Buying a Home When One Partner Has Bad Credit

Because both of your credit scores will be used by the lender when you apply for a mortgage together, one partner with bad credit could result in denial of your loan application or an offer to lend with a higher interest rate. Following are some tips for dealing with bad credit when buying a home with your partner.

download1. Under the Federal Fair Credit Reporting Act, FCRA, nationwide credit reporting agencies must provide individuals with a free copy of their credit report once every 12 months. Those agencies include Equifax, Experian and Transunion. Both of you should obtain copies of your reports and review them to ensure that they are complete, accurate and up to date before you apply for a mortgage.

According to the FCRA, both the agencies and the entity providing the information are    responsible for correcting incomplete and inaccurate information on your report. If you find inaccurate or missing information, you should let the reporting agency know what information is inaccurate. The agency will then conduct an investigation by notifying the information provider that will, in turn, complete an investigation and report back to the reporting agency. You will receive a written copy of the results of the investigation and, if it results in changes to your credit report, a free copy of your credit report. That report does not count against your once every 12 months free report.

2. If your partner’s credit report is accurate and complete, you should explain the reason for the bad report to your potential lender. For example, reduced income as a result of unemployment, illness or other unexpected events that occurred. This may make them more willing to work with you.

3. Lenders may feel more comfortable giving you a mortgage loan if you pay a larger amount of money for your down payment, generally more than 20 percent. This may make the lender more comfortable about getting the house back if there is a need to foreclose.

4. Consider delaying the purchase of a home until the partner with bad credit has improved his credit. According to the New York Times, correcting any credit report errors, paying all bills on time for at least a year and paying down credit card balances is a good way to raise your credit score.

Mortgage lenders look at your credit report, your income, your debt to income ratio as well as the condition of the home and its current market value when making a decision to approve your loan. It is possible that, once all factors are considered, the lender would be willing to finance your home for you.

The first step in purchasing a new home is to speak with a local LGBT real estate agent at He/she will have the knowledge to assist you through the process, including referring you to the appropriate lenders.

Prequalification for a Home Loan

If you are shopping around for a home and then applying for a home loan it means that you are putting “the cart before the horse.”  Knowing the amount of the mortgage you prequalify for before you shop around for home spares you the heartbreak of choosing a property and then being told by a lender that you cannot afford it. Having this information in-hand also impresses everyone involved in the real-estate transaction and may give you an edge in the bidding process.

bankYour first step to finding a loan is to visit the bank that offers you the lowest interest rate, but you also need to make sure that there are no “catches” to the offer. Sometimes banks advertise lower interest rates as a way of luring you into doing business with them but there can be factors involved that can elevate the cost of your mortgage. For instance, there may be a minimum down payment required on the loan before you qualify for the lower interest rate. You will also definitely be required to have a high credit rating before you will be considered for any mortgages with lower interest rates.

There can also be other hidden costs when applying for a prequalified mortgage that only really become evident once you have successfully acquired the home and it is time to sign an agreement. These hidden costs can include the closing costs, application fees and origination fees.

Before you talk to a lender it is a good idea to acquire a mortgage payment worksheet or use an online mortgage rate calculator to determine what the ballpark figure is that you can spend on a mortgage.

There is also next to no point in visiting a lender to acquired mortgage prequalification unless your debts are paid off or at the very least being paid absolutely on time; you have several active forms of credit in use including major credit cards from a prime company such as Visa, MasterCard or American Express; and ideally an already established credit line or proof that you have paid off a credit line on time and in full in the past.

Finally, if you are planning to apply for a mortgage prequalification do not buy a car, appliances or any other type of large item on credit at the same time as this can cause the lending institution to lower the amount it is willing to lend you.  It is also not a good idea to try and change jobs and buy a home at the same time, as most banks will not prequalify you for a mortgage unless you have been employed at least two years

Prequalification for a mortgage is, in a way, all about timing so make sure that you have all of the paperwork that is required in place. It is also a good idea to make sure that you have copies of everything that relates to your financial standing in place and ready to present to the lender in a meeting.

