Tag Archives: payments

Money Monday: Myths about credit score

Don’t fall for these myths about your credit score!

  1. Your credit score drops whenever you look at it
  2. You need to close credit cards that you don’t use
  3. Paying off that negative account takes it off your record
  4. Cosigning on a loan doesn’t mean you’re responsible to pay it
  5. Making payments on time show up on your credit score
  6. Your payment behavior shows up on your report

6 Myths about Credit Scores

This infographic is from CAR.org.

New short-sale program offers relief for underwater homeowners

One of the federal government’s most-important financial relief efforts for underwater homeowners started operating Nov. 1.

  •  Traditionally short sales, where the lender agrees to accept less than the full amount owed and the house is sold to a new purchaser at a discounted price, are associated with extended periods of delinquency by the original owner. The new Fannie-Freddie program breaks with tradition by allowing short sales for owners who are current on their payments but are encountering a hardship that could force them into default.
  • Eligible hardships under the new program run the gamut: Job loss or reduction in income; divorce or separation; death of a borrower or another wage earner who helps pay the mortgage; serious illness or disability; employment transfer of 50 miles or greater; natural or man-made disaster; a sudden increase in housing expenses beyond the borrower’s control; a business failure; and “other,” meaning a serious financial issue that isn’t one of the above.
  • Homeowners who participate in this new program should be aware that although officials at the Federal Housing Finance Agency – the agency that oversees the program – are working on possible solutions with the credit industry at the moment, it appears that borrowers who use the new program may be hit with significant penalties on their FICO credit scores – 150 points or more.
  • Other factors to consider are promissory notes and other “contributions.” In the majority of states where lenders can pursue deficiencies, Fannie and Freddie expect borrowers who have assets to either make upfront cash contributions covering some of the loan balance owed or sign a promissory note. This would be in exchange for an official waiver of the debt for credit reporting purposes, potentially producing a more favorable credit score for the sellers.
  • Finally, participants should be aware of second-lien hurdles. The program sets a $6,000 limit on what second lien holders – banks that have extended equity lines of credit or second mortgages on underwater properties – can collect out of the new short sales. Some banks, however, don’t consider this a sufficient amount and may threaten to thwart sales if they cannot somehow extract more.

Read the full story
http://www.latimes.com/business/realestate/la-fi-harney-20121111,0,6735335.story

5 myths about credit scores and mortgages

Remember that department-store card you signed up for to get an instant discount? Or the medical bill you didn’t pay on time?

What seem like minor moves could drive down your credit score, which factors in big time when you’re trying to finance your future home. Lenders look at how much you make, what you own and how much you’re able to put down — but your credit score also is a major factor.

“It’s four basic factors: income, assets, credit and the property itself,” said Chad Baker, a loan officer at Prime Lending, which has offices in the UTC area and Mission Valley.

“If anything is wrong with the four, then you will have problems,” he added. “If you need a higher down payment, then you can offset it with a gift from a friend or family member. But if you’ve exhausted everything (to fix your credit,) there’s nothing you can do. So, it’s extremely important.”

The good news: Certain credit-score issues can be fixed on your own at no cost as long as you understand a few financial basics — from paying bills on time to requesting your free credit reports. Those simple pointers could help you not only qualify for a mortgage but also save you up to thousands of dollars in the long run.

They can also make or break your chances in today’s tougher lending environment, which generally requires a bigger down payment and more proof of income than during the last housing boom.

A recent study shows the average credit score for someone who successfully closed any kind of mortgage in April was 745 (with 20 percent down). The findings, based on 20 percent of loan originations in the country, are from Ellie Mae, which provides services to the mortgage industry.

The U.S. average is 692, and California’s is 691, according to FICO, which rates consumers’ credit histories on a scale of 300 to 850. So, if you don’t have the 745 score cited in the Ellie Mae study, does that mean your chances of getting a mortgage are nil? No, mortgage insiders say. U-T San Diego busts that credit myth and others in this how-to guide:

Myth: Lenders are looking for one magic number.

Fact: The score range you should shoot for depends on what kind of mortgage you want…

Myth: There’s nothing I can do to change my credit score.

Fact: You have more control than you think. Changes all start with knowing what’s in your credit report…

Myth: Even if I do find an error in my credit report, it will take forever to correct.

Fact: You can get a rapid rescore done with the help of the lender…

Myth: I’ve never been late on any payment, so it’s a waste of time to check my score.

Fact: Errors in credit reports happen all the time…

Myth: The definitive source to get my free credit report is freecreditreport.com.

