Archive for the ‘Mortgage’ Category

You are most likely weighing the pros and cons of a short sale vs. a foreclosure. If you, like many other Americans right now, are coping with a challenge to meet your mortgage payment. This may be due to one or a combination of these common struggles: 1) job loss, 2) increasing rates if you are in an ARM loan, and 3) decreasing home values. It is most likely that you are deeply concerned with how either of these ugly terms will affect your credit score and which one may be the better choice of the two burdens. Instead of being intimidated, you are at least getting educated on your choices and the consequences. Though the reality of a short sale or foreclosure is not positive, researching what you will face is a good start to finding the best solution to your individual situation.

With a short sale, lenders typically take a loss on a loan that reflects the difference between what you owe and what the property actually sells for. They must be willing to accept this level of risk, and may execute one of two actions in a short sale: A) Sue you, the homeowner, for the difference; reflecting on your credit as a deficiency judgment which could profoundly impact your credit score in a negative way, or B) if they choose not to sue, they very well could absorb the loss, show it as a tax write off, and the IRS would see this as income sent your way. You would then be taxed based on the difference of the lender’s loss. This could prove to be extremely costly; however there would be no deficiency judgment showing on your credit.

Maybe your mortgage payments are current and you could proactively foresee any issues with your ability to continue to make them. Partnered with being current, if you have available assets to pay the difference within your short sale, then there should be no need for negative dings to your credit. Since you are in control of the sale, on top of your mortgage payments, and could pay the difference out of pocket, this may not be handled as an actual foreclosure. Hence this would be the ideal situation.

Now, a foreclosure is exactly what it is. You have fallen behind in your mortgage payments; you cannot sell your home due to housing market conditions and have chosen to walk away. A completed foreclosure can stay on your credit for up to 10 years and can literally sink your credit scores. Your credit score could potentially drop anywhere from 100 to 400 points; severely impairing your credit. If you are forced into a short sale, behind on your payments, and are unable to pay the difference, this “short sale” could reflect on your credit just the same as a foreclosure would.

Either situation that confronts you, whether it is after your foreclosure or a deficiency judgment from a short sale, the key to recovering from this successfully, is the determination to improve your credit once the damage is done. With your positive actions, commitment and patience you can fix your credit, and the dream of becoming a homeowner once again could someday become a reality.

Credit Score Guidelines in the ever changing housing market, if you want a mortgage, it can help for you to know your credit score.

So you are ready to take that challenging step to refinance your current mortgage or purchase your dream home; but do you know what your credit score is and how it will stand up to Lender’s current guidelines? With the obvious strain on the housing market today, Lender and Investors are really cracking down on the level of credit risk they are willing to accept. When you seek out a mortgage, each Lender that you go to will pull your credit report, and you are entitled to receive a copy of this so that you can see where your score ranks and how it will hold up in their approval process.

Lenders will assess the content of your credit report within their underwriting department to determine how much risk would be involved in financing your particular mortgage. Each lender has specific programs available according to your credit score, income and your overall ability to repay the mortgage. These programs have a certain set of guidelines that must be followed in accordance with government regulations.  For example, Fannie Mae has recently raised their minimum credit score requirement from 580 to 620. They now consider any credit score under 620 to be high risk and may question the customer’s ability to repay the mortgage without the possibility of default.

When these large agency investors, like Fannie Mae, have their set minimum credit score requirement it needs to be made aware that most other mortgage lenders may not agree that those minimum requirements are strict enough for them to comfortably lend on. So these individual mortgage lenders will set their own criteria called credit overlays to determine what is acceptable for their lending practices. Meaning, FNMA could accept a credit score of 620, but your local bank may only be willing to provide a mortgage product with a credit score of 660 or higher. Again, the question arises how your credit score fits into all of the mandatory regulations.

If you find that your credit score is outside of your lender’s guidelines, then you can research what steps you could take to better your mortgage financing situation. It is possible obtain a rapid rescore with the credit bureaus, if you find that something may be showing incorrectly on your credit report or you want to pay down a balance on a credit card or pay it off entirely. When reporting these actions to a credit agency with the appropriate documentation, they may be able to get the creditors to update the information on your credit report with the possibility of raising your credit score.

In conclusion, make yourself well aware of your lender’s guidelines and where your credit score fits in to accommodate your mortgage needs. Take the steps necessary and available to you to possibly improve your credit score by paying a balance off or down and/or attempt to remove inaccurate negative information reporting on your credit report. If this is all just too overwhelming, it may also be a great idea to seek out help from a legitimate credit repair service company that is familiar with the actual laws that pertain to what it might take to update your credit score in a positive manner. Having a head start with where your credit score stands and getting educated on the ever changing housing market regulations could help you get the appropriate mortgage financing you need.

The news is filled with talk about loan modification and President Obama’s Making Home Affordable plan, and in a nation where over 3 million people are past due on their mortgage payments, a solution to their woes is something worth talking about. Loan modification is being pitched as a way to help troubled homeowners reverse their progression toward a short sale or foreclosure.

While loan modification may be a perfect recourse for some, it should be noted that not all homeowners will qualify for a loan modification and even then, some who do would be better served pursuing a different option.

In order to qualify for a loan modification your mortgage must have originated before January 1, 2009, you must live in the home, your monthly mortgage payment must be more than 31% of your pretax income, you must prove financial hardship, and the amount you owe on your home cannot exceed $729,750. If you do qualify for loan modification, your loan servicer will reduce the interest rate on your mortgage until your monthly payments drop below the 31% threshold. This new interest rate can go as low as 2% but if that is not enough to get below 31% they may extend the life of the loan or offer to defer a portion of the amount you owe until the loan matures.

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With mortgage rates plummeting, homeowners are flocking to lenders with hopes of refinancing their home loans at a lower interest rate and saving loads of cash in the process. On a $250,000 30 year loan, refinancing from 8% to the record lows in the 5% range that were reported in early January would lower monthly mortgage payments by nearly $500. Over the course of the entire loan, this amounts to over $170,000 worth of savings.

Most people, however, will not be able to qualify for a refinance loan and an even larger percentage will not be able to get approved for the best interest rates.

Having a good credit score simply isn’t good enough when it comes to getting the best rates on a refinancing loan. Most people consider a 720 credit score to be a good score, says Chris Freemott, president of All American Mortgage, but to get the best rates, borrowers will need a credit score of 740 or higher.

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Transcript from the video

“My husband and I had a couple of late payments, inaccurate late payments in our report. We were trying to get a house and it was really difficult. It was really stressful. We were really worried about our future. We were worried about him finishing school. We were worried about not being able to get a house. It’s sad and it was very, very stressful.

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