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Buying a's not as bad as you think...


Being a "younger" real estate agent, I tend to get a lot of first-time home buyers. Some have tons of questions, WHICH I LOVE, because I'd rather you be completely in "the know" when you are going through the experience of buying your first home - NO SURPRISES! Nothing is worse than sitting in a closing and the buyer gets SHOCKED by something that the attorney or other Realtor says...AWKWARDDDD!! If you are someone who is scared to buy a home just because you don't know what to expect, well, I'm here to tell you it's not as bad as you think!! Here are some things that an inexperienced home buyer should know:

1) The first thing you should do is go to your bank and get preapproved. The reason it is good to do this is because, first of all, with the rates low, you may can afford more house than you think! Or on the other end, as a Real Estate Agent, I sure wouldn't want to get your heart set on a home that you can't afford! ALSO, different types of loans (FHA, USDA/Rural Development, VA, Conventional, In-House) all have different sets of guidelines or requirements for their loans. For example, with an USDA Loan, AKA a Rural Development loan, it only covers certain "rural" areas. Now, this doesn't always mean exactly what it sounds like. The entire county of Jones County, Mississippi is covered under USDA, even in the city of Laurel, which of course is not very "rural". If this is the type of loan that you get approved for, your Real Estate Agent will know which homes that he/she can show you to be able to be covered under this type of loan. If you love to "online shop" and sent your agent homes that you find and you have this loan already reapproved, then you can look at this site and enter the address of the property that you are interested in and learn if this home is in an area allowed by USDA.

Another example of where your loan type is important is with a fixer-upper, which is typically most ALL of your foreclosures (with very few exceptions). These homes won't typically go with a regular mortgage. These types of homes can SOMETIMES go conventional depending on the extent of the repairs needed, but most of the time they will probably only go "in-house". In-House loans are loans done by your local bank by the loan officers that also do your car loans, etc. Both conventional and In-House loans typically require a higher down payment - up to 20%. This is just something to keep in consideration when thinking of buying a distressed property. THERE REALLY AREN'T ANY FIRT TIME HOME BUYER LOANS anymore. There are limited grants that you might can find. The Tax Credit expired in 2009 and the USDA loan, which is a $0 down loan, can be used for first time home buyers, 2nd, 3rd, etc., as long as you qualify. Typically if you can't qualify for USDA, it's typically because of income limits around 75K, then the next best option is FHA. FHAis a 3.5% down and has no income limits. FHA does however have caps on how much they lend.In Mississippi, this limit is $271,050. All of these loans have minimum credit score requirements; however, each bank will vary with this a little bit. Most local banks tend to want a 640 credit score, but there are some banks that will take a slightly lower score.

2) Find a Real Estate Agent who you believe that you will work well with, and STICK WITH THEM. Don't call different agents at various offices that have different properties listed, call YOUR agent. All agents can show you all homes listed by all of the other real estate agents. So creating a relationship with one agent is best. We spend a lot of time for you behind the scenes and, of course, showing you homes. If an agent finds out that you are calling multiple agents, their dedication to you will typically dwindle. Keeping good communication with ONE agent will allow you to see new properties as they come on the market immediately. Great homes and great deals GO FAST! You want an agent loyal to you and WATCHING for them to come on the market, so be LOYAL to them and you are likely to find the home of your dreams.

3) It takes typically 4-6 weeks from the time you go under contract until your closing date. Sometimes you can do something a little quicker, and sometimes circumstances make things DRAG OUT longer than we all would like. But in most instances, 4-6 weeks is what it takes. The reason it takes this much time is because of the different steps the buyer and bank go through. There is typically and "order of events" basically, and here is a short run-down of this: a) First off, after going under contract, the buyer should order a HOME INSPECTION. Real Estate agents can give you cards of several home inspectors, but it is ultimately your choice who you use. Home inspectors are paid to find things wrong with the home. They will "pick the house to death". What I mean by this is they will typically list every little minor chip in the tile. It's what they do. When you receive your report, you should go over it with your agent, so he/she can try to explain all the findings and educate you on which is more serious and which ones will cause you any problems with your loan that you have in place. DON'T LET THE HOME INSPECTION SCARE YOU INTO BACKING OUT. When going over the report with your agent, together you will make a list of repairs to request the seller to fix in order for you to remain under contract with them. Most times, if the requests are within reason, the seller will agree to fix them. b) Once all items are repaired, the bank will order the appraisal. The appraiser will compare the property under contract to similar homes that have sold within the last 6-12 months or less. The home must appraise for AT LEAST the contract price. In the event that it appraises for less, then the buyer and seller will typically go into a re-negotiation. This is rare event, a good listing agent will already have the home listed where it needs to be so that this issue does not arise. c) Once all is cleared with the appraisal, the bank will send the file into underwriting. The underwriter makes sure that the loan officer followed all guidelines for the loan and checks that "all T's are crossed". Depending on the bank and how backed up the bank is, this can take a couple of days to a week or longer. d) Once the underwriting gives a "clear to close," the bank will send the file to the attorney's office or closing company. This office/company will do a title search on the property to make sure that the buyer is getting a clear title. Once they verify this, they will prepare the deed and hold the closing when it is scheduled. Once the closing is over, the title company will file your new deed at the courthouse to insure the possession of the property is properly changed over to the new buyer.

