debt

How to Get the Best Rates in this Market

/ Jennifer Larson

Rates are down and they continue to trend that way as inflation cools and home sales are slow in many areas. This is the best buyer’s market we’ve seen in a few years and it’s also a treasure trove of savings if you have the right strategy.

Even with rates in the low 6’s, buyers in slow markets have an advantage of getting motivated sellers to work with them. Instead of asking for $15k-20k off the sales price, a buyer will actually save HUNDREDS more per month on their monthly mortgage payment by, instead, asking for that amount in seller credits to buy down their rate in a 2-1 buydown. The buyers will then get a rate in the LOW 4’s for the first year and a 1% reduction the next year because of it. Buy down points are expensive and can easily cost thousands so if a buyer instead asks for the reduction as a credit versus a sales price drop, they’ll actually save significantly more. Just offering $20k below ask doesn’t save you much, believe it or not, on your loan. It’s all in the interest rate how much you pay and how you’re approved of what you can afford. Don’t worry so much about the price but how much you will pay per month. Here are some examples how it makes a big difference:

We’re going to compare this listing in Yucca Valley, CA from C & S Real Estate with a price reduction and a buy down scenario to show you the real way to save money on buying your next house.

Listing Agent Sean Dittmer and currently for sale as of this posting

If the buyer offers $20k below ask, their mortgage would be looking like this:

This is based upon an accepted offer $20k below asking and about 3.5% down or $13,000

If they instead asked for that in seller credits to buy down their rate, their payment would be approximately this: See the difference?

This is asking price but 2-1 buydown rate. Discount points are where it’s at! The down payment only goes up to $14k as well.

This is the same buyer with a 690 credit score and $60,000 annual income.

See how offering well below ask doesn’t lower your payment as much as a buydown? You can also buy permanent discount points for that amount from the seller and buy down to that permanent rate of 5% that’s shown in the example. These are real calculations from UWM that we use to price a loan. Instead of offering $20,000 below asking price, get that amount to buydown your rate and pay lower than market. If your credit is better than this buyer, you can possibly end up paying a rate in the 4’s!

It’s important to note that the rate you’re approved for will go up a little on your Closing Disclosure (the CD) because it includes the APR which is your rate plus all your points and fees financed into the loan. The APR is your total cost of the loan percentage. Mortgage insurance (PMI or MIP) are included in that Annual Percentage Rate so that’s the final cost you will pay as a rate on your loan. The APR is that mortgage 💸 insurance, any fees and points, + interest rate for your total loan percentage (APR).

To get a total APR under 5% you need better credit. If you’re working on your credit still, make sure you reach out and work with me. It’s free and easy. If you’re ready to buy, THIS is how you get the best rate. Get those buy down points so you save money and the seller will net the same price. Win Win!

Let’s get started!

Which Debts Are Most Important to Pay Down?

/ Jennifer Larson

For a home loan, it’s not medical debt. In fact, the Biden Administration is focusing on passing legislation through Congress that would eliminate it from being considered in your credit score for many types of financing and home loans. It also depends on what your credit report says (go to http://www.annualcreditreport.com) and a detailed report will show this if lenders can see it or not but it’s not typically a factor to worry about for approval. The biggest hindrance might be your student loans.

Make sure you’re getting as much loan forgiveness as you can and negotiating with your creditors to reduce fees and interest rates. This will help lower your payments and DTI which helps you get approved for more. If you don’t have student loans, your next biggest hurdle is probably your car.

Cars of all brands are absolutely ridiculous nowadays. We have clients paying almost a thousand dollars for Fords and Toyotas and I’m not talking their top of the line models with extra features. It’s insane right now so imagine for luxury cars how that can affect your approval! Add up your car payments and that amount will be how much less you’re approved for in underwriting because that’s all DTI and those numbers are subtracted from your total approval. We start with your front end DTI which is just how much the house will cost you per month to buy. Your back end DTI then starts reducing that amount because we have to factor in your cars, your credit cards, payment plans you’re on, etc. If it’s on http://www.annualcreditreport.com and you pay monthly on it, it’s probably going to reduce your approval amount. Car payments by far are the biggest killers of dreams and buying a house. Don’t buy brand new, and get them two years old at least, to save thousands on dealer mark ups and depreciation.

Next is credit cards 💳. People use these like free money and they’re NOT! Before you apply for a mortgage, make sure you are below 15% utilization and don’t be surprised you have to pay below 10% to get approved. Clients need to understand their current balances due are a major factor because it’s debt we have to account for. Pay it down tremendously before applying. It doesn’t matter if you always pay in full, pay before you apply!!

These are the top debts to pay down (or off if you can) so that your chance of a new house isn’t ruined by all these payments. You can have debt and buy a house but you can’t have a lot of debt. Lenders want to see fiscally responsible borrowers and big car payments and credit card balances are not a good candidate for rates around 7%. Sorry. 🤷‍♀️

What Do I Need to Apply for a Mortgage?

