Following are some helpful tips to avoid the credit mistakes many borrowers make during the loan process:
1. DON’T APPLY FOR NEW CREDIT OF ANY KIND, including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.
2. DON’T PAY OFF COLLECTIONS OR CHARGE-OFFS during the loan process. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through closing and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.
3. DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.
4. DON’T MAX OUT OR OVER-CHARGE YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board - make an extra payment on all of your cards at the same time.
5. DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in 4. If you want to save money on credit card interest rates, wait until after closing.
6. DON’T DO ANYTHING TO CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.
7. DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending on the program you select. (When you pull your own reports, you don’t get dinged for a hard inquiry.) This way, if something does show up on your reports that has caused your score to go down, you’ll know it immediately, and you may be able to take care of the problem before closing.
8. DO STAY CURRENT ON EXISTING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-75.
9. DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.
10. DO CALL YOUR LOAN ORIGINATOR if you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your broker may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus.
Keep in mind that the lender will pull their own credit report at closing, and if your scores have dropped, you may no longer qualify for the rate that was underwritten and the final approval may come back with a higher rate. All lenders use your credit score to determine which loan criteria you fit and every loan has different criteria attached (the loan-to-value and debt-to-income ratios, etc.) Many borrowers do not understand this, and mistakenly think the loan officer is “baiting and switching.” If an issue comes up and the lender decides you do not qualify for a certain loan, the only thing a loan officer can do is search for other lenders who might be willing to give the rate and program they thought you qualified for. If you have good credit and know your score, the loan officer can give you an idea of what he or she can offer based on what you state. But do not expect them to stand by their quote if your scores are lower when they pull your credit.
Tuesday, February 22, 2011
Sunday, February 20, 2011
New changes from FANNIE, FREDDIE, & FHA
Week after week I write about different topics that affect your purchasing or refinancing of your home. This week I want to discuss some changes in the mortgage lending guidelines that will directly affect you if you are purchasing or refinancing. These changes will make it more difficult to qualify for a mortgage because the monthly payments will possibly be higher and/or the closing costs may be higher. Most mortgages being applied for, approved and closed today are either FHA, FNMA (Fannie) or FHLMC (Freddie) mortgage loans. The changes that I am speaking about will affect these loans.
Let’s begin with the changes to FHA.
There was an important announcement from FHA. As of this coming April 18th, minimum down-payments are still 3.5%, but the monthly Mortgage Insurance Premiums will increase slightly for FHA loans.
For example, on a $400,000 sales price, with the minimum down-payment the mortgage will increase approximately $61 per month.
However, this change will help strengthen FHA, which is important since some estimates show that FHA loans represent nearly 50% of all loans being done today.
Even though FHA has slightly increased their rates, the FHA loan is still a good value for clients with little to put down. Rest assured that the FHA loan is still a very viable option worth considering.
Higher Fees Coming From Fannie and Freddie!
What Will This Mean to You?
Do you have less than 25% down to put on a home?
Do you need a loan-term longer than fifteen years?
Is your credit score less than exceptional?
If you answered yes to these questions, you could soon be paying more to get a mortgage.
Fannie Mae and Freddie Mac are raising risk fees that are charged to lenders for the first time since 2009, and these increases will affect most loans sent to Freddie Mac (beginning March 1) and Fannie Mae (beginning April 1).
Here's an example: Say you are purchasing a $250,000 home, putting 20% down, and your credit score is 720. Your risk fee will now be $1,000 (versus $500 before). And if your credit score is 680, the fee will now be $3,500 (versus $3,000 before).
Lower credit scores will directly impact your mortgage rate or closing costs. It is therefore very important to know what your credit looks like in advance of purchasing a home to make sure that you carefully review you credit report and optimize your credit score.
This last change is a good one!!
PMI Tax Deductibility Extended Through 2011
There's great news for homeowners! Congress recently extended legislation making private mortgage insurance (PMI) premiums tax deductible through 2011!
So why is this significant? PMI can help people buy a home sooner, by enabling them to put less than 20% of the purchase price down when buying a home. This increase in purchasing power can sometimes be the difference between affording the home of your dreams...or not.
What's more, this deduction is not just for first-time home-buyers, so, it can be used by current homeowners looking to upgrade to a new home. However, it does only apply to "qualified" residences, which typically include a primary residence and a vacation home, but not an investment property.
