Mortgage & Financial

Wells Fargo Says Credit Score of 500 OK

In a long-awaited shift, Wells Fargo is providing FHA mortgages to borrowers with credit scores as low as 500. The move comes after the National Association of Realtors® and FHA Commissioner David Stevens, among others late last year, criticized the country’s major banks for requiring credit scores as high as 650 in some cases before making loans. At NAR’s annual conference last year in New Orleans, Stevens said banks’ credit policies were out of sync with the FHA and artificially restraining home sales by as much as 20 percent. Under its new policy, Wells Fargo will accept borrowers with credit scores of 500 to 579 if those borrowers can make a down payment of at least 10 percent; gifted funds or other down payment assistance is not allowed. For borrowers with credit scores of 580 to 599, borrowers must put down 5 percent, with the same restriction on gifts and assistance funds. Borrowers with credit scores of 600 or higher can make a 3.5 percent down payment. The new policy took effect Jan. 15.

American Attitudes About Home Ownership

According to a NATIONAL ASSOCIATION OF REALTORS® survey of 3,793 adults conducted by Harris Interactive and released in January 2011, home owners and renters agree that home ownership benefits individuals and families, strengthens our communities, and is integral to our nation’s economy.

• The vast majority of both home owners and renters say that owning a home is a smart decision over the long term. Even in today’s challenging economy, 95% of owners and 72% of renters believe that over a period of several years, it makes more sense to own a home.

• Home owners are much more likely to be satisfied with the quality of their family and community life than renters. While more than half of owners (56%) are “very” or “extremely” satisfied with the overall quality of their family life, only about one-third (36%) of renters report the same levels of satisfaction. Also, 43% of home owners are “very” or “extremely” satisfied with their community life, compared with 30% of renters.

• An overwhelming majority of home owners are happy with their decision to own a home. A full 93% of owners surveyed would buy again.

• Most renters aspire to home ownership. The majority of renters (63%) say they are at least somewhat likely to purchase a home at some point in the future. Among them, young adults (18- to 24-years-old) have the strongest aspirations for home ownership.

The survey also confirmed that home owners and renters continue to have concerns about the economy:

• In today’s market, many aspiring home owners face worries about job security and credit worthiness. Among renters who are “very” or “extremely” likely to buy a home in the future, three out of five consider confidence in job security or creditworthiness to be an obstacle.

• Home owners and renters both believe that the mortgage interest deduction should not be targeted for change. 74% of owners and 62% of renters say it’s “extremely” or “very” important that the MID remain in place.

Given the strong public support of and aspirations for owning a home, we need to keep in place policies that support and encourage responsible, sustainable home ownership.

Resources You Can Use:
REALTORS® may share the data above with their clients and communities. For additional information, check out these resources:

8 Reasons Why You Should Work With a REALTOR®

Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here are five reasons why it pays to work with a REALTOR®. 

1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.

2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.

4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5.  Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

6. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.

7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.

8. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.

6 new hurdles for home financing

If you've been in the market for a mortgage recently, you've no doubt noticed how difficult it can be to get approved. You're not imagining it, and it's not just you. Paul McFadden, a loan officer with The Legacy Group in Bellevue, Wash., says, "These days, the number of mortgage applications that get approved is probably three out of 10. In the heyday, it was nine out of 10. Normally five or six out of 10 would be the ratio."

Underwriting standards have tightened, meaning that borrowers need higher credit scores, more income and higher down payments. And that's not all. There are many challenges to financing a home, but the following six are especially problematic in today's market.

1. Higher credit score requirements
Want a loan? You'd better have top-notch credit to get the best deal or, in some cases, to get approved at all. McFadden notes, “Although loans can be had in most cases for credit scores down to 620, they often come with a higher rate and/or fees."

Gregory B. Meyer, community relations manager with Meriwest Credit Union, says, "Credit is an issue, as lenders have raised the bar on credit scores. In 2006, a 680 FICO would get you into a house. Now it takes about a 740."

