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Good Morning!

As a homebuyer, having a competitive edge during our current housing market is an important part of the homebuying process.  I am often asked as to whether it is better to be a pre-approved buyer or a pre-qualified buyer for mortgage financing. The followng article from U.S. News will give you details on both and help you get that competitive edge.

Before you can buy a house, you have to know how you’ll pay for it. For 88 percent of homebuyers, that means financing the purchase with a loan, according to the National Association of Realtors' 2018 Home Buyer and Seller Generational Trends Report.

A major part of finding the right lender and knowing what you can afford is providing information to the bank, credit union or other lender to prove you can continue to pay back the loan, with interest, over time.

There are two options to find out what a bank is willing to lend you, as long as everything checks out once you’ve picked a house: prequalification and preapproval.

Prequalification. Having a prequalification letter from a lender means you’re conditionally approved to purchase a home up to a certain price, based on basic information about your income, debt and how much you have saved for a down payment.

While prequalification doesn’t require the documentation and proof of funds needed for a preapproval, it’s particularly helpful for homebuyers who have no idea about their budget for a home. “Prequalification gets them in a position to shop,” says John Pataky, executive vice president at TIAA Bank.

Preapproval. With preapproval, you’re providing the details about your employment and financial information and letting the lender pull your credit history to learn more about you as a borrower. A preapproval means the lender is stating confidence in lending you a certain amount of money to purchase a home, pending any issues with the house itself or unforeseen circumstances with your finances.

While the differences between preapproval and prequalification are merely a matter of reporting financial information versus providing documentation for it, a preapproval letter can be far more powerful when it comes time to place an offer on a home. That's because with preapproval, the seller has proof of your lender's confidence in you as a borrower. While prequalification makes it easier to shop for a home you can more realistically afford, preapproval gives you the strength to negotiate a purchase price, Pataky says.

Brian Simmons, founder and CEO of Ask a Lender, an online platform to help consumers shop lenders and loans and get financial advice, echoes the preference for preapproval: “One of the first things a buyer should do when they begin looking at homes is getting preapproved for a mortgage.”

If your local housing market is seeing frequent bidding wars and multiple offers on houses, a preapproval could help keep you from being overlooked by sellers who have many options to choose from when it comes to sale terms and price. Still, there are times when prequalification may be your best option to begin house hunting

Here are five things to keep in mind as you decide whether prequalification or preapproval is the best move for you.

To shop lenders, prequalify. You may not have decided on the lender you’d like to work with yet, and shopping around by inquiring with three lenders or so is always recommended. Rather than just talking to a loan officer about available programs, you can use the prequalification process to gauge how much a lender would be able to lend to you. Of course, don’t base your choice of lender solely on the maximum price you prequalify for. Also consider what terms, rates and other details will best suit you in the long run.

Don’t get preapproved by too many lenders. Preapproval includes a full review of your financial background, including your credit history. As a result, that inquiry is noted in your credit report and can negatively impact your credit score if you have too many recent checks into your credit history.

“It doesn’t necessarily reflect well on you,” Pataky says. If you’re unsure which lender you want to work with, ask more questions and consider trying out prequalification first, then apply for preapproval once you’ve made your decision.

Neither guarantees a rate lock. The interest rate on your mortgage may be a deciding factor in whether you can afford a certain house. But your ability to secure a desirable interest rate through a rate lock, which guarantees your rate will not increase over a set time period – typically between 30 and 90 days – often only happens when you’ve found the house you want to buy.

Rate locks vary based on lender practices, but prequalification rarely offers a rate lock, and preapproval often doesn’t include a rate lock until you’ve identified the house you wish to purchase – or even until the seller has accepted your offer. 

Ask your lender what’s required to ensure a rate lock and how long that rate lock lasts. In many cases, the lock is limited to 30 days, which is just enough time to get through the contract period on a house.

Preapproval still isn’t a done deal. Even if your lender is impressed by your salary and pristine history of paying off debt, no preapproval is a guarantee that a mortgage will be approved once you’ve found the house you want. There are still other factors at play, the first of which focuses on whether your financial situation has changed.

“The factors by which you were preapproved have to be maintained,” Pataky says. That means not quitting your job, not buying a Maserati to keep up with the Joneses in your new neighborhood and not opening up five credit cards in the last two weeks, he explains.

Another factor standing between you and mortgage approval is the house’s condition and appraised value. Even if you’re preapproved to buy a house for $400,000 and agree to that same price with the seller, if the house appraised for only $375,000, your lender will likely only approve you for a mortgage on the house at $375,000. You’re then tasked with trying to renegotiate on price with the seller, coming up with the extra cash on your own or starting your search for a home all over again.

