Can I Sell My Home If I’m Behind on My Mortgage?

If you have fallen behind on your mortgage payments and cannot find a way to catch up, you may think selling your home is the only way to get on top of your finances. As long as your lender has not foreclosed on your home yet, you still have the opportunity to sell your home and get out from under your mortgage. But in this situation you need to move quickly and decisively. Here is everything you need to know about selling your home after you have fallen behind on your mortgage payments.

The foreclosure process will start soon after you begin to miss mortgage payments. Even missing just one payment can cause you to receive a foreclosure notice in the mail. After you are more than 120 days late, your lender is legally able to reclaim your home and sell it in order to recoup their money. At this time, you will be forced out of your home. The foreclosure will also appear on your credit report and can drop your credit score drastically, impacting your ability to get future lines of credit. Fortunately, you have up until the actual day of foreclosure to sell your home on your own.

Even if you think you are heading towards foreclosure, you can still get in front of your situation and take financial control back. How you go about selling your home before foreclosure depends on whether your house is worth more or less than what you owe on your mortgage. You will be able to sell your home and use the profits to pay back your lender as long as the fair market value of your home is greater than what you still owe on your loan. Taking this path will look much like the steps you would take to sell your home at any time: find a real estate agent and hope you receive acceptable offers on your home. You will not normally need to get your lender’s permission to sell your home like this.

If you find your home is worth less than the amount you still owe your lender, you will need to sell your home as a short sale to avoid foreclosure. A short sale is when you accept an offer on your home that will not cover the full amount you still owe on your mortgage. You will need to get the approval of your lender in order to go down this path, however this may be difficult. Lenders automatically lose money on short sales so they may not be eager to approve. You will need to submit a hardship letter explaining why you can’t make your mortgage payments and evidence to support this claim.

Many lenders will eventually accept your short sale offer as long as you meet specific demands to help meet their bottom line. You might find yourself responsible for repairs and many closing fees so you need to decide if you want to take on these costs (and if you can even afford to do so). Your agent and real estate attorney will be able to help you negotiate these terms. A short sale will do much less damage to your credit than a foreclosure and will allow you to stay in the home until the sale is completed.

If you are behind on your mortgage payments, but you want to stay in your home, there are also other options besides selling or foreclosure, like mortgage forbearance or mortgage modification. Veitengruber Law can help you find the right solution for your specific situation.

The Biggest Mistake You Can Make While Saving to Buy a Home

money mistakes

When you are in the market to buy a home, the more savings you have, the better. Between closing costs, your down payment, and other home buying expenses, the out of pocket cost of buying a house can add up. It can be tempting to use your hard earned savings, a retirement fund, or even your emergency funds in order to have sufficient funds for a down payment. But cleaning out your savings to buy a home is a very bad idea—and here are three reasons why.

1. Unexpected Expenses

After you buy a home, you will need a strong emergency fund more than ever before. Your emergency fund should include at least three months of expenses saved in the event you lose employment. For a homeowner, that’s at least three months of mortgage payments, homeowner’s insurance, home maintenance, utilities, and all the little expenses that add up when you own a house. If you use your emergency savings to buy the house, you may not be able to absorb the costs of any unexpected repairs that pop up down the road. Tapping into your emergency fund to pay for your down payment or closing costs could leave you high and dry.

2. Continuing to Save, Even After Becoming a Homeowner

If you have to clean out your savings accounts in order to purchase a home, chances are you can’t actually afford the home in the first place. As soon as you sign your name on the closing paperwork, you’ll be responsible for a whole heft of new expenses, including your monthly mortgage payment, homeowners insurance, property taxes, indoor home maintenance expenses, exterior maintenance (ranging from lawn care to snow removal and SO MUCH in between), and utilities. Will you still be able to contribute to your savings account on top of these new expenses? While you may be able to afford the out of pocket expenses to buy a home on paper, if buying the home means you cannot afford to keep saving in the future, it isn’t a good financial choice. You are better off waiting to buy a home until you are in a position to purchase a home without touching your emergency savings AND keep saving.

