Bad Credit? Let's Fix it!

Fact: Poor credit history and a bad credit score can have a serious impact on your life. No one wants bad credit but sometimes mistakes happen. Sometimes factors like medical bills, job loss and tragedy influence our financial profile in ways we never could have predicted. Bad credit can happen to anyone.

photo credit: Wikipedia Commons

Factors that Damage Credit

First let’s clarify what can lower your credit score and damage your credit profile.

• Excessive Debt: If your credit cards are maxed and you have several loans, your debt profile is probably contributing to your low score
• Late Payments: The credit bureaus note any 30, 60, 90 & 120 day payment lates. It is essential that you pay your bills on time.
• Dormant Credit: A dormant credit card is an account that has infrequent or no use. In some cases, if an account has no activity for a period of time, issuers may close the account which revokes future charging privileges. Dormant accounts may not have additional debt but they also don’t help your credit score.
• Collections: If you fail to make a payment or pay off your account – the creditor may send your account to collections. This severely affects your score. Make sure to work closely with your mortgage or credit professional regarding paying off collections. Note: Collections on federal loans such as student loans will prevent you from getting financing from most (if not all) lenders.

How Does a Home Appraisal Work?

During most real estate transactions, it will be necessary to have a home appraisal completed. This formal process of evaluation is the most effective, un-biased way to determine the current value of a home for everyone involved in the transaction. While the concept might not seem confusing, there are several misconceptions that can make the process seem complicated. Understanding what the appraiser does and how their evaluation plays a role in your financing can make the transaction easier.

Home values fluctuate because of a variety of factors including supply, demand and regional influences. A home appraisal determines the current market value of a property on the date the inspection is completed. Since this value will be used by the lender to determine the loan amount, an approved, reputable appraiser must be hired to complete the evaluation. It is important to note that the formal appraisal report is filed with a national bureau when financing is being used from FHA, FNMA and Freddie Mac. The report and the property value is registered with the national database and kept on file for six months. This keeps buyers and sellers from “shopping around” for a different value.

Life After Bankruptcy, Foreclosure & Short Sale

A common questions many home buyers have today is, “How long do I have to wait before obtaining financing after a bankruptcy, foreclosure or short sale?”

Below is an overview based on credit issue:

Bankruptcy 

Conventional
• Ch. 7 or 11: 2 years with extenuating circumstance*, 4 year without and re-established credit
• CH 13 – 2 years from discharge date or 4 years from dismissal date

FHA
• Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

VA
•  Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

10 Credit Do's & Don'ts to Remember Prior to Getting a Mortgage Loan

Photo Credit: Wikipedia

How can a fully approved loan get denied for funding after the borrower has signed loan docs? Simple, the underwriter pulls an updated credit report to verify that there hasn't been any new activity since original approval was issued, and the new findings kill the loan.

This generally won't happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days. Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.

Why this happens?

It's can be an ugly cycle where by the buyer receives an approval and thinks everything is OK so they make a credit impacting decision (buys new car, furniture, runs up credit card balance).

The lender's Funder pulls new credit report right before they fund the loan to check for changes. The Funder sees the new credit or larger balances and denies the loan.