Posts Tagged ‘Mortgage loan’

FICO REASON SCORES

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Factors contributing to someone's credit score...

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

Have you ever wondered about the group of numbers following the FICO Score on your Credit Report?

e.g.  FICO Score: 500 38 21 18 05

They are not greatly complicated but are seldom used as they should be. Put simply they are the FICO “Reason Codes” and explain why your score is not higher than it is.

In the above example with the poor 500 score the meanings are:

(38) Serious delinquency and derogatory public record or collection filed. (90+ day late payments AND a public record, or account in Collection)

(21) Amount past due on accounts (current late payments)

(18) Multiple accounts with history of late payments

(05) Too may accounts with balances owed.

These are the 4 most important things related to this individual score and the things that need to be dealt with in order to improve the score.

Remember, they are not the reason your score is so low; they are the reasons it is not better.

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MCC. FREE MONEY FROM THE IRS

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Many States, Counties, and Cities have great programs to help 1st Time home buyers, but few if any are better then the Federal Governments Mortgage Credit Certificate (MCC) program.
This turbo charges the existing TAX DEDUCTION for mortgage interest by allowing 15% of it to be taken as a TAX CREDIT.
Here’s an example:
If you pay mortgage interest of $24,000/year you can take 15% of that ($3,600) and deduct it dollar for dollar from your total tax liability.
To put it simply; if your total tax bill was $20,000 it will be reduced to $16,500. You have now got a tax free pay raise of $250/m.
You can now tell your employer to reduce the amount they take from your paystub so you get the benefit of this right away with an extra $250/month in your pocket.
This program is administered by the Counties, and your Mortgage Broker/Bank, but be aware that not all of them are familiar with it. Be prepared to educate them.

HARP – HAMP – HAFA etc

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For borrowers unable to afford their mortgage payment, listed below are the options you will need to consider in the following order… HARP is always your 1st Option

1.) HARP (Home Affordable Refinance Program) this allows you to convert to a low 30Y Fixed. You must have a Fannie or Freddie loan with good credit and be current on your payments.

2.) HAMP (Home Affordable Modification Program) this is where most of the borrowers will be; however not everyone will qualify. You will need to have a financial hardship and there are front and back end financial conditions that need to be met.

3.) HAFA (Home Affordable Foreclosure Alternative) If you were denied a loan modification and unable to afford your mortgage payments, then you may want to consider selling your property at a loss (Short Sale). Your lender would first need to agree to the short sale and the credit impact will be two years and is less damaging then a foreclosure.

4.) Deed in Lieu (DIL). This is where you give the property back to the lender by signing a Deed-in-Lieu of Foreclosure. This also avoids a Foreclosure. DIL is not possible if you have more than one loan i.e. 2nd mortgage or Home Equity Line of Credit as these stay in force and the 1st mortgage holder would have to accept responsibility for them.

5.) Foreclosure. People with excellent credit are now foreclosing on their properties by walking away from it. They believe the property will not go up in value and have suffered a substantial loss from it. Consequences apply as this will stay on your credit report for 7 years.

6.) Bankruptcy. Regardless if it’s a Chapter 7 or 13, it will stay on your credit report for 10 years.
With the new Bankruptcy ACT of 2005 it is now more difficult to file for Chapter 7 and most likely you will need to file a 13, which still requires you to pay back your debts.

Mortgage Activity Increasing Rapidly

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A large increase in Mortgage loan applications for Buyers is another strong sign that the market is getting back to normal in many parts of the Country. Overall the number of applications for mid February to mid March was  22% greater then for the same period last year.

When added to the recent large increase in the number of Pending sales contracts this bodes well for a much stronger market overall.

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REFINANCE BLUNDERS

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TURNING 26 YEARS INTO 30 YEARS.

It’s not always a good idea to refinance a mortgage simply to lower the Monthly Payment.

Before you refinance a 30 year mortgage which has 26 years to go, and take a new 30 year loan, you must compare the total amount which will be paid over the life of each loan before deciding whether it makes economic sense.

The smartest way to take advantage of lower interest rates would be to calculate the amount you would have to pay each month in order to have the new loan paid off in 26 years, and then make an extra payment each month to achieve that highly desirable result.

