Is It Impossible to Get a Mortgage Loan?

Is It Impossible to Get a Mortgage Loan? 

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The Challenges:

With the numbers of recent foreclosures, lenders are having to re-purchase defaulted loans, often for minor technicalities. Losses incurred by some companies have forced them out of business.

As a result, not only have lending rules tightened, but underwriters are also being forced to follow them to the letter and beyond.

The Solutions:

Advance preparation and the right documentation will help streamline the process.

Your Money: All necessary funds must be verified, and deposits must be documented. Make copies of all checks and deposit slips.

Your Debts: Avoid delays by refraining from applying for or opening any new credit accounts.

Your Income: Expect verification through paystubs, written and verbal confirmations, tax returns, IRS transcripts, etc. All new employment or forms of variable income beyond regular wages (bonus, commission, alimony, dividends, etc.) are subject to rules of history and continuance. Do not depend on this income until we discuss its acceptability.

Your Credit: Score requirements have increased. If you’re not already, you need to be extra mindful of managing your debts. To help protect your score:

  • Do not close old or unused accounts.
  • Do maintain high lines and low balance ratios.
  • Do not transfer balances to a brand new card (at least not before buying or refinancing).
  • Do not use your extra cash to pay off debt. Sometimes, it’s better to have the cash than slightly lower balances.

Other factors can be at play, too, but the most important thing to remember is that it’s never too early to seek personalized advice. I work with mortgage loans every day, and I’m here to help you prepare so you can sail through the process when the opportunity is right.

Financing is still abundantly available. It simply goes most easily to those who plan ahead.  Let us help!

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Rebuilding Credit: It’s Not Too Late

It’s true, negative credit items can remain on your credit report for up to 7 years (up to 10 years for public records, such as a bankruptcy, tax lien or judgment). But this doesn’t mean that you have to wait 7 to 10 years to begin reestablishing a good credit rating. Because credit scoring models typically lend more weight to your recent activity than to the mistakes you’ve made in the past, you can change your habits right now and begin reestablishing yourself as a good credit risk for a purchase or refinance loan in just 6 to 12 months.The following are a few Dos and Don’ts when it comes to rebuilding your credit:1) Three months prior to securing your mortgage, DON’T apply for, close, or pay off any collections, charge-offs, loans, or other kinds of credit without speaking to your mortgage professional first. Any one of these actions, as innocent as they might seem, could seriously affect your credit score, adding significant costs to your mortgage should your score suddenly drop.

2) If you have any credit card accounts with excellent credit histories, DO use them – but use them strategically. Keep your balances below 30% of their limits for 3-6 months prior to entering into a loan transaction, and use them only for small purchases that you can easily pay off completely at the end of the month. Remember, creditors like to see evidence of stability, so the goal is to keep the good reports coming month to month without falling into the same financial traps that led to credit challenges in the past.

3) If you don’t have a credit card, DO get a secured card immediately. This is a great way to rebuild or establish credit quickly. Because this account is secured by funds that you deposit (typically between $100 and $400) you’re not seen as a great risk to the card issuer because of your initial investment. Again, use this card strategically to build a strong credit history. Pay your bill on time every month, and it won’t be long before you qualify for an unsecured credit account.

For some, opening a credit account with a co-signer could be a better alternative, but it’s important to note that both you and your co-signer are equally responsible for any activity on this type of account, good or bad, so this strategy could backfire in the end if you or your co-signer makes poor decisions. DON’T mistake “authorized user” for a co-signed account. While, in the past, becoming an authorized user on an account in good standing would benefit everyone on the account, the credit bureaus have reconsidered this practice, and new credit models have all but eliminated “piggybacking” your way to good credit.

Give me a call at your convenience. I will be glad to help you in any way I can!

© 2013 Vantage Production, LLC. All rights reserved.

Biggest Credit Myths, Mistakes, and Misconceptions

Credit-Report
Good credit is well worth the effort it takes to both achieve and preserve it. If you have good credit, the following tips will help you keep it that way. If you want to improve your credit, however, now is the time to get started. Give us a call. We’ll review your credit and find out exactly where you stand. In the meantime, if you plan on entering into a loan transaction in the next 6 to 12 months, you simply cannot afford to make the following credit mistakes:

Don’t fall behind on existing accounts. This includes your mortgage and car payments. One 30-day late can cost you anywhere from 30-80 points or more depending on the other factors being reported on your credit reports.

Don’t pay off old collections or charge-offs during the loan process. Paying collections will decrease your 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) the creditor agrees to give you a letter of deletion.

Don’t close credit card accounts. If you close a credit card account, it will appear to 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 that it is an account youve opened more recently. Remember, 10% of your credit score is made up of your Mix of Credit, so it is important that you have at least 1-2 major credit cards open and in good standing.

Don’t max out or overcharge your credit accounts. This is the fastest way to bring about an immediate drop of 50-100 points in your credit score. Try to keep your credit card balances below 30% of the available amount on your monthly statement, and especially during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.

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. If you want to save money on credit card interest rates, wait until after closing.

Don’t do anything that will cause a red flag to be raised by the scoring system. This would include adding new accounts, co-signing on a loan, or changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

Don’t give up. In many cases, small changes to your credit profile can yield big results that could save you thousands of dollars on your mortgage.

© 2013 Mortgage Success Source, LLC. All rights reserved.

October Updates

Ease on Down the Road What QE3 Means for Home Loan RatesIn  September’s issue of YOU  Magazine, we discussed  the possibility that the Federal Reserve would announce further purchases of Mortgage  Bonds to keep home loan rates low and help the economy continue to grow. On  September 13th, the Federal Reserve announced that it would indeed  begin another round of Bond Buying (known as Quantitative Easing or QE3). If  you’re in the market to purchase or refinance a home, you won’t want to miss  the latest on this story.

Eat That Frog! Getting Things Done Without CroakingThere is something a little intimidating about a long to-do list. And some  days, just seeing tasks written out in list form is enough to awaken the  procrastinator within any one of us.

5 Reasons Layaway Plans May Cost You More This installment-payment plan can help consumers avoid racking up debt when making holiday purchases, but it has its drawbacks. By Cameron Huddleston, Kiplinger.comLayaway has been making  a comeback since the recession. In fact, it’s been in the headlines recently  because several stores that offer this installment-payment program are reducing  or dropping layaway service fees.

Too Much of a Good Thing? The Dangers of Over-ExercisingAccording to the latest statistics from the  Centers for Disease Control, more than one-third of U.S. adults and  approximately seventeen percent of children ages 2-19 are obese. That’s just  one reason why a regular exercise routine is so important for all of us. Equally  important: being careful not to overdo it.

Too Much of a Good Thing? Part 2 Tips to Avoid OverschedulingThese days parents aren’t the only people who need organizers. Between after school activities and weekend events, kids can be just as busy if not busier than  adults. And while sports and extracurricular activities are healthy for children, sometimes it’s possible to have too much of a good thing.

Protecting Your Credit During Divorce

Rich Bersani, Vice President of FrontGate Mortgage Company (Sewell, NJ)

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting http://www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common secured

accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.