Home Buyers Tools

Minimum Requirements For USDA Direct Housing Loans

Who Can Get USDA Rural Development Direct Loans

When the mortgage markets get as tight as they are, getting mortgage loans for people with bad credit or low income, becomes ‘mission impossible’. In this review you can learn more on ways USDA Rural Development Direct Housing Loans can help you achieve a home loan, even if your income is low, or you have low credit score.

Being a homeowner is a dream many Americans can not accomplish, at present times, it becomes even more difficult for people to have any hope for homeownership. For these people the following direct housing loan plan can be the only hope for reaching their dream.

USDA Rural Development Financial Assistance

The USDA have many ways to help home buyers, in such ways both sides get their basic interests fulfilled. Not too many people know about the 0 down home loans programs the USDA is offering home buyers at specific zip codes where the federal government wishes to strengthen the community. The surprising thing about these programs is that some of the zip codes are not rural at all!

In the same way, the direct housing loans which are offered are also targeting specific rural zip codes in each of the states, but while one may expect a hut deep in Montana snowing peaks, some of the places may be just off road a few miles away from cities and towns.

What Can Be Done With The Direct Housing Loan

The loans will be granted to any kind of assistance to acquire housing for low income families. This means the money can be used for buying a house, repairing a house, renovate or relocate a home. The funds will be allowed even for purchasing land and preparing a site (paying for sewage facilities) for future housings.

So if you find a farm, a home, or a place which now looks as a wreck, by applying for the USDA direct housing loan, you may be granted a loan to rebuild the property for domestic housing needs.

When Direct Housing Loans Are NOT Approved

The definition is “Modest”. The USDA Rural Development will not approve an application for a direct housing loan for any kind of property. If the property is too ‘fancy’ or overpriced, the application would probably be declined. How can you know if the property is ‘modest’? The simple answer is to look around, do some kind of ‘appraisal comp’, compare the house to the houses down the street or location.

For example – If the house has a pool, if it is substantially larger (more rooms than other houses in the area) ,then it might not be approved by the USDA for the direct loan program.

Direct Housing Loans Minimum Requirements

The USDA is seeking to assist those who otherwise find it difficult to assist them selves. This means that the minimum requirements for the USDA direct housing loans are approved to those who otherwise will not be approved anywhere else. But since it is government backed money, even the highest risk has it’s limits, and the USDA Rural Development decline applications which seem hopeless to be funded.

Low Income Requirements

The loans will be granted to LOW or VERY LOW income families. Take notice that there is no obsolete ‘income’ amount, the income level to determine who is ‘low income’ is a factor of two parameters: Family income, and Area Median Income (AMI).

You need to check the AMI in your area (the area you plan to live in) and compare your income to the Median Income. If your income meets these limit levels, than these direct housing loans are for you:

• VERY LOW INCOME – Will be less than 50% of the area median income.
• LOW INCOME – Will be 50% – 80% of the area median income.

Minimum Financial Requirements

The direct housing loans are not grants, the loans are processed by USDA approved mortgage banks and lenders, who expect to get their money back. So families which apply must show they have the possibility to pay back the mortgage loan.

Now here is the catch.. These families should prove they can pay back the direct housing mortgage loans but have no chance to get a mortgage loan anywhere else.

So people with very low credit score (below 550) with low income levels who will be declined by any lender, can try to apply, and prove they are worth the trust of the USDA and meet the minimum USDA requirments to approve them for the loans.

What Kind Of Direct Loans To Expect

Most of the loans are issued for up to 33 years or even longer (up to 38 years!) for people who would not be able to stand the 30 year mortgage payments. The debt-to-income ratio for these families is 24%, so the mortgage payments, and the rest of the family debts, should not be more than quarter of the family income.

The loans have a limit too, you can not expect to request for loans which are higher than the average property value at the rural area. So the appraisal comps is wise to find the value of houses in the area, and request a loan which is within the reasonable home value.

Since the USDA knows that paying back direct mortgage loans still be a challenge for many families (especially when they aim at very low income levels) some of the families may expect payments assistance subsidy.

