Dear Doctor Mortgage,
My first mortgage just reset, and I have a second that has a prepayment
penalty. This is causing my LTV to be more than 80%.
Should I refinance my first and leave the second?
I welcome any suggestions,
AAron
Dear Aaron,
Good question. But first, I want to explain the LTV reference for other readers. LTV means loan to value ratio, a formula in which the loan balance is compared to the purchase price or the value of the home. So a loan balance of $320,000 on a home valued at $400,000, for instance, would carry an LTV of 80%. And you’re right. Your LTV is high.
Providing your second lender is willing to issue a Subordination Agreement, which means they will still be in second position for payment after you’ve finished paying the first lender, you can refinance your first loan without touching the second.
As a general rule, and if the market price does not change too much, the second lender will usually agree to these terms as long as you don't take any cash out when refinancing the first loan.
The question of whether or not to consolidate the first and second loans or refinance the first only hinges on several factors such as the interest rate and loan amount of your current second loan
and the interest rate you will get from the new first loan.
If your current second loan is a 9% 30/30 (30-year-fixed loan) and you can get a new first with 6.5% 30/30 without Private Mortgage Insurance (PMI), which protects lenders from losing money in the case of a loan default or foreclosures on loans where 80% or more of the loan is financed, then it does not make sense to keep the second.
But if your first will increase by 0.5% when you consolidate the first and second loans, depending on the loan amounts and your home’s current market value, it might be better to leave that second loan untouched.
Also, don’t overlook the prepayment penalty. To calculate the penalty, you should establish how much you can save annually after refinancing the first and second and decide how many years it would take to offset any prepayment penalty. So, for example, if you are going to save $1,000 annually during the next five years by refinancing both loans but the prepayment penalty outweighs those savings, refinancing both first and second doesn’t make sense.
Thursday, August 02, 2007
Wednesday, July 11, 2007
2-28 with Prepayment Penalty
Dear Doctor Mortgage,
I'm a victim of predatory lending and need to know what I've gotten myself into financially.
I paid $779,000 for my home. My FICA score was 630. And I put 15% down and financed the remaining $662,150 by securing a 2/28 hybrid adjustable rate mortgage.
My starting interest rate of 8.85% is indexed to the six-month LIBOR (London Inter-bank Offering Rate) rate, with a 6.576% margin.
The first adjustment is a 3% increase (11.85%) for 6 months. After that, my monthly payments increase by 1.50% and are capped to a maximum interest rate of 14.85%, which is rounded to the closest .125.
For the first two years, my monthly payment is $5,031.24. After that, payments will increase to $6,574.99 for the next six months. And payments for the remaining months adjust to $6,599.32.
At then end of the loan, I have a required balloon payment of $468,502.62. In addition, I have a prepayment penalty at the beginning of the loan.
Could you please explain what I've gotten myself into financially?
Respectfully submitted,
Joe
Dear Joe,
Your loan looks like a typical Sub-Prime program. And, unfortunately, the margin is extremely high.
First, let’s take a quick look at your loan. As you know, the 2/28 ARM is a mortgage that has a fixed rate for the first two years. After that, the interest rate adjusts for the next 28 years, which completes the full 30-year term. With the lowered initial interest rate, the 2/28 is popular with investors who plan to sell a home within a few years.
Investor or not, when securing any loan, make sure you understand how cap limits and margins will impact your payment adjustments. The fully adjusted rate will be the current index plus the margin set when your loan closed. And, as you can see, it is important with any loan to verify any pre-payment penalties before closing.
Without that prepayment penalty, and depending on your credit profile, you might be able to get a 30-year fixed loan at 7.125% with APR 7.236%
Still, even with the prepayment penalty, you have options. If the prepayment penalty is 3-2-1 (3points for the first year, 2 points for the second and 1 point for the last), for instance, I suggest you to wait until two months prior to the second anniversary date of your current loan and refinance into a 30-year-fixed loan. If you do this, you will pay 1% of the prepayment penalty to get 7.125% with PMI 0.52%.
