Tag Archive for: Local Pre-Approval

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Can you get a mortgage with no credit?

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Sometimes young clients who have not established credit are interested in getting home financing. Other times, clients who have never taken out any credit and pay cash for everything decide it is time to buy but don’t have enough cash.

How did those folks get into a home loan?

With most sub-prime loans going by the wayside, options for these people are limited but not completely closed.

FHA has a no credit loan when a borrower has no credit score but can prove a 12-month pay history on three lines of non-traditional credit.

For example, if someone has utility bills, car insurance, rent, or even something like Netflix, they may be able to get financing. We simply have to get the pay history from the creditor to show they have been on time for 12 months. Note that if they have any derogatory credit like collections, they can negate this option.

Oftentimes, clients with no score also have no non-tradition credit they can add. These clients will need to establish a score. This is not as difficult as it sounds.

If they cannot get a traditional credit card, they may be able to get a secured credit card. Most banks and credit unions will give a credit card that is secured by cash. There may be a minimum amount required, but usually $300 deposited with the bank can secure a card. The consumer then uses that card just like any other credit card to establish credit. This will take about six months and will be good credit for them as long as the balance is under 30 percent of the high credit limit when credit is pulled.

Pitfalls: Many people think that paying off derogatory credit (like collections) or closing out accounts with late payments is s good thing. While this may be the right thing to do, it may not help their score. Having new activity on a derogatory account can often LOWER the score!

Every situation is unique. That is why a consultation with a knowledgeable advisor is the best course of action. Call us for more details on how to establish credit and what is not advisable given your situation.

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Success Story: The Fredricks Family

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As part of our “Success Story” series, we’d like to introduce you to the Fredricks Family, a group of parents, siblings, cousins and friends, that have trusted Michigan Mortgage to guide them home. This is their story.

At Michigan Mortgage, it’s a family affair. We employ husband and wife teams, cousins and life-long friends.

Often times, the families we work with are related too. It’s an honor and a privilege when multiple generations – like members of the Fredricks Family – put their trust in Michigan Mortgage.

It all started many, many years ago. In third grade, in fact. Long before Rob Garrison was a licensed Loan Officer, he spent his days on the playground with Brian Fredricks. A friendship was born and it has lasted for nearly half a century.

“My dad, Brian, originally recommended Rob to me,” said Zach Fredricks. Because Brian had closed a loan with Michigan Mortgage years ago, and the two have been friends for so long, Zach was convinced that Rob and his team were the right fit.

He made the right choice.

“Early in the process, Rob advised us on ways in which to improve our credit score and drop off hundreds of dollars a month in interest making our dream home affordable,” Zach said.

“There were several times Team Garrison saved the deal,” he continued. “During the appraisal, when calculating cash to close. It’s unlikely that we would have been able to make the home sale happen without their expertise.”

After Zach moved into his dream home, his cousin Conor met with Rob to begin the home-buying process for the first time.

“Being a first-time home buyer, I wanted to work with someone I could have an open discussion with about my goals and how to best achieve them,” Conor said. “I trusted Rob to guide me through the process and was always comfortable asking him even the simplest questions.”

“I was purchasing a house from a family friend without a Realtor, so I needed someone to fill in any areas that typically would be handled by an agent and knew Rob would be willing to work with me.”

“I mention Rob anytime I talk with friends or family looking to get into a new place,” Conor said. “At the very least he is a great person to talk to with open questions and he can educate you on parts of the process you may not be familiar with. He knows how to layout your options clearly and help you hit your financial goals.”

The family tree doesn’t stop there. Before Zach and Conor worked with Team Garrison in 2018, they worked with Maury and Karen Fredricks and their daughter, Sandi.

“We initially went to Rob because he is a friend of ours,” said Karen Fredricks. “We had a complex issue and wanted to deal with someone we trusted with our personal information.”

“Rob and his team have a turn key system that is fast and efficient,” Karen said. “He proved to get the job done when others couldn’t.”

“I really couldn’t believe how fast Rob and his team got our deal done, it was within weeks,” she said. “It seemed like everyone had a task to complete the process from start to finish and their response to questions and requests was second to none.”

Team Garrison always found a way for the Fredricks Family, and because of that, they would recommend Michigan Mortgage “a thousand time more” because “they are truly the best.”

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Is there a “perfect” time to buy a home?

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No matter what is happening with home prices and mortgage interest rates, the right time to buy a house is when you are ready to take on the financial and emotional responsibilities of homeownership.

It’s easy to fall in love with a house, but committing to one for the long term can be more challenging.

“Buying a home is a serious investment,” said Loan Officer Rob Garrison. “Before you start shopping home listings, it is important to sit back, do your homework and analyze your personal and financial goals as well as your lifestyle before you take the plunge.”

“Don’t buy just because everyone else is, make sure you are ready.”

