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Category Archives: 203k

Do you really need to hire a credit repair company?

here’s a quick little story I wanted to share with you….

My team at Duckworth Lending Group are experts in First Time Homebuyers, 203k renovation loans as well as credit challenged borrowers.

To give you an idea of what that means, we just took over a file from a mortgage broker. The borrower had a low FICO score due to 2 medical collection accounts that were filed within the past 6 months. The broker did not know how to help them. He had the file for 2 months and the escrow was due to close within 2 weeks.

Within two hours we had completed conference calls with the hospital, the hospital billing office and the two collection agencies. We found that the insurance company paid the bills six months after the fact. On one of the accounts they only needed pay the $75 co-pay. We were able to successfully get both collection accounts deleted from their credit bureau resulting in a 42 point increase in mid-score.

This couple is now able to complete their escrow on their beautiful new $200,000 home using the VA loan program. Needless to say the realtors are ecstatic.

The lesson on this story was that the borrower did not have the knowledge or the patience to work through this problem himself. With a little help and a big dose of “calm” we were able to help him work through it. The marks are off his record and he’s ready to move forward into his new home.

Let us help you and your clients. Call us any time. (480) 359-5682.  If you don’t reach us right away we will get back to you within a few hours the same day or the next morning. Every time.

Can the FHA 203(k) loan program be the cure for the Phoenix market?

Can the FHA 203(k) loan program be the cure for the Phoenix market?.

Can the FHA 203(k) loan program be the cure for the Phoenix market?

The Phoenix, Arizona market has seen some unique challenges over the past few months. Now, before you e-mail me and say “what are you talking about? The last few months?!” I know. I know. We’ve been experiencing challenges since 2007. But what I mean when I say the last few months is this.

There is now and always is a pool of first time home buyers in any market. With severely depressed prices there is no middle market here. Those who are not forced to sell are sitting tight and not moving. So there really have become only three viable buyers in this market, the first time home buyer, the relocation buyer and the investor. (One could also include the government in this discussion but we’ll leave that for another day).

The first time home buyer and the relocation buyer are competing against cash paying investors for the best properties on the market. One year ago these investors were doing “fix and flips’. That is, buying the property for a deep discount at foreclosure auction, and fixing them up and selling to first time home buyers at fair market prices. The home buyer was getting a newly remodeled house and it was good business for everyone. But then the “buy and rent” crowd moved in. The “buy and rent” investor is willing to pay a higher price for the house then the “fix and flip” investor because they don’t have to worry about reselling the house right away. Demand for rentals has risen and with it so have rental rates. The fix and flip investor is now being squeezed out of the market. There is less inventory available for fix and flip investor and the first time home buyer to buy.  What is the answer then?

Many home buyers are now going back to new builder homes. Although the new builder home prices are seemingly still a bit too high in most parts of town.. Another idea is to buy the bank REO that is in disrepair and use the 203(k) program to remodel the house.

Consider this example using simple math. Let’s say a home is priced at $80,000 but it needs $20,000 worth of work. If that home were completely fixed up and on the market today it could be sold for $100,000. The fix and flip investor does not want to buy this house. There is no immediate profit in it. The buy and rent investor is also going to be hesitant because even though rents are high they are still not wanting to buy a house at 100% of market value. Cash buyers want a discount. Enter the first time home buyer and the 203(k) program. The home buyer can buy the house, use the money to do all the renovation work and have a home that cost them exactly what is worth today.

If a Buyer’s Agent wants to dramatically increase the pool of available homes for their client to look at then consider the fixer-upper house and utilize the 203(k) loan. If a Listing Agent wants to increase the pool of buyers and command a higher price for the listing then he/she should also employ this strategy. First hire a HUD qualified 203(k) consultant to examine the home and make recommendations for repairs. Then hire a General Contractor that is HUD trained and knows how to work with the product. The end result is a remodeled house with all the appointments picked out by the home buyer and a happy customer.

For more information on how to qualify for the FHA 203(k) program and how this loan can work for you contact Duckworth Lending Group at (480) 359-5682. We are ready to guide you through this process.

Are you ready to Buy Again After……..a Bankruptcy?

There are many myths surrounding bankruptcy.  One of the most serious myths is that an individual with a history of bankruptcy cannot qualify for a home loan. This myth can prevent someone deep in debt from obtaining needed relief.

The truth is that while lenders hate bankruptcy, they love federal guarantees. The Federal Housing Administration (FHA) is a government agency that insures certain home loans, and its policy for qualifying for a home loan is very flexible. The FHA will guarantee a home loan after a bankruptcy when:

  • Twenty four months have passed since the bankruptcy has been discharged;

FHA-insured home mortgages are also available to Chapter 13 debtors during bankruptcy. The debtor must (1) have completed one year of payments as required while under Chapter 13 and (2) must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow.

In addition to the above, individuals must meet the mortgage lender’s criteria. This usually means showing a stable employment history, a manageable debt to income ratio, and a good credit score. Surprisingly, most debtors are able to improve their credit scores quickly after a bankruptcy discharge.  Your credit score is weighted heavily on recent events, so when you file bankruptcy your score will immediate plummets. However, the farther you are from your bankruptcy discharge, the better your score will become. Additionally, an absence of credit delinquencies and a solid history of on-time payments after your bankruptcy case will boost your credit score.

Any person who has filed for bankruptcy protection and has the desire to buy a new home should start preparing themselves six months in advance.  I say six months because unless you have been monitoring your credit report you will probably need some work done to get the credit score to an acceptable number.  Making corrections on the credit report can take anywhere from one week to two months depending on the circumstances. The sooner you start working on it the better your chances of buying at the 2 year anniversary date. Other things to consider to make the jump back into home ownership smoother are; Be prepared with paperwork.  Make sure you have all of the required documents in a place easy to find and you are ready to go. These include, but are not limited to:

  • Complete Federal tax returns (1040s plus all schedules) for two years
  • Complete set of Bankruptcy papers including Discharge and all Schedules of Debtors
  • A letter explaining the circumstances around bankruptcy filing (your loan officer will review this with you so you know it’s explained together properly and completely)
  • Paycheck stubs for one full month
  • Bank statements for two full months

You may find a need for more documentation depending on your circumstances but these are items most everyone must supply.

If you or someone you know had a bankruptcy that was discharged on or before June 2010 now is the time to start working on your finances and credit to get yourself ready to buy a new home. Contact Duckworth Lending Group at (480) 359-5682 for help with your personal situation.

Advice to homebuilders: Reach out to the anonymous generations

Advice to homebuilders: Reach out to the anonymous generations.

Although I disagree with his assumption about fixer-uppers (still more preferred in Phoenix than a new home) his insights into new buyers in the market are worth reading.
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