2. Greater scrutiny of income and assets
"In the past, banks were lax in verifying income and deposits. Now those things have more  scrutiny,” Meyer says.

Tom Wissert, who has more than 30 years of experience in real estate, banking and mortgage lending, says, “Homebuyers better get ready to prove that just about anything that looks hinky on their application is not an issue. Mortgage lenders today have to verify, reverify and reverify again. Qualified buyers are now put through the wringer and often turned down because of appraisal issues, property issues or anything that looks strange, even if the buyer can prove they can pay cash for the property.

He says that we are now seeing regulatory overkill "after years of letting the rules be compromised by mortgage lenders who would not follow the traditional rules that are time-proven to work."

3. Ever-changing borrower requirements
Many borrowers are finding that they can't pin down just what they need to do to get their mortgages approved. Warren Greenlee, a broker with Re/Max at the Lake in Mooresville, N.C., says that a couple of years ago, "anybody with decent credit could get a loan for any size home. Now it is critical to have credit scores above 700, total debt ratios below 36%, a minimum of 20% down to avoid [private mortgage insurance] and good, stable employment. Unfortunately, a buyer can have all of these items fall into the current guidelines, only to have the guidelines change." 

Greg Cook, a licensed California mortgage broker with the First Time Home Buyers Network, says that for the "'middle of the road' consumer, those without a large down payment and average to slightly above average credit scores, home financing has become a moving target."

4. Home appraisals are coming in low
Mortgage banker Darren Clark, of Villa Mortgage Inc. in Cincinnati, says, "Because of slow sales, which lead to few comparables, and the large amount of short sales, sheriff's sales and bank-owned sales, which are priced at a fraction of a dollar, houses are not appraising for the contract price.

"Part of this problem can be blamed on the government enacting [the Home Valuation Code of Conduct], which regulates the appraisal industry, and was an attempt to curtail fraud, but has turned into an unexpected hindrance on the real-estate market recovery."

The problem with the HVCC, Clark says, is that appraisals are now often completed by appraisers who are inexperienced and often unfamiliar with the markets they are working in, resulting in inaccurate appraisals and unnecessarily rejected loan applications.

5. Fewer opportunities for small business owners and independent contractors
"Congress recently introduced legislation that would make 'liar loans' illegal," Cook says. "Liar loans" are another term for low- or no-documentation loans. As the name implies, some borrowers have used these loans to deceive their way into a mortgage they didn't really qualify for. However, these loans are also a valuable tool for many honest workers who are not U.S. citizens or who are self-employed and therefore don't receive regular paycheck stubs or have a simple, straightforward way to prove their income to lenders.

"Typically, a business owner pays himself the minimum amount to avoid paying payroll taxes while reinvesting profits into his business. Banks will no longer make exceptions for circumstances like these and turn many loans down that previously would have been granted."

6. Condo purchases face additional tests
Aimee Renkes, a mortgage consultant with Wintrust Mortgage in Chicago, says, "Condo loans are much tougher these days as we have to approve the condo building in addition to the buyer. We are documenting cash reserves, owner occupancy rates, low delinquency rates on monthly assessments and more. In some markets, such as Chicago, this can be tough to overcome. Additionally, the [Federal Housing Administration] recently changed the condo approval method, which has further inhibited many buyers who only qualify for FHA loans."

The quest for homeownership
For worthy borrowers seeking to take advantage of today's low interest rates and relatively low home prices, having to jump through hoops that homebuyers just a few years ago didn't have to can seem mighty unfair. If there's any upside to the tight credit market, it's that we should see fewer foreclosures in the years ahead.

Real Estate Provisions in the Tax Relief, Unemployment Insurance Reuthorization, and Job Creation act of 2010

On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) extending the Bush-era tax rates and a host of other expired and expiring provisions. The legislation is not "paid for," so there are no revenue raisers taken from real estate or other industry groups. The package provides temporary extensions of its numerous provisions. Some are retroactive, as well, so that the rules that had been in place previously will operate as if they had never expired.