Fact: It’s actually annualcreditreport.com

Read U~T San Diego’s article in full here: “5 myths about credit scores and mortgages”.

Bank of America offers relocation assistance to certain short-sellers

Bank of America says it will provide up to $30,000 in relocation assistance to delinquent borrowers who work with the bank to obtain a preapproved short-sale price before submitting purchase offers.

Short sales must be initiated by the end of this year and close by Sept. 26, 2013, to be eligible for the payments, which will range from $2,500 to $30,000 at the completion of a qualifying short sale. Payments will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations, Bank of America said in announcing the program.

The program — based on a similar incentive offer Bank of America tested last year in Florida — will be available nationally. But Bank of America anticipates the greatest response will come from borrowers in California, Nevada, Arizona, Florida, and other states hit hardest by the economic downturn and falling property values.

Customers who believe they may be eligible for Bank of America’s short-sale relocation assistance program may contact program specialists at (877) 459-2852. Qualifying short sales that have already started but have not closed may be eligible for the program.

Bank of America says its short-sale initiatives have generated 200,000 short sales in the last two years and another 30,000 in the first three months of this year.

Last month, Bank of America announced it was shortening decision times on short-sale offers to 20 days, down from 45 days or longer.

Why should you get a 15-year mortgage?

Benefits of 15-year mortgage hard to beat

Why those lured by smaller payments on 30-year loan should reconsider

By Jack Guttentag, Monday, April 30, 2012. Inman News®

The case for 15-year fixed-rate mortgages has never been stronger because, in the post-crisis market, the rate advantage over the 30-year has never been larger. The rate advantage is about 0.875 percent, whereas prior to the crisis, it was 0.375 percent to 0.5 percent.

Consider two $100,000 loans, one a 15-year at 3.125 percent and the other a 30-year at 4 percent. The respective payments are $696.61 and 477.42. After 15 years, the borrower with the 15-year loan has paid $39,454 more but is out of debt whereas the borrower with the 30-year loan still owes $64,543.

But there is a counterargument. A disciplined borrower can choose the 30-year loan and invest the difference in payment between the 30- and the 15-year loans, in that way offsetting the higher interest rate on the 30-year loan. Some financial planners recommend this approach to their clients as part of a program to build wealth faster.

The challenge in making such a program work is that the rate of return on the invested cash flow must exceed the rate on the 30-year loan by an amount that depends on how much higher the 30-year rate is than the 15-year rate…

Read the rest of this article by Jack Guttentag at Inman News here: “Benefits of 15-year mortgage hard to beat”.

Understanding Foreclosure

Understanding Foreclosure

It is an unfortunate commentary, but when economic activity declines and housing activity decreases, more real property enters the foreclosure process. High interest rates and creative financing arrangements also are contributing factors.

When prices are rapidly accelerating during a real estate “bonanza”, many people go to any lengths available to get into the market through investments in vacation homes, rental housing and “trading up” to more expensive properties. In some cases, this results in the taking on of high interest rate payments and second, third and even fourth deeds of trust. Many buyers anticipate that interest rates will drop and home prices will continue to escalate. Neither may occur, and borrowers may be faced with large “balloon” payments becoming due. When payments cannot be met, the foreclosure process looms on the horizon.

understanding foreclosuresIn the foreclosure process, one thing should be kept in mind: as a general rule, a lender would rather receive payments than receive a home due to a foreclosure. Lenders are not in the business of selling real estate and will often try to accommodate property owners who are having payment problems. The best plan is to contact the lender before payment problems arise. If monthly payments are too hefty, it may be that a lender will be able to make some alternative payment arrangements until the owner’s financial situation improves.

Let’s say, however, that a property owner has missed payments and has not made any alternate arrangements with the lender. In this case, the lender may decide to begin the foreclosure process. Under such circumstances, the lender, whether a bank, savings and loan or private party, will request that the trustee, often a title company, file a notice of default with the county recorder’s office. A copy of the notice is mailed to the property owner.

If the default is due to a balloon payment not being made when due, the lender can require full payment on the entire outstanding loan as the only way to cure the default. If the default is not cured, the lender may direct the trustee to sell the property at a public sale.

In cases of a public sale, a notice of sale must be published in a local newspaper and posted in a public place, usually the courthouse, for three consecutive weeks. Once the notice of sale has been recorded, the property owner has until 5 days prior to the published sale date to bring the loan current. If the owner cures the default by making up the payments, the deed of trust will be reinstated and regular monthly payments will continue as before. After this time, it may still be possible for the property owner to work out a postponement on the sale with the lender. However, if no postponement is reached, the property goes “on the block”. At the sale, buyers must pay the amount of their bid in cash, cashier’s check or other instrument acceptable to the trustee. A lender may “credit bid” up to the amount of the obligation being foreclosed upon.