3. Becoming “House Poor”

If you’re like most Americans, your savings fund isn’t just for emergencies—it’s also where you build up enough money for vacations, to travel to visit family, or to refresh your spring wardrobe. A house might seem worth the sacrifice now, but know that the excitement of a new home will wear off just like everything else. You don’t want to be scraping by to survive and lose the ability to enjoy other aspects of your life. Roughing it out in an affordable rental for a few more years while you save more money can allow you to continue living your preferred lifestyle while still working towards the eventual goal of homeownership.

Buying a home is exciting and it can be tempting to go for broke to finally have your own place. We recommend that you keep building your savings until you are truly ready to purchase a home. Not sure if you’re ready? Reach out to Veitengruber Law and we can tell you straight up if you should go for it now, or if you’re truly better off waiting.

Why Does My Escrow Payment Keep Going Up?

If you have a fixed-rate mortgage, you might be surprised to find that your monthly payment has increased on your most recent bill. If you’ve noticed an increase in your bill, chances are you should look to your escrow payment. Your escrow payment may increase from time to time, but if you notice a steady increase, it is important to understand why.

In relation to real estate, an escrow account is a portion of a homeowner’s monthly mortgage payment that is deposited into an account meant to cover mortgage-related expenses like insurance and property taxes. Your escrow account is set up at the time you take out your mortgage loan. There are some instances where a homeowner can potentially opt out of an escrow account—like if you put more than 20% down. But in most instances, a lender will insist on the inclusion of an escrow account to ensure that essential payments are made. If you do not have an escrow account, you will be required to make sure you are paying for the payments typically covered by an escrow account.

When you get a mortgage loan, your lender will set up an escrow account for you. Your monthly escrow payment will be based on an amount that will cover your homeowners insurance, property taxes, and any required reserves. Once your lender determines the cost of expenses to be covered by your escrow account, they have 45 days to provide you with a statement outlining what the payment will be and when they are due. There are limits to how much money your lender can require you to pay in escrow.

Your lender recalculates your escrow payment yearly. There are three reasons your escrow payment may increase: 1) your homeowners insurance premium has increased, 2) your property taxes have increased, and 3) your servicer previously miscalculated your fees. If your lender determines your monthly payment needs to change, it will be explained in your yearly escrow analysis.

It is also possible that you could have an escrow shortage.  This is when the money in your escrow account is insufficient to cover the cost of your mortgage-related expenses. When your escrow account is short, your mortgage provider will give you notice along with an explanation. Even if the shortage is not your fault—for instance, your property taxes increase—it is still your responsibility as a homeowner to make the payment. To cover the cost of the shortage you can either pay the amount in full or make higher monthly payments.

Your escrow account protects your lender in the event that you cannot pay expenses related to your mortgage, but it can also protect you as a homeowner. There are plenty of consequences and penalties you can face if you are unable to pay your property taxes or homeowners insurance. Monthly escrow payments allow you to spread these expenses out, making it easier to budget and preventing you from falling behind on payments.

While your mortgage payment and interest may remain the same, your escrow payment can vary from year to year. Don’t let this increase take you by surprise. Prepare for these changes by paying attention to communications from your mortgage lender and staying on top of your property taxes and homeowners insurance.

5 Important Things to do Before Buying a House

For most homeowners, buying a house is the purchase of a lifetime. Before you sign on for your dream home—and potentially all the debt that will come with it—you need to take an honest look at your finances. If you are thinking of buying a house, these tips will help you align your personal budget with your house goals.

1. Know Your Household Budget

Setting up your household budget should start with having a firm grasp on how much money you have coming in (after taxes) every month. Next, you’ll need to determine your monthly expenses, from bills, utilities, and insurance to groceries and entertainment. The amount of money remaining after you subtract your monthly expenses is your expendable income. Are there areas you can improve on? Is the expendable income you have enough to cover the added expenses of a mortgage, insurance, and home ownership? Make adjustments where necessary.