It's important to note that PMI is only tax deductible for homeowners with adjusted gross incomes of less than $110,000. Borrowers with adjusted gross incomes up to $100,000 may be able to deduct 100% of their 2011 premiums. Deductions are phased out in 10% increments for borrowers with adjusted gross incomes between $100,000 and $109,000.
As with any deduction, be sure to consult your tax advisor if you have any questions.
Let’s begin with the changes to FHA.
There was an important announcement from FHA. As of this coming April 18th, minimum down-payments are still 3.5%, but the monthly Mortgage Insurance Premiums will increase slightly for FHA loans.
For example, on a $400,000 sales price, with the minimum down-payment the mortgage will increase approximately $61 per month.
However, this change will help strengthen FHA, which is important since some estimates show that FHA loans represent nearly 50% of all loans being done today.
Even though FHA has slightly increased their rates, the FHA loan is still a good value for clients with little to put down. Rest assured that the FHA loan is still a very viable option worth considering.
Higher Fees Coming From Fannie and Freddie!
What Will This Mean to You?
Do you have less than 25% down to put on a home?
Do you need a loan-term longer than fifteen years?
Is your credit score less than exceptional?
If you answered yes to these questions, you could soon be paying more to get a mortgage.
Fannie Mae and Freddie Mac are raising risk fees that are charged to lenders for the first time since 2009, and these increases will affect most loans sent to Freddie Mac (beginning March 1) and Fannie Mae (beginning April 1).
Here's an example: Say you are purchasing a $250,000 home, putting 20% down, and your credit score is 720. Your risk fee will now be $1,000 (versus $500 before). And if your credit score is 680, the fee will now be $3,500 (versus $3,000 before).
Lower credit scores will directly impact your mortgage rate or closing costs. It is therefore very important to know what your credit looks like in advance of purchasing a home to make sure that you carefully review you credit report and optimize your credit score.
This last change is a good one!!
PMI Tax Deductibility Extended Through 2011
There's great news for homeowners! Congress recently extended legislation making private mortgage insurance (PMI) premiums tax deductible through 2011!
So why is this significant? PMI can help people buy a home sooner, by enabling them to put less than 20% of the purchase price down when buying a home. This increase in purchasing power can sometimes be the difference between affording the home of your dreams...or not.
What's more, this deduction is not just for first-time home-buyers, so, it can be used by current homeowners looking to upgrade to a new home. However, it does only apply to "qualified" residences, which typically include a primary residence and a vacation home, but not an investment property.
It's important to note that PMI is only tax deductible for homeowners with adjusted gross incomes of less than $110,000. Borrowers with adjusted gross incomes up to $100,000 may be able to deduct 100% of their 2011 premiums. Deductions are phased out in 10% increments for borrowers with adjusted gross incomes between $100,000 and $109,000.
As with any deduction, be sure to consult your tax advisor if you have any questions.
Sunday, February 13, 2011
THE BOOK IS HERE
Yes the book that I wrote with my sister Yael has finally been published!! "Real Estate Selling Success" breakthrough Sales & Marketing Strategies For Real Estate Agents!!!!
More info on how to get a copy etc will follow!!
More info on how to get a copy etc will follow!!
Tuesday, January 25, 2011
Reality Mortgage Episode. Lisa's Story
What happens when a borrower gets a commitment and then the same borrowers gets denied because of new information?
Well this happened to Lisa. Lisa went into contract on a home in Haverstraw NY, in August, got a commitment in September and was subsequently denied on Dec 31, 2010. She had provided paperwork again and again,sometimes duplicates, she had paid down her debt and she had complied with everything that the bank that she has applied with required. To compound matters, she actually moved into her new house in October, renting the home from the seller until the closing, which both parties thought would happen in days. But the months dragged on, paperwork was submitted and then ultimately the denial letter received on December 31, due to her credit score dropping below an acceptable level.
Three questions come to mind
1. This was a major bank, well known and prestigious with multiple branches across the region, state and country, why did they lose her paperwork requiring her to submit duplicates?