Start by answering these questions.

1. Why do you want to buy?
An important first step is to evaluate your reasoning behind wanting to buy. What do you hope to gain from purchasing a home? How does that fit into your short and long term goals? Consider how long you plan on spending time in one place, as it can tie you to that place. It is
important to take your career into consideration as well as the possibility of an expanding family.

2. Do you know what you can afford and still continue to live the lifestyle you are accustomed to?
You will likely need to take out a mortgage. It is important to begin by checking your credit score from three different reporting bureaus to assess whether you are able to obtain a mortgage. Then, there is the question of your down payment. There are zero down government options as well as 3-20 percent options, depending on your situation. Looking at your cash savings is an important first step.

3. Will you be staying there for five years or more?
When you purchase a home, the general rule is that you want to be sure you will be in the same location for at least five years. Otherwise, you are likely to take a hit financially. Of course this depends on the area you live in.

4. Do you have 3-6 months of emergency savings?
A good rule of thumb is that you have 3-6 months of living expenses in an emergency fund for unforeseen events. Home ownership also requires maintenance and repairs, so a slush fund is recommended to pay for repairs as they crop up.

If after careful evaluation you aren’t ready to purchase a home, there are great short term options to fit your needs. If you are looking for guidance to get yourself ready to purchase, enlisting a trusted, knowledgeable mortgage advisor is a great first step to realizing your dream,
whenever that might be!

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Tips that Make Getting a Mortgage a Breeze in 2019

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Tip #1: Start early. One of the most important mortgage tips you should know before you get started is to understand all of your financial details. This makes the mortgage process go much more smoothly and eliminates surprises throughout the process.

Tip #2: Check your credit report for errors. Review your credit report to ensure that there are no errors such as incorrect addresses, phone numbers, names or accounts that show up. Your mortgage lender can give you the most detailed credit overview. There are multiple online sources that will provide a free credit report as well.

Tip #3: Work with a qualified lender before making repairs to your credit score on your own. A professional will consult you so that you don’t end up inadvertently lowering your score by trying to repair it on your own.

Tip #4: You can avoid private mortgage insurance if you have 20 percent down. If you do not have 20 percent down, there are multiple loan programs available that require a lower down payment. Your credit score and other variables come into play, so it’s not a one-size-fits-all process.

Tip #5: Make sure you can afford the payment comfortably. Most mortgages have a debt-to-income (DTI) ratio requirement. The DTI is the amount of monthly debt payments you have compared to your monthly income. Most mortgages will allow a maximum DTI of 41 percent; however, this number is not the same for every borrower nor for every loan. Ideally, you want to be comfortable and not stretch yourself too thin so you still have cash on reserve.

Tip #6: Know the right kind of loan for your unique situation. There are multiple loan options available. With conventional, FHA, rural development, VA, doctor loans and MSHDA options, as well as the streamlined 203(k) program, there are numerous nuances and options available to meet every borrower’s unique situation. Make sure you work with a knowledgeable loan officer that will take the time to educate you.

Tip #7: Have your documents ready so you don’t slow down the loan process. The mortgage process requires a great amount of paperwork, so having as much documentation beforehand can save time and energy. A loan officer will need to verify your income, tax documents, employment and a slew of other things.

Here is a checklist of some of the documents you may need (not all will apply to your unique situation).

  • Bank statements
  • Tax returns from the previous two years
  • W2s from past and current employers
  • Pay stubs
  • A list of your debts
  • A list of your assets
  • A gift letter if you’re using gift funds
  • Proof of timely rental payments
  • Credit Report
  • Profit and loss statements
  • Signed purchase agreement
  • Proof of additional income
  • Divorce decree
  • Bankruptcy paperwork

Depending on the loan and your credit history, you may need additional documentation not listed above. To better understand the process and be the most prepared, reach out to your trusted loan officer. We’re always here to help.

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How to Save for a Down Payment

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Even if you don’t plan on buying a house for several years, you have probably started thinking about how to save for a down payment. Saving for a down payment means slowly setting aside small amounts of money and there are a number of ways to do that.

1. Plan ahead. Before you begin saving for a down payment for a home, you first need to know approximately how much you will have to save. Plan to sit down with a mortgage lender who will let you know what you qualify for.

In general, your housing expense should not exceed 29 percent of your monthly income. So, if your monthly income is $3,750 you can safely allocate $1,087 to your future house payment.

The $1,087 will include mortgage principal and interest, homeowners insurance, private mortgage insurance (PMI), real estate taxes and homeowners association (HOA) dues, if any. With interest rates at about 5 percent, this will put you into a mortgage loan ranging from $130,000 to $140,000.

To arrive at the amount that you can afford to pay for a house, you’ll have to add the down payment on top of that. So, if you are putting 5 percent down you would be looking at a sales price of about $135,000 to $145,000.