2. Pay Down Debt

Of course, it is possible to buy a house even if you currently have existing debt, but you are putting yourself in a much better position to be approved for a mortgage if you can pay off most or all of your debt first. Paying off debt will also improve your credit score, which is also an important factor in getting the best terms for your mortgage.

3. Save for a Down Payment

Lenders have been increasingly cautious about who they lend money to and how much money they lend. Because of this, lenders often require a 20% deposit on a home. Depending on the price of a home, this deposit can get pricey. Focus your personal budget on saving towards this deposit. It will improve your chances of getting approved for a loan and give you a head start in paying off your home.

4. Know How Much House You Can Afford

Feel out what kind of loan you can get pre-approved for. Typically, your actual “new home” budget will be less than the amount you are pre-approved for, but this is a good jumping off point. Next, seek out homes that could realistically fit into your budget. Most lenders suggest a house that is about 2.5 time your annual salary.

5. Research and Inspect

If you find a home you can afford that you want to buy, don’t jump to sign the first contract of sale laid before you. Take the time to hire a home inspector. A home inspector is different from an appraiser and you will have to hire them each separately. However, a home inspector could save you money in the long run by uncovering any big issues with a home before you own it. Take some time to research the real estate market you are buying into. Is this home priced fairly compared to similar homes in the area? If not, you could use this data to argue for a lower price.

Finding a home you will love with your budget is possible. By modifying your spending, you can save money, get the best mortgage possible, and land your dream home.

Mortgage Co-signer vs Co-borrower: What’s the Difference?

mortgage co-signer

If a bank is on the fence about approving a loan, they may ask the borrower if there is anyone who can share responsibility of the loan. Including multiple people on your loan application can increase your chances of getting the loan accepted. While many people think co-signers and co-borrowers are the same thing, these are two very different roles in the eyes of a lender. To decide which option is best for you and those helping you get the loan, it helps to compare the two roles.

A co-signer is someone who guarantees a loan for someone else. This means that the co-signer is agreeing to take responsibility for paying off the loan in the event the primary borrower fails to do so. With more resources available to pay back the loan, the lender will be more confident in receiving payment. A co-signer does not have title or ownership over any items acquired with the loan.

A co-borrower is one of at least two primary borrowers. For example, if a couple is buying a home together, they can apply for a loan as co-borrowers. Like co-signers, co-borrowers are responsible for the loan even if the other primary borrowers do not meet agreed upon payments. Unlike co-signers, a co-borrower will have an ownership interest in the property being purchased.

While both a co-signer and a co-borrower can help you when it comes to qualifying for a loan, there are some differences in the risks associated with the responsibilities of co-borrowers and co-signers.

It is important to understand as a co-signer that you are essentially taking on an all risk, no reward deal in which you could be responsible for paying off a loan with no benefit to yourself. If you co-sign to help someone buy a car, it’s their car—and if they stop paying on the loan, it is your responsibility to pay for their car. More than just paying the loan balance and interest, you can also be charged for late fees and other charges if the primary borrower has stopped making payments. Co-signing can also negatively impact your ability to borrow or your ability to get preferable terms on new lines of credit.

For co-borrowers, the risk is a little more personal. Because you are combining financial resources with someone else, co-borrowing can allow you to get approved for a loan that is much bigger than you could pay by yourself. Tragic accidents, bad break-ups, and any other number of difficult circumstances can leave you with a loan that is outside of your financial capacity. It can be very difficult to remove someone’s name from a loan, forcing you to sell the shared property or go through a time-consuming refinance in order to pay off the loan.

The bottom line is if you need someone to co-sign or co-borrow in order to secure a loan, you need to make sure it is someone you trust. Communicate fully the responsibilities associated with each role and confirm they feel comfortable adding their name onto the loan application. Keeping up regular communication with this person about the status of the loan can ensure you are on the same page, which is important since they are invested in the mortgage, too.