Direct Housing Loan Conclusion

Do not give up on the dream for home ownership. If you are willing to move to an area which the government call ‘rural’ and willing to commit yourself to 100% iron clad loan payback guarantee, then the USDA direct housing loans just might be your option to be a home owner at 2012.

VantageScore Scale A-B-C-D-F Letters Explained

Understanding The New VantageScore Scale

The new VantageScore credit scale uses letters and not only figures like the traditional FICO score does. Many people are having difficult time to adapt to the new credit scale, which was made to assist everyone understand their credit situation better.

The FICO score scale which runs from 350-850 is the more popular credit scale used, but with credit grades ending at 850 evaluating a persons credit position is more complicated. The new VantageScore scale may take some more time to become familiarized by the markets, but once used it is more friendly to understand.

In this short review we will try and explain the VantageScore letters scale, so next time you see a credit score in letters and not in the traditional figures, the overall picture would be much clearer.

Why Vantage Uses Two Scales – Figures & Letters

The VantageScore scale and algorithm calculates different factors, all contributing to the credit score outcome. This ‘credit score’ figure is used by lenders and credit companies to predict the financial risk from each customer and analysis the payment behavior expected from them. The score was developed by the three national credit reporting companies (CRCs) — Experian, TransUnion and Equifax  to standardize the credit ratings.

Another user for this credit score, is the customer himself. A person needs this figure to qualify for mortgages and credit cards and other loans.

The VantageScore has two scales, each developed for a different purpose. The lenders and creditors will continue to request and use the numeric figures, just like the FICO score they request and use today. The main different is that the Vantage scale runes from 501-990, so it is more intuitive to evaluate and calculate.

For example 738 FICO score is a great score, but how much better is it than 690? With the VantageScore Scale these kind of calculations are more easy to be done, and make more sense for people who are not mathematicians.

For the regular average credit customer, these factors and figures even make less sense. For the credit customers VantageScore build the easy to understand credit letter grades. The letter grades resemble the school grades which everyone remembers, thus understanding at each point the credit score situation is easy and appealing.

VantageScore Grades And Their Meanings

The VantageScore has 5 level of grades just like the school grades. On this credit scale, a person gets the personal credit score as if they were still at school. One person may get a ‘D’ score and another person will get a ‘B’ score. Just like at school, these grades are easy to follow and make sense when trying to understand the current credit position.

‘A’ Score Grade – This grade is the best grade you can achieve, like at school A students get the best treatment from the teachers, ‘A’ credit score will allow the customers to shop for the best home loans and best mortgage rates offers. The top tier of credit holders with score between 900-990 pose the least risk thus getting the best financial terms.

‘B’ Score Grade - These customers are at the top 59% of the credit holders with score ranging from 800-899 they will probably be accepted at any office and offered fairly low rates for loans and credit cards.

‘C’ Score Group – This score group will have more challenging times shopping for loans and credit rates, with Vantage Score between 700-799 they are still welcome at most lenders since they drive a high revenue. The customers at ‘C’ group are not in the ‘bad credit – not welcome’ group, they will be qualified for mortgages and will pay higher rates. Lenders fear them but need them since they will likely pay their payments on time (most of the time) and will borrow money at the higher rates than groups ‘A’ and ‘B’.

‘D’ Vantage Score – Means these customers are risky to acquire for the lenders. Lenders can expect credit troubles and delayed payments. In the eyes of the lenders lending money is an uncertain bargain, and they might need more efforts and resources to see the money paid back regularly. A score of 600-699 is very low at the new VantageScore scale, for this reason they will ‘sell’ their money at very high rates to cover losses or expected foreclosures. They will request more documentation and more down payments than other score groups.

‘F’ Score Group – People with Vantage score lower than 600 may see a ‘NOT WELCOME’ sign at many lender’s offices, lending companies are profit oriented, and lending money to ‘F’ group borrowers at current times is beyond their risk management analysis. ‘F’ grade means these people are at the lowest 19% grades from all the millions of U.S customers. If credit or loans are processed a very high interest rate will be attached to compensate for the risk involved.