NOT THAT BAD, right?! Every real estate transaction is different, so there's no way to tell you absolutely everything that COULD happen, but this list will at least give you the basic knowledge to give you the confidence that you need to TAKE THE LEAP!! Interest rates are still at record lows making it a good time to buy! Don't miss your opportunity to owning your own piece of this Earth. If you have any more questions, please feel free to call/text/email me anytime and remember that there is NEVER a stupid question! You are not expected to know everything, and I will never make you feel dumb for trying to learn this process. Contact me at the ways below with any questions that you may ever have and let's leap together!

-Christy Cell 601.344.9083/601.425.0955

New Listing - 15 Clairmont Circle in Laurel!


Attractive 3 bedroom, 2 bathroom 1,825 square foot brick home in the quiet Westover Subdivision. This home boasts a galley kitchen with breakfast area, separate laundry room, HUGE formal living and dining room combo, and a living room with exposed beams that accentuate the tall ceilings. Sliding door off den leads you to the large privately fenced in backyard with storage shed. All appliances included - even washer and dryer! Essence of move in ready.  It's a steal not a deal at $99,000! Contact me, Christy Sumrall, today for your private showing!

Is it Wise to Make a Down Payment Lower than 20 Percent?



By Anne WynterJanuary 17, 2014 2:19 PM


Right along with having a steady employment history and a strong credit score, many potential homeowners strive to save up for a 20 percent down payment before they sit down with a lender. Unfortunately, quite a few families and individuals fall short of that benchmark.  

Luckily, there are several options for people who want to buy a home, but don’t have the most robust savings. In fact, the Federal Housing Administration (FHA) offers a loan that only requires a down payment that’s 3.5 percent of the home price. And some lenders, such as the Navy Federal Credit Union, are offering no money down mortgages.

However, there may be a few risks associated with this tactic. Keep reading to learn more about some of the potential disadvantages of putting less than 20 percent down on a home.

Higher Interest Rates and Monthly Payments

When you come to the table with a lower down payment, you may qualify for a less favorable interest rate, says Jennifer Hayden, loan originator at Gateway Funding Diversified Mortgage Services, LP. The reason? Hayden notes that when you pay less cash up front, lenders consider your loan to be higher risk, and higher risk borrowers are often subject to higher interest rates - as much as a half of a percentage point.

While a slightly less favorable interest rate may not seem like the worst thing in the world, keep in mind that it means you’ll be paying more money each month. Not only that, but with all other factors being equal - the lower your down payment, the higher your monthly payments will be since you need to borrow more money. And a higher monthly payment may be the last thing a cash-strapped new homebuyer needs.

Take a look at the following two scenarios for a homebuyer who is taking out a 30-year fixed rate mortgage for a $250,000 home. We'll compare the monthly payment on a loan with 10 percent down at 4.5 percent interest, with a loan that has a 20 percent down payment and 4 percent interest rate.

Down Payment Percent 

Down Payment Amount

Interest Rate

Monthly Payment

10 percent


4.5 percent


20 percent 


4 percent



Even with a down payment of just $25,000 more and an interest rate that’s .5 percent lower, a homeowner can save about $185 on each monthly payment - which adds up to more than $40,000 over the lifetime of the loan.

Risks Associated with Having Low Equity

If you make a small down payment on your new house, you’ll begin your home ownership journey with a limited amount of equity. Why is low equity a big deal? Well, for one thing, you’re at a higher risk for being underwater on your mortgage, says Hayden.

What exactly does this mean? Well, when you owe more money than your home is currently worth, your mortgage is underwater or upside-down. And as the official site of the National Association of REALTORS®,, notes, this situation can make it difficult for a homeowner to qualify for a traditional refinance in the future. That means that if interest rates do happen to drop lower in the future, you'll have a harder time refinancing to a lower rate.

This low equity can also affect your outlook for selling your home.

“If someone purchases a home with a small down payment and then needs to sell the home in a couple of years, there is the possibility that they will owe more than what they are offered for the house,” Hayden points out.

