Moving Ahead After a Foreclosure

The housing market debacle that occurred in 2008 is still giving millions of US citizens stress. Many families are yet to recover completely from the difficult situations they had to face. Families invest their biggest resources into buying a home. Even more than money, it takes a world of emotions and dreams to build homes. Losing a home can be a very distressing situation, emotionally as well as in financial terms.

Many people, owing to loss of income and other negative economic events, had to lose the ownership of their much loved home due to a foreclosure. A foreclosure is a legal process in which the mortgage lenders force the sale of the asset (home, in this case) used as a collateral in the loan documents. Following the years after the economic recession of 2008, even people with good credit scores faced extenuating financial circumstances.

As per Mortgagee Letter 2013-26, people who went through a foreclosure are eligible to be a part of the Back to Work Home Mortgage Loan program. This program, which gives would be homeowners a second chance at mortgage after foreclosure, was welcomed by borrowers as they no longer had to wait for three years to seek a new home loan. The program reduced the waiting period to just one year after the foreclosure date.

If you have been through a foreclosure, it is best to look for a Federal Housing Administration (FHA) approved lender who assures you of sustainability throughout your loan duration and helps you with the new program. Borrowers have time till September, 2016, as the program will not be in effect after that.

When taking part in the program, you will not face any premium on your interest rate or additional closing fees.

To be eligible, borrowers need to meet a few requirements. They must submit documentation to prove that they have been through adverse financial situations.

HUD Mortgagee Letter 2013-26 defines an economic event as, "Any occurrence beyond the borrower’s control that results in a loss of employment, loss of income or a combination of both, which causes a reduction in the borrower’s household income of 20 percent or more for a period of at least six months”.

Borrowers must demonstrate a strong intent to make future payments, and thus lenders look for job stability in borrowers. Borrowers must attend a counseling session on mortgage loans before applying. Further, a minimum credit score of 500 is a pre-requisite. However, those with no credit scores also qualify for the Back to work home mortgage loan. Also, the credit history should be without any delinquency in the last 12 months of applying.

The Back to Work program has made life better for millions of Americans, giving them a second chance at mortgage after a foreclosure.

Home Mortgage Lenders Jargon Defined

A guide to understand the language that Back to Work program lenders are using

Whether you’re a first-time home-buyer or a repeat homeowner, some of the terms mortgage lenders use may seem confusing and even intimidating. However, their language really isn’t as complex as it may seem. Use this guide to decipher the “Back to Work” home loan process and become better prepared to meet with a lender.

Mortgage
A mortgage is a document that specifies that the home you are buying is a collateral item for the money you are borrowing. In other words, if you fail to make payments, your home will get taken away. Lenders hold the right to take possession of any property upon a borrower’s failure to repay a loan.

Good Faith Estimate (GFE)
A GFE is a document that shows an estimate of all of the fees and costs of a new mortgage. Lenders must complete this document within three days of a borrower submitting a loan application. When the document is completed, the lender will mail it directly to you. Prospective borrowers use this document to compare fees between different lenders and to better prepare for the overall cost of a new mortgage.

Credit History
A credit history is a financial record that shows how you have handled money and debts. Oftentimes, a person’s credit history will determine if they may qualify for a loan and the rate at which it must be paid back. A credit report shows if you have promptly paid bills, how much available credit you have and your total outstanding debts.

Annual Percentage Rate (APR)
An APR is an interest rate that is expressed numerically in annual terms. An APR always includes additional costs (such as mortgage insurance and broker fees), which is why it always higher than a regular interest rate. An APR can help borrowers easily compare rates charged by other lenders.

The Federal Housing Administration (FHA)
The FHA features loans that are insured by the U.S. Department of Housing and Urban Development. These loans are known for having low down payments. Back to Work program lenders allow borrowers to put down only 3.5 percent with no premiums or fees at closing.

Origination Fee
An origination fee is often required to be paid when a borrower is applying for a new mortgage. This fee is used to cover the cost of the application, appraisal and any follow-up work associated with a new mortgage.

Debt-To-Income Ratio
Home mortgage lenders look at debt-to-income ratio to ensure a borrower will be able to repay a loan. Lenders compare monthly payments, including the potential new mortgage, to the borrower’s monthly income. The result is displayed as a percentage.

Equity
Equity is the difference between the value of the home and the mortgage loan. In general, the equity on a home will increase over time as the value of the home increases and the amount of debt on a loan decreases.

How to Approach a Second-Chance Mortgage After Foreclosure

Beginning a new home loan application through “Back to Work”

Don’t be intimidated by complex loan processes; use these steps to help you get back in the housing world after foreclosure.

1. Find the right lender
 Most lending agencies and banks turn away families who have faced substantial economic events in fear that it will happen again. However, agencies that offer the “Back to Work” program are understanding and will listen to your story. They have experience handling financial problems just like yours. The program is offered at lending agencies in all fifty states, which is designed for families who need a second-chance mortgage after foreclosure or another economic event.

