Introduction

The dream of homeownership is still very much alive. Many people who have either experienced difficulty with financial problems in the past or who are first-time homebuyers wonder whether it is possible to purchase a home. While lending regulations have certainly changed as a result of the housing crisis the country has endured over the past few years, it is still possible to obtain a mortgage loan in today’s market. The key is to understand what lenders are looking for when reviewing mortgage applications, how to rebuild your credibility, and understand that there are alternative lenders available who can assist you in making your dream of homeownership a reality.

In this guide, we will walk you through the steps involved in obtaining a mortgage loan, including how to repair your credit and how to obtain a mortgage loan in special situations, such as if you have been through a foreclosure or short sale, if you are self-employed, or if you have bad credit.

Are you ready to learn how to become a homeowner?

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How to Buy a Home in Today’s Market

5900 Canoga Ave., Ste. 200 | Woodland Hills, CA 91367 | P: 877.874.7325 | www.peakfinanceco.com 2

Table of Contents

How to Buy a Home with Bad Credit .........................................................3

How to Buy a Home when I’ve had a Foreclosure or Been Through a Short Sale ......................................................................4

Tips for Self-Employed Borrowers ..............................................................4

First Time Home Buyer Tips ...........................................................................5

What You Need to Know About Getting a Home Loan ......................5

Conclusion ..........................................................................................................6

5900 Canoga Ave., Ste. 200 | Woodland Hills, CA 91367 | P: 877.874.7325 | www.peakfinanceco.com 3

How to Buy a Home with Bad Credit

Many people assume that if they have bad credit, they can never qualify for a mortgage loan. This is not the case at all. It is true that buying a home with bad credit is more challenging than in the past. Lenders want to ensure that you are financially capable of handling a mortgage loan. Even so, it is still possible to buy a home even if you have bad credit.

The first step is to educate yourself about the state of your credit. If you have not already checked your credit, do so now. Remember that consumers are entitled to receive a free copy of their credit report from each of the three major credit reporting bureaus annually. The three largest credit bureaus are Experian, Equifax, and TransUnion. You can obtain copies of your credit reports at www.annualcreditreport.com. Take advantage of the opportunity to review your credit so that you know where you stand. Good, bad, or ugly; you need to know the facts.

Reviewing your credit score will also give you the opportunity to determine whether the information presented on your report is completely factual. It is entirely possible that some information could be incorrect. If there are negative marks on your credit that are not correct, you need to take steps now to correct those items. This, alone, can help to improve your credit score and improve your chances of being approved for a home loan while also giving you access to lower interest rates. In the event that you notice an item on your credit report that is incorrect, you will need to provide supporting documentation to the relevant credit reporting bureau and request that the item be corrected. Remember to follow up within 30 to 60 days to ensure that the item in question was actually corrected.

So, what do you do if everything on your credit report is factual, but it is just bad? While you cannot repair your credit score overnight, there are steps you can take to that will help you to begin repairing the damage over the next few months.

If possible, try to at least pay down your debt obligations. Your credit score is based on a variety of factors, including the amount of your total credit that you use as well as how timely you pay your bills. The more of your available credit that you use, the lower your credit score will be. Additionally, if you are not already doing so, make an effort to pay your bills on a timely basis. Setting up automatic payments can assist with this.

When you are ready to apply for a home loan, keep in mind that alternative lenders are available who are more than willing to work with borrowers who have had a few hiccups in the past and whose credit may not be perfect.

The first step is to educate yourself about the state of your credit.

5900 Canoga Ave., Ste. 200 | Woodland Hills, CA 91367 | P: 877.874.7325 | www.peakfinanceco.com 4

How to Buy a Home when I’ve had a Foreclosure or Been Through a Short Sale

During the last few years, many homeowners fell victim to the housing crisis and endured either a foreclosure or a short sale. There is absolutely no shame in this and you are certainly not alone. Just because you have been through a foreclosure or a short sale in the past does not mean that you are not deserving of a second chance at homeownership.

One of the most common questions that many people have regarding buying a home following foreclosure or a short sale is how long they must wait. The answer to this can vary based on a number of factors, including the type of delinquency and your reason for defaulting. It can also depend upon the type of loan program that you are using to buy a new home. In the past, homeowners who had gone through a foreclosure were often barred from obtaining a new home loan for up to seven years. Recently, there have been exceptions made to such requirements. For instance, the FHA recently implemented the Back to Work – Extenuating Circumstances rule that allows homeowners who had lost their homes as a result of loss of income or employment to buy another home in as little as 12 months following a short sale or foreclosure.