If this happens, homeowners could be in the difficult position of having to come out of pocket to pay the difference between the value of the home and the amount of money owed to the lender, according to the Federal Reserve Bank of Cleveland. If a homeowner can’t afford this difference, he would have to sell his home at a loss, be forced to stay in the home, or he might face foreclosure, notes the Cleveland Fed.

Mortgage Insurance Requirements

Monthly mortgage payments can already be enough of a burden. But if you put down less than 20 percent for your down payment, you will typically have to pay mortgage insurance on top of your regular monthly payments.

This insurance protects the lender if a buyer forecloses on a home. And while mortgage insurance costs differ, reports that this insurance typically amounts to 0.5 percent of your home loan amount annually.

That means that if you were required to pay mortgage insurance at 0.5 percent for a $250,000 loan, you'd be paying an extra $104 per month. When you put that on top of the higher mortgage payments and increased interest we mentioned earlier, things can truly get pricey for a homebuyer without a substantial down payment.

Advantages of a Low Down Payment

While there can be risks associated with paying a low down payment, there are also several benefits.

Perhaps the most obvious advantage is that potential homebuyers can still get into a house with a low down payment. This is especially beneficial for homeowners who have consistent monthly bills, which makes saving up for a 20 percent down payment out of reach. And with FHA loans available at just 3.5 percent down, potential homebuyers can rest easy knowing that homeownership is attainable.

What's more, home prices are increasing at about 6 percent per year, says Joe Parsons, senior loan officer at PFS Funding and writer at The Mortgage Insider.

And with interest rates on the rise, it could get pricey to put off buying a home while you wait to save enough for a 20 percent down payment.

For example, taking a 6 percent annual home price increase into account, if you put off purchasing a $250,000 home for one year, you would pay $265,000 one year later, and $280,900 two years later - for the same house.

As a result, if home prices continue to rise, you may find yourself out of reach of the 20 percent mark anyway, or settling for lower-priced homes in order to reach that goal.

Manageable Ways to Pay Down Your Mortgage


You don’t need to go to extreme lengths to pay down your mortgage quickly.

And while it may seem impossible, there are painless ways to pay down your mortgage that won't leave you feeling financially overwhelmed.

In fact, putting a dent in your mortgage doesn’t mean you have to live like a pauper or grind away working overtime. Instead, here are four easy and manageable tips for paying down your mortgage.

Tip #1: For the Most Savings, Make Extra Payments in January

Making extra payments is a tried and true method of paying down your mortgage, but you may not know that there's a certain time of year that gives you the most bang for your buck. And even just one extra payment a year could make a big difference in paying down your mortgage.

"If you are determined to pay down on a mortgage, make an extra payment at the beginning of the year," says Jae Wu, a real estate and mortgage specialist at the real estate company, Heyler. Wu explains that the earlier you pay down in the year, the less interest you accumulate throughout the year.

For example, a $500,000 mortgage with an interest rate of 4.53 percent (the rate as of January 2, 2014 as reported by Freddie Mac), would have a monthly payment of $2,542. By making an extra payment of the same amount at the beginning of the year, you will shorten the loan payoff from 30 years to 26 years.

While four years may not seem like a huge difference, that time translates into big savings. By paying off this home loan four years early, you would save $67,582 in interest.

But where can you find the extra cash each year?

If you receive a year-end bonus, you could contribute that to your extra payment in the beginning of the next year. Another option that coincides with the holiday season is selling any unwanted gifts on Ebay. Or if you go out of town for the holidays, consider renting out your home on a site like

No matter how you make that extra payment, it will help you put a dent in your interest and ultimately your mortgage.

Tip #2: Find Out Whether You Can Lower Your Interest Rate by Refinancing

According to Freddie Mac's 2013 Third Quarter Refinance Report, homeowners who refinanced their home loan during the third quarter of 2013 were able to reduce their interest rate by an average of 1.8 percentage points. That's a savings of about 30 percent for individual homeowners.

To see if you could reap similar benefits, it's a good idea to consult your mortgage lender about refinancing. And that's exactly what Truong did.

After eight years of owning her first home, Truong was prompted to speak to her lender when she decided to buy a new home.  To help her qualify for another home, her agent suggested that she refinance her first mortgage, a 30- year fixed rate. Once she did, her mortgage rate fell from 7 percent to 3.5 percent, even though she kept the same loan term of 30 years.

According to Truong, her monthly mortgage payments were 40 percent less after refinancing. Refinancing not only lowered her monthly payments, but also lowered her debt-to-income ratio, which helped Truong look financially stable and less of a liability when purchasing her second home.

The refinancing process took about a month, says Truong, and involved filling out and providing a lot of paperwork. But for Truong, it was well worth the effort as it reduced her current mortgage payments by 40 percent, while also helping her qualify for another home.