Financing a Home as a Single Parent: What are my Options?

home ownership

Being a single parent isn’t easy. There are many unique financial challenges single moms and dads face as a one income household. For many single parents, buying a home can truly seem like an impossibility. But don’t give up on your dream of homeownership just yet. There are plenty of loan and assistance programs single parents can take advantage of, you just need to know where to look. In New Jersey, there are many state and federal assistance programs for home buyers with specific circumstances. While none of these categories explicitly list “single parents,” they can be a great benefit for those looking to buy a home with one income.

HUD 

One of the best places for single parents to start their home search is the U.S. Department of Housing and Urban Development (HUD). Contacting your local New Jersey HUD office can give you access to resources that will help you find housing options as well as demystify the home-buying process. A HUD housing counselor can fill you in on local home buying programs you might not be aware of or help you obtain a loan. Some single parents may also qualify for subsidies and extra assistance that will help you afford decent housing (depending on your income and employment).

FHA

Federal Housing Administration (FHA) loans are popular for many first time home-buyers, including singles on their own as well as single parents. FHA loans are government insured and easier to qualify for than other similar loans. There are many benefits associated with FHA loans that make them appealing to single parents, including a 3.5% down payment, lower credit score minimums, and low monthly mortgage insurance rates. FHA loans are also flexible about how a first-time homebuyer is defined. If you are recently divorced or become a displaced homemaker, you can qualify as a first-time homebuyer as long as the only residence you’ve ever owned was with a former spouse.

VA

Veteran Affairs (VA) loans are also an excellent resource for single parents. If you are a single service member, a veteran, or the surviving spouse of a veteran, you could be eligible for VA loan programs. There are a number of benefits for qualified buyers, including waived down payments and mortgage insurance, low-interest rates, and on-going support throughout home ownership. If you are facing foreclosure, the VA can step in to help you keep your home or find a new residence. In the event of a work-related disability, there may be additional Veteran’s benefits you can take advantage of.

USDA

The United States Department of Agriculture (USDA) offers a few different programs for low- and moderate-income home buyers in rural areas. Even if you aren’t sure that you live in a “rural” area, the USDA’s programs are still worth looking into. Many of the regions where programs are offered are located just outside major cities. USDA loan programs offer low interest rates and zero down payment options. Qualified borrowers can get 100% financing and the mortgage insurance premium is one of the lowest offered in any program. USDA loans do have an income maximum, but most single parents do not meet this maximum.

Private Lenders

Some private lenders will offer loan programs for single income borrowers. These custom loan programs can cater terms to your specific needs to help ensure that loan applicants get pre-approved for a mortgage. These custom loan programs can include help with your credit score or assistance with your down payment, among other things. While not all lenders will offer these kinds of programs for single parents, it is worth looking into as you begin your home search.

 

As a single parent, you aren’t limited to these programs. Your county, city, or even township might offer their own programs to help the single parent home buyer. Don’t lose hope in your dreams of owning a home. If you would like help getting started or with the application process, Veitengruber Law is more than happy to help you get on the path to home ownership!

 

 

 

 

 

 

 

Is an FHA Loan Right for Me?

FHA loan

The standard mortgage loan down payment of 20% can be a huge sum of money to many prospective homeowners. If this big number is the main reason you have put off buying a home, consider applying for an FHA loan. An FHA loan will help you finance the purchase of your home without having to put down a huge down payment.


FHA loans prevent would-be home owners from getting priced out of the real estate market.

An FHA loan is backed by the Federal Housing Administration, an agency of the U.S. government. The FHA does not lend you money; instead, they insure the loan used to purchase your home. In the event that you are unable to make payments on your mortgage, the FHA will step in to pay your lender. This makes it less risky for lenders to grant mortgages to buyers with lower down payments or poor credit scores. As long as your credit score is 580 or higher, you can qualify for an FHA loan with a 3.5% down payment. If your credit score is between 500 and 579, your FHA loan will require a 10% down payment.