2. Why didn’t she close once she got her original commitment within a short time frame?
3. Why didn’t they try to help her rectify her credit?
I don’t know the answers to all the questions. What I do know is that the “Big Banks” have to go through the same hoops and jumps as the smaller more boutique style mortgage bankers. We all follow the same basic guidelines and underwriting requirements. Large banks though do other things besides mortgage lending. They also do car loans, truck loans, education loans, business loans, saving and checking accounts etc. Mortgages are just a small piece of the business that the larger depository lenders do. Because of that, they may add stricter overlays on the basic guidelines like requiring a higher credit score or a more conservative debt to income ratio. Their mortgage personal may not necessarily be better trained or experienced and/or they may be overwhelmed with clients so if something doesn’t work out, they are already on to the next client.
When Lisa came into my office on January 5, she was devastated and her confidence was shaken. She told me that she had been so excited about buying a house and now she just wants it over with and she was very worried as to whether she would get her $25,000 down payment back if she could not get a loan. I looked at her credit and I saw that there was a current late to Best Buy for $26. She told me that the balance had already been paid in full and that when she moved to the new house, the bill didn’t get forwarded and Best Buy had sent her a letter stating that they would remove the late payment. I got that letter from her, did a “rapid Re-score” of her credit and last week, on Tuesday I got her new score and it was 35 points higher than before. Her file was submitted, we got a commitment and we hope to close on January 31.
Lisa’s story is not unique. The mortgage professional that you go to is key in you getting a timely approval and facilitating your moving into a new home as painlessly as possible.
Well this happened to Lisa. Lisa went into contract on a home in Haverstraw NY, in August, got a commitment in September and was subsequently denied on Dec 31, 2010. She had provided paperwork again and again,sometimes duplicates, she had paid down her debt and she had complied with everything that the bank that she has applied with required. To compound matters, she actually moved into her new house in October, renting the home from the seller until the closing, which both parties thought would happen in days. But the months dragged on, paperwork was submitted and then ultimately the denial letter received on December 31, due to her credit score dropping below an acceptable level.
Three questions come to mind
1. This was a major bank, well known and prestigious with multiple branches across the region, state and country, why did they lose her paperwork requiring her to submit duplicates?
2. Why didn’t she close once she got her original commitment within a short time frame?
3. Why didn’t they try to help her rectify her credit?
I don’t know the answers to all the questions. What I do know is that the “Big Banks” have to go through the same hoops and jumps as the smaller more boutique style mortgage bankers. We all follow the same basic guidelines and underwriting requirements. Large banks though do other things besides mortgage lending. They also do car loans, truck loans, education loans, business loans, saving and checking accounts etc. Mortgages are just a small piece of the business that the larger depository lenders do. Because of that, they may add stricter overlays on the basic guidelines like requiring a higher credit score or a more conservative debt to income ratio. Their mortgage personal may not necessarily be better trained or experienced and/or they may be overwhelmed with clients so if something doesn’t work out, they are already on to the next client.
When Lisa came into my office on January 5, she was devastated and her confidence was shaken. She told me that she had been so excited about buying a house and now she just wants it over with and she was very worried as to whether she would get her $25,000 down payment back if she could not get a loan. I looked at her credit and I saw that there was a current late to Best Buy for $26. She told me that the balance had already been paid in full and that when she moved to the new house, the bill didn’t get forwarded and Best Buy had sent her a letter stating that they would remove the late payment. I got that letter from her, did a “rapid Re-score” of her credit and last week, on Tuesday I got her new score and it was 35 points higher than before. Her file was submitted, we got a commitment and we hope to close on January 31.
Lisa’s story is not unique. The mortgage professional that you go to is key in you getting a timely approval and facilitating your moving into a new home as painlessly as possible.
Tuesday, December 21, 2010
Appraisals and how they affect you
What is an appraisal? An appraisal is a report provided by a licensed appraiser, which states that appraisers opinion on what, the current value of a specific property is. It includes pictures, charts and an assessment of the neighborhood. There are three methods used to asses the value, but the most common for residential mortgages is the Comparative Market Approach which heavily relies on the data involving the activity and sales of similar and like homes within a close geographical area.
Why is the appraised value of a property important? The bank relies on the information provided from the appraisal to determine if they want to lend and how much money they would lend on a specific property based on the value and condition, which is in the appraisal report.