If the new lower payment plus the extra to make it a 26 year loan is less than the amount you are currently paying then go for it. If not then you should reconsider other options before proceeding.

I cannot go into details regarding other options within a simple post such as this, but I can assure you they do exist. However the regular Loan Officer is not going to bring them to your attention. 

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WHY PAY POINTS?

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A recent nationwide survey asked a wide age range of Homeowners the following question:

“When is it smart to pay points to get your mortgage”?

Amazingly 83% of the respondents answered NEVER. This displays either an astounding ignorance of basic economics, or a desire to help Banks get richer.

The CORRECT ANSWER should be “When it saves me money with no extra risk“.

Put simply you pay points to get a lower Interest Rate. If you keep the loan for at least 5 years you will be showing a Profit. Every year from then on you add to that profit.

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CHF DOWN PAYMENT ASISTANCE

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The Best Home Loan News of The Year.

How about a mortgage loan program that GIVES you up front 3% of the price of the home you want to buy, and that:

0 Never has to be paid back.

0 Is NOT limited to 1st time buyers.

0 Works with FHA and V/A loans.

0 Down to 620 credit scores.

Here’s a simple example:

Tom and Jenny earn $6,300 per month between them, and over the past year have saved $5,000 toward the down payment on a house they love priced at $300,000. Therefore the lowest possible down payment allowed is 3.5% of that price i.e. $10,500

Add in reasonable closing costs of 1.5% ($4,500) and they are about 2 years away from being able to buy.

Using the CHF program they will receive a grant for $9,000, add in their current cash of $5,000 and they are Ready to Buy right NOW.

I think this would qualify as good news for Tom and Jenny, and  many other wanna-be homeowners in similar situations.

If you would like more information contact me at bmccord@rwnetwork.com or http://www.nhfloan.org/programs/CHF_Platinum/Guide_CHF_Platinum.html 

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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 http://www.Broadviewmortgagecorp.com/MarioBasura for this update. 

    

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Bank of America Loan Modification

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Here’s one more example of a Bank pretending to do something positive about loans to defaulting Sub-Prime borrowers, while actually increasing their payments.

While 90% of mortgage lenders resist  handing out any type of loan modifications, despite being advised and even pressured by the government to do so, Bank of America claims it is now taking the lead. The initial B of A model seeks to conditionally (read: unlikely) cut up to 30% off the principal of 45,000 home mortgages nationally. Note: This is not the same as a reduced payment.

This program is very limited in breadth and scope. It applies only to those homeowners with negative amortizing ARM’s.  The principal reduction program will not be available to underwater homeowners with fixed rate mortgages or ARMs with amortized payment schedules. B of A claims their goal is to reduce homeowners’ monthly payments to an amount equal to 31% of their household income – the parameter set by the federal government two years ago, in 2008, based on long-standing fundamentals of mortgage lending.

In practise this program will apply only a few of the loans B of A inherited when it took over Countyrywide; specifically (negative amortization loans), where the Borrower is at least 60 days late!!

A more important problem is that the proposed modifications will usually result in a HIGHER MONTHLY PAYMENT for people already unable to make the current minimal payment.

For a delailed analysis of this Public Relations Excercise check http://blog.firsttuesdayjournal.com/2010/04/lenders-attempt-to-lock-homeowners-into-paying-underwater-homes/

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Mortgage Credit Cerificates (MCC)

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Here is another dynamite program for 1st time home buyers.

Details here are for Santa Clara County but other Counties and Cities also operatate these programs.

The County of Santa Clara has been awarded a new MCC Allocation in the amount of $3,031,944.

This award should serve approximately 70 Households.

MCC Applications will be accepted beginning February 12, 2010, until the allocation is depleted.

MCC PROGRAM: The Mortgage Credit Certificate Program is available for first-time home-buyer’s purchasing their first home in participating cities in Santa Clara County. The Mortgage Credit Certificate Program gives first-time home-buyer’s a federal income tax credit of up to 15% of the interest paid on their first mortgage loan each year the home-buyer keeps the same mortgage loan and lives in the same property as their primary residence.

The Maximum Income Limits for 2010:

Effective February 12, 2010:

1 or 2 person household = $102,500

3 or more person household = $117,875

The Maximum Purchase Price Limits are:

Resale/Existing Units = $570,000 and for,

Newly Constructed Units= $630,000

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