products as 4.275% and 4.086%, respectively, on their websites. (Note: Rates are subject to change and the points you may be required to pay will vary.) But that’s not to say someone with good credit couldn’t score a lower rate or better overall deal at another financial institution, smaller bank or local credit union. It’s still wise to do your research and crunch the numbers to be sure you’re getting the best mortgage. The prospect of credit card rewards should be, at best, an afterthought.

The Nitty Gritty

That being said, if you do have good credit, are looking for a mortgage on a new home and have a Sapphire credit card in your wallet, Chase’s offer could be worth looking into. The exact value of the points will vary, depending on what card is in your wallet and how you ultimately choose to redeem them, but 100,000 points can translate to some significant dollars.

You may recall that when the Chase Sapphire Reserve (full review here) launched last summer, it touted a 100,000 bonus point offer equivalent to $1,500 when redeemed for travel through Chase’s Ultimate Rewards. The card, which also comes with a hefty $450 annual fee, currently carries a 50,000-point signup bonus (equivalent to $750 in travel) if cardholders spend $4,000 in the first three months.

As far as the new mortgage offer details go, it applies only to residential first mortgage purchase loans submitted directly to Chase. You’ll have to have had a Sapphire card prior to May, 7, 2017 launch date to be eligible, so no need to rush out and apply for any new plastic.

Cardholders only get the bonus points if their loan is fully approved and they close on the home. (Points will get automatically posted to the primary cardholder’s account within 10 weeks of closing.) The offer is not transferable, limited to one per property at a time, and could be discontinued without notice, the bank says on its website, where you can find more offer details.

Meanwhile, if you are currently looking for a new home, we’ve got 50 things house hunters should do ahead of their search right here

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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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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15 ZIP Codes With the Most Underwater Properties

Mortgage debt is a desperate struggle in many areas of the country. See where underwater homes are most prevalent.

Nearly a tenth of homes with a mortgage in the United States were considered “seriously underwater” at the end of the first quarter of 2017, according to statistics from ATTOM Data Solutions.

These homes — all 5.5 million of them — are not physically flooded, though the situation is nearly as alarming: A property is seriously underwater if the amount owed on the loan secured against it is at least 25% higher than the value of the property.

The good news is that the number of seriously underwater homes is down from the same time in 2016, but up slightly from the fourth quarter.

Where Are the Trouble Spots?

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.

These pockets exist in several Rust Belt cities, Las Vegas and central Florida, Blomquist said. And nearly a third of all homes nationwide valued at less than $100,000 are seriously underwater.

Using ATTOM data, we’ve compiled the ZIP codes where at least 65% of the properties are seriously underwater. They represent the worst areas in the country.

Remember, if you’re in the market for a new home, a good credit score can help prospective homeowners secure lower interest rates on their mortgages. You can check two of your scores free on Credit.com.

15. Chicago ZIP Code 60636
Properties with loans: 7,875
Properties seriously underwater: 65.6%

14. Detroit ZIP Code 48227
Properties with loans: 7,825
Properties seriously underwater: 65.8%

13. North Chicago ZIP Code 60064
Properties with loans: 2,856
Properties seriously underwater: 65.9%

12. Milwaukee ZIP Code 53206
Properties with loans: 3,189
Properties seriously underwater: 66.2%

11. Detroit ZIP Code 48234
Properties with loans: 6,096
Properties seriously underwater: 66.6%

10. Maple Heights, Ohio ZIP Code 44137
Properties with loans: 7,694
Properties seriously underwater: 66.8%

9. Detroit ZIP Code 48205
Properties with loans: 7,574
Properties seriously underwater: 67%

8. Riverdale, Illinois ZIP Code 60827
Properties with loans: 5,391
Properties seriously underwater: 67.4%

7. Dolton, Illinois ZIP Code 60419
Properties with loans: 6,673
Properties seriously underwater: 68.2%

6. Detroit ZIP Code 48228
Properties with loans: 9,993
Properties seriously underwater: 68.2%

5. Detroit ZIP Code 48224
Properties with loans: 8,974
Properties seriously underwater: 69.4%

4. Las Vegas ZIP Code 89109
Properties with loans: 6,327
Properties seriously underwater: 69.9%

3. Detroit ZIP Code 48235
Properties with loans: 9,629
Properties seriously underwater: 70%

2. St. Louis ZIP Code 63137
Properties with loans: 5,954
Properties seriously underwater: 70.6%

1. Trenton, New Jersey ZIP Code 08611
Properties with loans: 4,426
Properties seriously underwater: 74.6%

Image: eclipse_images 

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Millennial Homebuyers Still Value a Personal Touch

Many millennials surprisingly opt for local, face-to-face interaction over online tools when buying homes.

All the hullabaloo about millennials coveting their social media accounts over face-to-face interactions holds untrue — at least when it comes to real estate, according to a recent survey conducted by the financial wellness community, CentSai. (Full Disclosure: I am the co-founder and president of CentSai.)

In fact, the 2,050 millennials surveyed are more traditional than previously believed when faced with buying a home. Three-quarters of respondents – age 18 to 34 – prefer to use a local real estate agent instead of an online one.