Included in the bill are provisions that affect real estate investment and operations—such as energy-efficiency tax credits, capital gains, and more. A few key provisions of interest to REALTORS® include:

• Retention of Bush-era tax brackets through the 2011 and 2012 tax years;
• Retention of the capital gains tax rate of 15 percent for assets sold or disposed of during 2011 and 2012;
• Reduction of payroll taxes for employees and self-employed individuals during 2011;
• Extension of numerous energy efficiency credits through December 31, 2011, including: the Energy Efficient New Homes, Energy Efficient Existing Homes, and Energy Efficient Buildings credits.

For more detailed information on the provisions of this bill affecting real estate, home owners, and REALTORS® as small business owners, please see the see the full summary.

Congress has passed and President Obama has signed legislation (HR 4853) that

extends the Bush-era tax rates and a host of other expired and expiring provisions.

The legislation is not “paid for,” so there are no revenue raisers taken from real

estate or other industry groups. The package provides temporary extensions of its

numerous provisions. Some are retroactive, as well, so that the rules that had been

in place previously will operate as if they had never expired.

Only the provisions that affect real estate investment and operations are included

in this summary. The bill itself is vast, even though there are few expansions or

cutbacks of previous or current law.

Tax Rates:

tax years. Thus, there will be 6 brackets ranging from 10% to 35%. Also, the

backdoor rate increases that affect upper income taxpayers are repealed in 2010,

2011 and 2012. These backdoor rate increases are known as the personal

exemption phase-out and the limitation on itemized deductions.

Capital Gains:

2011 and 2012. Depreciation recapture tax rates remain 25%. No new limitations

are created for Section 1031 like-kind exchanges. The 15% rate is retained for

dividends received during those years. Small investors with incomes in either the

10% or 15% brackets will have a capital gains and dividend tax rate of 0%.

Payroll/Self-employment Taxes:

6.2% for employees and 12.4% for self-employed individuals. During 2011,

employee payroll tax rates will be 4.2% and self-employed individuals will have a

10.4% rate. This holiday is available only for earnings during 2011. The earnings

cap in 2011 is $106,800.

Estate Tax:

assets from an estate were required to use a so-called “carryover basis” in

determining the value of the assets they receive. Carryover basis is the amount

that the original owner of the asset paid for it. Prior to 2010, the heirs had always

received the asset with a “stepped-up basis.” Carryover basis requires heirs to

know when the decedent acquired his/her assets and at what price. Stepped-up

basis measures the value of the asset at its fair market value at the time of the

During 2010, the estate tax was repealed, but heirs who receivedFor many years, the payroll tax rates have beenThe tax rate will remain 15% for assets sold or disposed of duringThe Bush-era tax brackets will remain intact for the 2011 and 2012

 

Home Buyer Tax Credit Closing Deadline Extended

On Friday, President Obama signed into law a three-month extension of the homebuyer tax credit closing deadline. The extension only applies to transactions that had contracts in place as of April 30, 2010, but hadn’t yet closed. Now those buyers will have until Sept. 30 to make the closing deadline.

Read more

Loan Pre-approval – The Advantages of Loan Pre-approval

Preapproval Letters Give Homebuyers an Edge

Real estate experts tell first-time home buyers that it's critical to apply for a loan before shopping for a home, and it's true; this is an essential first step. But do you know that it's far better to be preapproved for a loan than to be prequalified? There are more advantages to gaining preapproval than you would initially surmise. When the lender hands a borrower a preapproval letter, it means the borrower can:

Save Time by Looking at the Right Homes 

If your real estate agent is sending you automatic e-mail listings of available homes, you can ask her to change the parameters to more tightly encompass the selection of homes that you are qualified to buy. If you're not receiving e-mails from your agent, ask her to send them to you. Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you'll save time by checking out homes you can actually afford to buy instead of falling in love with pie in the sky.

