A First Time Homebuyer's Complete Guide to Credit And Qualifying

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An overview of how credit affects your loan approval, how to improve your credit scores. Also, details about what is required for a loan application and what the lenders will look at in qualifying for a loan approval

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A First Time Homebuyer's Complete Guide to Credit And Qualifying

  1. 1. First Time Home Buyer’s Complete Guide to Credit and Qualifying Thank You for Attending Class will begin at 7:00pm Presented By: Broadview Mortgage Corporation Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]
  2. 2. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Purpose and Goals of this Class </li></ul><ul><li>To Create and Empower Home Owners </li></ul><ul><li>Educate you about the current California Real Estate market and Financing Options </li></ul><ul><li>Empower you with the ability to make educated decisions in the home buying process </li></ul><ul><li>Give you the confidence to enter into the housing market without risk </li></ul>
  3. 3. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Topics We Will Cover In This Class </li></ul><ul><li>An Introduction to Your Credit Report </li></ul><ul><li>The Loan Application Process </li></ul><ul><li>The Loan Qualification Process </li></ul><ul><li>Wrap Up and Take Aways </li></ul>
  4. 4. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Ask Questions throughout presentation </li></ul><ul><ul><li>You may type questions in at any time during the presentation – Questions box on your screen </li></ul></ul><ul><ul><li>Home buying specialists are standing by to answer your questions during the presentation </li></ul></ul><ul><ul><li>The only dumb question is the one you don’t ask </li></ul></ul><ul><li>Write number down now in case you get disconnected </li></ul><ul><ul><li>1-866-667-6724 </li></ul></ul>
  5. 5. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>An Introduction to your Credit Report </li></ul><ul><li>What you need to know about your Credit </li></ul><ul><li>Installment Loans and Revolving Credit </li></ul><ul><li>3 Steps to Improving your credit scores </li></ul><ul><li>Wrap up and Take Aways </li></ul>
  6. 6. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>What you need to know about your Credit </li></ul><ul><li>Your Credit is a Current Snap Shot </li></ul><ul><ul><li>Creditors report on different cycles </li></ul></ul><ul><li>Not knowing how to build good credit can result in bad credit </li></ul><ul><li>How to get your truly FREE Credit Report </li></ul><ul><ul><li>FTC Credit Report Site www.ftc.gov/bcp/conline/edcams/freereports/index.html </li></ul></ul><ul><ul><li>www.AnnualCreditReport.com </li></ul></ul><ul><li>Free credit reports from TV are not FREE </li></ul><ul><li>Consumer credit reports do not report the same as mortgage inquiries </li></ul>
  7. 7. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>What you need to know about your Credit </li></ul><ul><li>Credit reports are not always right </li></ul><ul><ul><li>Creditors are much quicker to report negative items than they are to remove them </li></ul></ul><ul><li>How credit can affect your loan approval </li></ul><ul><ul><li>Can trigger “risk based pricing” – increase cost </li></ul></ul><ul><ul><li>FHA does not penalize for credit scores </li></ul></ul><ul><li>12 Month payment history </li></ul><ul><ul><li>Most lenders are looking at past 12 months </li></ul></ul><ul><li>Credit Reports show past employers, past addresses, AKAs, social security number and birth date deviations </li></ul>
  8. 8. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Installment Loans and Revolving Credit </li></ul><ul><li>What is an Installment Loan </li></ul><ul><ul><li>Fixed term </li></ul></ul><ul><ul><li>Fixed Payments </li></ul></ul><ul><ul><li>Auto, Education, Furniture, Cash Call </li></ul></ul><ul><li>What is a Revolving Credit Line </li></ul><ul><ul><li>Credit Cards </li></ul></ul><ul><ul><li>High credit limit / Balance </li></ul></ul><ul><li>How they differ / How they are the same </li></ul><ul><ul><li>On time payments the same </li></ul></ul><ul><ul><li>How Balances are treated are different </li></ul></ul><ul><ul><li>Number of months remaining </li></ul></ul>