Keep in mind that in addition to applying for conventional loans through traditional lenders, you may also be able to obtain a home loan through an alternative lender, even if you have gone through a foreclosure or short sale in the past.

In order to improve your chances of being approved for a new home loan, it is important to work diligently toward improving your credit score, have a down payment of at least 10 percent saved, and be able to demonstrate that you are financially capable of meeting your new mortgage obligations.

Tips for Self-Employed Borrowers

Buying a home can be somewhat more complicated when you are self-employed. Gone are the days when you could receive a no documentation loan. Self-employed homebuyers often face two primary challenges in obtaining a mortgage loan. First, you must be able to prove your income with tax returns. Second, you need to be able to demonstrate that you have a sufficient amount of stable income to cover your mortgage payments.

The more documentation you are able to provide your lender, the better chance you will have of being approved for a mortgage loan. Among the most important documents you should provide are multiple years’ of tax returns in addition to statements that show the current value of any holdings, including stocks, savings accounts, retirement funds, and bonds.

Have a down payment of at least 10 percent saved.

5900 Canoga Ave., Ste. 200 | Woodland Hills, CA 91367 | P: 877.874.7325 | www.peakfinanceco.com 5

First Time Home Buyer Tips

As a first-time homebuyer, the prospect of buying a home can be both exhilarating and a little frightening. Much of the stress associated with obtaining a home loan as a first time homebuyer is associated with simply not knowing what to expect. Before you embark on the path to homeownership, it is important to make certain that you are ready financially for this type of responsibility. In many instances, homeownership can actually be less expensive than renting, but it is also important to keep in mind that you will have expenses that you do not have when renting. Such expenses include homeowner’s insurance, property taxes, and maintenance. Therefore, it is important to determine how much home you can actually afford. Keep in mind that while you may believe you can afford a $400,000 home, the lender may believe you can only handle $300,000.

The amount that a lender will qualify you for depends upon a variety of factors, including your current debt, your monthly income, and the length of time you have been employed at your current job. Using a mortgage calculator can give you a fairly good idea of the amount of home that you can afford, but you won’t know for certain until you actually speak with a lender. Remember that not all lenders are the same. Do not hesitate to shop around to compare offers from lenders in terms of interest rates as well as the amount for which you can qualify.

You will also need to make certain that you have saved a sufficient amount to cover the down payment and closing costs. Several years ago, 100% loans were fairly common, but in most instances today, you will need to make certain you have saved at least enough to cover a 3-5% down payment. The amount you need to save for closing costs will vary based on variety of factors, but as a general rule, you should plan to have enough set aside to cover 1% to 2% of the home’s purchase value. As an example, if you are purchasing a $400,000 home, you should plan to have $8,000 set aside for closing costs, in addition to your down payment.

Determine how much home you can actually afford.

5900 Canoga Ave., Ste. 200 | Woodland Hills, CA 91367 | P: 877.874.7325 | www.peakfinanceco.com 6

What You Need to Know About Getting a Home Loan

The process of obtaining a home loan is often viewed as challenging by many consumers, but in reality, it can actually be fairly straightforward when you know what to expect. Among the most important steps you can take to ensure the process is as simple and hassle-free as possible is to ensure that you have all of the necessary documentation collected to provide to your lender. If your lender requests additional documentation, make it a point to provide the necessary documents as quickly as possible.

Additionally, do not make the mistake of taking on extra debt while you are in the process of obtaining a mortgage loan. Many homebuyers fall into the trap of making major purchases while they are shopping for a home or even after they have been approved for a loan but the home loan has not yet closed. If you make major purchases during the time period of being approved for a loan and signing at the closing table, your credit score could very well change, thus rendering you ineligible for your home loan. Wait until after you have actually closed on the loan before buying new furnishings, appliances, or other items for your new home.

Conclusion

The process of buying a home can be exciting and challenging, even more so when you fall into a special category such as bad credit, a foreclosure or short sale, or a first time homebuyer. Understanding what to expect, steps you can take to improve your credit, and where to turn to obtain the best chances for being approved for a loan can help you to make your dream of becoming a homeowner a reality.

Have all of the necessary documentation collected.