What You Need to Know (Before You Apply)

fha loan

1. You need a consistent income.

While FHA loans don’t have a set minimum or maximum income requirement, you must prove that you earn a steady income. Pay stubs or yearly tax returns can help you prove that you are a reliable earner. Bonus points if you’ve worked in the same field or for the same employer for a couple of years.

2. Heavy debt can hurt your approval chances.

The FHA is unlikely to approve your application if you already have a lot of existing debt—like auto loan(s), credit card debt, and student or personal loans. An FHA loan officer will analyze your income to determine what percent of your monthly income goes to paying down your debts. As a general rule of thumb, your mortgage shouldn’t be more than 31% of your income before taxes. Additionally, your combined debts should not be more than 41% of your income.


An FHA loan officer won’t approve you for a mortgage if you’ll be paying half your salary toward debts.

3. Lenders favor borrowers with credit scores above the 580 minimum.

While 580 is the minimum credit score the FHA requires to insure your loan with a 3.5% down payment, some of the lenders the FHA works with do have higher credit score requirements. For most lenders, you will have a better chance with a credit score of at least 640.  If your credit score isn’t quite there yet, it can be worth it to take the time to improve your score before applying for an FHA loan.

4. Be realistic about your buying power.

There are limits on how much money you can borrow with an FHA loan. These limits are based on real estate prices in the area(s) where you want to buy a home. If you can afford to buy a huge house with a swimming pool, you likely don’t need an FHA loan to begin with. Keep in mind that FHA loans aren’t just for single-family homes. A smart investment move is to purchase a multi-family housing property with up to four units. Rental income can pay for your monthly mortgage payment (and sometimes more). FHA requirement for purchasing multi-family homes is that you must live in the property for at least a year.

5. You will need mortgage insurance.


Mortgage insurance is an insurance policy for lenders in case the borrower defaults on the loan.

If you have an FHA loan, you must have mortgage insurance. The up front premium for mortgage insurance will be part of your closing costs and is approximately 1.75% of the total loan amount. In addition to the 1.75% upfront cost, you will also have a monthly mortgage insurance premium. This will typically read as mortgage insurance premium (MIP) on your FHA loan statements. Mortgage insurance costs between 0.5% and 1% of your loan value each year. This calculates to ~ $120 a month for a home loan of $195,000.

If you are trying to decide if an FHA loan is right for you, sit down and look at the numbers to make sure you can afford a mortgage payment, mortgage insurance, the down payment, and closing costs. If you think your budget is ready for homeownership, an FHA loan can be a great way to make your dreams a reality!

NJ Foreclosure: Am I Entitled to Mortgage Surplus Funds?

mortgage surplus

Most people view foreclosure as the end of a long battle to keep their home. While it may feel as though you are losing everything, there is still a chance you could get something out of the process. Foreclosure can be a very frustrating experience, but there is a potential for you to receive some funds from the sale of your home to help ease the burden of losing your residence. The monies homeowners can be entitled to after the sale of their home at auction are known as mortgage foreclosure surplus funds. Here, we take a look at who is entitled to mortgage surplus funds.

Once your lender has obtained a final judgement of foreclosure, they will begin trying to sell your home in a sheriff sale in order to make up for the money you owe on your mortgage and any expected costs or fees that have accrued. A sheriff sale typically occurs in the form of an auction. The lender can start the bidding at any amount up to the total amount owed to pay off the debt. However, if multiple buyers are interested in the property, a bidding war can jack up the ultimate sales price. If the buyer ends up paying more for the house than the total amount the owed by the original homeowner, there is a mortgage surplus. Alternatively, if the home sells for less than the borrower owed on the house, the remaining balance is a deficiency. While the lender can file a separate lawsuit to recuperate these funds, it is not a common practice to do so in New Jersey.

Am I entitled to any mortgage surplus funds?

