Tag Archives: Credit

Its spring time, how is your credit?

With the spring finally coming to the Treasure Valley, many will be going out to look for a home this year.  The first nice weekend of February is what I typically see as the start of the main sales season for real estate in the Treasure Valley.

Like those preparing for a marathon, preparing to buy a home will pay massive benefits when you get out and start making offers on houses.  The single most important aspect of that preparation, is to check your credit report.

Checking ahead of time will allow you to correct any errors on the report before you apply for a mortgage pre-approval.  This could qualify you for better loan programs or options not available for those with lower scores caused by erroneous credit reporting.

Here is an article from my other site that discuses the habits of those with great credit scores.

Weather you are in the market for your first home, or are buying that retirement home, it pays to stay abreast of your credit report.

What are the new rules for Reverse Mortgages on April 27th 2015?

The Home Equity Conversion Mortgage, aka Reverse Mortgage will have new requirements after the 27th of April, 2015.

The borrower seeking a HECM will have to undergo a financial assessment done as a part of the process.  If the borrower is deemed to be incapable of handling the ongoing responsibilities of the loan, ie property taxes and insurance, a portion of the loan will be set aside to cover property taxes and insurance.

The most common way Reverse Mortgage borrowers get in trouble late is being unable to pay their insurance and taxes.  Defaulting on those items can put them into default and eventually foreclosure.

If a borrower has a good credit payment history and sufficient income, they can probably handle the property taxes and insurance.  If they are lacking income or have a history of delinquent payments, then it’s probably a good idea to set aside some of the funds to cover these future expenses.

Now, if you are currently in process of getting a reverse mortgage, this will not apply to you.  Anyone who starts an application after the 26th, the new rules will apply.

 

New Home Loan qualifications and bank overdrafts

New changes to mortgages in 2014 require a lender to judge the borrowers ability to repay.  I like to think that we did prior to this, but when new laws are passed, they always generate new guidelines that supersede the past methods of qualifying borrowers for a home mortgage.

In the past, the presence of overdraft fees in a borrowers bank accounts were left to the discretion on the underwriter.  Now, they are considered a negative factor in judging a borrowers ability to repay the home loan.  Even transfers from a line of credit when done to prevent an overdraft are considered a negative factor in the borrowers ability to repay their home mortgage payment.

Overdraft and Transfer fees can add up to a significant amount of fees in a month.  This in effects becomes a regular monthly debt which can at the least increase your Debt to Income to the point you don’t qualify.  Even if it’s not much, it’s an unnecessary fee that you don’t need to be paying.

What if you have them?  It might be possible to ignore them if  you have a few months of zero overdraft fees or credit line transfer fees.  How to address that if you do have them showing on your bank statements?  It’s sometimes possible to prove to the underwriter that you have changed your ways.  Pre purchasing and budget counseling certificates can prove you have. A letter explaining specific steps you have taken to better manage your money will probably be required as well.

It is definetly more complicated to qualif for a home loan these days, but with proper planning and the willininess to do what it takes, you can get qualified for your next home mortgage.

If you’re in Idaho, and you have questions or want me to look at your situation, call or request a loan pre-qualification at my site.

 

 

How to increase your credit score, FAST!

Outstanding credit card balances can impact a large portion of your total credit score.

Look at the available credit line vs what you owe.

If you have accounts that are being utilized over 50%, pay them down to under this amount.

If you are actually over the available balance, pay that down first.

The credit card companies usually report new data every month, and that will impact your next credit score when factored into the overall credit report.

 

Got a credit Question, ask below!

 

The quickest way to increase your credit score

I’ve been seeing a number of people who have lower credit scores lately.

A common attribute is excessive revolving debt or credit card balances that are close to the limit.

Having a credit card balance that is over 30% of the available limit will lower your credit score.  Being close to or even over the limit will put a hurting on your score.

Recently, a borrower who was over their limit by a few dollars said the credit card company told them to charge up the balance then pay the minimums to pay it off.  The only benefit for that “advice” is to the credit card company who is making interest off them.

Furthermore, with many people cutting back on credit cards, they can hurt them selves by closing accounts they don’t use often.  By reducing the amount of available credit to the ratio of credit in use, you can hurt your score as well.

So……My advice on how to increase your score the fastest, probably by next month is………Pay Down your outstanding credit card balances!

Further example, you have 3 credit cards.  One has 300 with a 500 limit.  The second one is 1500 balance on a 2000 limit and the last one has 400 on a 500 limit.

Pay the 400 balance down to less than 250 first.  Next pay the 1500 balance down to 1000 or less and finally pay down the 300 to 250 or less.  If you are tight on money, maybe the 300 before the 1500.  By reducing the credit used to under 50% of the balance available, you will get more points on your scores.