Tip #3: Get a Mortgage Rebate Check From Your Credit Card's Reward Program

For those of you who don't have credit card debt, Andrew Schrage, financial expert and co-owner of the personal finance website,, recommends using a credit card with cash-back rewards and applying the cash towards your mortgage.

As for how to choose a cash-back credit card, Schrage recommends picking a credit card with cash back features that are most in line with your purchasing habits, such as cash back on gas or groceries. But another financially-savvy option would be to choose a card that offers rewards that could be applied directly to your mortgage.

For example, Citibank offers their members the opportunity to use credit card points earned toward their monthly mortgage payments.  Members who redeem their points receive a check issued to their financial lending institution, which they can then send to their lender to help pay for their mortgage each month.

However, he warns, "It's important that you don't carry any credit card debt, because if you do, you are effectively losing money."  This is because the annual percentage rate on a credit card is much higher than any cash back rewards rate, says Schrage.

Tip #4: Round Up Your Mortgage Payment

One of the most important tools in personal finance is a budget. Seeing how much is coming in - and how much is going out - can help you keep your money and investments in perspective. But who knew that rounding up your mortgage expenses could help you pay down your mortgage?

J. Money (pen name), the blogger behind, a popular personal finance blog geared toward 20-somethings, did just that after buying his first home in 2007.

"I don't care for exact, detailed numbers when I'm budgeting," he says. "So, I would round up to the nearest $100 on my mortgage payment."

For example, he explains that if you have a monthly mortgage payment of $1,800, round up and pay $1,900 instead. If you can afford it, you could even round up your payment to $2,000.

"Rounding up is the easiest thing that any average person can do and probably not notice at all," says J. Money. He adds that over time, that extra $100 each month is shaving months and eventually years off your mortgage. "Even if the only thing you ever do is round up, you're still going to be saving money and time in the long run."

The Bottom Line

As you can see, there are very manageable ways to pay down your mortgage early – and they won’t cramp your lifestyle or make too noticeable of a dent in your bank account.

From this list, rounding up your payments is probably the easiest and most hassle-free technique. So start out with that method and see how much you can pay extra each month.

But, for the most savings, refinancing is likely going to be the most-effective savings method, especially if your current interest rate is higher than 5 or 6 percent. You can stand to save a lot by refinacing to a lower rate. And though there's paperwork involved, filling out those forms and working with a lender could be the best way to manageably pay down your mortgage and cut costs. 

Home loans are becoming easier to get – for some


Do you want to buy a home, or refinance the one you own, but are worried that you don't have the financial status to qualify for a mortgage?

Well, here's some news that might raise your spirits: Mortgages might be easier to get now, according to a report from Ellie Mae, a national mortgage tracking firm.

Specifically, Ellie Mae's September 2013 "Origin Insight Report" found that for closed loans, average credit scores and down payments are coming down, while at the same time, allowable debt limits are rising.

"Although it's not loosening rapidly, we are seeing a consistent loosening that has happened over the last 12 months and in particular since the beginning of the year, in underwriting criteria," says Jonathan Corr, Ellie Mae's president.

Wondering why mortgages might be just a little easier to get? Keep reading to see what we found out.

Credit Score Standards have Loosened

You might be more than just a number in a computer somewhere, but one number - your credit score - is massively important to lenders when it comes time to throw the thumbs up - or down - on your mortgage application.

So if you're planning to refinance or buy a home anytime soon, it may come as good news that according to Ellie Mae, the average FICO credit score for closed loans came in at 732, down from 750 the year before. The FICO score, which ranges from 300 to 850, is the one mortgage lenders use most, says Corr.

And while the lower average qualifying score is good news, another stat excites Corr even more. According to the study, the percentage of folks with credit scores under 700 who qualified for loans jumped from 17 percent in 2012, to 32 percent in September of 2013.

[Thinking about buying a new home? Click to compare interest rates from lenders now.]

Why is that significant? "People see a 732 average score and they get worried that they can't qualify if they don't have it. But actually, what we're seeing is the number of folks who have [a credit score of] under 700 and have closed loans jumped quite a bit. That shows a loosening of qualifying standards and gives more people a chance," says Corr.

Higher Debt-to-Income Ratios are Allowed by Lenders

It may come as no surprise that lenders who are about to loan you a large sum of money worry about whether you have, or are taking on, too much debt to be able to make your monthly mortgage payment.

So, one of the key things they calculate is your debt-to-income ratios (DTI), says Corr. There are two. The first ratio, says Corr, is your "front-end" DTI. This is the percentage of your gross monthly income your mortgage will take up. The second ratio is your "back-end" DTI, or the percentage of your gross monthly income that your mortgage, plus other debt obligations such as credit card payments, car loan payments, personal loans, and other such debts, will claim.