Home Purchase Mortgage Terms Explained

Buying a home can be a stressful, confusing process ~ knowledge is power, and when it comes time to start interviewing mortgage lenders it will help to have the basics of the “business terminology” under your belt!

Mortgage  InterestHere’s a few terms that you should be familiar with;



APR means annual percentage rate. Each time a mortgage lender quotes a mortgage rate, the loan’s APR has to be disclosed as well. The stated rate is used for monthly payment calculations; however it doesn’t prove anything concerning the cost of financing. APR will assist a lot in comparing the mortgages that have different rates and costs.


LTV stands for loan-to-value, which is a percentage of the homes selling price or appraised value (whichever is lower) that’s being financed. Loans that have a lower LTV are safer for lenders and they normally come with reduced mortgage rates.


This is the short form for adjustable rate mortgage. Unlike FRMs (Fixed-rate mortgages), ARMs have varying interest rates over time. ARM loans have rates that vary with economic conditions… most home buyers feel more secure with a fixed rate mortgage.


TTL stands for truth-in-lending. TIL will disclose your APR, which shows the cost of your mortgage in terms of investment rates and this allows easier comparison amongst other programs with varying rates and fees. The other thing is that it can give you the credit cost of the loan over the loan period and it can tell you when your payments are due and the amount to pay.


GFE stands for your good faith estimate. It shows the costs of your mortgage. Each time you apply for a home loan, the lenders need to provide a GFE for you within three business days. According to law, the real cost upon the closure of your home loan must be equivalent to what was disclosed within specific margins. Some of the information that the GFE has include;

  • Summary of your settlement charges
  • Adjusted origination charges
  • Escrow account information
  • Total estimated settlement charges.
  • Charges for All Other Settlement Services.


This stands for debt-to-income ratio. A DTI is calculated in two forms if your mortgage underwrites the evaluation of your application. The first form is known as your front-end or top-end ratio, and this represents your housing expenses divided by gross income (before taxation). The other form is called the back-end or bottom end ration. This is considered as the most important number; it would mean dividing monthly obligations (for example, car payment, credit cards, housing expenses and student loan payment) by your gross income.

If you are able to internalize the terms used before searching for a home loan, you will be more comfortable when talking to home lenders.

Mortgage, Credit Card Delinquencies Drop in Second Quarter

Fewer U.S. consumers fell behind on their home loans and credit card payments in the second quarter, reports TransUnion.

The rate of borrowers 60 days or more past due on their mortgages slipped to 5.49 percent from 5.78 percent in the first quarter of 2012.  TransUnion expects mortgage delinquencies to continue to fall for the rest of the year as the economy slowly improves.

“The economy has not grown at a robust rate, but it does continue to slowly improve and we believe the improvement in mortgage drMmelinquencies will follow a similar pattern,” Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit, told the Wall Street Journal.

Credit card holders 90 days or more past due fell from 0.73 percent in the first quarter to 0.63 percent in the second quarter.


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So what exactly is a short sale?

In today’s economic crisis and down real estate market this is a term that comes up a lot. But what exactly does it mean? In simple terms, a short sale is a tool that is used by banks and borrowers who have come on difficult times, as an alternative to foreclosure when a borrower cannot repay their loan.

When a homeowner takes out a mortgage loan to purchase their house, they agree to pay a certain sum of money, known as the principal. This principal balance is paid over the course of 15, 20 or 30 years plus interest.

In the event the homeowner is unable to, or stops making their mortgage payment, the bank, or lending institution will start the foreclosure process. The bank will always give the homeowner along the way several opportunities to pay the back-owed payments, and stop the process. In the event the homeowner cannot catch-up their payments, the bank will proceed with the impending foreclosure.

At this point homeowners have a few options to consider.

  1. They can simply wait for the bank to take their home or walk away from it.
  2. They can try to get a loan modification, where the bank will change the condition of their loan and either lowers the principal amount owed, the interest rate they are paying, or the term of the loan and thus lowering their monthly payments to an affordable amount.
  3. They can give the property back to the bank (known as a deed in lieu of foreclosure) or
  4. The final option is that the bank can authorize a “short sale.

