Monthly Archives: July 2013

How to Get a Home Loan With Low Income

Those who have low-income will always face problems when it comes to getting approved for home loans. And it is not only with mortgages, but also with getting approved for credit cards and other type of loans. However, this does not mean that all is completely lost if you have low-income, and you would want to own your own home. There are a few steps you can take to get approved for a mortgage, despite your income status.

160018787So what are these options that will help people with low-income status obtain a mortgage? There are two options in my experience. These are:

(1)The Federal Housing Administration, FHA, Loan program. The program helps those with low income to acquire their own homes. We will discuss how to go about the application process and all that you require to get you approved later in this article.

(2) Using your assets such as a car as collateral to get the mortgage.

(3) Using a co-signer, also known as co-debtor to apply for the mortgage with you.

OK so let’s get into the details of each option.

The FHA Loan Program for Those with Low Income Levels

1. The Federal Housing Administration, FHA, Loan program is there to assist people who have low incomes to acquire their own homes. It is specifically called the FHA 203 Loan program.

So how do you qualify? To qualify for the FHA loans program, you need all your personal finance documents available. Also if you have any assets, ensure the documents covering them are also made available.

So what happens when you submit your application for the FHA program? Your income-to-debt ratio is determined. This ratio is simply how much debt you have compared to the amount of income you have, including all your assets. It is worth noting that this test differs from state to state.

The test is conducted to determine if there is the slightest possibility of you being able to pay for the loan that is given to you through the program. So your credit score could be borderline good, you can still qualify for this loan and be able to own your house. There are people with a credit score as low as 580 who have been approved for the FHA loan and are now homeowners.

2. So how do you make your application? Go to your mortgage officer. Let them know you want to apply for the FHA 203 home loan program so that they can give you the appropriate application forms. Fill the forms out. If there is something you do not understand, let the mortgage broker help you out.

3. One thing you need to understand about the FHA home loans program is that the loans have fixed interest rates and it stay the same unless you decide to refinance. If you application is approved, you will get a confirmation from the FHA office in your state or from the mortgage broker you used to make the application. So this one option of getting a home loan with a low-income status.

Other Options beside the FHA Loan Program

For some reasons, there may be people who will not be able to qualify for the FHA 203 Home loan program. In that case, you can consider these other options to help you get a mortgage if your income status is low.

4. Using your assets as collateral. Although your income status may not be good, it is possible that you have assets you can use a collateral to help you a home loan. These assets could be your car, bonds and other investments you may have. Talk to your bank about the possibility of using any asset you may have as collateral to help you a home loan.

5. Using a co-signer.

If the two options above do not work out for you, the last option is to consider getting a co-signer to sign the loan application with you. A co-signer is ideally a relative such as a parent, sibling or spouse. They should have an excellent credit score since the banks or financial institution giving you the home loan will make their decision based on the co-signer’s credit rating.

6. Once you get your co-signer, go ahead and make your application for a home loan with a private mortgage lender, using your co-signer credentials as well as yours as well as your own. Typically, you will need to have the co-signer go with you to the offices of the lender to sign the forms. In other cases too you can simply get them to sign the forms and then you would present it to the lender.

7. One characteristic of co-signed loans is that of defaulting. It is important to have clear, documented steps of what will happen to your co-signer if you default on repaying the loan. Co-signer assume responsibility for the loan if you default. So have a clear, written plan in place if this should happen.

FHA Mortgage Loan Timeline

An FHA Mortgage loan is the most common type of mortgage for home purchasers to use these days.  Getting an FHA Loan is also one of the most frustrating experiences for a home buyer to endure.  It makes shopping for the home, negotiating the price, and the home inspection seem easy for most people.

159668411After taking a quick survey and finding that this was the most frustrating part of the home buying process for most buyers, we decided to put together this little FHA Mortgage Timeline that would help buyers understand the process a little better.

  • Day 1 – Loan application over the phone, pull credit, review loan options.
  • Day 2 – Meet client, collect initial paper work, turn in file to operations. (If it fits everyone schedule!).
  • Day 3 – Operations scrubs file for missing items, signatures ect. Orders title, appraisal file goes to processor (if we can order appraisal due to inspection not being complete, once ordered appraisal are taking 10-14 days).
  • Day 4 – Processor talks with client to collect any missing or added documents. Needed ASAP.  Processor usually has file a 3-6 days depending on how fast client returns items needed.
  • Day 5-9 – File goes in line to be underwritten as soon as file is complete. Underwriting time is 48-72hrs.
  • Day 10-13 – Receive conditional loan approval, call client with list of conditions.
  • Day 13-16 – Client returns all loan condition  items (hopefully).
  • Day 17 – Possibly still waiting for appraisal to be done & trying to get title to make corrections that are needed.
  • Day 17-21 – Possibly still waiting on borrower to send in all conditions.
  • Day 22 – Appraisal is completed.
  • Day 23 – Hopefully we have every thing we need to re-submit the file to underwriting with appraisal and loan conditions. 48-72 hrs.
  • Days 26 – Ask appraiser to make any needed corrections on appraisal.
  • Day 27 – Hopefully appraisal repairs, if necessary, are in.
  • Day 28 – File is cleared to close. Once that happens the file is sent to get the PMI certification.  Usually takes 3-8 days.
  • Day 32 – PMI certification comes in then we are clear to close. Schedule with title company, docs & wires are ordered 48-72hrs.
  • Day 35 – Close