As an example, say your household gross monthly income was $6,000, your mortgage was $1,500, and all your credit card and auto loan monthly payments came to $600. In that case, your front-end DTI would be 25 percent, and your back-end DTI would be 35 percent.

Now here's the good news: The average percent of DTI is going up, says Corr. That is, for a variety of reasons - such as a strengthening economy and housing market - Corr says lenders are becoming more lenient about how much debt they see as acceptable for borrowers to take on.

[Time to refinance your mortgage? Click to compare interest rates from multiple lenders now.]

"[The average DTIs] were about 23 percent and 34 percent, and we've seen them come up a bit to 25 percent and 37 percent. So while it's not massive, you are seeing some loosening, which is a positive sign for borrowers," says Corr.

It's also important to remember that these are averages, not limits. So if your DTI is a bit higher, Corr says that doesn't necessarily mean you can't qualify for a mortgage.

Loan-to-Value Requirements are Lower

In case you aren't sure what exactly a loan-to-value is, think in terms of your down payment. The loan-to-value simply refers to the amount you are borrowing (your mortgage) compared to the appraised value of the home you are buying or refinancing. The remainder is the down payment.

As an example, if the home is $300,000 and you pony up a 20 percent down payment of $60,000, the loan-to-value would be 80 percent.

"Not long ago, many lenders weren't even doing loans with less than a 20 percent down payment [80 percent loan-to-value] because they were taking a risk-adverse approach," says Corr. "Now, we're seeing the average come down, from 22 percent to 19 percent."

On a $300,000 home, that's a $9,000 difference in the amount you have to come up with. And again, remember that these are averages, says Corr. So if you don't have 19 percent to put down on your home, that doesn't mean you can't qualify. Lenders take many other factors into consideration.

[Click to secure a low mortgage interest rate from a lender now.]

There are More Competitive Insurance Options

When buying a home, if your down payment is less than 20 percent of the appraised value of the home, you'll most likely have to get private mortgage insurance (PMI), says Corr. The same goes for people who refinance, but don't have 20 percent equity in their home.

PMI is insurance that covers the lender against any losses in case your home declines in value and you default on your mortgage. In that case, the lender might not be able to sell the house for an amount that would recoup their mortgage principal. If you can't get insurance, you won't get the mortgage, says Corr.

And when home values were declining, mainly from 2008 to 2010, PMI was hard to get in many places, says Corr. It got so bad, he says, that many insurers went bankrupt, and many borrowers were turned away because of a lack of ability to get PMI.

"Now we're seeing that the insurers who are still here have strength again, and we've also seen new [insurers] enter the market, so you have a greater supply of insurers. That combination has made it more competitive and made it more likely for folks to get mortgage insurance," he says.

The bottom line, says Corr, is that across the spectrum, the strict requirements for qualifying for a mortgage have loosened as the housing market has strengthened. And that's good for everyone.

4 Ways to Raise Your Credit Score in 2014


US News 

When you're writing out your New Year's resolutions this year, why not add "improve my credit score" to your list? Boosting your credit score can have positive effects - including getting you better rates on future credit, helping you buy a home or car, and even making you a more competitive job candidate.

While erasing major credit blunders - such as a foreclosure or collections account - can take years, you can still take some relatively simple steps to boost your credit score. Some of these steps will have a larger effect than others, but by following a combination of these steps in 2014, you could increase your credit score by 100 points or more.

Start by pulling a recent copy of your credit report, and then make plans to complete these four steps in the new year:

1. Payoff past due accounts.

The bulk of your credit score - about 35 percent - comes from your payment history. The more often you make payments on time, the better your score will be.

So start by checking your credit score for past due accounts. If you have several past due accounts, it's time to triage.

Accounts that are 90 days late will have a bigger negative impact on your score than those that are 60 or 30 days late. So pay off the most past-due accounts first, and gradually catch up on all your payments.

2. Ask for good faith adjustments.

When you look at your credit report you may see just one or two late payments. Maybe these payments were late because of an oversight or because of a one-time financial problem that has since been resolved.

In this situation, you might get an automatic boost to your credit score by asking for a "good faith adjustment." Call or write to the creditor, and ask for a courtesy adjustment. If you've been a good customer and only have one or two late payments on your account many creditors will remove the late payment from your credit report.

3. Deal with collection accounts, charge-offs and liens.

Accounts that have been charged off or sent to collections have a negative impact on your credit score, and you need to be careful how you deal with them.

Paying charge-offs or liens that are older than 24 months won't boost your credit score. Address charge-off accounts that are less than 24 months old first, then pay the others when you have the funds to do so.

Pay off collections accounts as well, but be aware that paying off collections accounts can, at first, cause your credit score to drop. That's because when you make a payment, the last activity on the account becomes more recent, making it weigh more negatively in your credit file.

