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.

Does Home Refinancing Make Sense for You?

photo credit: deposit photos

Refinancing a home mortgage is a big decision. Your situation and needs change so should your mortgage. Current market conditions have brought low rates and increasing home values so the time to evaluate your options is here.

If you have an FHA mortgage, which you entered into before January 2015, then you may want to take advantage of a new reduction in the mortgage insurance premium. This has opened the door to refinancing your mortgage using a streamline option which can allow a reduction with no appraisal or income qualification. Some restriction apply but the reduction can save you money on your monthly payment.

How do you decide if refinancing makes sense for you? Ask yourself these questions:

• Are you in an adjustable rate mortgage?
• Do you have mortgage insurance added to your monthly payment?
• Are the current mortgage rates at least .75 to 1% lower than your current rate?
• Do you need cash out for other financial opportunities or to pay debt?
• Does the cost of refinancing divided by the monthly payment savings equate to a reasonable term for recapturing your fees?

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.

Canceling Private Mortgage Insurance

Private Mortgage Insurance is a special type of insurance policy, provided to protect the lender against loss if a borrower defaults on their loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price.

The Homeowners Protection Act provides two methods for you to remove PMI (Private Mortgage Insurance) from your home loan: requesting cancellation or automatic cancellation. Keep in mind that these rules apply to conventional mortgage loans and are only applicable to loans that closed after July 29, 1999.

Requesting PMI Cancellation

You can request that your lender cancel PMI when the principal balance of your mortgage falls, or is scheduled to fall to 80 % of the original value of your home.

Here are some additional requirements that must be met in order to cancel PMI:

• Your request must be in writing.
• You must have a good payment history and be current
• on your payments.
• Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
• Your lender can also require you to provide evidence, usually with an appraisal, that the value of your property hasn't declined below the value of the home when you first bought it. If the value of your home has decreased, you may not be able to cancel PMI.

Economic Revolutions: Boomers to Millennials

The Baby Boomers and the Millennials are two special generations. Their influence is worthy of evaluation especially because it is likely you will be interacting with both groups in some way in your daily life. Whether you work for a Baby Boomer or you’re trying to have a positive relationship with your kids (or grandkids), the trends and ideologies of these two groups of people are driving our social and economic structure.  Why? The Numbers – 82 million Millennials (born 1981 to 2001) and 77 million Boomers (born 1946 to 1964).

Baby Boomers were the generation that pushed revolutionary ideas in marriage, relationships, civil rights and social commentary. Millennials are the first generation to have computers in the home and classrooms, to have cell phones, instant messaging and hundreds of cable channels. The ease at which they use technology is the greatest difference between Millennials and every other generation.

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

Understanding Advertised Mortgage Rates in California

Photo Credit: Pixabay

Ads for home loan offerings are everywhere. Online, on TV, driving down the street, or listening to the radio, mortgage loans are probably the most common advertisement.

Lowest Rates Offered...are Lures

Banks and mortgage companies promise that they will do whatever they can to offer homeowners the lowest mortgage payment. It is important to understand the rate market and that it is constantly changing   daily and often hourly.  When you see an ad from a bank or mortgage lender that offers a lower rate, or gives you one solid payment figure based on a certain loan amount, you should be skeptical. In fact, most banks and lenders usually offer rates to just bring you in the door, though you may never actually be offered the advertised rate.

Is a Reverse Mortgage Right For Me?

Photo Credit: istockphoto.com

Have you asked yourself this question? The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program. This plan enables a homeowner 62 years of age or older to withdraw some of the equity in their home.  The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements or purchase a home with NO monthly payment.

How does a Reverse Mortgage Work?

Basically, the equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. This usually requires a 35 to 40% down payment but the senior will not have a monthly pinciple and interest payment and will not be tying up as much liquid cash as when they purchase a home for all cash.

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.

5 Myths About Home Values in California

Photo Credit: Wikipedia

During periods of economic growth, home values typically go up and most homeowners do not question appraisals. Conversely, in times of turmoil when property values are declining, homesellers naturally question appraisal values.

The actual appraisal process has changed very little over the course of the housing boom and bust cycle but since the topic of home values seems to be a hot discussion, let's address the top five appraisal myths/questions.
Appraisal Myths:

Myth #1- Appraisal values are based upon a simple formula that uses dollar per square foot and comparable sales prices.

Reality - There are several factors the affect the value of a property which include comparable sales prices, location, amenities, exterior and interior condition, maintenance, lot size, bed and bath count, traffic and much more.  There is no simple formula.

Loan Options Available for Home Buyers in California

Photo Credit: Website Builder

There are many home loan types to consider when seeking financing to purchase a home.  The loan you choose will have a long term effect on your financial picture so it is important that you understand your options before you commit.

• Fixed Rate Mortgages 

Fixed rate mortgages are probably the most popular loan due to the fact that the payment stays the same throughout the life of the loan. Each monthly payment is comprised of a portion to pay the principle of the loan and the interest on that loan.  Many times the monthly payment can include the payment for the taxes and insurance due on the home.  The payments continue for a pre-determined time after which the home is paid off.  The most common terms are 30 year and 15 year.

Buying After a Short Sale in California

Photo Credit: Website Builder

Good News! Changes in lenders' guidelines have reduced the waiting period for buyers who wish to purchase a home after experiencing a short sale. Maintaining good credit since, paying all bills on time in the last 12 months, saving a down payment (as little as 3.50% to 20% down payment), and of course, having income to qualify for a loan make it possible to buy a house in as little as 12  to 36 months.

10 Credit Card Myths Your Mom Might Have Told You

Photo Credit: Website Builder

The best defense against making a credit blunder is to better educate yourself. These are things that our parents didn't tell us because credit has changed and morphed into something that can limit our "pursuit of happiness."

Myth #1: Avoid Using Credit Cards

FALSE! - This may be a good way to get rid of debt, but it's utter destruction to your credit score. Why? Because of the 5 factors that make up your credit score, one is how you use and manage your credit, a factor that makes up 30% of your score. That's 255 points! Use the cards every month for gas, groceries etc. but pay them off.

Myth #2: Consolidate Debt onto 1, Low-Interest Credit Card

FALSE! - Everyone gets the tempting credit offers to consolidate your debt onto one credit card but when you max out that card, your credit score will drop 60-100 points overnight! Do not consolidate your credit card debt UNLESS, the balance will be under 30% of the available limit.

Myth #3: It's Okay If You Go Over Your Credit Card Limit Because The Bank Authorized the Purchase

FALSE! - Going over limit, even if it's just by one dollar deals you a double penalty a 50 point lower score and usually a $39.00 fee.