If you stay in your current loan for a third year, your current lender will increase your rate to 3% or 8.85%, which equals more than 4.205 points (3% + 8.85% - 7.125% - 0.52% = 4.205%) added costs for the third year. So refinancing before that second anniversary should save you money in the long run.
I'm a victim of predatory lending and need to know what I've gotten myself into financially.
I paid $779,000 for my home. My FICA score was 630. And I put 15% down and financed the remaining $662,150 by securing a 2/28 hybrid adjustable rate mortgage.
My starting interest rate of 8.85% is indexed to the six-month LIBOR (London Inter-bank Offering Rate) rate, with a 6.576% margin.
The first adjustment is a 3% increase (11.85%) for 6 months. After that, my monthly payments increase by 1.50% and are capped to a maximum interest rate of 14.85%, which is rounded to the closest .125.
For the first two years, my monthly payment is $5,031.24. After that, payments will increase to $6,574.99 for the next six months. And payments for the remaining months adjust to $6,599.32.
At then end of the loan, I have a required balloon payment of $468,502.62. In addition, I have a prepayment penalty at the beginning of the loan.
Could you please explain what I've gotten myself into financially?
Respectfully submitted,
Joe
Dear Joe,
Your loan looks like a typical Sub-Prime program. And, unfortunately, the margin is extremely high.
First, let’s take a quick look at your loan. As you know, the 2/28 ARM is a mortgage that has a fixed rate for the first two years. After that, the interest rate adjusts for the next 28 years, which completes the full 30-year term. With the lowered initial interest rate, the 2/28 is popular with investors who plan to sell a home within a few years.
Investor or not, when securing any loan, make sure you understand how cap limits and margins will impact your payment adjustments. The fully adjusted rate will be the current index plus the margin set when your loan closed. And, as you can see, it is important with any loan to verify any pre-payment penalties before closing.
Without that prepayment penalty, and depending on your credit profile, you might be able to get a 30-year fixed loan at 7.125% with APR 7.236%
Still, even with the prepayment penalty, you have options. If the prepayment penalty is 3-2-1 (3points for the first year, 2 points for the second and 1 point for the last), for instance, I suggest you to wait until two months prior to the second anniversary date of your current loan and refinance into a 30-year-fixed loan. If you do this, you will pay 1% of the prepayment penalty to get 7.125% with PMI 0.52%.
If you stay in your current loan for a third year, your current lender will increase your rate to 3% or 8.85%, which equals more than 4.205 points (3% + 8.85% - 7.125% - 0.52% = 4.205%) added costs for the third year. So refinancing before that second anniversary should save you money in the long run.
Tuesday, April 17, 2007
With all this talk about bad loans in the media, how do I know if my loan choice is wise?
Times have changed in the housing, but most experts agree that if you can afford it, buying a home is a great investment. Still, with so much talk about foreclosures in the media, you might be wondering how to make sure the loan you choose is right for you.
Don’t worry. Despite recent media reports, experts say most home loan defaults result from life circumstance changes such as a significant adjustment of income from a job loss, health problems, marital changes or a death in the family. Bad loans amount for a small percentage, 1% according to some lenders, of problems.
• Still, here are a few things to consider when evaluating a home loan.
• Make sure you understand all the terms of your loan. Ask if and when the payment could increase and by how much. Find out about prepayment penalties, balloon payments due at the end of the loan, fees, increases in monthly payments tax and insurance implications related to the loan.
• Don’t overextend yourself financially. Make sure you can afford the loan.
• Keep a prudent reserve of funds for additional expenses such as unforeseen home repair costs, insurance and taxes.
If you have a financial change that requires attention, talk to your lender first or the lender’s loan mitigation department.
A notice of default is a public document and can be recorded by a lender when the debt is as little as 30 days late, making many borrowers subject to scams that range from people offering to talk to the lender for a fee paid upfront, of course – to scammers who encourage the owner to put the property in the scammer’s name as part of a lease and buy-back program that can result in the owner losing all rights to the home.
Even if your problems are temporary, let your lender know what is happening.
If you have questions about financing a home or concerns about your current loan, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Don’t worry. Despite recent media reports, experts say most home loan defaults result from life circumstance changes such as a significant adjustment of income from a job loss, health problems, marital changes or a death in the family. Bad loans amount for a small percentage, 1% according to some lenders, of problems.
