The purpose of a Loan Modification Hardship Letter is to give an overview of your family’s current financial situation.   What might be an acceptable hardship? Listed here are the generally accepted hardships:

1. Loss of job or decrease in income 
2. Homeowner, family member, or spouse dying
3. Family member or home owner who becomes ill
4. Divorce or relationship breakup
5. Compulsory work relocation
6. Shock from interest rate reset (adjustable loan)

How can you put together a credible hardship letter to support your application for a loan modification which informs the lender of your financial situation? Try to remember the fact that lenders are swamped with desperate debtors searching for a cost effective way to stay in their home.

* A successful loan modification hardship letter should be short, 1-2 pages max.
* Describe the hardship.
* Explain what you’re doing to solve the problem and get back on track.
* Convince the lender that you are responsible and want to save your home.

Savvy and energetic homeowners can negotiate with their lenders to reduce their interest rate, shrink the principle or modify the term and thus start paying a more manageable monthly payment. It is not necessary to be a financial expert; simply understanding the process may help you lower the amount you repay.

WARNING! The process of drafting a hardship letter is only the first step to getting a loan modification. In addition, you will be asked to show an entire statement of finances and documents showing your income. To succeed and give yourself a chance at success, arm yourself with negotiating tips and insider information before contacting your lender about loan modification.

Scott Hudspeth is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 800-466-5626 ext 149 or at Scott@AmeriFirst.com

What is this process and how is a loan modified? Basically, loan modification is exactly what it sounds like: both the lender and the borrower come to an agreement whereby the structure of the loan contract is changed. This usually means the lender giving the borrower a reduced interest rate, easier repayment terms and possibly lengthening the loan term to reduce the monthly repayment and help avoid foreclosure. Loan modification can be initiated by a government, for example, the Indy Mac fallout. The government will intervene and will modify some 25,000 troubled home loans to assist the borrowers in avoiding foreclosure.

Why is it that there are all these borrowers looking for loan modification? A high number of borrowers are stuck in costly and unaffordable high interest rate loans. Since the value of their homes have depreciated to below what they currently owe on their homes, the borrowers seek loan modification to try and lower their interest rate and monthly payment to make better sense of the whole situation. In fact, modifying the loan is the borrowers’ final solution to the problem of impending foreclosure. A significant number of borrowers with negative equity are trying to achieve loan modification to decrease the interest rate they pay, so that they can avoid foreclosure.

Is loan modification offered by all the banks? While the majority of banks do not like modifying loans; almost all would ultimately offer this to borrowers who are very close to foreclosure. Due to the negative benefits for the lender, they usually see this as the last hope for a troubled debtor who is close to foreclosure. A lender may refuse to modify a loan even though the borrowers seek to do so, after comparing what they expect to lose in that process compared to losses expected from a foreclosure.

Ultimately, securing a loan modification could help you avoid foreclosure and keep your credit rating healthy. However, convincing your lender to agree to alter the loan can be a difficult and possibly unsuccessful process. In a case where the lender will take a substantial loss on a loan, it may be in the lender’s best interest to modify the loan for the borrower.

Scott  is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 800-466-5626 ext 159 or at Scott@AmeriFirst.com

•1.      What is a loan modification, exactly?

A permanent change to one or more of the terms of a borrower’s home loan which enables the loan to be reinstated and results in a payment schedule the homeowner can afford is known as a loan modification.

•2.      Can the Loan Modification include late charges inserted by the lender?

Depending on the type of loan you have, late charges and other penalties may be waived by the lender at the loan modification, but make sure that you get a complete breakdown of all fees, and make your lender explain it to you. 

•3.      Is the bank able to force you into an interior inspection if the property condition is questionable?

Yes. Although they do not normally order an inspection or an appraisal, in order to verify that the property possesses no physical conditions that could adversely affect the value, the lender could conduct any review it considers necessary. 

•4.      How do I determine whether or not I will qualify for a loan modification?

The primary consideration on the part of your lender is going to be whether you have the ability to make the new modified payment both now and in the future. You will have to show the lender proof of your income, along with a detailed financial statement showing your income and expenses to prove to them that if granted the loan modification, you will be able to afford the new, reduced payment. 

•5.      Do I have to already be behind on my payments to get a loan modification?

The majority of lenders have begun accepting applications for loan modifications from homeowners who are not yet behind on their payments, if these homeowners can demonstrate to the bank that in the near future they will not be able to afford their payments. 

•6.      What constitutes a valid Hardship situation?

Lenders typically consider divorce or separation; the death of a spouse, co-borrower or family member; illness; loss of income; job relocation; or military service to be acceptable reasons to entertain a loan modification, although each situation which caused a homeowner to fall behind on their home loan is different. A very important part of a loan modification application would be a compelling letter. 

•7.      Can I stop a foreclosure by applying for a loan modification?

Of course; that is the point of a loan modification. Figuring out a loan workout solution with your lender can bring your loan current and have the foreclosure process stopped. 

•8.      Is it possible to have missed payments added back into my new loan modification? Yes, past due payments can be added to the new loan principal and amortized over the life of the loan. 

•9.      Do I need to hire someone to help me or can I do a modification of a loan independently?

