First Time Homebuyer Information & Education

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Can I Buy A Home If I Have Collections?

Can I Buy A Home If I Have Collections? - If you have any outstanding delinquent debts that are being reported on your credit bureau as collections it may or may not affect your ability to purchase a new home. The type of debt and how long ago it occurred will be a couple of the factors the lender will take into consideration when looking at your collections.

If your broker is placing you with BC lender, most of the lenders don't care for the medical bills you have on your credit report.

There are some sub-prime lenders, also known as B/C lenders, who will not care about collections at all when you are buying a home or refinancing your home. Some lenders will allow open collections up to a certain total amount and they can not exceed that amount or they will need to be paid to buy a home. Other lenders will not allow you to buy a home with any collections present at all, even if it was just a $50 medical bill. This is a good reason why it is good to take a look at your credit yourself a few months in advance of obtaining a loan to see what is reporting to your credit report and if there are any items that you need to take care of or have corrected before you begin trying to buy a home and obtain home loan financing. Sometimes you may have old collections that have been paid for showing up on your credit still. It is amazing how many collection companies out there don't have problem reporting collection accounts to the credit bureau as quickly as possible but when you pay off the collection, they don't seem to care about properly reporting the fact the collection was paid to the credit bureau. Therefore, collections can impact the availability of which lenders you can use to finance your new home purchase. No collection accounts can open up a wider variety of programs and lenders for you to choose from while having a lot of collections can really shut the door on the use of many lenders and may require you to obtain a loan with terms that are not as favorable.

Depending on the lender, you can have collections depending on how old the collection date is and the amount. If the collection was filed over 24 months ago, most subprime lenders disregard those collections. Another factor a lender will look at is the total amount owed in collections. Some lenders will allow you to have collection amounts not exceeding $2000. Government collections however, must always be paid since they can become a lien that attaches to the title of the property.

Although you can leave collections open and still secure home financing the higher interest rate you will be charged by leaving them open may or may not cost you more over the life of the loan. Talk to your mortgage broker about financing options when open collections are involved.

How Can I Buy My First Investment Property? - For many people purchasing their first investment property can be overwhelming. You will have many mortgage options depending on what your plans are for the property. Some of the important questions to ask yourself are:

1. How long do I want to own the property?
2. Are there any improvements needed before I can flip it, or find renters?
3. How much money do I have to put down on the purchase, or for repairs and upgrades?
4. Am I financially able to make the payments if I do not sell it in the timeframe I anticipate, or cannot find renters right away?

Once you have answered these questions your mortgage consultant will be able to present you with mortgage options that address your concerns.

The easiest way to purchase an investment home is to keep your current home and turn that into an investment property when you are ready to move or upgrade to a bigger home. This way you still have great rates and financing from your existing home loan because it was an owner occupied property when you last financed it and now you can rent the home out. You can still get the same great financing on your new home because this will be an owner occupied property. Once you have one investment property it is usually much easier to buy another. You can use the equity in one of your homes as a down payment and possibly to pay for the new home in full.

One popular mortgage for investors is the Pay Option ARM. Generally, this loan has several payment options every month including a payment that is so low it increases your balance by deferring some of the interest. If you plan to purchase, renovate, and flip a home all within a few months then you should ask your mortgage professional if a pay option ARM is right for you.

A rehab loan is a great option for investors seeking to improve their property immediately upon purchase. A rehab loan provides the funds to purchase your home and the funds rehabbing all in one loan. There is only one application, one set of fees, one closing, and one convenient monthly payment.

Do an online search for foreclosure listing, bank's REO inventory and HUD's foreclosed property listing site. Most of the time, the houses on these sites are under the fair market value. Thus, as soon as you purchase the property, you would have already built up some equity.

The amount of cash required to buy an investment property will depend on your credit history. If you have excellent credit there are lenders that will allow you to borrow up to 100% the value of the property.

How much money do I need to buy a home? - When you purchase a home, the amount of money that you will need is determined by the home that you want to buy. Usually, its not a question of how much money you need, but of how much you can get. You need to know how much money you can afford to borrow, and then you can look for a home that is in that price range.

The best first step is to contact a mortgage professional who can help you determine how much money you can afford to borrow to purchase a home. I can help you with that! Call me today at 440-614-0130 or email me at dave@gofirstsecurity.com and I will help you get pre-approved for a mortgage to purchase a home.

Your loan officer will look at your income to figure out what monthly payment you can afford. If you aren't comfortable with that payment, let your loan officer know what you are comfortable paying, and they will base your loan amount on that payment. From that payment amount, they will figure out the total loan amount that you can borrow. With that number, you can find an appropriately priced home.

After you know how much home you can afford to buy, you should start working with a real estate agent who will help you find a home that fits your desires and price range. I may be able to help you find a real estate agent who can assist you in finding the right home - call me today at 440-614-0130! Working with an agent is also a good idea because they help you with all of the necessary paperwork involved in buying a home, and they help you figure out how much you should offer on a home. Part of their job is to keep you from paying too much for a home.

Be sure to let your loan officer know if you have no money on hand for down payment or closing costs. Many times a good loan officer can structure your loan to require very little cash out of pocket.

There is something called a seller concession where the seller will actually pay for all, most or part of the buyers closing costs, prepaid items, and or points. There are different limits and guidelines per each lender regarding seller concessions and how much is permitted based on the home mortgage loan programs that you choose. This can be a very effective way to buy a home without paying any money for a down payment or for closing costs out of your pocket at all.

Never assume that you cannot afford to get a home. Mortgage loan officers are in the business of finding loans for their clients. If I cannot find a suitable loan program for your needs, I will help you develop a plan to obtain your loan in the near future.

There are loan programs available that will not only allow you to finance the entire purchase price of the home, they will also allow for financed closing costs or cash for needed repairs. There are loan programs that will allow you to borrow up to 124% of the homes value.

 

Information listed above is to be used for educational purposes only and is not guaranteed

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