You are likely entitled to surplus funds if: 1) your home was sold in foreclosure for more than you owed the lender, 2) you had equity in your home before foreclosure, or 3) you received a letter from the foreclosure trustee notifying you of surplus funds. It is important to note that any other creditors with liens or judgements on the property may also be eligible to receive surplus funds. If these other creditors do not make application or if there are no other creditors connected with the property, the funds will go to the homeowner.

After your home has been sold and the lender has received payment for the amount owed in the final judgement of foreclosure, the excess money will be deposited into the Superior Court Trust Fund. The lender is not entitled to any funds exceeding what was described in the final judgement, including taxes or insurance costs accrued after the fact. In the event that there is a surplus, the County Sheriff who oversaw the sale will be able to provide information concerning how to receive payment. The former homeowner can file a motion with the court explaining why they are entitled to these funds. If the court approves this motion, an order directing payment of the surplus funds to the former homeowner will be issued.

If you think you are entitled to mortgage surplus funds, Veitengruber Law can help. We are highly experienced in the New Jersey foreclosure process and are proud of just how many NJ homeowners we have helped to the other side of losing their home. We can help you recover a surplus from your foreclosed property. Additionally, we can help you navigate the legal process and handle complex paperwork so you can get your money back faster. We understand the stress and anxiety going through foreclosure can have on our clients. Our goal is to ensure the recovery of any monies due so your brighter financial future can start sooner!

Mortgage Relief Scams: What You Need to Know

mortgage scam

If you’re in over your head on your mortgage, you may be starting to feel desperate. In these difficult times, it can be easy to see a mortgage relief scam as a lifeline to financial stability. By the time people realize the phony promises and baggage attached to these scams, it can be too late. The best way to avoid mortgage relief scams is to be informed of your rights and what warning signs to look for in a potential scam. Even if an offer looks legitimate, here are some basic precautions you can use to protect yourself against fraud.

The most important thing you can do is understand your rights as a homeowner. In 2010, the Federal Trade Commission published the Mortgage Assistance Relief Services (MARS) rule in order to protect homeowners from mortgage relief scams. This rule holds companies promising mortgage assistance accountable by prohibiting them from collecting any fees until after fulfilling their promises. This means that even if you agree to accept help from one of these companies, you don’t have to pay any money at all until you have received and accepted a written mortgage relief offer from your lender. The MARS rule also bars these companies from saying they work for the government or your lender and requires them to warn you that your lender may not agree to modify the loan.

When trying to spot a scam, a good rule of thumb is that any organization that tries to charge you a fee for mortgage counseling or loan modification is not legitimate. Other than accredited attorneys, the programs that can help struggling homeowners are almost always free. If a company asks you to pay up front or with a cashier’s check/wire transfer, it’s most likely a scam. Other red flags: if they guarantee results, pressure you to “sign now,” or attempt to cut you off from contacting your mortgage lender.

Here are some precautions you can take as a homeowner to protect yourself from mortgage relief scams:

1. Do your research.

Check to see if the establishment has a website and verify that the contact information listed matches the information you have. Make sure the business address is legitimate, and not just a P.O. box. The Better Business Bureau can also provide helpful information; more specifically if the company is associated with any known scams. Do not provide any personal information until you have taken the time to do ample research.

2. Don’t sign without reading the fine print.

Be careful what you sign. Make sure you have read the document thoroughly and understand it completely before you put pen to paper. It is very important for you to understand what you are agreeing to when you sign a document. If you are in doubt about anything, recruit the help of a lawyer to look over the document and explain to you in plain language what the agreement will be.

3. Keep up with mortgage payments.

Some scams advise homeowners to stop making regular payments on their mortgage while they “negotiate” with your lender. Never do this. Missing monthly mortgage payments can increase your risk of foreclosure and damage your credit, putting you into a deeper financial hole. It is also important to note that you should never be sending your mortgage payments to anyone other than your lender unless your lender has directly told you, in writing, to do so.