What changed recently that suddenly homes are not appraising? Well in the last few years, there has been a decline in Real Estate values and therefore homes are appraising for less now than they have in recent years. People who want to sell or refinance are faced with appraisers who are very conservative on value because house prices are declining.
If I want to Purchase or refinance, can I choose my own appraiser?
Not anymore. This is another change that has occurred in the last year. There are new rules that lenders have to adhere to. This rule is called HVXCC, Home Value Code Of Conduct. Almost all mortgages in the country have to follow this rule which basically does not let anyone with any interest in the transaction speak to an appraiser regarding the appraisal and the value. So when you enter into a mortgage transaction, an independent appraisal management company randomly chooses the appraiser. The Realtor or Mortgage professional cannot speak to this appraiser to ask what the value may be or tell them what value is necessary to make the deal.
Once an appraisal is done and the value came in lower, is the appraiser fee refundable? No, appraisers get paid to do their job and once they have provided their report, the fee is not refundable anymore.
What are your options when the value comes in low? It is possible to challenge the appraised value. Usually you would have to provide the management company with new information such as another comparable sale or a copy of an active contract of sale etc. Once the appraiser has received the new information they can revise the appraised value at that point.
How can a person determine the value of there home before applying for a mortgage? There are some online sites, which for the most part are inaccurate. I would think that the best way would be to call a local realtor who has a good handle on the Real Estate market. They are familiar with the same information as the appraiser and therefore they can give you an accurate guide as your approximate value.
What are the biggest obstacles to getting an accurate appraised value? One of the biggest challenges is that a lot of appraisal management companies have appraisers from other areas do the appraisal. Sometimes those appraisers just cover the county where your home is but they are for the most part unfamiliar with the demographics of the area so the value can be wrong. For example about one year ago I did a refinance of an attached home in Spring Valley. The appraiser compared it to other attached homes in Spring Valley. Because he was not from Rockland, he didn’t know about all of our villages and unincorporated areas. This specific home was in South Spring Valley. There was a sale on the block that the appraiser missed because he never searched South Spring Valley. The appraisal came in about $60,000 less than it should have. If this was a purchase it may have killed the deal.
Appraisals are key components of the mortgage transaction. Understanding the in’s and out’s of the appraisal limitations and expectations is key to a successful transaction.
Why is the appraised value of a property important? The bank relies on the information provided from the appraisal to determine if they want to lend and how much money they would lend on a specific property based on the value and condition, which is in the appraisal report.
What changed recently that suddenly homes are not appraising? Well in the last few years, there has been a decline in Real Estate values and therefore homes are appraising for less now than they have in recent years. People who want to sell or refinance are faced with appraisers who are very conservative on value because house prices are declining.
If I want to Purchase or refinance, can I choose my own appraiser?
Not anymore. This is another change that has occurred in the last year. There are new rules that lenders have to adhere to. This rule is called HVXCC, Home Value Code Of Conduct. Almost all mortgages in the country have to follow this rule which basically does not let anyone with any interest in the transaction speak to an appraiser regarding the appraisal and the value. So when you enter into a mortgage transaction, an independent appraisal management company randomly chooses the appraiser. The Realtor or Mortgage professional cannot speak to this appraiser to ask what the value may be or tell them what value is necessary to make the deal.
Once an appraisal is done and the value came in lower, is the appraiser fee refundable? No, appraisers get paid to do their job and once they have provided their report, the fee is not refundable anymore.
What are your options when the value comes in low? It is possible to challenge the appraised value. Usually you would have to provide the management company with new information such as another comparable sale or a copy of an active contract of sale etc. Once the appraiser has received the new information they can revise the appraised value at that point.
How can a person determine the value of there home before applying for a mortgage? There are some online sites, which for the most part are inaccurate. I would think that the best way would be to call a local realtor who has a good handle on the Real Estate market. They are familiar with the same information as the appraiser and therefore they can give you an accurate guide as your approximate value.
What are the biggest obstacles to getting an accurate appraised value? One of the biggest challenges is that a lot of appraisal management companies have appraisers from other areas do the appraisal. Sometimes those appraisers just cover the county where your home is but they are for the most part unfamiliar with the demographics of the area so the value can be wrong. For example about one year ago I did a refinance of an attached home in Spring Valley. The appraiser compared it to other attached homes in Spring Valley. Because he was not from Rockland, he didn’t know about all of our villages and unincorporated areas. This specific home was in South Spring Valley. There was a sale on the block that the appraiser missed because he never searched South Spring Valley. The appraisal came in about $60,000 less than it should have. If this was a purchase it may have killed the deal.