The best way to avoid this problem is to ask the collector to erase the account from your credit file when you pay it off. Many collections agencies will delete reporting when you've paid off the account. If the agency agrees to this, be sure to ask for a letter stating that the agency agreed to delete the account upon receipt of your payment.

4. Improve your debt-to-credit ratio.

Another factor used to calculate your credit score is amounts owed. Amounts owed isn't about the actual dollar amount you owe but your debt-to-credit ratio - how much money you owe versus how much credit you have available.

There are several ways to improve your debt-to-credit ratio, which is probably the fastest way to improve your credit score. Here are a few to try:

--Ask for a credit increase. This improves your debt-to-credit ratio without paying an extra dime on your outstanding debt.

--Move credit card balances. Keep your debt at or below 30 percent of your credit limit on each credit card. One way to do this is to simply move balances between cards, even if it means opening a new card. (Plus, you might be able to take advantage of balance transfer promotions.)

--Pay down revolving debt first. Your credit score will reward you somewhat for paying down installment loans, but you'll get the most bang for your buck when you pay down revolving debt like credit cards and lines of credit.

--Transfer debt to a personal installment loan. Consolidate all your credit card debt under a personal installment loan.

Abby Hayes is a freelance blogger and journalist who writes for personal finance blog The Dough Roller and contributes to Dough Roller's weekly newsletter.

One big change that will make it harder to get a mortgage after January 10th

Yahoo Homes 

Mortgage rules under The Dodd Frank Wall Street Reform and Consumer Protection Act will change on January 10, 2014, affecting both homeowners who want to refinance, and first-time homebuyers who need a mortgage.

If you're wondering which rule change will have the biggest impact on mortgage seekers, the answer is the rule regarding allowable debt-to-income (DTI) ratio. The DTI is your monthly debt repayments (including your prospective mortgage, and any other loan or alimony payments you must make) divided by your gross monthly income (your income before taxes).

"Home loan seekers need to know that the allowable debt-to-income (DTI) ratio for a qualified mortgage under Dodd-Frank come January will be 43 percent," says Grace Keister of First Team Real Estate in Irvine, CA. The lower debt ratio means no more than 43 percent of applicants' incomes can go to paying debt.

Todd Huettner, a Denver, CO mortgage broker and the owner of Huettner Capital, agrees this change is an important one. Currently, traditional conventional conforming loans, like those under the Fannie Mae and Freddie Mac programs, enjoy an automated underwriting approval of up to 45 percent total DTI ratio, Huettner says.

"That two percent difference does not sound like a lot, but it will surprise many people and prevent them from getting a loan," says Huettner.

The 'Ability to Repay' Rule and Qualified Mortgages

According to the Consumer Financial Protection Bureau's (CFPB) publication, "What the new Ability-to-Repay rule means for consumers", prior to the financial crisis, lenders gave mortgage loans to borrowers who couldn't make the payments.

The Ability to Repay rule under Dodd Frank introduces a new mortgage category known as the Qualified Mortgage (QM), which generally allows a DTI of no more than 43 percent, according to the CFPB.

The DTI rule change will especially have a strong impact on first-time homebuyers.

"Dodd-Frank will have a chilling effect on many first-time home buyers that are stretching every dollar to get into a home," says Henry J. Daniels, a senior mortgage adviser in Woodlands, TX. "The lowering of debt-to-income limits on most loans will force some buyers to wait longer and save more to make that first purchase," says Daniels.

Refinancing a Conventional Mortgage

Homeowners planning to refinance may also be affected by the coming Dodd-Frank rules.

"Many may be in a position where they cannot refinance, because even if they lower their payment the DTI may prove to be too high after they roll in the closing costs," says Daniels. He suggests some borrowers may have to pay down the balance of their mortgage to a certain amount at closing to fit in the new debt limits. For example, if their loan balance is $200,000 but they need to get it to $190,000 to be below the maximum DTI ratio limit, they will need to pay their mortgage balance down by $10K to be able to qualify for the refinance.

[Thinking about refinancing your mortgage? Click to shop multiple lenders now.]

Other options, such as the 100 percent financing programs of USDA and VA are unaffected by the rule because required DTIs are already below 43 percent. Streamline programs including conventional, FHA, VA and USDA mortgages don't require reviewing DTIs, according to Daniels.

What You Can Do to Prepare for the Change

Though the impending DTI changes may seem like bad news, you can start preparing now to improve your chances of qualifying for a mortgage or refinance.

"Check and see what your debt-to-income ratio is and if it's not at [or below] 43 percent, then from now until January you need to start paying down your debt," says Keister.