A short sale is an agreement by the bank to allow the borrower to sell the property at a discounted price.

The homeowner will hire a real estate agent and put the house on the market just like any other sale, except the home will be priced according to current market value and conditions, which is typically much less then the homeowners owes on their mortgage. Buyers will come and tour the home and make offers.

In the end, the bank will have to approve any “short sale” offer made by a potential buyer before the sale can continue. Once the bank has made that agreement, the property can be sold just as it would normally.

The bank is essentially agreeing to accept the purchase price as a payment in full on the loan that is owed. It frees up the borrower to walk away from the property without a foreclosure on their credit, and it keeps the bank from having to take the property back.

It’s my opinion that a short sale is a better option than a foreclosure, as you’re cooperating with the bank in selling a home they loaned you money on, that you can no longer afford ~ short sale or foreclosure, expect your credit to be damaged.

Additionally, it’s important as part of the short sale agreement, that the bank agrees not to come after you for the “short payoff”… in some cases with foreclosure or short sale, the bank may attempt to collect from you the negative balance and or 1099 you for the “gift”, which you’ll pay taxes on.

Always consult a professional REALTOR® and or tax and legal professionals that are experienced in “short sales” to analyze your best options. 

Author Jeff Hammerberg is the Founding CEO of ~ Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast.

Should I buy a bank owned home if I have to move by a certain date?

In today’s housing market, there are many bank owned homes available that are well worth the bargain price tag.

Not only are homes being sold for less, but mortgage rates are at historic lows. Getting an interest rate near 4% has never happened in the history of mortgage lending!

Although there is some risk associated with purchasing an REO (Real Estate Owned by a bank due to a foreclosure), the bank is trying to cut their losses and unload as many homes as possible – which makes it a buyer’s dream. Part of the risk associated with an REO home is the uncertainty of when the bank will actually make a decision on your offer… is it 4 days or 4 months? ~ most lending institutions have a “history” which your real estate agent should be able to determine, but buyer beware “banks move at incredibly slow speeds historically”.

If you’re scheduled to move out of your current home by a certain date, purchasing a bank-owned home before the clock runs out could be a tricky matter. Having all of your ducks in a row will help with the approval process, i.e.; Pre-Approved for a Mortgage, No Contingencies, Quick Inspection Dates, etc. will help the bank choose you, over the possible stack of offers it may receive.

If your magic move-out date is less than 60 days away, you might have some cause to worry, but if that date is six months away, the likelihood of missing the deadline is quite small. Hopefully, the closing process will take less than 90 days.

When dealing with REO’s as a backup plan, a buyer should consider alternative, temporary living space, in the event that the sale doesn’t close within the allotted time. That may mean staying with a relative or friend and renting a storage unit for a few months, or renting an apartment on a short term basis.

If you’re getting a smoking deal on a home, this would be a small price to pay.

And what if the bank chooses another offer? Another concern with writing an offer on an REO is your hands are tied until you hear from the bank… how many great properties will you have to pass by, hoping for this deal to be approved. 

With REO’s you’re in the driver’s seat if time is on your side.

The beauty of obtaining an REO home is that it practically pays for itself as soon as you lay your money down. In just a few years, the housing market should recover and your investment will automatically be worth much more than you invested.


Author Jeff Hammerberg is the Founding CEO of ~ Instant Free Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast-to-Coast, offering Free Buyers Assistance.

Home Refinancing Basics

In today’s world of tight credit standards, government confusion, and record-low interest rates, it is beneficial to every homeowner, regardless of status, wealth, or property type, to know the home refinancing basics.

Homeowners all across America as well as many other countries are clamoring to take advantage of these low interest rates, and in order for them to be successful, they should consider three factors:

  1. Refinancing only makes sense if the long term savings outweigh the cost of refinancing.
  2. Homeowners should be very thorough in researching and selecting the best loan option.
  3. The choice of financial institution is important.