Keep asking your lender questions. Even if you’ve bought a home with a mortgage before, it’s likely been at least a few years, and the process will feel different. At every step of the way, you shouldn’t be afraid to ask your lender about expectations, timing and documents you should have ready to help streamline the process as much as possible.

“During the preapproval process, the buyer will need to provide some of the documentation their loan officer will use when it’s time to underwrite the loan,” Simmons says. “This is a good opportunity to ask the lender questions about the process and get a checklist of documents the lender will need, such as pay stubs, bank statements and tax documents.”

Have an awesome week!




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Credit Score: How Low Is Too Low To Buy A Home?

by Galand Haas

Good Monday Morning!

Frequently, I get questions from would-be homebuyers in regards to credit scores and home purchases. There are requirements for any home loan on specific credit scores needed to obtain a loan.  The following is a great article from "Realty Times" that explains the credit score process for home financing.

When it comes to your credit score, how low is too low? The number you really need to buy a house.

We all know that when it comes to buying a house, there are a few things we need, like a down payment and a good enough credit score to qualify for a loan. But what does a "good enough credit score" really mean? Does your credit history have to be impeccable? Can you have a couple of boo-boos? And, if you do have issues on your report, how much of a hit will you take? Your credit score is "a number, roughly between 300 and 850, that summarizes a consumer's creditworthiness," said Bankrate. "The higher the score, the more able and willing a consumer is to repay a loan, lenders believe. The best mortgage rates and terms go to borrowers with credit scores of 740 and higher."

But most of us can't measure up to that number. Thankfully, we don't have to. There's room for lower scores - even really low scores - depending on the type of loan you're applying for, with a number of other factors (your income and work history, the amount of your down payment, the state of the economy) thrown in. Knowing where the bottom is will help you figure out how to proceed.

FHA loans

The advantage to a Federal Housing Administration (FHA) loan for many buyers is the low down payment. You may need only 3.5% down to purchase a home with this type of loan, which is backed by the government. But, you'll need a minimum 580 credit score if you're only planning to put 3.5% down. Can't meet that benchmark? You'll need more cash up front.

"If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility," said the FHA. "Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan."

For FHA loans, your credit score can be as low as 500. But, "Those with credit scores between 500 and 579 are limited to 90 percent LTV," which leaves a lot of people out of luck.

Non-government-backed loans

The issue with FHA loans for many buyers: That pesky private mortgage insurance (PMI), which can add several hundred dollars to the monthly payment and is "required any time you put less than 20% down on a conventional loan," said My Mortgage Insider.

If you have a larger down payment, you may be able to avoid paying PMI by going with another type of loan - but only if you have the credit score. "To qualify for a conventional mortgage, a borrower generally needs a minimum credit score of 680 and at least 5 percent down," said Bankrate. "Many lenders require at least 10 percent down."

There may be more wiggle room in that credit score if you can come up with more money for a higher down payment. But, if it's too low, you'll likely be pointed right back to FHA loans. On the other end, a higher score will get you the best possible interest rates.

Subprime mortgages

Have a credit score below 500? You're officially in the "bad credit" zone. But, you may still be a candidate for a loan, even if you can't qualify by FHA standards, by going with a subprime mortgage. The word "subprime" still sends shivers down the spines of many people because loans extended to what many industry professionals considered to be unqualified applicants were largely blamed for the last housing crash. Accordingly, many of these opportunities dried up in the aftermath.

Today, though, subprime mortgages are available. Keep in mind that minimum credit scores will depend on the individual loan and lender, and each borrower's unique set of financial circumstances. And, you'll pay for the privilege of being extended a loan with higher rates and/or fees.

"Subprime mortgage lenders mostly use collateral like equity earned when considering a ‘refinance' or a more significant down-payment when talking about a ‘purchase money' transaction," said First Time Home Financing.

Private Money Lenders

If all other avenues fail, you may still be able to get a loan with your bad credit from a private money lender. These are individuals with money to spend who are looking for investments. Because your low credit score makes you risky, you'll be charged more for your loan.

"Your personal credit is usually a smaller factor in these types of loans. However, you should know that the interest rate on these loans is much higher - in the range of 10-15%," said First Time Home Financing. "If you really have bad credit, this could be your only option for the time being."

Have An Awesome Week!


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Good News On the Mortgage Front

by Galand Haas

Good Monday Morning!