Spend More Time Examining the Right Homes 

By decreasing the inventory of homes to those that fit your parameters, you can allot more time to thinking about all the little nuances each home has to offer. Lots of home buyers never move past the price point when sorting out their preferences, but now you can devote your energies to looking at the little things that matter to you most such as whether your SUV will pass through the overhead space in the garage or smash into the microbeam.

Gain Confidence & Avoid Disillusionment

Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You'll sleep better at night knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not "lose face" with anybody.

Increase Bargaining & Negotiating Power

Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that her home is sold. She can take her home off the market and place it into pending status with confidence.

Enjoy a Faster Closing Period

Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals can be ordered immediately. It's possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can't decide which offer to accept. Yours will move to the front if you can accomplish the seller's need to quickly close.

Because mortgage approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a preapproval letter as soon as you're ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.

FHA Loans – Reasons Home Buyers Love FHA Loans

FHA Loans Carry Many Benefits for Home Buying or Refinancing

FHA loans are fell out of grace for a few years, but since 2005 have rebounded! It's an institution that has been around for a long time, since June 27, 1934. The Department of Housing & Urban Development folded the Federal Housing Administration (FHA) under its umbrella in 1965.

FHA loans began to lose favor in the late 1990s, when home values began to inch upwards, surpassing FHA mortgage limits, and sellers balked at FHA's stringent appraisal guidelines.

How FHA Loans Work

Now, FHA does not make loans or guarantee loans. It insures loans. The insurance removes or minimizes the default risk lenders face when buyers put down less than 20 percent. Without further approval from FHA, its approved lenders are authorized to:

• Take loan applications 
• Process loan applications 
• Underwrite and close the loan

FHA Mortgage Limits

My parents bought our first home in 1955 for $9,000 with an FHA loan. It's almost inconceivable to think of a home costing that today. As a result, FHA periodically changes its mortgage limits. As of January 1, 2009, the maximum mortgage limit in high-cost areas is 115% of local median prices, not to exceed $625,500. The maximum conforming loan limit is $417,000 for single-family residences nationwide. Your area could support a lower mortgage limit. Here is how to find your FHA mortgage limit.

FHA Loans Allow a Blemished Credit History 

If your credit is less than perfect, FHA might be the loan for you. You may qualify for an FHA loan even though you have had financial problems.

• FICO scores can be lower than those for a conventional loan. 
• Bankruptcy. You can obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you've maintained good credit since your debts were discharged. 
• Foreclosure. If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you two to three years from the final date of your foreclosure.

FHA Loans Boast Competitive Rates & Terms

Today's terms are pretty straightforward. In fact, in many markets the rates and terms are better than those for 80% / 20% piggyback loans. 

• There is little or no adjustment to the interest rate for an FHA loan, as the rates vary within .125 percent of a conventional loan.
• Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance premiums.
• As of January 1, 2009, Borrowers can finance 96.5% of the purchase price and put down 3.5 percent. In some instances, when combined with other types of loans, the down payment can be zero.
• Allowable debt ratios are higher than the debt-ratio limits imposed for conventional loans.

FHA Loans Demand Fewer Repairs

At one point, FHA repair demands were so excessive that sellers would discount the list price to buyers who would agree to obtain conventional loans over FHA loans. Today the requirements appear more reasonable.

• Defective roofs that leak still need to be replaced but an older roof does not necessitate replacement if it doesn't leak.
• Windows that stick upon opening or have cracked panes do not require replacement.
• FHA appraisals do not take the place of a home inspection, never have. Buyers should still obtain a professional home inspection.

FHA loans are available to anybody but are used most often by first-time home buyers and low- to moderate-income buyers. However, there are no income limit qualifications.

