The mortgage reform just keeps coming.  The latest guideline changes coming from Fannie Mae are lower Debt-to-Income changes.  Get ready America, getting a mortgage just keeps getting harder.

As the mortgage industry keeps over-correcting, now they want to make it harder than ever to get a home loan.  Fannie Mae is changing their guidelines again so that borrowers will now have to qualify with a 45% back-end debt ratio. 

What exactly does this mean?  When lenders look at debt ratios, they are looking typically at “front end” and “Back end” debt ratios.  Front end means your income to house payment expense only.  Your housing expense includes principal, interest, taxes, insurance, mortgage insurance, and homeowner association dues.  The preferred magic number for a front end ratio is around the 30% mark.

Back end means all of your front end expenses plus all of your additional debt such as car payments, student loans, credit cards, etc. (typically only those items that are reported on your credit report).  As stated previously, that magic number is now 45%.  There are exceptions to this rule, but don’t look for too many exceptions.

Previously, Fannie Mae would allow higher debt ratios based on credit scores.  So if you had an extremely high credit score, then you could possibly go has high as 60% back end debt ratio. 

The bottom line is that the days of easy credit is over.  We must all tighten our belts.  We can’t just go crazy buying the expensive cars and maxing out our credit cards.  We may even have to go without the extras!  Oh the horror!  But if you are thinking about buying a home, then that is what you must do. 

If you are thinking about buying a home in the near future, give me a call to go over your debt situation to see if you will qualify.  There is no charge for a consultation.  I can show you how to make your home ownership dreams come true!

Time is running out on the first time homebuyer tax credit.  You will need to act soon if you want to take advantage of this program.  This incentive applies to qualified home purchases completed before December 1st of this year.  The program is actually a credit up to 10% of the cost of the home or a maximum$8,000. 

You must be a first time homebuyer which means that you cannot have owned a home in the last three years.  The credit also does not apply to high income tax payers and begins to phase out for married couples with adjusted gross incomes above $150k and for unmarried taxpayers with AGI above $75k.

The credit is available on a taxpayers 2009 return or amended 2008 return.  On FHA insured mortgages, the credit can be monetized in order to pay for closing costs or additional down payment.  A homebuyer still must come up with the FHA minimum down payment of 3.5% on his/her own.

If you don’t have the minimum 3.5% down, there are other government agencies that can help.  Go to www.5280HomeMarket.comand click on the first time homebuyer tab.  You can also call Adam at 303-668-6490 to get more information.  With the Denver Metro home market so strong and rates so good, now is truly a great time to buy!

There are a number of entities that will help Colorado first time home buyers with either down payment assistance, closing costs or both.  The key to getting this assistance is planning well in advance and know your options.  Down payment assistance (DPA) can come from the state level, county level or city/town level. 

In order to qualify for the assistance, you must be a “first time” home buyer, and your income cannot exceed a certain level.  Keep in mind that a “first time” homebuyer is a buyer that has not purchased/owned a home in the last three years.  Each DPA sets their own income levels.  You must also, in most cases, complete a home buyer course and get your certificate.  Some courses can be done online while others must be done in person.  Courses can be limited each month, so reserve your seat early.  Also, some DPA’s are running out of money.  So getting into the class and knowing when you will be able to receive money is primary before spending too much time house hunting.

Bottom line is that if you are going to need DPA, then plan ahead and know how the system works.  Getting together with a Realtor and a Mortgage Broker in advance will help you figure out who has the best assistance for your area and will help you plan and time your purchase appropriatley. 

For a list of Down Payment Assistance entities in Colorado, please e-mail Adam at adam@5280HomeMarket.com.

Last time I wrote about getting better credit scores by keeping your revoloving debt low.  This blog deals with “length of credit history.”  Length of history accounts for 15% of your FICO score.  This part of the score looks at the age of your oldest account, the average of all accounts and the length of time certain accounts have not been used.  Your score gets better the longer the history. 

So how exactly would you maximize score?  First, don’t go crazy opening credit accounts.  New credit will negatively affect your score.  So if you don’t need the new account, then don’t open it!  Do not close older accounts, unless the accounts are not being used.  Closing accounts will reduce the average age of your accounts.  Lastly, use the accounts you have.  Even if you don’t use the account often, use it once in a while just to keep some activity going.  That does NOT mean that you need to carry balances.  I am a firm believer in paying off your accounts every month so you don’t have to pay interest.

My rule of thumb is never have less than 3 accounts and probably not more than 6 or 7 accounts.  Those three minimum accounts could include a mortgage, car, credit card(s), student loan(s), etc.  Also, all three accounts would need to be rated for at least 12 months and preferably 24 months or longer.  Keeping the number of accounts open to a low roar is important. 

So now you know to keep them paid on time, keep the balances low, and keep the number of accounts between three and six.  I feel your scores skyrocketing already!

Let me be frank…no one wants a junker. You need to think about the “average Joe” and what Joe wants his future home to look like. Just because you live in chaos, doesn’t mean that will be good enough for potential buyers.

Nice homes sell the quickest!! That doesn’t mean that your home has to be the biggest one on the block. It means that your home has to look good and smell good. Take the time to de-clutter. Clean it like you have never cleaned before. Clean the carpet.  Put out some nice scents…apple pie or fresh baked cookies works well.

Get a home stager if necessary. Pretend your home is a model home. Why do you think builders have fully furnished model homes? Because that is what sells the home.

So roll up your sleeves and get to work! Sit down, if need be, and watch a lot of HGTV to get some great ideas. Unless getting your house sold quickly and for top dollar is not important to you!