There is some really good news on the mortgage front.  100% home financing is back.  A new home loan program is now available for those buyers qualifying for FHA financing in the Eugene and Springfield market areas.  This new home financing option is called the OMT 100 loan.  It consists of a 96.5% first loan and a 3.5% second loan. The interest rate is at whatever the going FHA rate is at the time of the loan application.  All homes that would qualify for FHA finacing will qualify for this loan program.

Another twist to this loan is the fact that in many cases, the home seller can contribute towards the buyers closing costs and create a situation where the buyers bring little or no money to the table for the home purchase.  This loan program will make homes affordable to many who were stuck because they could not come up with the money needed for a down payment.

Reemember, mortgage loan interest rates are still bouncing around at historic low levels. This is not going to last forever, so if you have been left out of the ability to purchase a home because of not having enough money for the down payment, this is your opportunity to jump in and take advantage of the current attractive home purchase environment.

Call me or e-mail me for information on the OMT 100 mortgage loan program.

Have An Awesome Week!


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Obtaining Mortgage Financing In This Difficult Market

by Galand Haas

Good Monday Morning!

One of the largest obstacles in purchasing a home today is obtaining financing.  Whether you are purchasing a home for your personal residence or for investment, the mortgage loan process can be difficult.  We are in a whole different world now than we were several years back when anyone who could fog a mirror could also obtain mortgage financing.  Today, there are no stated income or no doc loan programs.  Only buyers with good credit and sufficient debt to income ratios can even think about obtaining mortgage financing.  Even the good buyers today will be under the strict scrutiny of the mortgage loan underwriter.  

As a result of todays tough mortgage world it is more important now than ever to make sure that you are dealing with a mortgage professional who really knows the current market.  Anything less could end in disaster.  If you are thinking about either a purchase mortgage loan or a refinance the list of top mortgage professionals who really understand today's mortgage climate is limited in our area.  One suggestion is to contact me and I can furnish you with a list of the best mortgage professionals in the Eugene and Springfield market area.  This just may save you a great deal of time and money.

Have An Awesome Week!



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Bright Spot In Local Housiong Market

by Galand Haas

Good Monday Morning!

There are some bright things taking place if you are a Home Buyer or Seller in the Eugene and Springfield area.  There is now an $8,000 tax credit for first time Homebuyers that will go a long ways towards getting people into their first home.  This is good news as mortgage interest rates also continue to be very low and may dip even further in the weeks ahead..  Another situation that will benefit both Homebuyers and Sellers is that the FHA price range is going to revert back to $313,000 in Lane county..  This is will help sellers because the cap had been reduced to $278,000.  This will open up a price range for FHA financing that has been unavailable. 

Overall activity on home purchases in our area has picked up significantly over the past weeks.  Great prices on exiting home inventory with the attractive financing available is having a large impact on our local market.  Look for our market to heat up even further if mortgage rates take anohter drop.

Have An Awesome Week!


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Monday Morning Real Estate Update 5/12/08

by Galand Haas

Good Monday Morning!

It looks like Summer may arrive this week.  90 degrees by Friday!!!

There is certainly a great deal of inflation taking place in the economy right now.  Gas is hitting $4 per gallon, postage went up to $.42 for a stamp, groceries and everything else are going through the roof.  One area that this is not the case is with home prices here in the Eugene and Springfield area.  Home prices are dropping and there are some extremely attractive opportunities available right now.  Mortgage loan rates are also attractive and are holding at under 6% for 30 year fixed financing.  It would appear that home prices may continue to decline even further over the coming months.  The unknown is whether mortgage rates will remain at the current low levels.

Have An Awesome Week!



Monday Morning Real Estate Update 1/14/08

by Galand Haas

Good Monday Morning!

It was certainly nice to see sunshine on Sunday!

Nationally, the housing market continues to slump.  Look for the Feds to make further moves to kick start housing by dropping the prime again. Also, look for a substantial drop this time.  How much effect this next drop has on mortgage interest rates is yet to be seen.  Rates are already at a 3 year low and a further decline can do nothing but help at this point.  Negative press on the availability for mortgage financing is somewhat exaggerated.  There are plenty of good loan programs out there for those who qualify.  The sub-prime loans that were feeding financing to those who were at very high risk are the loans that are gone.

Have An Awesome Week!


Displaying blog entries 1-7 of 7




Contact Information

Photo of Galand Haas Team  Real Estate
Galand Haas Team
Keller Williams Realty Eugene and Springfield
2644 Suzanne Way
Eugene OR 97408
Direct: (541) 349-2620
Fax: 541-687-6411

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