• Still, here are a few things to consider when evaluating a home loan.
• Make sure you understand all the terms of your loan. Ask if and when the payment could increase and by how much. Find out about prepayment penalties, balloon payments due at the end of the loan, fees, increases in monthly payments tax and insurance implications related to the loan.
• Don’t overextend yourself financially. Make sure you can afford the loan.
• Keep a prudent reserve of funds for additional expenses such as unforeseen home repair costs, insurance and taxes.
If you have a financial change that requires attention, talk to your lender first or the lender’s loan mitigation department.
A notice of default is a public document and can be recorded by a lender when the debt is as little as 30 days late, making many borrowers subject to scams that range from people offering to talk to the lender for a fee paid upfront, of course – to scammers who encourage the owner to put the property in the scammer’s name as part of a lease and buy-back program that can result in the owner losing all rights to the home.
Even if your problems are temporary, let your lender know what is happening.
If you have questions about financing a home or concerns about your current loan, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Tuesday, April 10, 2007
Should I get a loan from a builder’s in-house lender or an unrelated lender?
While you can borrow from any lender who will take your business, buyers who go with a builder’s in-house lender often get inducements and financial incentives. So while a builder can’t list a home for $400,000 and raise the cost by $10,000 if you go with your own lender, that same builder can reduce the sale price of that same house by $30,000, for example, for a buyer who chooses the builder’s preferred or in-house lender. And while there is money to be made within the in-house lending arena, the real reason most builders promote in-house funding is to keep the sale from falling through.
For consumers, one of the advantages of working with a preferred lender is proximity to the developer’s team (design, construction and sales personnel), the lender and access to important documents such as public reports, appraisals for certain loans, purchasing agreements and information about any covenants, conditions and restrictions applied to homeowners who live in the area.
Being at the center of the transaction can provide a great buying-lending experience that comes from having all those involved working toward the same goal from the same platform. It also means the lender and the builder can amend some rules expediting the sale, for instance, buying down the mortgage to lower your interest rate and reduce your monthly payments for the first few years, paying closing costs or sweetening the pot with credit toward options like better carpeting and kitchen upgrades.
Still, when working with an in-house lender, make sure your loan covers any fees associated with those incentives, extras or upgrades. Lock in a good interest rate on the loan. And find out the best time to solidify your rate.
Although the line of communication between the builder and their in-house lender should be wide open, don’t assume it is. It is important to know where your loan is in the lending process. So be your own lending advocate, and make sure the in-house lender is in touch with the builder and you.
Ultimately, and no matter what the incentives or enticements, remember, you have a choice about your lender.
So do your homework, compare loans, rates, costs for every portion of the deal. And find the option that is best suited to your needs.
If you have questions about financing a home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
For consumers, one of the advantages of working with a preferred lender is proximity to the developer’s team (design, construction and sales personnel), the lender and access to important documents such as public reports, appraisals for certain loans, purchasing agreements and information about any covenants, conditions and restrictions applied to homeowners who live in the area.
Being at the center of the transaction can provide a great buying-lending experience that comes from having all those involved working toward the same goal from the same platform. It also means the lender and the builder can amend some rules expediting the sale, for instance, buying down the mortgage to lower your interest rate and reduce your monthly payments for the first few years, paying closing costs or sweetening the pot with credit toward options like better carpeting and kitchen upgrades.
Still, when working with an in-house lender, make sure your loan covers any fees associated with those incentives, extras or upgrades. Lock in a good interest rate on the loan. And find out the best time to solidify your rate.
Although the line of communication between the builder and their in-house lender should be wide open, don’t assume it is. It is important to know where your loan is in the lending process. So be your own lending advocate, and make sure the in-house lender is in touch with the builder and you.
Ultimately, and no matter what the incentives or enticements, remember, you have a choice about your lender.
So do your homework, compare loans, rates, costs for every portion of the deal. And find the option that is best suited to your needs.
If you have questions about financing a home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Thursday, April 05, 2007
How much money do I need to buy a home?