Refinancing a home involves certain costs, also called “points,” “origination fees,” or “discount fees.” When considering whether to refinance, it is vital that points and fees be taken into consideration. The short term cost (or long term if a “zero point loan” that builds the cost into the new loan,) must be balanced with the anticipated savings, eventually leading to a calculation of how long one must own the house to make up for the costs and realize a savings.

If, for example, a refinance would lower the monthly mortgage payment by $100 and the points on the loan amount to $3,000, the homeowner would need to keep the home for 30 months before the refinance would start netting a savings.

After the mortgage crisis and mass defaults on sub-prime mortgages, it is more important than ever to research what type of loan to refinance into, specifically the term of the loan and the type of interest rate. Mortgages over a shorter term for example 15 years versus 30 years, have a much higher monthly payment but result in a substantially lower total cost of borrowing (interest.) Long-term mortgages have the reverse effect.

Loan variability means choosing between a fixed interest rate that is unchanging for the life of the loan or a variable rate, of which there are many varieties, with rates that change at certain points during the life of the loan. Each type has its own pros and cons.

As far as choosing which financial institution to utilize, the most important factor is to shop around. The holder of your current mortgage may offer a great savings of time in that they already have much of the necessary information and potentially also a monetary savings as a reward for loyal customers. Another option is to ask for referrals from your trusted real estate agent ~ they work with lenders every day… it’s more important to have a trusted adviser than to have an offer of ¼ point less from an “unknown” in another state.

There are nearly infinite banks and mortgage companies worth exploring, and only after researching the institutions as well as the above enumerated considerations of total savings and mortgage type can a truly informed decision be made.

Author Jeff Hammerberg is the Founding CEO of ~ The Nation’s Largest Free Directory of Gay, Lesbian and Gay Friendly Realtors offering Free Buyers Representation, Free Sellers Competitive Market Analysis and Free Relocation Kits to Any City, USA.

How Much Cash Do I Need for a Down Payment when Buying a Home?

Getting pre-qualified before touring homes can be a great way to ensure that you can act fast in today’s real estate market.  When you’re on the prowl for that perfect property and are ready to pounce, the last thing you need is a pre-qualification delaying your offer.

One of the questions your mortgage professional with inevitably ask is, “How much do you want to put down?”  Your down payment can be a gateway into a variety of useful mortgage programs suited for a wide range of needs.

It’s important to note that mortgage program guidelines are always in a state of flux, so be sure to contact one of our real estate professionals to make sure you’re prepared with the latest information.

Mortgage Programs

There are three main mortgage programs you for which may qualify, based on your down payment amount and credit scores:

  • FHA (Federal Housing Administration)
  • Conventional
  • VA (Veteran’s Administration)

Down payment requirements for each program were consistently updated in relation to current market conditions.  In most cases, the more you put down on your new home, the more incentives the loan program provides.

Since most consumers are primarily concerned with interest rates (and rightly so), remember that the minimum down payment may not always get the best interest rate, while a higher down payment will expand your loan program opportunities.

Mortgage Insurance

If a lender is at a higher risk of loss when a buyer may default on a loan program, the lender will usually require you to pay for an insurance policy on their behalf called mortgage insurance (MI).

Traditionally, this is required on a loan with a down payment less than 20% of your new home’s purchase price.  VA loans, however, are exempt from paying MI.

Down Payment Tiers

There are three main down payment levels that will progress you through the various loan programs for a traditional single-family home.

  • No-Money Down (currently limited to VA loans only)
  • 3.5% down (FHA)
  • 5% down (Conventional

VA loans are limited to those currently enlisted in the military and veterans.  While there is no down payment requirement on VA loans, a funding fee will be required by law.  This fee can be reduced with a down payment of at least 5% down and also be financed with your loan if needed.

FHA financing will require a minimum of 3.5% down and an up-front mortgage insurance premium (UFMIP) to be paid.  This fee is also constantly revised through mortgagee letters issued by HUD, so be sure to check with your mortgage professional for the latest UFMIP amounts.