Vantage Score Scale Conclusion

Most people do not realize how much they would save per year by repairing their credit score. If it is a FICO score or a VantageScore, having a low grade score means paying up to thousands of dollars each year (can reach hundred dollars per month savings!).

Repairing the credit score is easier than most people think and can be done alone with a few simple tweaks. See the following guide to help you through credit repair process in 37 days. For better and more professional results you may want to get the ‘credit repair software’ this is one of the best softwares used for self credit repair, it will pay back itself from day one, once your credit raises.

If your Vantage Score is not ‘A’ you can be a better ‘credit student’ and do something about it, any raise will allow you to negotiate lower rates or even get lower rates without even requesting, moving from ‘B’ group to ‘A’ group is like moving to the VIP lounge of the financial markets, bankers are willing to crawl in order to add a ‘A’ score to their customers list.

You may find these articles relevant too:

1. The NEW VantageScore Explained
2. Your FICO Credit Score Explained
3. How Your Credit Score Affects Your Hard Earned Money
4. How To Delete Negative Items From Your Credit Report
5. How To Rebuild a Low Credit Score

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VantageScore Credit Score Explained

New Credit VantageScore Scale Explained

Many people wish to know whether they can get a FICO score over 850? Well the answer is that they can not, they probably have seen a VantageScore rate of 900 and thought it was a FICO score. In this short review we will try and explain VantageScore range so people could understand it better and know how it is calculated.

Simple VantageScore explanation is that the score range is between 501-990, which allows a better accurate prediction and risk management for the banks and lending companies.

Why Use A Different Credit Score

The three credit reporting companies (CRC) Equifax, Experian and TransUnion joined together and developed a new kind of credit scoring to help them evaluate the credit reports and produce a better accurate creditworthiness prediction based on known factors.

Before VantageScore was established there was a great diversity between the three CRCs, they used different scoring methodologies which developed different scores for each consumer. The different scores reported using the FICO algorithm were caused because different factors of the FICO algorithm was used with different methodology, and because there are different elements being reported individually to the credit reporting companies.

The VantageScore was developed by financial and mathematical experts from all three reporting companies, together with a huge ‘sample’ of 15 million anonymous credit users files. The original VantageScore range was released at March 2006 to the financial markets. A newer Vantage Score model called Vantage Score 2.0 is now present.

VantageScore Advantages Explained

The VantageScore grading is softer than the harsh FICO score, the VantageScore scale takes less emphasis on credit history than the FICO Score scale. This means that consumers who would be low graded by the FICO score have better chances to be upgraded by the new scale by Vantage Score.

Some customer types have a bad credit score, and would not be able to qualify for a mortgage because their score will be lower than the minimum credit score needed by most lenders. These people would need to qualify for the FHA Home Mortgage Plans for those with bad credit.

Within these customer who get abused by the FICO algorithm would be: young people just after collage without a steady financial background; divorced or widowed who never had active credit reports; people who immigrated and have no ‘credit history’ to show; people who are not credit users by ideology. All these will get a unbalanced low FICO score.

What Is VantageScore 2.0 ?

The simple VantageScore 2.0 explanation is that the credit markets for 2011/2012 are not what they where back at 2006/7. The violent financial crisis which hit the lenders and the financial institutions like a Tsunami, wrecked everything lenders and borrowers worked for years. This drastic changes had to be blended to the credit score algorithm.

The VantageScore 2.0 uniqueness is that it benchmarked two different time-frames, to evaluate better understanding of credit behaviors, before and after the sub-prime crisis erupted. Using a two time-frames for comparison allows a better score, because it lowers the algorithm sensitivity to a single financial event.

VantageScore Algorithm Factors Explained

Like the better known FICO Score (by Fair Isaac) the VantageScore has a diversity of factors the algorithm calculates, here you can see the factors and how much they contribute to the overall rate. The percentage may change slightly but the emphasis on recent credit behaviors stays the same:

30% – Recent Credit – Number of recently opened credit accounts and credit inquiries. Applying recently for many accounts makes you a risky borrower. (In the FICO score Credit Inquiries is 10%).