  9. 9. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>3 Steps to Improving your credit scores </li></ul><ul><li>Step 1 – Know your Do’s </li></ul><ul><ul><li>Do Order your free annual credit report </li></ul></ul><ul><ul><ul><li>Or have a lender run your credit </li></ul></ul></ul><ul><ul><li>Do Educate yourself about your credit </li></ul></ul><ul><ul><li>Do maintain at least 3 revolving accounts </li></ul></ul><ul><ul><li>Do keep balances on revolving credit lines under 50% </li></ul></ul><ul><ul><li>Do Treat your revolving credit cards like an AMEX </li></ul></ul><ul><ul><li>Do pay your “Reported” debts on-time </li></ul></ul><ul><ul><li>Do ONLY use “referred” credit repair services </li></ul></ul>
  10. 10. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>3 Steps to Improving your credit scores </li></ul><ul><li>Step 2 – Know your Don’ts </li></ul><ul><ul><li>Don’t be afraid to speak to your creditors </li></ul></ul><ul><ul><li>Don’t take out “quick fix” loans with extremely high interest rates </li></ul></ul><ul><ul><li>Don’t max out your credit cards </li></ul></ul><ul><ul><li>Don’t apply for every credit card application you receive </li></ul></ul><ul><ul><li>Don’t transfer credit card balances to one card </li></ul></ul><ul><ul><li>Don’t Make payments more than 30 days late </li></ul></ul><ul><ul><li>Don’t use credit repair services without a personal referral from someone </li></ul></ul>
  11. 11. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>3 Steps to Improving your credit scores </li></ul><ul><li>Step 3 – Take Action Now </li></ul><ul><ul><li>Manage your existing credit lines </li></ul></ul><ul><ul><ul><li>Pay down balances on revolving lines </li></ul></ul></ul><ul><ul><ul><li>Increase high credit limits on revolving lines </li></ul></ul></ul><ul><ul><ul><li>Reduce installment to 10 months remaining </li></ul></ul></ul><ul><ul><li>Dispute derogatory items on Credit Report </li></ul></ul><ul><ul><ul><li>Order free credit report to identify derogatory reporting </li></ul></ul></ul><ul><ul><ul><li>Order online report for bureaus that are showing derogatory accounts </li></ul></ul></ul><ul><ul><ul><li>Dispute all incorrect or inaccurate information </li></ul></ul></ul>
  12. 12. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Wrap up and Take Aways </li></ul><ul><li>There is no Mystery or Magic to credit reporting </li></ul><ul><li>It’s never too late to get on the right track and improve your credit rating </li></ul><ul><li>Knowledge is Empowerment – Educate yourself about good credit practices </li></ul><ul><li>6 Month Plan – Starting from Scratch </li></ul><ul><li>Need it Now – Credit Repair Services </li></ul><ul><ul><li>Costs range from Hundreds to Thousands </li></ul></ul><ul><li>Perfect credit not required for FHA loans </li></ul>
  13. 13. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Application Process </li></ul><ul><li>2 years Housing History </li></ul><ul><li>2 years Income / Employment History </li></ul><ul><li>Assets and Liabilities – Credit History </li></ul><ul><li>Legal Declarations and HMDA Reporting </li></ul>
  14. 14. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Application Process </li></ul><ul><li>2 years Housing History- Pg 1 </li></ul><ul><ul><li>Rental history from Apartment / Mgmt Company </li></ul></ul><ul><ul><ul><li>Verification of rents – verify timely payments </li></ul></ul></ul><ul><ul><li>Rental history from Private Party landlord </li></ul></ul><ul><ul><ul><li>12 months cancelled checks showing monthly payments </li></ul></ul></ul><ul><ul><li>Living with Parents / Family </li></ul></ul><ul><ul><ul><li>No documentation required – must be truthful </li></ul></ul></ul><ul><ul><ul><li>Cannot not have residence history on credit </li></ul></ul></ul>
  15. 15. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Application Process </li></ul><ul><li>2 years Income / Employment History- Pg 1 </li></ul><ul><ul><li>If less than 2 years employment, may ask for schooling in similar subjects as line of work </li></ul></ul><ul><ul><li>Ok to change jobs if line of work is similar </li></ul></ul><ul><ul><li>Ok to change line of work if history is at least 2 years </li></ul></ul><ul><ul><li>Ok to go from Self Employed to employed (W2) with less than 2 years “employed” if in same line of work </li></ul></ul><ul><ul><li>Self employed must show minimum of 2 years </li></ul></ul><ul><ul><ul><li>Tax returns, business license </li></ul></ul></ul><ul><ul><li>Income documentation is 2 years of tax returns or W2’s and most current 30 days pay stubs </li></ul></ul>