How to Find a Down Payment to Buy a Home

12 Ways to Find a Down Payment

Home ownership in America has increased from 25% in the early 1900s to 67% at the end of that century. During all those years, many home buyers struggled to come up with a down payment. In some cases, the banks required as much as 50% down before they would lend on a mortgage.

Today, the desired down payment is typically 20%; however, few people have that much cash available to them. FHA loans, for example, require only 3.5% down. But the fact remains that the more a buyer puts down, the lower the mortgage. Low mortgage balances carry low mortgage payments.

Here are 12 ways to find that down payment.

1.) Save Your Tax Refund

If it's hard for you to save, you can change your withholding exemptions from 1 to zero. This will force your employer to pay more to the I.R.S. and reduce your paycheck by that amount. For some free-spending and undisciplined individuals, this method assures a fat income tax refund. Even a regular tax income refund, however, might be enough to help you buy a home.

2.) Borrow From Parents

It's not unusual to ask your parents for money to help you buy a home. Favorable tax laws will let each parent gift a certain amount without tax consequences (check with your CPA).

If your parents won't give you the money, perhaps you could ask for an unsecured loan and pay it back at a better rate than your parents could get at the bank or in a money-market account? The rate you pay would likely be less than the prevailing rate from your own lending institution, which makes it win-win for everybody.

3.) Sock Away X Amount Periodically

The secret to making a savings account grow is to make identical deposits at the same time every month. For example, if you are paid every two weeks and save $200 from every paycheck, at the end of 12 months, you will have saved more than $5,200, excluding interest.

4.) Sell Stuff on eBay or Hold a Garage Sale

Everybody has too much stuff. I've never met a person who didn't. Some people spend thousands every year on storage units where this stuff is stashed. Look in your attic, your basement, under your bed and in your closets for stuff you no longer use. If you haven't used it in a year, sell it at a garage sale, put it on Craig's List or set up an eBay account and get rid of it.

I thought I was going to have pay somebody to come haul away my 10-year-old treadmill that was collecting dust in my family room. Put that baby on Craig's List and sold it (for a lot of money!) in less than week. You can, too.

5.) Ask Seller to Give it to You

Hey, you never know. If you pay the seller's asking price, you'd be astonished at what some sellers will do for you. Some of them will even give you the down payment as a credit or pay your closing costs or both. Check with your lender before asking for the credit because lenders have strict requirements as to how much you can receive. The Nehemiah program, for example, allows up to 6% as a credit from the seller.

6.) Settle Lawsuits Fast

From personal injury suits to civil litigation, typically delays just make the lawyers more money, apart from the fact that the time-value of money decreases as the clock ticks. We live in a litigious society where even a simple auto accident involving slight bumper damage ends up being filed in court. Settle the case quickly and use that reward to help you buy a house.

7.) Check Out Government Programs

If you've served your country in the armed forces, you may qualify for a loan backed by the Veterans Administration, known as a VA loan. The government also runs a slew of down payment assistance programs for first-time home buyers. Also, check with your county to see if it offers special programs to induce home ownership in certain neighborhoods.

8.) Take a Second Job

Some renters will sacrifice evenings to work part-time at a second job. If it's a short-term situation, it might not be that hard to do. It could also be seasonal work such as from Thanksgiving to Christmas or specialty work around tax time in the spring.

9.) Ask for a Raise

Sit down one evening and write up a list of every thing you have done over the past year that made your company money or somehow increased its bottom line. List every accomplishment. Then take that list to your boss and ask for a raise. Ask for more than you think you will receive. You never know, you might get it.

10.) Get a Better Paying Job

As long as your field of employment remains the same, taking a different job should not affect your mortgage application. Maybe it's time to look for employment elsewhere that will pay more. Check with your local employment office, network with peers and send résumés to companies where you want to work, regardless of whether it advertises a position.

11.) Tap Your Retirement Funds

Certain retirement accounts will let you borrow from them to buy a home. Check with your CPA for current regulations. Some types of requirement accounts will let you take out the principal balance without a penalty.