Appraisals are key components of the mortgage transaction. Understanding the in’s and out’s of the appraisal limitations and expectations is key to a successful transaction.
Tuesday, December 7, 2010
THE TEN COMMANDMENTS When applying for a Real Estate Loan
10)Thou shall not change jobs, become self-employed or quit your job. When applying for a mortgage, job consistency and security are one of the key elements of the approval process. If you change jobs, you have to have worked at least 30 days and provide a paystub verifying at least a 30 day history. If you change the method of employment, wage earner to self employed or commissioned, you may not be able to verify any income because the mortgage guidelines require a minimum of a 2 year history.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
Sunday, November 21, 2010
Can someone even get a mortgage today?
Well, if you were to speak to the First Meridian closing department in Brooklyn, it seems that many peoples actually can get approved and are actually closing mortgage loans today!
So assuming that one can qualify for a mortgage loan, the #1 question that I am asked all the time is, what is my rate? And when should I lock in my rate and how do I know that this rate is the best possible rate?
In order for me to properly answer I have to ask questions. The rate is determined by the following 5 factors.
A. Percentage down payment or “loan to value”
B. Credit score.
C. Type of loan; Conventional, FHA or No income Verification.
D. Loan Term, 15 or 30 year and
E. Type of property- house, condo or coop.
All of these factors determine what your rate will be.
A client called me a few months ago and asked me what his rate would be. I answered him by asking more questions. He said, my credit is excellent, my income is stable and I already have a pre approval from another mortgage consultant (what is a pre-approval or a pre-qual? A discussion for a later article!). I said okay and I was about to give him the current rate when he mentioned that he owns a rental property in Lakewood NJ. I asked him, does the property show a loss? He said he thinks his accountant does a good job. I said to him, I can give you a rate but until I see your tax returns and your credit etc.. I could not write a pre-approval letter. To make a long story short, his income was fine albeit the rental losses. The problem was his credit score was 642!!
He was eligible for rates that were ½ % higher because of the credit score. The lower the score, the higher the risk to the lender so, the higher the rate. If your score is low you may not be able to put less than 20% down, you may not be able to get a mortgage at all!
Needless to say, we closed the loan, her score improved and she got a great rate!
Getting a mortgage in November 2010 is different than in the prior years. Sometimes when refinancing, the best deal out there is with the current servicer of your current mortgage. Sometimes the best deal out there is not the one that boasts the lowest rate, but the one that actually ends up at the closing table.
So assuming that one can qualify for a mortgage loan, the #1 question that I am asked all the time is, what is my rate? And when should I lock in my rate and how do I know that this rate is the best possible rate?
In order for me to properly answer I have to ask questions. The rate is determined by the following 5 factors.
A. Percentage down payment or “loan to value”
B. Credit score.
C. Type of loan; Conventional, FHA or No income Verification.
D. Loan Term, 15 or 30 year and
E. Type of property- house, condo or coop.
All of these factors determine what your rate will be.
A client called me a few months ago and asked me what his rate would be. I answered him by asking more questions. He said, my credit is excellent, my income is stable and I already have a pre approval from another mortgage consultant (what is a pre-approval or a pre-qual? A discussion for a later article!). I said okay and I was about to give him the current rate when he mentioned that he owns a rental property in Lakewood NJ. I asked him, does the property show a loss? He said he thinks his accountant does a good job. I said to him, I can give you a rate but until I see your tax returns and your credit etc.. I could not write a pre-approval letter. To make a long story short, his income was fine albeit the rental losses. The problem was his credit score was 642!!
He was eligible for rates that were ½ % higher because of the credit score. The lower the score, the higher the risk to the lender so, the higher the rate. If your score is low you may not be able to put less than 20% down, you may not be able to get a mortgage at all!
Needless to say, we closed the loan, her score improved and she got a great rate!
Getting a mortgage in November 2010 is different than in the prior years. Sometimes when refinancing, the best deal out there is with the current servicer of your current mortgage. Sometimes the best deal out there is not the one that boasts the lowest rate, but the one that actually ends up at the closing table.
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