Home prices and the type of mortgage you get factor into how much you need to buy a home. But a typical home purchase has three main costs a deposit, a down payment and the closing fees.
The deposit or earnest money tells the seller that you’re a serious buyer. When you submit your offer on the home, the real estate agent will take the deposit and put the money into an escrow account. If the seller accepts the offer, the deposit will be applied to your down payment. If the offer is rejected, the deposit should be returned to you.
The next cost is a down payment, a percentage of the price of the home that you fund directly. Some loans require a down payment to be 10% or 20% of the purchase price. And many programs allow qualified buyers to put as little as 0% or 3% or5%, so ask your lender about the various options. But the more you put down initially, the lower your monthly payments, so it is important to determine what you can afford.
To determine what you can afford, most lenders look at your ratio of debt to income. Today’s automated underwriting systems suggest monthly mortgage payments should not exceed 36% to 65% of monthly income.
Credit also can dramatically impact your mortgage options and down payment. So talk to a loan officer about how to improve your credit score before getting a mortgage, and ask them to run a credit report.
Closing costs cover various transaction, paperwork and processing charges incurred by the lender during the sale. These can include appraisal fees, title search and recording fees. Paid when the transaction is settled, closing fees average 1% to 4% of the price of the home.
During the closing, the buyer meets with a closing agent or escrow office, who explains and reviews a large stack of closing papers with the seller.
Take the time to read each document and understand exactly what it is before you sign. And before you leave, make sure you have copies of all the documents you signed to review at home.
Since closing costs are usually disclosed by the lender upfront, there shouldn’t be any surprises. But you might ask your real estate agent to join you for this meeting to make sure all your interests have been addressed as you review and sign the purchase documents.
In addition to initial costs, remember to factor some long-term expenses such as monthly utilities, homeowner’s insurance, association or condo association dues and property taxes. Taxes and insurance fees can be escrowed or rolled into your mortgage payments, but to get a clear picture of what that new home will cost in the first year, ask your broker to break down those costs in advance.
If you have questions about financing a home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
The deposit or earnest money tells the seller that you’re a serious buyer. When you submit your offer on the home, the real estate agent will take the deposit and put the money into an escrow account. If the seller accepts the offer, the deposit will be applied to your down payment. If the offer is rejected, the deposit should be returned to you.
The next cost is a down payment, a percentage of the price of the home that you fund directly. Some loans require a down payment to be 10% or 20% of the purchase price. And many programs allow qualified buyers to put as little as 0% or 3% or5%, so ask your lender about the various options. But the more you put down initially, the lower your monthly payments, so it is important to determine what you can afford.
To determine what you can afford, most lenders look at your ratio of debt to income. Today’s automated underwriting systems suggest monthly mortgage payments should not exceed 36% to 65% of monthly income.
Credit also can dramatically impact your mortgage options and down payment. So talk to a loan officer about how to improve your credit score before getting a mortgage, and ask them to run a credit report.
Closing costs cover various transaction, paperwork and processing charges incurred by the lender during the sale. These can include appraisal fees, title search and recording fees. Paid when the transaction is settled, closing fees average 1% to 4% of the price of the home.
During the closing, the buyer meets with a closing agent or escrow office, who explains and reviews a large stack of closing papers with the seller.
Take the time to read each document and understand exactly what it is before you sign. And before you leave, make sure you have copies of all the documents you signed to review at home.
Since closing costs are usually disclosed by the lender upfront, there shouldn’t be any surprises. But you might ask your real estate agent to join you for this meeting to make sure all your interests have been addressed as you review and sign the purchase documents.
In addition to initial costs, remember to factor some long-term expenses such as monthly utilities, homeowner’s insurance, association or condo association dues and property taxes. Taxes and insurance fees can be escrowed or rolled into your mortgage payments, but to get a clear picture of what that new home will cost in the first year, ask your broker to break down those costs in advance.
If you have questions about financing a home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Sunday, January 28, 2007
I don’t have a 20% down payment. What are my options?
