Shopping sprees can delay closing or even lose your home loan

Most people want to go shopping the moment their offer to buy a home has been accepted. Why not? You have already been pre-approved for the loan, right? 

Not so, most mortgage lender will recheck a borrower’s credit prior to closing on a mortgage. If anything new arises in the credit re-check, lenders may want to delay the closing to verify the borrower can still afford the mortgage. In some cases, the lenders may even cancel the mortgage prior to closing, which could mean a higher interest rate on a new loan. In real estate the purchase is not a sure thing until final contracts are signed and sales price is funded. 

A new charge on your credit card for new furniture, a refrigerator, etc can change your ratio immediately. 

So what are the banks looking for? They want to make sure that your income can cover all your monthly expenses, including PITI (principal mortgage balance, Insurance, Taxes and Insurance). They calculate your credit worthiness by using two percentages called front-end ratio and back-end ratio. 

The front-end ratio indicates the percentage of your income that will go towards your PITI (principal mortgage balance, Insurance, Taxes and Insurance). The back-end ratio indicates the percentage of your income that will go towards all your reoccurring debts, including PITI.

So what is a good ratio? The smaller the percentage the better. Traditional lender would like to see a front-end ratio of 28% or less and a back-end ratio of 36% or less. Fannie Mae allows for a back-end ratio of 45%. 

Knowing your ratios ahead of time can help you prepare for home ownership. 
 
 
1) Front-end ratio

	Total amount of new house payment:	$750
	Borrower's gross monthly income (including spouse, if married):	$2,850
	Divide total house payment by gross monthly income:	$750/$2,850
	Debt to income ratio:	26.32%

2) Back-end ration

	Total amount of new house payment:	$750
	Total amount of monthly recurring debt:	$400
	Total amount of monthly debt:	$1,150
	Borrower's gross monthly income (including spouse, if married):	$2,850
	Divide total monthly debt by gross monthly income:	$1,150/$2,850
	Debt to income ratio:	40.35%

FRAUD ALERT - RENTAL HOME

Is the offer too good to be true? It probably is. Don't be a victim of Fraud WORST RENTAL SCAMS 1. The "Vacant Home" rental: Con artists in some cases are breaking into vacant homes and changing the locks. They are showing and renting these homes to unsuspecting tenants. They promptly leave town once they have collected the deposit and first month's rent. 2. The just-about-to-foreclose home: There have been a surge of homes being rented within the pre-foreclosure stage. Owner collect the deposits and first month's rent before the home is auctioned. This is usually bad news for the renter. Federal law does give tenants the right to stay in the home 90 days after foreclosure but in the mean time you have lost the money and time put into moving. 3. The eviction prevention hoax: In this scam, a fake legal service sends letters to tenants living in a foreclosed homes and promises to keep them from being evicted; this of course comes at a fee of $800 to $3000 4. The stolen deposit: Watch out for landlords that keep your deposit without cause. If landlords do retain your money, they have to give you an itemized list of repairs and how much they cost. 5. The approved upgrade take back: Some landlords will verbally approve the tenant to make repairs or upgrades and then backtrack later, leaving the renter with the bill.  6. Phony online rentals: Be on the lookout for scammers on Craigslist and other online classifies when searching for homes. Scammers will copy legitimate listings and advertise the home on their website at a lower cost. If the price is too good to be true, it probably is! RENTAL FRAUD: Things that might be suspicious Does the email start out with Sir / Madam? Emails are overly polite, very poorly written or express eagerness to rent without allowing you to inspected the property Are there character mistakes in the email? i.e Hello,my nameis Susie. Is there excessive capitalization? Does the email reference God, UK, Cashiers Check, Doctor, Nigeria, Reverend, etc. Is the email from a free email provider. i.e gmail, yahoo, aol, hotmail. Does the email refer to another person or agent? Does the email reference wanting to move in site unseen? Is the person unable to preform a credit check? Did the landlord ask for a rental application or references? is the price of rent too low for the area? Is the landlord out of the country on business? Does the landlord ask you to wire funds to a friend of yours and asks for a copy of your receipt? Ask the landlord for ID. Can they provide this? Look up the property owner. Does it match?   Report Scams and Fraud   If you find a fraudulent listing, you may    contact the following authorities to report possible fraud: Federal Trade Commission:  via its toll free hotline: 877-FTC-HELP (877-382-4357) or the FTC online complaint form Federal Bureau of Investigation's Internet Fraud Complaint Center Non-emergency number for your local police department. Sources and for more information: http://www.rent.com/company/security/ http://fraudpreventionunit.org/tag/rental-scams/ http://www.wegolook.com/Craigslist-Scams.aspx