If you want even more points, the next step is to lower them to less than 30%, and finally to zero every month.  Don’t close them out but keep them open and available with minimal use.

“But  XYZ Bank is offering me a zero percent balance transfer?” I hear this sometimes.  That is great if you are trying to minimize your payments but if you are trying to get qualified for a mortgage, you have a different goal.

I’ll save my thoughts on the balance transfer scam,  strategy for a later post.

10 Misconceptions about VA Loans

  1. You can only use them once:  The VA loan program allows subsequent use of the loan program up to the full entitlement.
  2. Only a Veteran can be on the home loan; Spouses can and should be on the loan.  Widows of veterans can qualify in some instances.
  3. You can’t have more than one at a time.  Subject to the limits of your entitlement, you can have more than one VA loan at a time.
  4. You can buy a rental property or vacation home.  Sorry, the VA loan program is for primary residence use only.
  5. The loan is from the Government.  The VA loan program is funded through private lenders but guaranteed by the US Government in the case of default by the homeowner.
  6. You have to have unblemished credit.  The VA loan program allows for bankruptcy and foreclosure after a short waiting period, usually 24 months.
  7. There is mortgage insurance if you don’t have 20% down payment.  The VA loan program does not have a monthly mortgage insurance requirement like the FHA and Conventional loan programs.  It does have a “funding fee” which is added to the loan balance.  This fee ensures the long term viability of the VA loan program
  8. They are an expensive loan-Dave Ramsey says they are but he doesn’t realize that the last few years the rates on Conventional loans have been higher.
  9. The VA does a home inspection; you should hire your own inspector if you have concerns about the property condition.  An appraiser will inspect the property according to the minimum property standards that the loan program requires, but it is not a comprehensive home inspection that a consumer would order.
  10.  I need my original certificate of eligibility or DD214 to qualify; nowadays, we can obtain them online in a very short time.

FHA’s back to work program requirements

The changes to FHA’s back to work initiative have opened up the housing market to many potential home buyers  who otherwise would have to wait another year.

The Back to work guidelines allow for a home buyer to purchase a home after 12 months from the date of a Foreclosure, Bankruptcy, or short sale.  Until now, the guidelines required 24 months or longer after those events.

Its not without its qualifications, here they are:

  • Borrower(s)      must have a FICO score of 640 and above.
  • Borrower(s)      experienced an “economic event” such as job loss, loss of income, or combination of both which caused a foreclosure/pre-foreclosure, deed-in-lieu, or short sale.
  • “Economic event” resulted in at least 20% decline in household income and      lasted six months or more.
  • A   minimum of 12 months has elapsed since “economic event”.

Borrower(s) must receive HUD-approved counseling.

 

I’m not sure how I feel about the changes, on one hand it gets people into homes earlier than in the past.  On the other hand, I didn’t feel than 24 months after a bankruptcy and 36 after a foreclosure was too long to sit out of the home ownership market.

Bottom line is, some people will be sufficiently motivated to go through the counseling, gather documents proving the economic event and have made efforts to get their credit straightened.  Those people are probably the ones who will be ok buying a home sooner than later.

 

 

Good article from USAA on building credit history from scratch

1146426_house_question_2I get many first time home buyers in my office who have no idea about their credit history much less their credit score.  With a little preparation ahead of time, they could prevent an unpleasant surprise.

If you have an adult child that is just going out into the real world or college, it would be wise to discuss this with them. https://www.usaa.com/inet/pages/advice_building_credit?offerName=logoff_advice_building_credit

You should take advantage of the free reports offered by the bureaus once per year at www.AnnualCreditReport.com.  These reports won’t give you their score-they make you pay for that, but you are looking for any surprises and how any existing creditors are reporting your credit history.

Even if you’re one of those types who says I don’t need credit, you do need a credit history to get the best financing when the day comes to apply for a mortgage.  Contrary to what some like Dave Ramsey say, living without a credit score has many disadvantages.

If you open credit accounts, buy a tank of gas a month on the account and then pay it in full when the bill comes, you’ll build a history of responsible use and avoid finance charges.  This method works well while avoiding debt building up.  After 6 months, you’ll see the positive effect on your credit score.

I would add that if you’ve had a bankruptcy or foreclosure, you really need to make an effort to repair and rebuild your credit history.  You can’t shun credit simply because you had problems.  A good part of your credit score is how you manage your credit.  Avoiding it is not the same as managing it.

With a little advance effort, you can detect any errors, bad credit, and monitor how your existing credit is showing.  It’s common for me to work with borrowers some time in advance to get ready to purchase.  Should you need this help or know someone who might, call me.

 

 

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