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Posts Tagged ‘Credit Tips’

Credit lending today has certainly tightened up. People that could get financed only a year ago can’t seem to get any financing today. With the tightened credit requirements, many are beginning to see identity theft on the rise. That means you need to seriously consider doing something that will help protect your good credit.

One way to help protect your credit rating is to consider a third party program such as LifeLock. LifeLock is the only Identity Theft Prevention Solution backed by a one-million dollar guarantee! (Click here to get a 10% discount.) This means that if anyone were to steal your identity, LifeLock will spend up to $1,000,000 to clear your name. From what I have seen and heard, the clean up after the ID theft is the nightmare part, so with this kind of guarantee, you should get back to normal much quicker!

Getting approved for a Charlotte mortgage home loan is tough enough in today’s mortgage market. Don’t risk your good credit without some assurances. By protecting your credit rating today, you will help ensure that when you are ready to buy your home in Charlotte (or beyond) that you will be able to get approved for the mortgage loan you are needing.

LifeLock is offering a 10% discount! 

A Credit Tip Concerning FHA Mortgages

Important Notice! You may be hurting your chances to get approved for an FHA mortgage loan!

Any accounts in dispute on your credit report will automatically make your mortgage application with FHA a manual underwrite! This means that even if the FHA automated approval system says yes, your mortgage application will be downgraded to a no and it will be up to an underwriter to determine if you should get the mortgage. Manually underwritten mortgage loans face tougher scrutiny and can take longer to close.

The reason I tell you this is that too many people still believe that disputing a bad account on your credit will somehow either make it go away or make it not count. This is not true. Without proper documentation, removing an account that is correctly reported will not happen. In other words, if you did not pay them, you can’t simply dispute it to make it go away.

Under this FHA guideline, disputing the account can take you from an automated Yes to a manual No. In many cases, the account in question may not have made a difference either way.

So before you begin going around just disputing items on your credit, be sure to talk to a qualified mortgage consultant. Knowing how the FHA system works can make the difference between an approval and a long drawn out denial.

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Charlotte Home Loan Dies over $25

“But it was only $25.00. Surely that can’t matter that much!” Unfortunately, it did.

Recently a client of mine went from being approved to buy a home in Charlotte to being denied for a Charlotte mortgage loan. It was over a $25 credit card payment. Unfortunately, the payment on one of their credit cards was not paid on time and the late payment was reported to the credit bureau. This late payment caused their credit scores to drop significantly, enough to disqualify them from the mortgage they had applied for.

The amount of your monthly payments has no bearing on the significance of the payment history. It does not matter if the monthly payment is $1,000, $100 or $1. If there is a payment due and it is not paid on time, it is reported as late. A recent late payment will hurt your credit rating and your score will suffer because of it. Most mortgage companies in Charlotte and across the country are looking very hard at credit. It is more important than ever.

If you are considering buying a home in Charlotte, make sure that every obligation you have is paid on time. If you think it is insignificant, pay it anyway. The last thing you want to experience is what this client did… it can be very heartbreaking. And delivering the news isn’t fun on my end either!

Acceptable types of Alternative Credit for FHA Mortgages

According to the HUD Mortgagee Letter 2008-11, HUD has created two groups of references that can be used as alternative credit for FHA mortgage loans. These are used when the borrower’s credit file does not have enough information to create a credit score, or when the credit file produces a score with very limited credit. HUD stressed that these are not to be considered as an alternative to “poor credit.”

Basic Guidelines for FHA Alternative Credit

There must be at least 3 references that can show a solid bill payment history. All of these should cover the payment history of the most recent 12 months. At least one of these should be from the “Preferred” Group with the focus of references being mainly in the “Preferred” group. Once all options have been exhuasted with the “Preferred” group, then references from the “Secondary” group can be considered.

The “Preferred Group”

rental housing payments (subject to independent verification if the borrower is a renter), utility company reference (if not included in the rental housing payment), including gas, electricity, water, land-line home telephone service, cable TV. If the borrower is renting from a family member, request independent documents to prove regularity of payments, such as cancelled checks.

The “Secondary Group”

insurance coverage, i.e., medical, auto, life, renter’s insurance (not payroll deducted); payment to child care providers – made to a business providing such services; school tuition; retail stores – department, furniture, appliance stores, specialty stores; rent to own – i.e., furniture, appliances; payment of that part of medical bills not covered by insurance; Internet/cell phone services; a documented 12 month history of saving by regular deposits (at least quarterly/non-payroll deducted/no NSF checks reflected), resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments.

These alternative credit references must be verifiable. HUD’s preference is that they are verified by a credit reporting agency and that they create a “nontraditional mortgage credit report.” This report would be used by the lender just like a standard credit report would be used.

If a nontraditional mortgage credit report is not possible, HUD further requires that each reference be independantly verified and should be backed up by cancelled checks covering the last 12 months’ payment history.

In my next posting I will address what can be done if no references can be found, or if there no “Preferred” group references available.

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HUD Clarification on Alternative Credit

A while back, I wrote an article dicussing how FHA mortgage loans are not Subprime Mortgage Loans. Obviously, too many loan officers are not getting that point very clear in their minds. With the lack of mortgage loans available to individuals with very poor credit, many loan officers that worked strictly in subprime lending have turned to FHA as their savior. This is causing a lot of trouble and a major backlog with many lenders in their government underwriting departments.

The mess has gotten so bad with many lenders that loans can take up to 30 days just to get their government deals looked at! This includes both FHA and VA mortgage loans!

So in an attempt to help bring loan officers back to reality, HUD has released a Mortgagee Letter (#2008-11) to clarify Nontraditional Credit Verification and Evaluation. In this letter HUD addresses using alternative credit references, when they can be used and how they should be verified.

The idea is that using these alternative tradelines is appropriate when a borrower does not have sufficient credit to create a credit score. Alternative credit can also be used to help support what is considered to be a “thin” credit file where a credit score is created but based on very limited credit. HUD does clairify that if the credit is in bad shape, you can’t simply turn in a payment history for a light bill and get it approved!

“nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.” HUD Mortgagee Letter 2008-11

Alternative credit lines must have a solid 12 month history and be one of two groups of trade line references. In the next couple postings, I will go more into what these groups are and how HUD wants these references to be verified.

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According to a Countrywide bulletin this morning, the private mortgage insurance companies have raised the bar for 100% mortgage loans in Charlotte and the entire country. Now to qualify for a conforming conventional mortgage loan, you will need to have Read the rest of this entry »

Chase, one of the leader wholesale lenders, has announced some big changes and modifications to their product line up.   Read the rest of this entry »

Wow. You are almost there! You have been pre-approved for a mortgage and located just the right house. Your offer to purchase was accepted after some further negotiations over the house’s price.

You submitted your offer to purchase to your mortgage lender and all the income documents he requested. The home inspection went well and the home appraisal came in over what you offered!

The lender has submitted your loan to underwriting and you are simply waiting for final approval so you can close on your home… your dream is almost real!

Only a few more things to do before closing… Read the rest of this entry »