Because of the risk to lenders, in previous years, financing wasn't always available to you borrowers with low down payments. In simple terms, a down payment is the portion of your home’s purchase price that a buyer puts into the escrow. But lenders want to lend. So to mitigate the risk with downs under 20% and protect against any default on a loan, lenders now offer private mortgage insurance.
PMI enables borrowers to obtain a mortgage with a lower down payment while protecting the lender from defaults. And, as of Jan. 1, new legislation allows borrowers with household adjusted gross income of $100,000 or less who buy a home in 2007 to deduct the full cost of the mortgage insurance they pay during the 2007 tax year. PMI typically amounts to about one-half of one percent of the loan, according to the Mortgage Bankers Association of America.
So if you put 10% down on a $400,000 loan, for example. The lender multiplies 90%, or $360,000, by .005 percent. The result is an annual PMI of $1,800, which is divided into monthly payments of $150. However, creative financing treatments like the 80-10-10 loan can help homeowners with low downs avoid PMI payments.
So what is an 80-10-10 loan? The program is a package of two loans, one added on top of the other, and a 10% down payment. The 90% mortgage is made up of one mortgage equal to 80% of the sale price. The remaining 10% loan, which can be either fixed or adjustable, has a higher finance rate. However, since that higher finance rate applies to only 10% of the loan, the payments on an 80-10-10 loan are still lower than a single mortgage with PMI insurance. And the mortgage interest on the 80-10-10 loan is tax deductible.
If you have questions about an 80-10-10 program, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
PMI enables borrowers to obtain a mortgage with a lower down payment while protecting the lender from defaults. And, as of Jan. 1, new legislation allows borrowers with household adjusted gross income of $100,000 or less who buy a home in 2007 to deduct the full cost of the mortgage insurance they pay during the 2007 tax year. PMI typically amounts to about one-half of one percent of the loan, according to the Mortgage Bankers Association of America.
So if you put 10% down on a $400,000 loan, for example. The lender multiplies 90%, or $360,000, by .005 percent. The result is an annual PMI of $1,800, which is divided into monthly payments of $150. However, creative financing treatments like the 80-10-10 loan can help homeowners with low downs avoid PMI payments.
So what is an 80-10-10 loan? The program is a package of two loans, one added on top of the other, and a 10% down payment. The 90% mortgage is made up of one mortgage equal to 80% of the sale price. The remaining 10% loan, which can be either fixed or adjustable, has a higher finance rate. However, since that higher finance rate applies to only 10% of the loan, the payments on an 80-10-10 loan are still lower than a single mortgage with PMI insurance. And the mortgage interest on the 80-10-10 loan is tax deductible.
If you have questions about an 80-10-10 program, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Saturday, January 27, 2007
Should I refinance in 2007?
As with 2006, most industry observers expect mortgage rates to rise in 2007. Still, David Lereah, chief economist for the National Association of Realtors, says buyers have a window of opportunity to secure lower mortgage interest rates.
So if you’re looking to pay off that line of credit, secure a better rate with a fixed rate or adjustable loan or consolidate debt, now is as good a time as any.
Don’t get caught up playing the rate-guessing games. You might miss a great opportunity to secure a super loan or buy the home of your dreams while waiting on the sidelines for the so-called “lowest” rate to arrive.
A good rate is a good rate. And if you plan to be in a home or secure a loan for the long term, financing or refinancing with a good lender is a smart move. Inbar Cohen would agree. Believing a rapid decline in prices would diminish the equity accrued on her Tarzana home she bought for $166,000 in 1999, Cohen sold the property for just under $400,000 in August 2003, rented a house in Encino for $2,000 a month and started looking for her dream home. Four years later, Cohen is still renting.
Dixie Long, an agent with First Team Real Estate Inc. in Huntington Beach, says Southlanders waiting for the market and mortgage rates to hit rock bottom, should ask themselves: “When is that going to happen?” So if the timing is right, and you’ve seen a home you like or feel it’s time to refinance, trust your instincts and get the loan.
If you have questions about financing that dream home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
So if you’re looking to pay off that line of credit, secure a better rate with a fixed rate or adjustable loan or consolidate debt, now is as good a time as any.
Don’t get caught up playing the rate-guessing games. You might miss a great opportunity to secure a super loan or buy the home of your dreams while waiting on the sidelines for the so-called “lowest” rate to arrive.