2. Determine your timeframe and budget. You will have to make some room in your budget to make sure that your savings are doable. Managing a tighter budget is a good way to prepare you for managing the type of tighter budget that home ownership requires.

3. Find the best way to save your down payment. Typically, since the money that you are investing will be used in a specific time frame, you should not save in a risk type investment (stocks). Instead, the money should be saved in a safe vehicle like your savings account or short-term CD.

4. Set up an automated savings plan. Set aside a certain percentage of or dollar amount of your regular pay to go directly into a savings account or money market account. This will remove the temptation and ability to spend the money for other purposes.

5. Windfall savings. You can shorten the savings period by including income tax refunds, gifts received, bonuses, and large commission checks and even the sale of personal assets into your down payment savings account.

If you have questions about down payments and costs associated with owning a home, please reach out to your trusted mortgage lender.

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Tips to Establish Credit for the First Time

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Picture this: You live rent-free with a family friend, own your car outright, you are debt free and pay everything in cash and all the while you have been able to save thousands of dollars since starting a new job three years ago.

You’re in the perfect position to buy your dream home. Right?

Not exactly.

“Before applying for a mortgage, clients really need to understand the importance of having established credit and having a good credit score,” said Jill Dobb, loan officer assistant at Michigan Mortgage. “Buying a home requires you to have credit and the better the credit score the better the interest rate you will qualify for.”

“Many believe that just because they don’t have any debt, they are ready and financially capable of financing a home, which oftentimes is not the case.”

Living debt free is a goal for many, but in the eyes of the credit bureaus, debt free sometimes means you’re a credit “ghost,” meaning you’ve been inactive and nothing has reported to the bureaus for six months.

If you’ve had your credit pulled by your trusted mortgage lender and your score comes back 0, Dobb offered a few pieces of advice.

“We suggest that our clients with a zero credit score apply for a credit card or get a secured credit card at any national bank,” she said. “They need to use that card wisely to obtain a good credit score.”

“We recommend keeping all of your credit card balances below 30 percent of your credit limit and make sure all of your payments are made on time.”

If you have absolutely no credit score with all three credit bureaus, it will take a full 6 months to obtain a score with a revolving line of credit.

If you need additional information about credit improvement, or are interested in getting pre-approved for a mortgage, give us a call. We’d be happy to guide you in the right direction.

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Why a Doctor Loan?

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For a new physician excited about the possibility of buying a home but carrying the weight of heavy student debt, a physician mortgage can be a great springboard for entering the housing market.

The physician loan (also known as a doctor loan) is designed to help a unique population that often has a high amount of student loan debt and minimal savings, as well as a new job contract that is required by lenders.

These loans are available for doctors, dentists, podiatrists, ophthalmologists and veterinarians.

The main advantages of doctor loans are access to financing with little to no money down and no required private mortgage insurance.

For new physicians, doctor loans offer a fast path to home ownership that would not be available otherwise. Last year, 84 percent of graduates from medical school reported having student loan debt; the median amount was $190,000 (according to the American Association of Medical Colleges).

Here’s a list of the program highlights.

  • 15-year fixed
  • No Mortgage Insurance
  • Loan amount up to $650,000
  • Minimum Credit Score: 700
  • Not available for Construction Loans
  • Not available for investment properties, second home or manufactured housing
  • Maximum 50 percent debt-to-income ratios

The perks of doctor loans are appealing for medical professionals who are ready to settle down after the grueling years in medical school and residency.

Physician loans are not a on size fits all option. It is important to sit down with a trusted mortgage professional and consider your individual situation to decide whether or not one is right for you.

For more information about doctor loans, visit www.michmortgage.com or contact one of loan officers. We’re here to help.

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How is the value of a home appraised?

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You’re pre-approved for a mortgage, you found your dream home and put in an offer. It’s been accepted! Before you can take possession, an appraisal is necessary.

Will you be able to move forward with the purchase? That depends on the loan-to-value of the home you’re pursuing.

Here’s what Eric Ridlington, owner of Prestige Appraisal Service, had to say about the process.

Michigan Mortgage: How is the value of a home appraised?

Eric Ridlington: Simply put, an appraisal consists of a comparison of your home to the most similar, recent and nearby sales in a given area. The appraiser will view your home inside and out, and use that for the basis of selecting comparables.

MM: What factors do you look at when appraising a home?

ER: The appraiser should consider all features including – but not limited to – the site, design, quality, condition, size, room count, added features and overall appeal to the market. An appraiser should consider all factors of a home and/or property as the typical buyer would, but also with a professional eye because of their experience in their given market and neighborhood.

MM: Why is the appraisal value so important in the lending process?

ER: The value of your home assists the lender in determining to approve your loan or not, or to what extent to agree to lend. Meaning, how much money to lend you. They’ll use the appraised value to calculate loan-to-value.