And 71% said they would choose a local lender instead of applying online.

This is in stark contrast to a 2015 Fannie Mae survey, which found 70% of homebuyers would like to obtain a mortgage online and 69% would like to complete a mortgage application online. (Your credit plays a key role in the terms and conditions of your mortgage. You can view two of your credit scores free on Credit.com to see where yours currently stands.)

Millennials Want Someone They Can Trust

Online mortgage lending and brokerage services are expected to transform home buying, but millennials surveyed said that – contrary to popular belief – they prefer local providers due to existing relationships and local knowledge.

“While sites like Zillow are perfect for looking online to size up the market, when it came to using a lender or actually buying a home, personal touch was essential,” said Keenan Spiegel, who bought his first home with his fiancée in Norwalk, Connecticut, last year.

Spiegel, a wealth management associate at Morgan Stanley and director of data visualization for CentSai, said he used a local real estate agent recommended by his family because he wanted to be sure he worked with someone he trusted.

And while getting approved for a mortgage online could have taken minutes, the couple preferred the experience of using a local, brick-and-mortar who was more hands-on and available when they called with an “endless” list of questions.

“We felt local lenders also know much more about the area they service and can provide a lot of information about the community where you’re about to buy a home,” Spiegel said. “We wanted to know about the quality of schools and the crime rates.”

Online Isn’t Everything Yet

Despite the purported savings and the ease of use, online providers may not yet be as big of a disruptor in the sector as one would expect.

That said, the vast majority of millennials surveyed (91%) said they would use an online site or mobile app to research neighborhoods and home prices and help identify the home that they may buy. But they cited various reasons for “going local” when it came to choosing their agent or lender – including personal touch and handholding, longstanding relationships and local knowledge.

A little more than half (56%) of the millennials surveyed plan to buy a home in the next two years, and for this group, online lenders likely need to provide an even more personalized experience to garner business.

The fear of missing out on valuable information that comes out of an in-person conversation still weighs on the millennial mind.

After all, buying a home is a major purchase, and despite all the bots and burgeoning artificial intelligence, the internet still has a way to go before it can mimic sitting across the table from a real estate agent.

Image: Steve Debenport

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The 20 Most Profitable Housing Markets This Year

If you own a home in one of these markets, there's a good chance you've had a nice return on your investment.

If you’re looking to buy or sell a home this year, you probably know the housing market is booming in virtually every corner of the country. In fact, homeowners who sold in the first quarter of the year realized an average price gain of $44,000 since purchasing their home, a new ATTOM Data Solutions report shows. That equals an average 24% return on purchase price across the country — the highest average price gain for home sellers in nearly 10 years.

“The first quarter of 2017 was the most profitable time to be a home seller in nearly a decade, and yet homeowners are continuing to stay put in their homes longer before selling,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. The report showed homeowners are staying in their homes just shy of eight years on average. “This counter-intuitive combination is in part the result of the low inventory of move-up homes available for current homeowners, while also perpetuating the scarcity of starter homes available for first-time homebuyers,” Blomquist added.

Of course, there are still some laggards. Baton Rouge, Louisiana, for example, saw average home prices decline by $15,000 from their previous purchase price. The same is true for Huntsville, Alabama, where average home prices declined by $8,100.

Of the 20 metro areas with the highest percent return on the previous purchase price, 10 were located in California and three were in Colorado. Competition among homebuyers, especially in these areas, is fierce, so it’s particularly important to have your finances locked and loaded before you start your search. Regardless of where you’re looking, getting pre-approved for a mortgage is key. You’ll also want to be sure your credit is in good shape so you’ll get the best mortgage terms available. You can check your credit scores for free on Credit.com.

These are the top 20 metro areas where home sellers are making the most money when selling their homes.

20. Port St. Lucie, Florida

Average return on investment: 39%
Average price gain: $53,000

19. Austin-Round Rock, Texas

Average return on investment: 39%
Average price gain: $81,795

18. San Diego-Carlsbad, California

Average return on investment: 41%
Average price gain: $144,000

17. Riverside-San Bernardino-Ontario, California

Average return on investment: 41%
Average price gain: $90,000

16. Boston-Cambridge-Newton, Massachusetts-New Hampshire

Average return on investment: 41%
Average price gain: $111,100

15. Oxnard-Thousand Oaks-Ventura, California

Average return on investment: 43%
Average price gain: $160,000

14. Sacramento-Roseville-Arden-Arcade, California

Average return on investment: 43%
Average price gain: $99,000

13. Fort Collins, Colorado

Average return on investment: 43%
Average price gain: $97,500

12. Greeley, Colorado

Average return on investment: 44%
Average price gain: $85,050

11. Urban Honolulu, Hawaii

Average return on investment: 46%
Average price gain: $161,110

10. Salem, Oregon

Average return on investment: 46%
Average price gain: $70,800

9. Vallejo-Fairfield, California

Average return on investment: 47%
Average price gain: $115,000

8. Denver-Aurora-Lakewood, Colorado

Average return on investment: 50%
Average price gain: $110,000

7. Los Angeles-Long Beach-Anaheim, California

Average return on investment: 50%
Average price gain: $187,000

6. Stockton-Lodi, California

Average return on investment: 51%
Average price gain: $101,000

5. Modesto, California

Average return on investment: 51%
Average price gain: $87,500

4. Portland-Vancouver-Hillsboro, Oregon-Washington

Average return on investment: 52%
Average price gain: $110,799

3. Seattle-Tacoma-Bellevue, Washington

Average return on investment: 56%
Average price gain: $139,325

2. San Francisco-Oakland-Hayward, California

Average return on investment: 65%
Average price gain: $276,750

1. San Jose-Sunnyvale-Santa Clara, California

Average return on investment: 71%
Average price gain: $356,000

Image: Peopleimages

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These Are the States Where Mortgage Debt Is Rising Fastest