A good rate is a good rate. And if you plan to be in a home or secure a loan for the long term, financing or refinancing with a good lender is a smart move. Inbar Cohen would agree. Believing a rapid decline in prices would diminish the equity accrued on her Tarzana home she bought for $166,000 in 1999, Cohen sold the property for just under $400,000 in August 2003, rented a house in Encino for $2,000 a month and started looking for her dream home. Four years later, Cohen is still renting.
Dixie Long, an agent with First Team Real Estate Inc. in Huntington Beach, says Southlanders waiting for the market and mortgage rates to hit rock bottom, should ask themselves: “When is that going to happen?” So if the timing is right, and you’ve seen a home you like or feel it’s time to refinance, trust your instincts and get the loan.
If you have questions about financing that dream home, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Friday, January 26, 2007
How can I make sure the loan agent delivers on their promise?
Refinancing a home or securing a new mortgage can be stressful under the best of circumstances. So how can you make sure your lending experience meets your expectations?
Completing and application and verifying information is only one step in the loan process. Understanding all the elements of securing a loan, being involved and keeping yourself informed and in communication with your lender are all good tools for ensuring a smooth experience. Before you meet the loan officer, make sure to have documents that may be required to process your loan. Being prepared up front can save a lot of time and prevent anxiety in the long run.
To be prepared, secure documentation that shows your financial health such as an itemization of your current bills, existing mortgages, loans, debts and monthly payments (credit cards and car loans) and work history.
The lender also should be prepared to explain the application process and provide information on mortgage vehicles, interest rates and fees. To get the most from your lender, don’t be afraid to ask questions about rates, fees, points and anything else that concerns you.
While consumers usually complete the initial form, it is imperative that the form is accurate, so any good lender will have no problem helping you complete the form. Even when both sides are prepared, waiting to see if you got the loan can be stressful. So find out how to contact your loan officer. Make sure you stay in contact with your lender. And get detailed information about timelines and what to expect.
Remember, a good lender wants to secure your loan as much as you do. And by working together as a team and keeping the lines of communication open, lenders and consumers can make the loan approval process a great experience.
To speak with a lending agent, contact HomeLoan123.com.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Completing and application and verifying information is only one step in the loan process. Understanding all the elements of securing a loan, being involved and keeping yourself informed and in communication with your lender are all good tools for ensuring a smooth experience. Before you meet the loan officer, make sure to have documents that may be required to process your loan. Being prepared up front can save a lot of time and prevent anxiety in the long run.
To be prepared, secure documentation that shows your financial health such as an itemization of your current bills, existing mortgages, loans, debts and monthly payments (credit cards and car loans) and work history.
The lender also should be prepared to explain the application process and provide information on mortgage vehicles, interest rates and fees. To get the most from your lender, don’t be afraid to ask questions about rates, fees, points and anything else that concerns you.
While consumers usually complete the initial form, it is imperative that the form is accurate, so any good lender will have no problem helping you complete the form. Even when both sides are prepared, waiting to see if you got the loan can be stressful. So find out how to contact your loan officer. Make sure you stay in contact with your lender. And get detailed information about timelines and what to expect.
Remember, a good lender wants to secure your loan as much as you do. And by working together as a team and keeping the lines of communication open, lenders and consumers can make the loan approval process a great experience.
To speak with a lending agent, contact HomeLoan123.com.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Thursday, January 25, 2007
How can I change my credit score?
Although changing your credit score might seem like a mythical act, you have the power to change your credit score. Changing your credit score might require amending personal spending habits or paying bills in a timely manner. But all too often, the real credit score offenders live on your FICO report. And with as much as 50% of all credit reporting agency data reportedly listed incorrectly, looking at your report is the first step toward improving your credit score.
To get a copy of your report, check with the big three reporting agencies: Experian, (formerly TRW), www.experian.com, 888-397-3742; Equifax, www.equifax.com, 800-685-1111; and Trans Union, www.transunion.com, 800-916-8800. Some companies offer free credit reports, so go ahead and ask.