With the recent attention given to foreclosure, there also has been corresponding interest in buying foreclosed properties. However, caveat emptor: buyer beware. Foreclosed properties are very likely to b e burdened with overdue taxes, liens and clouded titles. A buyer should do his homework and ask a local title company for information concerning these outstanding liens and encumbrances. Title insurance may or may not be available following a foreclosure sale and various exceptions may be included in any title insurance policy issued to a buyer of a foreclosed property.

This article is by California Title Company and Cam Hunter.

More questions? Need help with your property being foreclosed on?  Please, call me and let me help!

John A. Silva, Realtor

(619) 890-3648 | www.JohnASilva.com

Guest Post: Managing your finances before homeownership to save your home from a foreclosure

Managing your finances before homeownership to save your home from a foreclosure

Are you planning to purchase a new home? If yes, you have to buck up your finances so that you don’t fall in trouble in the near future and then risk losing your home to a forced foreclosure. Managing your finances is the most important job that you have to do when you plan to take out a home mortgage loan from a bank. The mortgage loan entails your home as collateral so that when the borrower defaults to make the payments on time, the lender can foreclose the house and recuperate the money. How much house can I afford is the most important question a borrower should ask himself before taking the plunge. Here are some important steps that you should take in order to manage your finances once you plan to take out a home loan.

  • Stop all the unnecessary expenses: Whenever you contemplate buying a new house and forget paying further rent, you should stop making all the unnecessary expenses that you can do without. If you don’t read magazines, stop the monthly subscriptions to magazines. If you can cook well, stop dining out every weekend as this will save your dollars in the long run. You can even do without the cable connection at home. If you can build an emergency fund, you can easily take out a mortgage loan at an affordable rate.
  • Stop using your credit cards: Are you aware of the fact that the mortgage lender will check your DTI ratio or the debt-to-income ratio that is the ratio between the total monthly debt obligations with your monthly income. If you keep on purchasing things with your credit cards, you’ll drown in unsecured debt and thereby be forced to take out a home mortgage loan at an unaffordable interest rate. Therefore, stuff your wallet with cash so that you may stop buying things when you’re exhausted.
  • Save enough money: Yes, this is the ultimate secret that will take you to the path of a smooth mortgage loan approval. The mortgage loan underwriter will check the amount you’re paying down while taking out the loan amount. The more you pay down, the lower will be the rate offered to you. You should save enough money so that you can at least pay down 20% of the loan amount and avoid paying PMIs later on.
  • Keep track on your credit score: Don’t take any wrong step that can hit your credit score. Pull out a copy of your credit score time to time so that you know where you stand financially. Repair your credit as much as possible so as to grab the best mortgage loan at the most covetable cost.

When you’re dreaming of homeownership, make sure you follow the money tips mentioned above. By taking all the tips mentioned above, you can get the most appropriate loan in accordance with your affordability. Don’t forget to ask yourself “how much house can I afford” before taking out the loan.

Lowest Mortgage Rates in History & Buying or Selling

With signs that sales are on the rise for residential real estate, mortgage rates have again dropped to their lowest point in history this week at 3.88% for a 30-year fixed rate mortgage, while 15-year fixed rate mortgage averaged in at 3.17%.

For more details, read Freddie Mac’s article here: “30-year Fixed-rate Mortgage Averages 3.88 Percent“.

Are you still resting comfortably on the fence or are you doing the same thing over and over again–which is the description of insanity!! Get out there now! Prices are great, interest rates are great! What else is there? Oh year, you need a great real estate agent to guide you! Well, since you are reading this and you know I am one with over 20 years’experience, I promise I will not bite!

If you are thinking of selling to downsize, upgrade–or you want to hold onto your current residence and rent it out, you have the opportunity of a lifetime.

On the other side of the coin, if you are struggling to make your house payments or about to, I will meet you one on one to go over your situation and help you explore all the avenues to keep your home at no cost. This offer is never made by the so-called gurus or big producer agents personally; you will only meet with their assistants. I have contacts in the legal and accounting arena that are also at your disposal for free, but you will need to contact me for that offer to be complete.

In listing a new property yesterday, the owners that I conferred with were so relieved to know that they have their best option after I counseled and reviewed their situation in detail. The relief and clear mind that was produced cannot have a value placed on it. there are so many options with consequences out there to keep or sell your home, that a consultation is the best prescription.

I am here to help.