Archive for October, 2010

Poor Credit Is Expensive

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Low Credit Scores accounted for one third of all of mortgage loan applications made across the country during September being turned down.

Borrowers with credit scores under 620 were refused even when they had down payments up to 25%. According to this minimum requirement eliminates 29.3% of the population who might wish to get a mortgage.

Note: While FHA will insure loans to otherwise well qualified borrowers with lower scores, the Banks will not make such loans.

Meanwhile, the lowest interest rates went to mortgage borrowers who were among the 47 percent of Americans with excellent credit scores of 720 or above.

In the first half of September, borrowers with credit scores of 720 or above got an average low annual percentage rate (APR) of 4.3 percent for conventional 30-year fixed mortgages. Borrowers with mid-range credit scores between 620 and 719 received APRs between 4.44 and 4.73 percent, with the APR rising as credit score drops. Those with credit scores below 620 received too few loan quotes to calculate average low APR.

The message is very clear. A poor credit score is expensive even if you can get a Mortgage.

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Down Payment Gift Funds

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Fannie Mae, the most important rule maker in the mortgage business, has released this new guideline.
“If a borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower’s own funds and may be used to satisfy the minimum down payment, as long as both individuals will be living in the property.   

This change improves and clarifies how gift funds can be counted when qualifying for a mortgage. This can be the difference between being able to buy that 1st home, and having to continue renting.   

  Thanks to Mario Basura of Broadview Mortgage for this update. 


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Foreclosure Moritorium.

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There’s been a lot of babble in the media about the possibility of a Federal halt to ALL foreclosures. Being the MASS Media there seems to be 100% agreement that this would be catastrophic for the crippled Economy, and disasterously expensive for the poor Banks.

The reasons stated are that it will slow down the recovery which needs lots more honest decent folks to lose their homes.

I beg to differ.

I suspect that a moritorium would actually result in Banks putting more effort into Loan Modifications and, where not feasible, Short Sales, which cost 20% less than foreclosures but need a small element of intelligence. These options are both far less traumatic and would get the bad loans reseolved quicker.

Anyone care to guess why the Banks aren’t doing this already?

Given that the Banks caused this situation with their stupid lending practices, is it too much to ask that they give us a little help in digging out of it.

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