  16. 16. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Application Process </li></ul><ul><li>Assets and Liabilities / Credit History- Pg 2 </li></ul><ul><ul><li>Sourced and seasoned assets </li></ul></ul><ul><ul><ul><li>Must show in account for 60 days </li></ul></ul></ul><ul><ul><li>Assets must cover closing costs and reserves </li></ul></ul><ul><ul><ul><li>Reserves not required for FHA </li></ul></ul></ul><ul><ul><ul><li>Reserves = compensating factor for approval </li></ul></ul></ul><ul><ul><ul><li>Must be able to use funds to be reserves </li></ul></ul></ul><ul><ul><li>Gift funds can be used when allowed </li></ul></ul><ul><ul><ul><li>Must provide paper trail if deposited </li></ul></ul></ul><ul><ul><ul><li>Best to always wire directly into escrow </li></ul></ul></ul><ul><ul><li>Liabilities imported from Credit Report </li></ul></ul><ul><ul><li>Present and Proposed housing expenses </li></ul></ul>
  17. 17. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Application Process </li></ul><ul><li>Legal Declarations / HMDA Reporting- Pg 3 </li></ul><ul><li>Declarations </li></ul><ul><ul><li>Discloses law suits </li></ul></ul><ul><ul><li>Bankruptcy history </li></ul></ul><ul><ul><li>Co-ownership / Co-maker on note </li></ul></ul><ul><ul><li>Intentions of occupancy </li></ul></ul><ul><ul><li>Past occupancy </li></ul></ul><ul><li>HMDA Reporting – Monitors discrimination </li></ul><ul><ul><li>Ethnicity & Race </li></ul></ul><ul><ul><li>Sex </li></ul></ul><ul><ul><li>Acknowledgment and Authorization </li></ul></ul>
  18. 18. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Qualifying Process </li></ul><ul><li>Automated Underwriting Engines </li></ul><ul><ul><li>Fannie Mae is standard </li></ul></ul><ul><ul><li>FHA DU </li></ul></ul><ul><li>Risk Assessment Underwriting Model </li></ul><ul><ul><li>Income of household </li></ul></ul><ul><ul><li>Assets (reserves) </li></ul></ul><ul><ul><li>Credit profile </li></ul></ul><ul><ul><li>Equity (loan to value) </li></ul></ul><ul><ul><li>Loan to Value </li></ul></ul>
  19. 19. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>The Loan Qualifying Process </li></ul><ul><li>Compensating Factors </li></ul><ul><ul><li>Debt to income </li></ul></ul><ul><ul><li>Months of reserves </li></ul></ul><ul><ul><li>Credit Scores </li></ul></ul><ul><ul><li>Loan to Value </li></ul></ul><ul><li>Manual Underwriting – FHA Only </li></ul><ul><ul><li>Actual FHA approved underwriter reviews all documents – much more restrictive </li></ul></ul><ul><li>Debt to Income Ratios are most restrictive </li></ul><ul><ul><li>Maximum purchase price will be determined by maximum payment / DTI </li></ul></ul>
  20. 20. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Wrap up and Take Aways </li></ul><ul><li>Getting approved for loan is the first step </li></ul><ul><li>You cannot get approved without completing the loan application and getting an underwriting approval </li></ul><ul><li>Begin gathering your documents and putting together all information for loan approval </li></ul><ul><li>If credit challenges prevent approval now, at least you know and you can work on it </li></ul>
  21. 21. First Time Home Buyer’s Complete Guide to Credit and Qualifying <ul><li>Wrap up and Take Aways </li></ul><ul><ul><li>We are a direct Lender for all CalSTRS, CalPERS, CalHFA, FHA & VA, Conventional and Jumbo Loans </li></ul></ul><ul><ul><li>We can Refer you to a qualified Real Estate Agent in your area </li></ul></ul><ul><ul><li>We are more than happy to be your “second opinion” if you are already working with someone </li></ul></ul><ul><ul><li>We are committed to educating and empowering homeowners - Join us for future classes </li></ul></ul>
  22. 22. Upcoming Home Buyer Classes <ul><li>A Complete Guide to Buying Foreclosures and Short Sales </li></ul><ul><li>Real Estate Agent Round Table </li></ul><ul><ul><ul><li>Open Q&A with Experienced Buyer’s Agents talk about buying home in this market </li></ul></ul></ul><ul><li>A Complete Guide to FHA Purchase Loans </li></ul><ul><li>A First Time Home buyer’s Complete Guide to Closing Costs and the Good Faith Estimate </li></ul><ul><li>Check back often for upcoming classes </li></ul>
  23. 23. Thank you for Attending Please Join us for one of our other educational home buyer classes Presented By: Broadview Mortgage Corp. Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]

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