28% – Payment History – Repayment behavior,  There is a difference between someone who tried hard to be current and failed and cooperates with the lender and someone who has a disrespectful attitude when approached. Borrowers who are few days late every month or late once by 30 days. The VantageScore takes into account those risk behavior factors too. (In the FICO Scale Payment History is 35% of the score).

 23% – Utilization – Credit utilization means how much of your credit you are using from your credit limits. A person who has a high Debt-to-Credit ratio is riskier than a person using a small fraction of available credit. (In the FICO score Credit Utilization is 30%).

9% – Balance – How much money are you owing lenders and credit companies at any given month. Balance calculated is both current and delinquent. A recent rise in the balance is a credit risk indicator.

9% – Depth of Credit – How deep (long) is the credit history, are you a new credit user or an experienced credit customer. Different kinds of credits are calculated like revolving accounts and installment loans. (In the FICO Score scale it is 15%)

1% – Available Credit – How much of credit is available for you.

 As you can see the Vantage Score places less emphasis on the depth of the credit history, and more emphasis on the recent credit accounts. This takes less weight from credit behaviors prior to the 2008 crisis and places more wight for your current credit behaviors.

By this the Vantage algorithm tries to be more accurate and relevant ‘risk predictor’ than the FICO score. Lenders at 2011 will learn more about your real financial creditworthiness with Vantage Score than with the FICO score.

The VantageScore Letter Indicators Explained

The VantageScore ranges from 501 to 990. Within this range there are five groups levels A-B-C-D-E-F, the letters are part of the Vantage segmentation predicting the risk assessment. The letters help people and organizations clearly see the score in a familiar grading. Instead of thinking how good (or bad) is 735 the ‘C’ score places it at the appropriate position. 

• 501-600 – Gets the ‘F’ grade.
• 601 to 700 is a D grade.
• 701 to 800 is a C.
• 801 to 900 is a B.
• 901 to 990 is an A. .
   

Vantage Score Model Conclusion

 The VantageScore has not yet been fully adopted by all financial organizations and lenders, mostly because it requires them to change their statistical and software databases. Most mortgage lenders will request a FICO score rather than a Vantage Score.

Since the VantageScore 2.0 release more and more lenders begin to use the Vantage score gradings and segmentations, since this segmentation compares behaviors on two time-frames and is apparently better to predict foreclosure risks than the former FICO score.

This ‘Vantage Credit Score explained’ review is for general information, please use professional counseling before major financial decisions.

You may find these articles relevant too:

1. VantageScore NEW Alphabet Scale Explained
2. Your FICO Credit Score Explained
3. How Your Credit Score Affects Your Hard Earned Money
4. How To Delete Negative Items From Your Credit Report
5. How To Rebuild a Low Credit Score

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How To Detect Home Seller Lies By Body Language

Is The Seller Is Lying To You?

Humans body language never lies. If you know how to read body language and interpret the signs, you will know when the home seller is lying. In this short review you could learn how to detect if the home seller lies to you about things which you should know about.

When a homebuyer is in a process of buying property, a home for their family, they will come across many kinds of people who have some interest in the deal. These people can be the mortgage broker, the real estate agent, the lawyers, lenders, appraisers  and the home seller.

When buying a home there is so much to lose and the financial risk is high, if someone is cheating and lying about a certain issue, it can have a tremendous effect later on for the buyer.

Body Language And Lie Detection

The body does usually react differently when people are anxious or in stress, when it comes to lying there are more physical changes, and behaviors worth knowing. These techniques of lie detection are well known and tested, some body language experts are actually ‘human lie detectors’ and can be accurate like a polygraph test when talking to another person.

Is The Home Seller Lying To You

There are usually several behavioral signs when someone is lying, once you get to know them, you will notice how much the appear and how you have missed so many of them until today. 

The basic thing you need to know, is that people who lie are usually not comfortable with their lie. If the buyer is trying to hide that the roof is leaking, they will be uncomfortable with ‘not mentioning’ that. Some people’s behavior is more easy to read, others who are more ‘poker face’ are slightly more difficult to uncover.