Mortgage debt is rising fast. Here's a look at the states where it's happening.

Mortgage debt is rising fast. Nationwide, the average balance owed on a mortgage is $196,014, up 2.5% from the year prior and 6.4% from nine years ago.

You’d expect to hear about soaring mortgage debt in pricey places like New York and San Francisco. But — surprise — the top five states where mortgage debt climbed the fastest in the past 12 months were North Dakota, Texas, South Dakota, Kansas and West Virginia, according to new data from Experian.

To be sure, traditional real estate hotbeds aren’t getting off easy. As far as average mortgage debt goes, Washington, D.C. tops the list at $385,159, followed by California, Hawaii, Maryland, Massachusetts and New Jersey. New York, Virginia and Connecticut are close behind.

And traditionally less expensive markets are catching up quickly.

Over the past nine years, when total debt in states like California and Illinois was essentially flat, mortgage debt soared by 52.29% in North Dakota. It was up sharply in Wyoming (32.36%), Louisiana (27.18%) and Texas (27.08%) as well.

Of course, in these traditionally poorer states, mortgages had plenty of room to grow. For example, over those nine years, average mortgage debt in North Dakota rose from $99,833 to $152,039. While that’s a big increase, a $159,000 mortgage balance still looks great to Californians, who typically owe more than twice as much.

What’s Driving the Trend

The obvious explanation for rising mortgage debt is rising prices, which lead to larger loans.

“This list definitely lines up with trends in median prices,” said Daren Blomquist, senior vice president at ATTOM Data Solutions, which studies the housing market. “States with the highest median home prices mean higher loan amounts for purchase mortgages.”

The overall housing market comeback explains a lot of the increase, but local factors matter too, said Experian’s Susie Henson.

“North Dakota and Wyoming … This is purely related to the oil boom and bust economy,” she said. “When oil was about $60 a barrel, North Dakota had an instant demand for housing because of the flood of workers who came to the state for work. Personal income grew, people bought houses.”

The share of homes that are underwater also contributes, Blomquist said. Underwater homeowners generally can’t refinance or take out home equity loans due to poor credit. (You can view two of your credit scores for free on Credit.com.)

“Homes that have not yet regained their equity lost during the housing downturn by definition will not be selling for higher price points and higher loan amounts, and the owners certainly won’t be able to do cash-out refinance,” he said.

The reverse is also true. As regions soak up their underwater inventory, thanks to rising prices, existing owners can increase their mortgage balances. ATTOM said the number of “seriously underwater” U.S. homeowners has decreased by about 7.1 million since 2012, an average decrease of about 1.4 million each year.

Demographics could also be playing a role.

Older populations mean older mortgages with shrinking balances. More first-time buyers mean “younger” mortgages with larger balances. EllieMae, a mortgage processing company, publishes a “Millennial Tracker” with data on places where young adults make up a large share of buyers. It includes several metro areas in Texas, the Dakotas and Kansas showing young people moving there, which has helped lift the overall mortgage debt total.

For example, millennials, at the time of this writing, make up 37% of buyers in Wichita, Kansas; 44% in Sioux Falls, South Dakota; and 53% in Odessa, Texas. In San Francisco, only 18% are young buyers. In the New York/New Jersey area, only 25% are young buyers. That’s something to think about.

The Return of Low Down Payment Loans 

Another lesson from the data is that low down payment loans are back. Blomquist said his firm’s data shows that the “percent down payment” on new mortgages hit a four-year low in 2016.

According to Zillow, in 2009, fewer mortgages were obtained with 5% or 10% down payments, and nearly half of buyers put 20% or 25% down. In recent years, a 5% down payment had become “just as common as a 20% down payment.” (Here’s how to determine your down payment on a home.)

“Higher home prices, a lot of times, mean lower percent down payments, so that rings true with the cycle,” said Logan Mohtashami, a California mortgage broker and economics expert.

Low down payment home loans are on the long list of suspects to blame for the last decade’s housing bubble. Would-be homebuyers who feel uneasy about low down payment loans can look to places in the country where real estate is cheaper, but as cheaper markets “catch up,” there might be another option — looking in areas they may have thought were too expensive before, such as New England.

The five states where mortgage debt grew the slowest last year were Vermont, Connecticut, Wisconsin, Ohio and Rhode Island. In each state — three of which are in New England — total debt remained essentially flat.

Image: elenaleonova

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