/ Jennifer Larson

You need all of your current financial documents and you must fill in a complete Uniform Residential Loan Application URLA 1003 form through your trusted lender. Almost every loan requires this application and an MLO cannot process anything without it first.

This is what I use to pull a customer’s credit and get all of their information for escrow. You need two years of pay stubs, a couple months of recent bank statements, and any other financial paperwork you’re going to use for your approval chances. If you have been divorced and pay alimony and child support, we need that. If you receive it, it is at your discretion to use it or not. You do not have to disclose unless you wish for it to be included in your monthly income. If your partner is applying too, I need their information and they must apply jointly with any of their current financial documents. You cannot use their income without also using their credit. If it’s a lot lower, that will hurt your chances because we use that lower number as our base.

On the application, you will fill in everything about you, your employers, your income, expenses, debts including current credit card balances, any property you already own, and what you’re applying for. If you don’t already have a home or budget in mind, we’ll skip that until you put in an offer. Just a note: There is some demographic information at the bottom of the application that we must legally fill in if a client refuses, per federal law, based on our assumptions and physical guess. This is required to verify discrimination and equality of loans in all areas, including underserved communities where diversity is low to ensure loans are being accurately processed and routinely funded in those areas. All buyers have equal rights regardless of any background and are to be approved solely on the merits of their financials and credit.

If you’re planning to buy this year, any money you will use as down payment needs to be in a legitimate account. Any “mattress money”, offshore accounts, piggy bank funds, gifts from family, etc. must be in a bank account at least 60 days prior. Any large deposits without a paper trail and proof of origin cannot be used. Put your money into an HYSA High Yield Savings Account, like SoFi, and let it grow on high interest there until you’re ready. In fact, all savings should be in one anyway.

If you don’t have a SoFi account, I have a free referral link for a sign up bonus that gets you extra money so email me at agentofparadise@gmail.com and I’ll send it to you.

Should I Pay Off My Debts Before Buying a House?

/ Jennifer Larson

Experts give different answers but this is truly a personal choice. Do you have to pay all your debts off? Usually, no. The issue some people has is their income isn’t high enough to carry much debt and a mortage so lenders will tell them to pay down debts first. I recently had a client working through pre-approval and they only had savings for the down payment but not closing costs and how much they could get approved for wasn’t as high. We also tried a no down payment program but because the rates were almost 9% for those programs they were approved for nothing in the area that low. Their biggest issue with both loan types? Their car payments.

When each spouse has a car payment, it really affects how much you can afford. Remember that you’re approved for payment, not overall price or rate. So if you’re approved for $3,500, it’s that payment regardless of home price and rates BUT that payment doesn’t go as far when rates are higher because more of that payment is interest so less is left for actual home price. And depending on rates, that payment gets you far or not. With 3% it gets you a great house in most areas! At 7% it doesn’t get you much in many areas and it could be a home at $350,000 in some areas where that doesn’t get you far. Now let’s say you have two cars that are about $500 a month. Well, lenders then deduct those payments from your overall approval payment. Now you’re only approved for $2,500. In your area at current rates, how far will you get in the market with that? Most people? About $250,000 which is around what my clients were approved for. It didn’t get them anything anywhere near them. The car payments were killing their chances of buying a new home. They’re now focusing on saving and paying off those cars instead.

So, it depends. If you $350k gets you a house without paying off debts, is it worth it then? Well, it depends if what you want is in that range or closer to $500k. It’s all subjective. If $350k gets you what you’re happy with, then no, you don’t need to pay off debts to get approved. Each circumstance is different and your needs should be first priority when deciding to or not. Do what’s best for you!

It’s here!!!!!

/ Jennifer Larson
Includes my Standard Savings Plan

My Homebuyer Savings and Debt Pay Down Plan is here and ready!!!

This is a key step to getting started on the home buying process when you’re not ready for a couple of years but want to get started saving and improving your credit. Finances and credit take years to build so get this guide now and start working on those goals.

The guide includes my Standard Savings Plan and how to pay down the right debt to improve your DTI, score, and viability as a buyer for lenders (like me). Lenders look at scores differently so it’s important to understand how it works for us and what we look at.

To get the guide, just email: jenniferlarsonent@yahoo.com and be sure to write GUIDE in the subject line. As always follow and check this blog often and visit me on Instagram at @snowplowsandcacti too.

Coming Soon

/ Jennifer Larson

I am updating my Standard and Beginner Savings Plans and will put them in a guide to download and a free ebook and follow with worksheets and tips for credit building as well.

They will contain various ways to track your spending, where to put your savings to get the most out of your money and how to grow it exponentially on any salary.