Listen To The Body & Face Microexpressions

Ask a straight forward question – One simple thing is to ask people a straight forward question, a YES / NO question, and see the reaction of the person answering. Remember that all those who lie, never admit they are lying… Ask the seller “does the roof have any problem?” “When was it last fixed?” “Who checked the roof lately?” and listen to the answer and listen to body language signs.

• A shaky voice, a long ‘hummmm’ may indicate they are trying to hide something, looking for a better way to answer.
• See if the shoulders are rising, when people try to find an excuse for a wrong doing, they lift their shoulders slightly.
• Scratching the side or back of the neck – When lying the body heats, and people tend to play around the collar of the shirt at the side or back of the neck, to release some body heat.
• Jiggling feet – People sometime are better at controlling the body language signs of the upper body, but the feet will be moving, jiggling, jumping, the toes will be moving within the shoes..
• Remember Pinocchio? When people lie they touch the nose, scratch the nose, touch sides of the nose or sides of the mouth. They feel their nose has grown (Pinocchio) They are trying to ‘hide’ the lie by hiding the mouth or distracting the attention from their mouth.
• Stiff body movements – If the seller is lying they will turn stiff, and the body gestures become smaller, they will keep their arms and fingers close to their body, so they will not ‘reveal’ their lie.
• Placing objects in between – If the seller is lying about issues they are trying to hide, they might be placing objects between them and you in that conversation, holding the cup, grabbing some papers to the chest, holding the pen with both hands. They are trying to block you away.
• Hiding the palms – In the body language ‘dictionary’ the palms represent the honesty. We would believe to people more if when talking to us they will show us their hands. Liars and dishonest people hide their palms, they will place hands in the pocket, hold palms together tightly, cross arms over their chest, or hide the hands behind their back.
• Avoiding eye contact. Liars know their eyes will give them up, so they turn away or look down to avoid a direct eye contact when they are lying.

When trying to detect lies with body language, do not put all the emphasis on one single gesture. A person might be cold and hug themselves, or hot from walking or dressing too warm and playing around their collar, or rubbing the nose because they have a cold. When tracing body language try lie detection look for clusters of signs, a shaky leg with a rub of the nose, together with a long ‘humm’. 

Using Eye Movements To Detect Lies

This can be done only at a face to face meeting, this is why it is important when buying a home to meet the people you are about to do business with or rent their services. If you are hiring a builder try to meet them and ask them straight forward questions – There are eye movements which are subconscious and uncontrollable, they will help you detect when the constructor is lying to you.

When looking at a person, When the eyes turn up and to the right the person is trying to remember an image. When the eyes go to the upper left corner, the person is inventing a ‘new image’ to talk about. The brain is divided into two sides, each side is in charge of a different cognitive function:

Telling the Truth – Fetching a visual memory image will send the eyes to the upper right corner (when you are facing them). If you ask the constructor to describe what he did, and ask them questions about ‘how bad was the leakage?’ ‘what did it look like?” when they will try to remember how it was, their eyes will rise for a Milli second to the top right corner, when their brain is fetching the image to describe.

Lying and Inventing a Story - When the body needs to invent an image or a story it will construct the image at the ‘creative’ side of the brain, and the eyes will rise for a second to the upper left corner when the ‘image processing’ is done.

If your real estate agent is inventing something like ‘his wife said the price you offered is too low’, you can ask the real estate agent, ‘by the way, how does his wife looks like?”, if you see the eyes rise to the up and left side, then he is trying to create a false description to describe to you.

Other Signs For Lie Detection

These signs are not ‘body language’ or include micro-expressions but they will help you detect lies when speaking to all the people you will need to speak to, until you became a homeowner.

 1. People who lie tend to use less contractions, they will use whole words and say them clearly, they are afraid their voice will shake or come out unclear. They will say “I did not..” instead of “I didn’t”.

2. People who lie add unnecessary details to their description to make it sound more believable. Too precise answers means they are trying to hide something and are uncomfortable with the slim answer.