Not sure how to calculate DTI? It's easy. "Your debt-to-income ratio is calculated by adding your monthly debt, such as credit card payments and loans, and future monthly housing payments, dividing that all by your gross monthly income and multiplying that by 100," explains Keister. Once you know it, start reducing it.

How to Lower your DTI

"To lower your DTI, you have to either make more or owe less," says Huettner. "Typically, paying down debt is the easiest and fastest way to lower your debt to income."

Huettner says to start with your car loan. "Paying off car loans is the usually the biggest bang for your buck because they are short loans with higher payments compared to student loans, home loans, or even credit cards." Another common tactic is debt consolidation into a home loan or other loan, he says, resulting in a lower payment and lower DTI. However, Huettner cautions mortgage seekers to make these decisions carefully.

"Please keep in mind these tactics to lower DTI are often slippery slopes that cause people to struggle financially. PLEASE BE CAREFUL," he cautions.

He offers a simple tip that many mortgage seekers overlook.

"The best and safest way to lower your DTI is to simply make sure the lender is calculating your income and debt correctly," Huettner advises. "This is why you need an experienced lender."

How one homeowner saved big by improving his credit score


Yahoo Homes 

Jeffrey Green bought his home in September 2005. An engineer in his late 40s, Green purchased his 2,500-square foot, 4-bed, 2.5-bath home in the Los Angeles area with a $525,000 loan. He received an interest rate of 6 percent on a 30-year fixed, interest-only loan.

According to the Federal Deposit Insurance Corporation website, interest-only loans allow homeowners to make payments toward the interest only (nothing is paid toward the principal) for a set period of time - usually three to 10 years. After that time, you must start making payments toward both the principal and the interest, the FDIC website explains.

Due to the interest-only loan, Green was making payments of $2,625 a month toward his mortgage, opposed to the $3,147 a month he would have paid with a traditional loan. That's a difference of $522.64.

Green chose an interest-only loan to have lower initial payments, says Brian Vosberg, a financial advisor and licensed mortgage broker, who handled Green's refinancing.

"At the time, based on his income, a traditional loan payment would have put pressure on his budget," Vosberg explains.

Green's plan was to refinance to a traditional mortgage when his income increased.

Refinancing Roadblock: Low Credit Score

When May 2013 came around and interest rates were low - an average of 3.54 percent (according to Freddie Mac) - Green was ready to refinance.

At the time, his credit score was 643, which, according to Vosberg, is less than ideal for a mortgage.

"If he went with the refinance at that credit score, the interest rate would have been 4.875 percent for a 30-year fixed loan," says Vosberg. That means he would have received an interest rate that was more than 1 percent higher than the average.

While an interest rate of under 5 percent was an improvement over his current rate, Vosberg thought Green could get a better rate if he improved his credit score. An excellent credit score to have when refinancing is 740 and higher, according to Vosberg.

Vosberg says credit scores are one of the ways that mortgage companies gauge the creditworthiness of the borrower.

"The lower the score, the more risk the lender takes on," Vosberg says. And when taking on higher risk, the lender compensates by charging higher interest rates, Vosberg explains. And this is exactly why Green was quoted such a high interest rate.

How he Improved his Credit Score

The first step in repairing Green's credit score was to take a hard look at his finances, Vosberg says. He says the reason for Green's low credit score was immediately obvious: credit card debt.

"[Green] had four credit cards maxed out, carrying over $50,000 in credit card debt," Vosberg explains.

And while paying off the credit card debt was the apparent next step, Vosberg says paying off $50,000 would have taken several years, and Green would run the risk of interest rates increasing.

The solution? "We took a loan from his 401k for $35,000 and immediately paid off two credit cards and reduced the balance of the other two by more than half," Vosberg says.

While it's not always a good idea to take money out of a 401k to pay for your mortgage, it made sense in Green's case as the interest rates on his credit cards were high. Paying off credit card debt - instead of having the money sit in his retirement account - actually saved him a lot of money in the long run, says Vosberg.

Then, over the following four months, Green was able to pay an additional $10,000 towards his debt using cash savings and income.

By September 2013, Green's credit score jumped up to 722 - an improvement of a whopping 79 points over four months.

With the higher score in hand, Green was able to refinance his home with an interest rate of 4.25 percent - instead of the initial 4.875 percent he was quoted with his lower credit score. And while the difference might not sound like much, an improved credit score saved Green an additional $200 per month on his new 30-year fixed loan of $525,000, according to Vosberg.

What's even better is that his new monthly payment was $2,582.68 - $42 less than he was paying with the interest-only loan.

Thanks to the refinance - and his improved credit score - Green is now making payments towards the interest and principal of the loan, while also managing to reduce his monthly payment.

Is Foreclosure the End of Homeownership for You?