Stay tuned for more and remember to check out my videos on instagram @snowplowsandcacti for more tricks to save and get approved for a loan.

I’m Broke and I Need to Save Money

/ Jennifer Larson / 1 Comment

Start with my Beginner Savings Plan and grow $1200 every year plus extra interest on this account. ⬇️

Step One: Get the right account!

Email me for an updated link to get a free and easy sign up bonus for both HYSAs and other SoFi accounts. HYSAs are High Yield Savings Accounts that are free to open and use and pay way more than any traditional savings account can dream to pay you. Make dollars on your money, not cents.

Every pay check deposit at least $25 automatically into your HYSA.

You have to start somewhere and aim for a minimum of $50-$100 every month in deposits that you DON’T TOUCH 🙅🏼‍♀️. This is going to be your savings beginning and what you will put into a CD to grow even further every year.

Start here. If you’re really broke I’ll bet you have one streaming service you can cancel and transfer that same amount every month to the HYSA. $15 adds up!!

And keep building. If you need more help building credit and savings. DM me on IG @snowplowsandcacti for more help and a personal recommendation plan.

How to Build Credit When You Have None

/ Jennifer Larson

Over the years I have talked about not liking credit cards for many reasons because of how it can send clients into a spiral of bad spending and lowering their DTI score for their loan. The problem is, some people have no credit and need to build it. What then?

Today!

Unfortunately it is true that building credit is most easily and quickly accessible through opening a card. I eventually did this when secured cards weren’t readily doing much for me. I opened a Capital One card and was approved initially at $300 which is actually GREAT. You want just enough to build credit but not any more to get you into trouble and debt. The Quicksilver ONE card is geared for people who have no bad credit but not good credit either. It starts you on a small credit limit and gives you at least six months to prove your creditworthiness of ontime payments and responsible spending before you’re eligible for a credit increaase or new cards.

If you have low to no debts and a decent income of even $25,000 you might get approved. If you have a higher household income that’s even better. Again, other debts always impact your approval chances which is why it’s so important to not have any or low in relation to your income. If you approve just on your income with no rent or car payments, student loans, etc you will have a great chance. I did this and built my credit quickly in a few months by never being late and always paying before the due date. Of course, you can use combined household income too which helps.

If you want to get one too, email me for an account credit. Their pre-approval tool makes it easy to see what cards you’re eligible for with no impact on your credit score. Plus, no credit score is required to apply. The app is so easy to use, make payments, track your credit score free, and monitor your accounts instantly. This is not an ad but I do love my card and the customer service.

There is no magic trick to building a credit profile and growing your score. It just takes a few months, paying your statements on time, not overcharging, and slowly applying for a second card, and having an excellent payment history there too. Don’t close accounts either but rather pay them down and keep them open, even if they’re unused. They still produce a score and show lenders you do have established credit history even if it’s not in use–which is good!

A Growing Real Estate Trend

/ Jennifer Larson

Remember when states were encouraging, even compensating, homeowners to build ADUs to help ease the affordable housing crisis in many areas and rent those units in their properties with little oversight requirements to encourage as many as possible to build them? There’s a newer trend and some are utilizing those differently now.

Multi-generational housing is on the rise. Properties with casitas, pool houses, ADUs, guest houses, backyard cottages, etc were all once considered a luxury and feature of the rich. Not anymore. Now they’re not just in law suites or apartment income to rent out; they’re permanent rooms of entire families moving onto the same property full time. They’re not for when they visit. Extended families are buying and moving in with each other to afford housing and share living expenses so they can live off shrinking incomes as costs soar ever since Covid now almost five years ago.

Some homes are now being built brand new by developers as these homes to be intended for families to buy with their grandparents, aunts and uncles, or even older siblings. There are all kinds of dynamics in play but basically, they’re moving in with other family members living next door in the same land or attached at the studs; literally. Garage conversions and ADUs are now being done for families to move in their aging relatives home or others in their family who can’t afford to live elsewhere because rents are so high and buying a home is not a possibility on their own.

Many of my relatives and myself own large plots of land. If we ever had to build a small house or cottage on it for family to live that’d be mult-generational housing. We even considered it for our aging mothers since we have acres to share and they’d be close to us in case something happened. Would you consider this to buy a home and/or help your family?

What is underwriting?

/ Jennifer Larson

This is the actual approval process of your loan and when you’re actually going to be determining eligibility for the loan you applied for. This is a deep dive into your account history and all of your finances, line by line, and everything on your credit report. They’re doing an investigation basically into your employment status, your balances, your credit usage, your past history, and everything else.

A lot of these begin right away but basically coincide and are part of the bank decision making the loan or not. How does the home appraise, what’s in the title chain, and verify everything listed on your end and the rest about the property. If you get past all of the above and underwriting, you’re good to go usually.