Federal and State laws require that derogatory information bankruptcies and other items that are not accurate or can’t be verified in a timely manner be removed.
If you find erroneous information on your report, write a letter to the credit reporting agency stating your position and why you feel the information is incorrect. Include supporting documents and request that the item be amended or deleted. The CRA is required to investigate. This will usually take about 30 days. The CRA will respond and should include a free copy of your credit report. If they don’t remove or amend the item, contact the creditor who placed the item on your credit and write to the Federal Trade Commission. Explain the problem and request help resolving the issue.
It might take time, but it will be worth the effort to change your credit score.
If you have questions about your credit and financing, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
To get a copy of your report, check with the big three reporting agencies: Experian, (formerly TRW), www.experian.com, 888-397-3742; Equifax, www.equifax.com, 800-685-1111; and Trans Union, www.transunion.com, 800-916-8800. Some companies offer free credit reports, so go ahead and ask.
Federal and State laws require that derogatory information bankruptcies and other items that are not accurate or can’t be verified in a timely manner be removed.
If you find erroneous information on your report, write a letter to the credit reporting agency stating your position and why you feel the information is incorrect. Include supporting documents and request that the item be amended or deleted. The CRA is required to investigate. This will usually take about 30 days. The CRA will respond and should include a free copy of your credit report. If they don’t remove or amend the item, contact the creditor who placed the item on your credit and write to the Federal Trade Commission. Explain the problem and request help resolving the issue.
It might take time, but it will be worth the effort to change your credit score.
If you have questions about your credit and financing, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
Wednesday, January 24, 2007
What does my credit score really mean?
Past payment history used to be a major factor lenders considered when deciding whether to lend money. Today, more lenders look at the relationship between credit scores (FICO) and mortgage delinquencies.
The chart below shows the likelihood of a 90-day delinquency related to specific FICO scores.
FICO Score Odds of a Delinquency
595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1
So while about 50% of borrowers with scores below 595 became delinquent, borrowers with scores about 700 are a good bet for lenders. And because lenders often reward borrowers by reducing the cost of a loan, it pays to have a good FICO score.
FICO, which stands for Fair Isaac & Company, scores are generated by three major credit bureaus TRW (Experian), Equifax, and Trans-Union. Because each bureau places emphasis on different factors, scores can be different for each agency, but FICO scores range from 350 to 850.
Delinquent payments, too many new credit accounts opened within the past 12 months, limited or no credit history, being maxed on the balances related to revolving credit and public records (tax liens, judgments or bankruptcies) impact your FICO score. And because too many recent credit inquiries can negatively impact your credit score, when you are looking for a mortgage or shopping for any big-ticket item that might require the potential lender to run a credit inquiry, try and settle on a lender before allowing numerous firms to run your credit.
To keep your credit healthy, pay your bills on time, limit your credit use, don’t apply for unnecessary credit cards, don’t max out your credit cards and limit credit inquiries.
If you have questions about your credit and financing, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
The chart below shows the likelihood of a 90-day delinquency related to specific FICO scores.
FICO Score Odds of a Delinquency
595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1
So while about 50% of borrowers with scores below 595 became delinquent, borrowers with scores about 700 are a good bet for lenders. And because lenders often reward borrowers by reducing the cost of a loan, it pays to have a good FICO score.
FICO, which stands for Fair Isaac & Company, scores are generated by three major credit bureaus TRW (Experian), Equifax, and Trans-Union. Because each bureau places emphasis on different factors, scores can be different for each agency, but FICO scores range from 350 to 850.
Delinquent payments, too many new credit accounts opened within the past 12 months, limited or no credit history, being maxed on the balances related to revolving credit and public records (tax liens, judgments or bankruptcies) impact your FICO score. And because too many recent credit inquiries can negatively impact your credit score, when you are looking for a mortgage or shopping for any big-ticket item that might require the potential lender to run a credit inquiry, try and settle on a lender before allowing numerous firms to run your credit.
To keep your credit healthy, pay your bills on time, limit your credit use, don’t apply for unnecessary credit cards, don’t max out your credit cards and limit credit inquiries.
If you have questions about your credit and financing, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
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