Conventional loans require a minimum of 5% down and have the largest variety of loan programs available.  A conventional loan is a traditional loan by a bank with competitive interest rates based on your credit scores.

Talk to your Real Estate and Mortgage Professional

As you can see, obtaining financing can be a difficult process if tackling it alone.  Luckily, our real estate agents have dedicated themselves to understanding this process completely and have teamed up with mortgage professionals who share the same passion.

Contact a agent today to get started.

Author Jeff Hammerberg is the Founding CEO of offering Free Instant Access to Gay, Lesbian and Gay Friendly Realtors Coast to Coast.

Now is the Perfect Time to Buy a Home

If you are thinking about buying a home, but you’re still a bit hesitant, then here is some great information that may help you decide to do it now. True, the economy appears to still be on the downside and we are seeing a lot of unemployment, but did you know that if you are stable enough financially, then now might be the right time to invest in a home. Hopefully the information presented here will open your eyes and understanding about the current status of the real estate industry.

Over the past 20 years, we have seen a boom in the real estate market. A lot of homes were built, and sellers were able to cash in on that increasing trend at the time. However, with the recent recession that hit our country, we are seeing a lot of unsold property in the market. The reason behind this is because it’s become increasingly difficult to get a loan and a lot of people are afraid to invest now because of the instability of the economy.

You see, the law of supply and demand is currently at play. On one side, there’s a huge supply of homes available. On the other hand, there aren’t a lot of buyers. This forces the sellers to drastically lower their prices, and even offer more incentives to buyers, such as paying all your closing costs, etc. There’s a chance right now, to get more value for the money you are willing to invest.

Another reason why you should consider buying a home right now is that you have the chance to accumulate almost instant home equity. Paying a monthly mortgage can build towards a home that you can call your own someday. Your growing equity can become your personal savings account, which you can eventually use to buy a better home in the future, or use a part of your retirement strategy.

Another big factor to consider is that interest rates are currently at historic low levels, and they won’t stay here forever. There are also very Low Money Down Programs that can be availed, as low as 3% granting that you have good credit standing. It’s very easy to get the best deals on home loans with most financial institutions. Although, they are a bit stricter now and choosy on who would be eligible for a home loan. But if you are on the stable side of the economy, with a good credit standing to boot, then there are no reason why a bank would not want to loan you the money with the most competitive interest rates available.

Yes we’ve seen a decline in the prices on real estate these past few years, but as of today in many markets, prices are on the upswing. So, instead of guessing where the bottom may be – take advantage of the many positive factors in today’s market. Waiting it out, you may find yourself out of luck in the near future when you finally decide on buying a home.

The time to decide on buying a home is now while the economy is still conducive for buyers. Now more than ever, you have the best opportunity to invest in a home with the lowest prices and interest rates. Home ownership and its long term benefits are enough to encourage even the most hesitant of buyers. 

Jeff Hammerberg is the Founding CEO of the Nation’s Largest Free Database of Gay, Lesbian and Gay Friendly Realtors serving the LGBT Community.

White House may unveil mortgage plan next week

The Obama administration is considering unveiling new plans next week to revive the ailing housing market and reduce foreclosures, including an effort to help troubled borrowers refinance their mortgages.

The administration has been working for weeks on how to implement a mortgage relief program. President Barack Obama could include a nod to the plan in a speech on job creation next week, sources familiar with the administration’s plans said.

The refinancing initiative would allow certain borrowers to refinance loans that are backed by government-owned Fannie Mae and Freddie Mac or the Federal Housing Administration, the sources said.

A broad-based effort to automatically refinance millions of mortgages is not in the works, yet the administration is looking to take targeted changes to an existing program that would allow more borrowers to take advantage of low mortgage rates, including allowing borrowers to refinance even if they owe a significant amount above their property’s current value.

The idea is to help struggling borrowers refinance at current low interest rates, which would cut their monthly payments and free up cash for other spending. The hope is that this could drum up overall business activity.