If your home was foreclosed upon during the recent housing crash, you might think there’s no chance for you to ever own a home again. But that couldn’t be further from the truth. Although lending standards are tighter than they were pre-recession, there are still a few steps you can take to put yourself on the path to homeownership again.

The biggest hit you’ll take after a foreclosure is to your credit score. You may see a drop anywhere from 100 to 300 points depending on your credit history. But a foreclosure only stays on your credit report for seven years and there’s a lot you can do in that time to improve your score.

Rebuilding Your Credit Score

The first thing you’ll want to focus on after a foreclosure is rebuilding your credit.  There are lots of paid services out there that claim to boost your score. But there are many things those services do that you can actually do for yourself. Focus on paying all your bills on time to prove that you can be trusted with credit again.

Anytime there’s a negative action on your credit report (foreclosure, missed payment, etc.) your score is going to take a hit.  The seven-year waiting period should give you sufficient time though to take corrective action so that you’ll be prepared for homeownership the next time around.

Adding Positive Events to Your Credit History

In order to show lenders that they should lend to you again, it’s important to take small steps here and there. In addition to paying your bills on time, ensure that you pay off past-due accounts and pay off any outstanding credit card bills. It’s important to have a low utilization rate on your credit report. A utilization rate of 10% or less is what consumers with the highest credit scores have.

Things like lowering your utilization and opening new lines of credit that you can manage responsibly go a long way to show lenders you’ve learned from past mistakes. If you want to track your progress as you work on your credit, the free Credit Report Card gives you a monthly snapshot of your credit scores and credit history.

Avoiding Another Foreclosure

Although a single foreclosure won’t be devastating to your finances, you’ll want to ensure that it never happens again. Here are some things to focus on to avoid a future foreclosure.

  • Don’t buy more house than you can afford. Just because a lender will loan you a certain amount of money doesn’t mean you should borrow that much. You should determine how much you can afford and borrow no more than that. And don’t forget about the extras that go into buying a home like maintenance and repairs. These added costs will be on top of mortgage, property tax, insurance and HOA fees.
  • Establish an emergency fund. One way to be better financially prepared is to start an emergency fund. Save three to 12 months of expenses so that if you lost your job or had some other life-changing event, you’d still be able to make your payments.
  • Make a larger down payment. First, a larger down payment means you have more equity in your house, so you can meet refinance requirements faster (you have to have 80% equity generally to refinance). Second, it means you have lower monthly payments (compared to a smaller down payment on the same loan amount), so you can weather a job loss or income reduction more easily.

Home-Selling Secrets for Real Estate's Off-Season


By AJ Smith

By   | Posted Dec 5th 2013 2:52PM

Updated Dec 6th 2013 8:10PM

It's been said that spring and early summer are the best times to sell your house. Competition among buyers can be fierce during these warm months and for whatever reason, the data has consistently shown that homes sell for more in spring and early summer. Maybe there's something psychological to warm weather that entices buyers or maybe it has something to do with the fact that families want to settle in before the school year starts in the fall.

Either way, it's not always possible to choose when to put your home on the market. But while spring might be the busiest time of the year for real estate transactions, homes get bought and sold every season of the year. Here are some tips for selling your home in the off-season.

Staging for Snow: In many parts of the country it gets cold and snowy during the winter. If you live in a climate where snow is prevalent, make sure that you stage the outside of your home accordingly. Shovel the driveways and be sure to clear ice away from walkways and doors. Buyers want to feel safe and comfortable when they're looking around.

Just because your grass is brown or your house is covered in snow doesn't mean you can't stage it successfully. Try to highlight the house with tasteful winter-themed decorations like Christmas wreaths and aesthetically-pleasing lighting. Houses for sale in the winter tend to show especially well when they're decorated for the holidays.

Seeing decorations, lights and presents under a Christmas tree can create a warm feeling for buyers. And it might help your house seem even more attractive than it would be in the warmer months. Make sure that you choose tasteful decorations, though, that will appeal to a wide variety of buyers.

Leave the Lights On: Once daylight saving time ends, it can get dark pretty early. Consider putting your outdoor lights on a timer. That way, when prospective buyers show up, the house will look bright and cheery instead of dark and dreary.

You can apply the same idea to the inside of your house too. Make sure that the heat is on before buyers arrive and that the place is clean, smells fresh and is warm. First impressions are everything in real estate so you really want to "wow" buyers when they pull up to your house and walk inside.

Stand Out From the Competition: During the winter months, there may not be as many buyers but there also aren't as many sellers. Often times, off-season buyers need to move quickly, whether due to job relocation or major life changes, so be ready for them.

In order to make your property stand out, consider adding a video to your listing or creating a small website to showcase your home. When there's less competition out there, you can end up getting more for your property if you're willing to go that extra mile.

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