Who would have thought that home financing would have been so complicated. Are you ready to buy a home and get into a home mortgage or would it be better to lease now or maybe do a lease to purchase and effectively get the home you want to keep but delay obtaining a mortgage for a period of time. In todays house market, you are frequently looking at buying a short sale or bank owned property, these properties are not likely to allow a lease to own. Plus you may need to do a lot of fix up to make the property livable for your needs, that may call for a loan that allows you to build in the cost of fixing the property called a FHA 203K. A lot of us don't quite understand what the mortgage options are for a purchase agreement or how our credit score can make a huge difference.

Take a look at the article on types of mortgages that are available. If your credit is very poor consider a lease to purchase program. Once you have made the decision to get a mortgage be sure and work with a highly qualified mortgage broker. One of the excellent brokers I work with has provided some mortgage programs for you to review and of course to contact the mortgage offer. Common Mortgage programs include conventional, FHA, VA, and more. Follow the link to get more information before you begin your home purchase.

Finally, use the mortgage calculator in this section of my web site. Don't forget that if you calculate only principal and interest you will also need to add in taxes and insurance. Get as much information as you can to make a good decision for buying your new home. After you have signed the papers it may be too late to fix a bad mortgage.

FHA 203K Home Loans 

The process for buying a home that needs work can be a big problem if you are not using something that is built into the mortgage system. The government sponsored FHA 203K mortgage loan allows buyers to purchase their home and fix it up with the cost of the fix up built into the mortgage payment. The actual process is straight forward and can help you from making mistakes when deciding on what to do. The process is laid out in the following paragraphs.

• Home buyer Locates the Property.After the property is located, the home buyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

1) The extent of the rehabilitation work required;

2) Rough cost estimate of the work; and

3) The expected market value of the property after completion of the work. Note:

• Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer's acceptance of additional required improvements as determined by HUD or the lender.
• Home buyer Selects Mortgage Lender.
• Home buyer Prepares Work Write-up and Cost Estimate. A consultant can help the buyer prepare the exhibits to speed up the loan process.
• Lender Requests HUD Case Number.
• Fee Consultant Visits Property. The homebuyer and contractor (where applicable) meet with the fee consultant to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.
• Appraiser Performs the Appraisal.
• Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property
• Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.
• Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.
• Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower.
• Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage.
• Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.
• Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)
• Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.
• Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is unused contingency funds or mortgage payment reserves in the Account, the lender must apply the funds to prepay the mortgage principal.

Financing your home seems like it should be so simple. Just go to a lender with connections to thousands of dollars, tell them when you need it and at close of escrow it appears in the escrow agents hands. Maybe your loan will go that simply, most likely is will be more involved. In fact many of the homes that "fall" out of escrow at the last minute have to deal with loan problems. Look at some of the data in this section and get the information you need to reduce the stress and issues in getting your loan.

 Credit Scores - How do they impact a home purchase.

When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you. FICO scores are the credit scores most lenders use to determine your credit risk.

What is in your FICO Score?

Example Interest Rates

 [This chart is for illustrative purposes only and does not reflect actual interest rates]

A person with FICO scores of 760 or better will pay $129 less per month for a $216,000 30-year, fixed-rate mortgage than a person with FICO scores below 620 – THAT’S A SAVINGS OF NEARLY $1548 A YEAR.

You can see that it pays  to improve your FICO scores.  This editorial is for informational purposes only and does not replace professional legal or financial counsel.  Reference:        http://www.myfico.com