3. Watch them when you change the subject of the conversation. A liar will show signs of relief when the subject is changed. 

4. Pause and watch a liar get uncomfortable. Stop in the middle of the conversation and stare at the other side, give them  a long look.. Watch their behavior. Liars get nervous or try to add humor to ease their stress.

 Home Buying and Body Language Conclusion

Most body language signs are body gestures and face micro-expressions. Those slight body movements and expressions, are priceless when we are aware of what they might reveal. Once you know how to detect lies by body language, it will be helpful not only when buying a home or getting a mortgage offer.

Knowing to detect lies by body language will be useful with your spouse and romantic life, help notice a cheating husband or wife or help you detect if your teenagers are using drugs.

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More relevant articles you might be interested to read:

1. How To Negotiate Credit Rates Like John Wayne

2. Minimum Credit Score Needed For FHA Loans

3. How To Break Free From Credit Card Debts

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How To Break Free From Credit Card Debts

Be Free From Credit Card Debts

Many Americans today depend on credit cards or other types of loans in order to survive. Buying a car, purchasing a home, going to college or even paying for monthly expenses are all financed. If you are one of the millions of Americans who lives from pay check to pay check maybe you should consider turning your life around.

Paying off your loans early will save you money and help you live a much happier and stress free lifestyle. There are many techniques to pay off your loans early and different financial experts will argue one way is better than the other.

Is Paying Off Debts Worth The Effort

Once you are with less debt to income balance your FICO credit score will rise, and you will get better interest rates from all the lenders. Many people do not know but even a small raise in their credit score, can save thousands of dollars from the mortgage loans.

Paying debts on time mean that fixing any credit report will be easier than you think. Here are a few techniques you can use to help you down the road to financial freedom.

The Road To Debt Free Life

A common way to approach debt freedom is to use the snowball effect. Pay only the minimum payments on all loans except one. Pay all you can on that single loan until it’s paid off. Move that money to the next loan and continue the snowball effect. Each loan paid off will give you a larger amount of money to pay on the next loan. The snowball will get bigger and bigger each time.

Two Strategies To Be Debt Free

There are two ways to implement the snowball effect of debt freedom. The first is to pay off the lowest balance first. Small balances will be easier to pay off and keep motivation levels high. A big advocate of this method is financial expert Dave Ramsey.

A second approach of the snowball effect is to pay off loans with the highest interest rates first. Many financial experts argue this will save you the most money because you are knocking out high interest rate loans.

Fast Debt Payoff Solution

Another option for quicker debt payoff is to use a debt consolidation. Many professional debt consolidation companies can consolidate all your debt into a single monthly payment. Your monthly payment will be lower and often times you can get a lower average interest rate than you had.

A great way to start any debt payoff method is to pay a large chunk of cash down on the debt when you start. Many people clean out the attic and have a yard sale with unwanted items. It is possible you may earn enough money with your extra stuff to pay off your first debt immediately. Wouldn’t this be some great motivation!

You have to understand that in order for any of these debt payoff methods to work there has to be one common factor. You have to stop spending more money than you make. If you are in a position where this is not possible with your current job, you may have to look into other part-time work until the debt is paid off.

Look around your house, how many things around you do you really NEED? People with debts are usually those who get tempted to buy things on ‘sale’. If you are such a customer, who buys faster than he earns the money to pay for it, than you may need to avoid shopping trips to mall.

Personal Debt Managment

No matter which technique you choose you have to stay focused on the overall goal. Keep thinking about how happy your life will be once you are debt free.

 ’Poor’ people spend their free cash on things to buy, to feel better, and because of this they have less money to pay back their loans. Once you will pay off most of your debts, you will have more free funds for investing, and this is the way the ‘rich’ people make their money.

Debt can be a nasty monster that can destroy your life if not controlled. Take control of your debt and pay off your loans early. Reduce the stress in your life and get ready to enjoy your golden years in retirement.

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You may find these articles relevant too:

• How You Can Rebuild Your Credit Score
• How To Get a Round 800 Fico Score
• What Effect Has A Small Change In Credit Score On Mortgage Payments