2. Take housing counseling
You may be surprised by what you could learn from a housing counselor. Although your economic event may have been out of your control, a housing expert could provide you with life-changing financial advice. The FHA requires all “Back to Work” participants to complete at least one hour of one-on-one housing counseling. The agency must be approved by the U.S. Department of Housing and Urban Development and take place at least 30 days, but no more than six months prior to submitting a new loan application.

Housing counseling is designed to help families avoid making the same mistakes twice. They teach how to avoid scams and how to create and assess a household budget. Perhaps most importantly, they teach how to avoid repeating the same economic event again. This gives borrowers and lending agencies confidence that beginning a new home loan is a good idea.

3. Boost your credit
Although an event like foreclosure will stay on your credit history report for up to seven years, it’s never too early or too late to start boosting your credit score. “Back to Work” participants must have credit scores above 500. Borrowers must be able to provide a 12-month credit-history report that is clear of late housing, installment debt payments, delinquency and any other derogatory credit issues. Those with no credit whatsoever remain eligible.

4. Gather documentation
All “Back to Work” borrowers must be able to provide proof of a previous economic event. This can be shown through a Verification of Employment (VOE), W-2 form, old pay stubs or signed tax returns from the past two or three years. Lenders will also want to see recent copies of your pay stubs (30 days worth), and a clear copy of both your driver’s license and Social Security card.

If you receive additional income from Social Security, child support, alimony or a pension award, provide proof that will verify it. Also bring bank statements from the past two or three months from every checking and savings account you have, as well as 401K or other stock accounts. Any person who is signing the loan should bring all of these documents to apply for a new mortgage. This will help determine your financial situation after foreclosure and if the “Back to Work” loan is the right second-chance mortgage for your family.

What do I need to do to get ready to buy my first home?

Are you considering buying your first home? Congratulations! You probably have a million questions. Let's start with what you should do to prepare to buy your first home. These steps will help get you off to the right start, in the home-buying process:

Evaluate your credit report.
Look for mistakes in data, inaccurate records and dollar amounts. Be sure to check the small details – the lenders look at everything. Scan every word and number so you can see if there are any issues or inconsistencies. For example, you may be surprised to find relatives on your credit report or possibly you have someone that is still a joint holder of a bank account. You will want to clean up any of these issues before you start the home purchasing process.

Look for credit cards that you no longer use. You might want to close some, but keep in mind that lenders like to see long-standing credit relationships. Consider keeping your oldest credit card open, even if you are not currently using it. Having too many lines of open credit can be viewed as a negative value on your credit report. With this in mind, consider closing newer credit cards, which aren't in use.

Carefully select your mortgage lender.
Consider interviewing multiple lenders, to aid in selecting which one you will use. Remember, you'll be establishing a long-term relationship with that lender. Check for references and check with the Better Business Bureau to verify that the lender is reputable. Make sure that you are comfortable with that potential partner.

Keep in mind that a lender might try to tempt you with a slightly lower interest rate. This is especially common with Internet based lenders. Keep in mind the whole picture, a low interest rate is only one factor to consider. Be sure to calculate the entire cost of the loan, not just the monthly cost. What will the mortgage cost you over twenty years?

You want your mortgage lender to be available to answer any questions you may have. The lender can provide you financing options and help you determine what you will be able to afford. In addition, the lender can help you review your credit report and give you advice on how to improve it, if needed.

Compile a list of needs and wants in your life.
This includes the home (backyard, two bedroom, etc.), the lender (flexibility, established, good references), your life goals and ambitions. Where do you want to be (in your life) in twenty years? Do you want children, college expenses, etc.? All of these types of decisions will have some effect upon the decision of purchasing a property and how you will finance that property.

It is easy to desire every possible home option, but the reality is you will have to work within a budget. Before looking at houses, determine what you really need and which things you could live without. Consider things like number of bedrooms, number of bathrooms, lot size, neighborhood, school system, commute time, and proximity to shopping and restaurants.

At 1st Alliance Lending, we work closely with first time homebuyers. We help them through every step of the home buying process. We want to be your trusted partner. Contact us to learn more about purchasing your first home.

The Advantages of New Home Mortgage Loans

Home mortgage loans now offer shorter waiting periods among other advantages for families with extenuating circumstances

The Federal Housing Administration’s new home mortgage loans suggest that millions of families are finally being rescued from the housing market crash of 2008. As of August of last year, borrowers who have faced extenuating circumstances have a program specifically designed for their financial struggles.

If you have faced foreclosure or another economic event that significantly reduced your credit score and caused you to lose your home and your job, you may be eligible to apply. Check out these top-four advantages of beginning Back to Work home mortgage loans.