MM: Thanks for the great information! If a seller is interested in increasing the value of their home, what updates or upgrades should be made?

ER: The most common updates which impact value are the big items such as siding, kitchens, bathrooms, etc. However, to get a big bang for your buck, flooring, paint and light fixtures go a long way because those items cover such large areas and painting can be done without a professional in most instances, if you’re willing.

Not only is Eric Ridlington an appraisal expert, he’s also a professional member of our Service Rewards program that offers home discounts for honorable service. Why?

“The Service Rewards program appeals to me because it benefits many people who work in the community in careers which help so many people,” he said. “I see it as an opportunity to say thank you for their service.”

If you have questions related to the appraisal of your home, give us a call at 231-799-2606 or visit our website. As always, we’re here to help!

Could an FHA loan be the loan for you?

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What is an FHA loan?

FHA stands for the Federal Housing Administration, which is a government agency. The FHA was created by the Housing and Urban Development Department (HUD) to increase homeownership in the U.S.

This loan was designed to allow more home buyers to qualify for home loans by allowing for lower credit scores and lower down payment requirements. FHA loans only require 3.5 percent down payment and in some circumstances, allow for credit scores as low as 580. The borrowers are required to pay mortgage insurance monthly (calculated at .85 percent of the loan amount) as post of the total payment.

FHA Credit Score Requirements

To qualify for a loan, the FHA may allow for credit scores under 580, but the borrower typically has to put more money down as most lenders do not wish to assume the risk, especially after the housing crisis of 2008. If your credit score is below 580, it is highly recommended that you improve your credit score before applying for a mortgage.

Who are candidates for FHA loans?

  • Borrowers with a low credit rating
  • Borrowers that cannot afford a large down payment
  • Borrowers using a gift for a down payment
  • Borrowers with high debt-to-income ratios
  • First time home buyers

Down Payment Requirements

Perhaps the most significant benefits of an FHA loan is the 3.5 percent down payment requirement. Many conventional programs require down payments ranging from 5 percent to as high as 20 percent.

As an example, if you are purchasing a $200,000 home, a private loan will require no less than 5 percent down, or $10,000. With an FHA loan, at 3.5 percent down, the down payment would be $7,000 for a $200,000 home.

Each home buyer has a unique set of circumstances that impacts the type of loan that will be best. Make sure you work with a local lender that spends the time to educate you so you are able to choose the best loan for your situation.

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Tips for Buyers in a Seller’s Market

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Don’t let your dream home slip through your fingers. A solid pre-approval letter will give you a leg up.

Getting preapproved and having a dependable, air-tight written pre-approval from a respectable lender could never be more important than it is today.

In what is called “a seller’s market” multiple offers are being made days and sometimes hours after a property is listed on the market. We have seen purchase agreements that are tens of thousands of dollars more than list price.

This seller’s market has created some unique challenges that serious buyers need to be prepared for.

1. Standing out among the crowd. Anytime you have a competitive situation, you want your offer to stand out among all the others. The best way to do this is to submit your pre-approval letter with the offer. At a minimum, the pre-approval letter should tell the seller that the lender has reviewed your credit, income and assets.

2. Seller concessions. For a long time, seller concessions (i.e. a clause where the seller contributes to the buyers closing costs and prepaid costs) have been common place. However, in this market, sellers are getting more reluctant to except those terms. Aside from this reducing the net proceeds to the seller, sellers understand that many appraisals are not coming in at the contract price. Until comparable sales catch up with the market, this may prove to be an issue.

3. Large earnest money deposit. Another attractive strategy for buyers is to put down a large earnest money deposit. This says to the seller that you are serious about their house and are willing to put money on the table. If The buyer decides to walk away from this agreement, they would lose those funds. I have also recently seen buyers agree to have an earnest money deposit being non-refundable for any reason if buyer does not obtain financing.

4. Quick close date. Buyers are offering to close their transaction faster than other offers. This is attractive to a seller that is trying to purchase another property. Unfortunately, those promises are dependent on more than just the lender. To get from start to finish on a closing, there must be cooperation from appraisers, title companies, realtors, borrowers, sellers, as well as the lender. Nevertheless, in this market it has never been more important to have a lender that has all of their ducks in a row so that the buyer can get to the closing table as quickly as possible.

5. The added phone call. For many of my clients, I will personally call the listing agent after I send a pre-approval letter to let them know that this buyer is good to go. It’s amazing how far that will go to get your offer excepted.

6. Out of town or unknown lender. I’ve heard multiple realtors tell me that they do not except pre-approval letters from lenders they are not familiar with. Right or wrong, this is an important reason to get approved from a local reputable lender.

In a market where your pre-approval is more important than ever, it is imperative that borrowers connect early and thoroughly with the right lender. We’re here to help!