4. Never sign over your deed.

Under no circumstances should a mortgage relief company ask you to sign over your deed to a third party. There are two times you can sign your deed over: when you sell the home or if you sign it over to your lender in order to fulfill a debt forgiveness agreement. Signing your deed over to a third party will not save your home.

If you do find yourself the victim of one of these scams, the best thing you can do is to report it. This will give you the best chance of recovering some of your money, although the process may be lengthy. You can file reports through the FTC, the Better Business Bureau, the Consumer Finance Protection Bureau, or through an attorney.

Most people fall for mortgage relief scams looking for a quick way to get out of a financial jam, but getting on top of debt takes time and commitment to financial responsibility. If you find yourself in trouble with your mortgage, the best thing you can do is work with your lender to come to an agreement on the situation. Going to your lender directly can be intimidating. Veitengruber Law is here to help. Our experienced NJ real estate legal team can work with you to determine real debt relief solutions for your specific situation.

Can I be Approved for a NJ Mortgage with a Bad Credit Score?

NJ mortgage

A lot of people with a bad credit score assume it is impossible to become a homeowner. A low credit score can definitely make it harder to get a new credit card or any type of loan, including (and especially) a mortgage loan. If the one thing standing between you and home ownership is your credit score, don’t give up hope. It is possible to get approval for a NJ mortgage with a low credit score.

What is considered a “bad” credit score to mortgage lenders?

Different lenders have different criteria for loan applicants. The lower your score, the more likely it is that potential lenders will see you as a risk. If your score is somewhere in the middle—between 620 and 740 (approximately)—there is a little more wiggle room. While you will likely face higher interest rates and be restricted in how much you can borrow, you should still be able to secure a mortgage loan without much issue. Generally, if your score is under 620, you will not be able to get a loan from a traditional lender. But that doesn’t mean you have no options for getting a loan; it just means you will have to go through less traditional lenders.

Private Lenders

One option for borrowers with low credit scores is to go with a private lender. Mortgages through private lenders often come with higher interest rates and more substantial minimum down payments for borrowers with bad credit. You also may have to do a little more work with a private lender, like providing additional paperwork that is typically not required with a traditional lender. It’s important to do your due diligence when going through a private lender. Shorter payback periods and higher interest rates can make it difficult to make your monthly mortgage payments. Make sure you will be able to make timely payments in full for the duration of the loan.

FHA Loans

Another possibility is a Federal Housing Administration (FHA) loan. If your credit score is at least 580, you can qualify for an FHA mortgage with 3.5% down. With a score between 500 and 580, you will need to put at least 10% down. The cutoff for credit scores with an FHA loan is 500. Downsides to an FHA loan include: high interest rates and a mortgage insurance premium of 1.75% as well as monthly insurance premiums. If you pay less than 10% of the loan for your down payment, you will have to pay these monthly insurance premiums throughout the life of the loan.

Mortgage Tips for Low Credit Score Borrowers

Sometimes it’s possible to make up for a bad credit score in other ways. You can offset the risk of the loan by offering to pay a bigger down payment. While first-time home buyers typically put down 6% or less, making a 20% or more down payment could encourage lenders to approve your application despite a poor credit score. Plus, the more money you put down, the lower your monthly payments will be.

Another option is to enlist the support of a co-signer. If you have a close friend or family member with a great credit score, they could help you secure a mortgage loan. This is not a commitment to take lightly, though. While the mortgage is in your name, the co-signer will be equally responsible for any payments. This means if you miss a payment, their credit will be negatively impacted. Working with a co-signer requires a lot of communication and trust.

#1 Way to Own a Home with Bad Credit

If your goal is to buy a property but your credit score is poor, the best thing you can do is take the time to rehab your credit score. The higher your credit score, the better chance you’ll have of working with a traditional lender. Working with a traditional lender means your down payment, interest rate and monthly payments will be lower. Regardless of your situation, Veitengruber Law can help you determine which path to home ownership is best for you.