1. Shorter waiting periods
After foreclosure, short sale and deed-in-lieu, the typical waiting period is three years. The waiting period after bankruptcy is normally two years and other economic events can last up to seven years. Through the “Back to Work” program, families battling extenuating circumstances can apply for a new mortgage only twelve months after losing a home. This is a dramatic and life-altering change for lenders and their borrowers.

In order to qualify for the reduced waiting period, the borrower must be able to provide proof of an economic event and a reduction in income of 20 percent or more for a period of at least six months. This can be documented through a federal tax return, W-2 form or written verification of employment.

2. Efficient rates
The “Back to Work” program allows families to put 3.5 percent down with no premiums nor fees at closing. Rates are the same as other FHA loans. Your mortgage rate will be unaffected by the “Back to Work” program. With other lending programs, a poor credit history could significantly change your repayment schedule. The program does not accept borrowers with credit scores below 500. However, borrowers with no credit score remain eligible.

3. Housing counseling
The FHA requires “Back to Work” borrowers to attend at least one hour of one-on-one housing counseling. Some borrowers may frown upon this requirement, but it is harmless and very beneficial to the borrower. During counseling, borrowers learn how to become better prepared for future financial shocks, how to avoid scams, and how to create and manage a household budget. The FHA hopes by requiring counseling, borrowers learning these actions will help prevent reoccurrence. The counseling agency must be approved by the U.S. Department of Housing and Urban Development. For a list of approved agencies, visit www.hud.gov.

4. Guidance designed for your situation
Lenders who provide the “Back to Work” program are understanding and willing to work with your financial situation. Good lenders are good listeners. Although applying for a new home loan after an economic event is stressful, lenders are excellent communicators and will disclose all fees and costs upfront. Search for a lender who has your best interest. Mortgage lenders should view you as a life-long customer, since you could be committing to a long-term repayment schedule.

Shopping For Your First Home Mortgage Loan

Shopping for your first home can be one of the most exciting events in your life. To ensure your home shopping experience goes smoothly and you get the best rate possible on your first home mortgage loan you will want to have your finances in order and be prepared to put a down payment on the home.

How To Improve Your Loan Terms
1. Pay off any outstanding balances on your credit cards before applying for your loan.

2. Pay creditors off and ask that they remove your account from any credit history.

3. Rebuild your credit score. (This will help you tremendously, as it will lower your interest rate, down payment requirement and the overall condition of your loan terms.) You will be glad you took the time to correct your credit history and score, as this will allow you to receive better loan terms. With better terms, you will be able to find a mortgage loan that you are confident and comfortable with, which will make paying for your new home much easier to manage.

When To Apply For Your Home Mortgage Loan
Applying for your mortgage loan before you begin shopping is a great option, as this will allow you to be pre-approved for your loan amount and make you 100% aware of your shopping budget. This also allows you to submit offers on the home that you are most interested in without having to wait weeks to see if the lender will approve the amount.

If you are serious about buying your first home we would like to guide you about loan options and terms that may fit your circumstance. Our focus is to create loans that are sustainable for our borrowers so they are set up for homeowner success, now and in the many years to come. Feel free to Contact us today about your options for a new home loan.

New Home Mortgage Loan Process for First Time Buyers

Are you a new home-buyer wondering what the process is for obtaining a mortgage?  It is not as complicated as it seems especially if you have a lender working as a partner with you.  At 1st Alliance Lending we will be on your team as you navigate the loan process.

Submit a Loan Application

The first step is to submit a loan application.  You will need to include proof of your income by submitting 30 days worth of pay stubs.  You will provide your drivers license and social security card so a credit history can be examined.  Tax forms and W-2s from the past 2-3 years are also requested.  You may be requested to provide bank statements and a list of your addresses for the past 7 years.  If you have had a financial hardship in the past that you would like to explain you can include a Hardship Letter.  Many financial institutions will not take into account job loss or illness of a family member impacting previous credit performance.  At 1st Alliance Lending we want to know the details and will take information provided in a Hardship Letter into account when evaluating your application.  

If all of this documentation seems like a lot of work just realize that after you submit your loan application your homework is done.  Now it is time for 1st Alliance Lending to do the work.  

)

Application is Processed

After your application is completed we will provide you a Good Faith Estimate (GFE), which gives our best estimate of the fees and costs you will incur to obtain a mortgage.  We provide the GFE within 3 days of application as required by law.

Processing the application typically takes 1 week and includes verifying it has been filled out completely and accurately.  We evaluate public records to see if there are any liens.  Occasionally additional information or documentation may be requested.

Options Presented

You will be presented the rate and loan options that you qualify for.  In general, better credit history equals a better interest rate and more options available.  Keep in mind that 1st Alliance Lending doesn't just rely on your credit number but looks at the whole picture to determine which loan is appropriate for you.  We strive to provide you with a mortgage you can afford long term.

If you are ready to partner with 1st Alliance Lending to procure a new home mortgage loan contactus.  We would be happy to be on your team and walk you through the mortgage process.