The average rate on a 30-year fixed loan was 4.22 percent last week, close to the lowest level in more than 50 years, according to Freddie Mac.

Fannie Mae, Freddie Mac and the FHA, which together account for 90 percent of the U.S. residential mortgage market, would be given permission to begin refinancing plans for borrowers that are current on their mortgage payments and not considered seriously delinquent, according to the sources.

While the administration is under pressure to firm up the details, it is not yet clear whether borrowers seeking to take out a loan that is more than 80 percent of the value of the home would qualify for refinancing. The White House has kept the specifics of the refinancing plan closely guarded as it attempts to work out the details.

White House officials had long been wary of trying aggressive new programs to revive the housing market. The prevailing view at the White House over much of the last two years was that any remedies would cause at least as many problems as they solved.

A mainstay of the administration’s housing initiative, rolled out in April 2009, has fallen short of expectations. Known as the Home Affordable Refinance Program, it was originally intended to help 4 million to 5 million homeowners avoid foreclosure. As of May it had helped only about 810,000 homeowners refinance into loans with lower rates, according to the Federal Housing Finance Agency.

But Democrats close to the White House said the weakness in the economy and the drop in mortgage rates have led officials to take a second look at ideas that could bolster the housing market and ease the strain on household budgets.

Analysts who favor action say housing is at the heart of the economy’s woes and that its moribund state is creating a risk of a Japanese-style “lost decade” of economic stagnation.

“We can either spend the better part of a decade allowing households to gradually work off their debt burden,” said William Galston, a scholar at the Brookings Institution think tank. “Option number two is that we try to jump-start the process.”

“I think it’s time to go back to the drawing board,” he added.

Chicken or the egg
Some economists, however, believe the strain the housing market is putting on the rest of the economy can be addressed in other ways, such as using infrastructure spending and tax credits to encourage hiring in order to reinvigorate growth.

Christina Romer, a former top economic adviser to Obama, said that compared to other measures to address the economy’s woes, a housing-specific program could be expensive. She noted that homeowners tend to be wealthier than the general population so such programs would not be targeted to people most in need.

“A bold jobs program might be just as effective and better targeted to those who need help the most. Also, healing the economy is as likely to heal the housing market as programs aimed directly at housing,” said Romer, a professor at the University of California, Berkeley.

And while refinancing has accounted for the majority of mortgage applications for many months now, according to weekly data from the Mortgage Bankers Association, there is no evidence that the refinancings are providing a spur to consumer spending.

The refinancing initiative under consideration by the Obama administration mirrors a plan contained in legislation co-authored by Senator Barbara Boxer, a California Democrat, and Senator Johnny Isakson, a Republican from Georgia.

In a letter on Monday to Edward DeMarco, acting head of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, Boxer argued that the plan would provide a “dual benefit.”

She said it would help Fannie and Freddie avoid losses, since fewer borrowers would fall delinquent, while providing a boost to the economy.

Bondholders on the losing end
The loudest objections are being registered by holders of mortgage bonds, who would take a hit if loans are paid off early.

Some fund managers have loaded up on agency mortgage-backed securities, those bonds backed by mortgages guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association, because they offer higher yields than U.S. Treasuries.

Last week, the $5.4 trillion agency MBS market recorded one of its worst weeks in a year as traders dumped mortgage bonds out of concern the White House would put forward a plan that would shoulder them with losses.

While mortgage rates have been hovering around record low levels, banks remain stingy with lending although they are sitting on more than $1 trillion in excess reserves. Homeowners without a job or good credit histories have been essentially shut out of the refinancing process.

Some investors say the economic benefit of a government-encouraged refinancing wave would be minimal.

“It’s a political hail Mary. It’s unclear why they want to throw a monkey wrench into a $5 trillion market,” said John Kerschner, head of securitized products at Janus Capital Group in Denver. He said the net benefits for the economy are negligible, perhaps adding $20 billion to $30 billion “at best” to the U.S. economy.

The aurthor of this article is Thomson Ruters

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