12.) Consider 100% Financing

If you have excellent credit, you may qualify for a 100% loan, providing your community offers these special first-time home buyer programs. This could be a single mortgage insured through mortgage insurance, or you may qualify for a silent second mortgage, due when you sell. Talk to your mortgage broker to see which programs may be available for you.

Where to Get a Mortgage

Most home buyers finance real estate, which means almost all home buyers will need to get a real estate loan. So what are your lending choices? Where can you get a real estate loan? Which type of real estate lender is best?

Unfortunately, there is no pat answer because the best choice for you depends on your personal situation, the type of property you want to buy and how the lender's rates compare within the lending community. You can get a loan from a variety of sources such as:

Mortgage Brokers

More than half of all the real estate loans made in the United States originate from mortgage brokers. A mortgage broker is a middle-person who brings together lenders and borrowers. Mortgage brokers each work with different lenders, sometimes 200 or more. It's important to ask about the variety of products offered as this will vary from broker to broker. Your choices are dependent on the broker's number of working relationships.

• Fees are paid by the buyer or lender or both.
• Loans at "par" mean the buyer is not paying a fee.
• Yield-spread premiums (YSPs) are typically disclosed at closing and paid by the lender.
• Mortgage brokers can also operate as "up-front" mortgage brokers, meaning they will negotiate a fee directly with the buyer in exchange for shopping for the lowest (wholesale) interest rate & fees.

Mortgage Bankers

Mortgage bankers, as you may have guessed, work for a bank. They may represent more than one bank but the loans they make are bank loans, funded by the bank.

• Fees are generally not negotiable and are set by bank policy.
• Loan products are limited to those the bank offers.
• The banker may not be licensed.

Commercial Banks

Citigroup, Bank of America, and Wells Fargo are good examples of well known commercial banks. Commercial banks offer a wide variety of services. In fact, you probably have a bank like this in your neighborhood.

• Primary source of business is not making mortgage loans.
• Bank rates are competitive.
• Your bank may offer a discount or incentive on your loan if you maintain a checking or savings account at that institution.

Savings & Loan Associations

Savings and loans accept deposits from customers into savings / money market accounts and pay interest on those accounts. To prevent a relapse like the S&L crisis in the 1980s, President Bush in 1989 signed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Many savings and loans are now regulated by the Department of U. S. Treasury, Office of Thrift Supervision.

• Primary source of business is making real estate loans.
• Savings and loans do not make business or commercial loans but lend for construction, purchase or home improvement purposes.
• The process for obtaining a mortgage is a bit easier than going to a commercial bank.

Credit Unions

These institutions are regularly under attack by lending competitors because credit unions do not pay federal taxes and enjoy certain taxable advantages that other lending institutions do not. They are formed by a group of individuals with a common interest such as state government and community education employees or religious groups.

• Customers must meet qualifications to be eligible for membership.
• Interest rates and terms are typically very attractive and competitive.
• Many credit unions do not sell their mortgage loans on the secondary market.

Private Individual

Anybody with money in the bank can make a real estate loan to you as long as they comply with federal and state regulations regarding such items as interest rates, fees and charges, and provide legally required disclosures.

• The seller can carry back common financing instruments such as a mortgage, trust deed or land contract.
• No appraisal or title policy may be required, but you should still obtain an appraisal and title protection.
• Owner financing works best on properties that are free and clear because an existing loan will most likely contain an alienation clause.

Stock Brokerages & Online Lenders

You might be astonished to learn that the company handling your IRAs or mutual funds or online savings also makes mortgage loans. A few easily recognizable names are HFC Home Loans, INGDirect, Charles Schwab, and Ditech.

• If you need to shake hands with your loan officer in person, an online lender might not be for you.
• Internet lenders seem to work best for sophisticated borrowers with great FICO scores who know exactly what they want.
• Contact only reputable and known companies with secure sites, and stay away from fly-by-night operators.

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