Since most loan modification companies require a substantial fee upfront, your current financial situation, along with your comfort level in dealing with your lender, will have to be considered when you make this decision. Regardless of the choice you make, your number one priority should be to learn everything you can about the process of loan modification.  You should also know what is involved in getting a loan modification application approved and what your legal rights are.  A highly skilled, knowledgeable professional could help with this. 

•10. What are the procedures to have my loan modified?

Do your homework - learn as much as you can about the loan modification process before contacting your bank’s loss mitigation department or a loan modification company so you can make informed decisions. 

Scott Hudspeth is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues.

To better understand this, it helps to take a look back in history to the last extended series of rate cuts by the Federal Reserve. This occurred between January of 2001 and June of 2003. During this time the Federal Reserve lowered its target Fed Funds rate 13 times. In the month following each of those rate cuts, the 30 year fixed mortgage rate fell 8 times, but 5 times it went up! In fact, almost every time on the actual day the Federal Reserve cut rates, mortgage rates went up even if they later continued going down. Most of the time it took them a week or two to even return to pre-rate cut levels.

The reason why is, in the end, pretty simple. There is absolutely no direct relationship between the rates controlled by the Federal Reserve and mortgage rates. Only a very slight indirect relationship. The Federal Reserve controls the rates they charge banks to borrow money and the rates banks charge when loaning money to each other for very short terms. Often for money just loaned overnight. This is why you keep hearing the term “liquidity” thrown around on the financial news when discussing Federal Reserve rate cuts. When banks don’t have enough liquid cash on deposit to cover their daily obligations, which is often, they borrow it from each other. This rate indirectly affects credit card rates, bank personal loan rates, and banks use it to set their “prime rate”. The prime rate is the rate that banks charge their most credit worthy customers. Most customers don’t get that rate. Home equity line of credit rates are based on the prime rate plus some factor which depends on the loan characteristics. Home Equity rates will usually be quoted as “prime plus x” where x is some factor like 1 or 1.5 or 2 added to the prime rate. None of this affects 30 year fixed FHA or conventional rates.

The money that the bank uses to loan you for your mortgage comes from the sale of mortgage bonds. There are many different types of bonds including mortgage bonds, treasury bonds and corporate bonds and they are all competing in the marketplace for investment money. This money comes from individuals and also pension funds, retirement funds and money market funds. These bonds are also competing for investment dollars with the stock markets and commodity markets. There are three primary agencies that sell most mortgage bonds. These are FNMA (Federal National Mortgage Association or Fannie Mae), FHLMC (Federal Home Loan Mortgage Corporation or Freddie Mac) and GNMA (Government National Mortgage Association or Ginnie Mae). You hear about Fannie Mae and Freddie Mac in the news all the time today. They each issue bonds for conventional mortgages. You don’t hear much about GNMA, but they sell the bonds which fund government mortgages like FHA and VA loans.

These “mortgage backed securities” are traded on the open market daily and prices change constantly throughout the day. The prices go up and down just like the stock markets. Here is where it gets a little tricky. The bonds are pooled in huge amounts based on their face interest rates. So the price quotes will go up and down from 100% of the face value of the bonds. So when the price goes down, the yield goes up. For instance, when traders can buy FNMA 6% mortgage bonds for less than 100% of the face value the effective interest rate goes up. To simplify it, if they pay $99 for $100 of face value at 6%, the owner is getting a yield or interest rate above 6%.

At all hours of the day as borrowers are locking loans, lenders have to make an educated guess about how much they will be able to sell that mortgage bond for. What they hope is to be able to sell the bonds for more than 100% of face value, but they don’t know the price they will get on the open market, so they try to add a cushion to the rates to make sure they have room to profit. It is this price which determines the mortgage rates you get when you lock in your mortgage.

Because these bonds are competing in the marketplace for the same pool of investment money available for stocks as well as other types of bonds, the prices of mortgage bonds usually go down when the stock market goes up. People have to sell their mortgage backed bonds in order to buy stocks. As they sell, bond prices go down and interest rates go up.

Mortgage rates had been falling for months now prior to the .50% Federal Reserve funds rate cut today. The Federal Reserve cut the rate because of massive losses in stock markets all over the world among other things (700 billion Bail) which didn’t help yet, so many unanswered questions. They wanted to prevent such losses in the U.S markets but it doesn’t look like it was what the market was looking for.   Stocks closed down 200 today after the news with lots of uncertainty still in the economy.  Were down over 200 points today.  Yes, people (institutions really) had to sell their bonds causing bond prices to drop and mortgage rates to go way up today. Most lenders changed rates for the worse 4 times just today trying to catch up with the falling prices. In one afternoon, rates lost weeks of improvement. And I think it will take some time to recover from all of this.

So there you have it. If your eyes haven’t glazed over or you haven’t fallen asleep yet, you at least know the basics of what happens behind the scenes where interest rates are being set. 

Scott Hudspeth
Teleseminar coming October 29th, 6:00 P.M.
sign up at www.michiganzerodownfinancing.com 
 www.michiganzerodown.com

Guaranteed Housing Program has partnered with local lenders to help them extend 100 percent financing opportunities to

The Benefits are:

• No down payment required.

• No expensive monthly mortgage insurance means you may qualify for a larger loan

• Flexible credit and qualifying guidelines

• No mazimum purchase price limit

• Closing costs can come from any course and may even be rolled into the loan up to appraised value 

• Repairs and improvements can be included in the loan up to appraised value.

• competitive fixed 30-year rates, 2-1 buy downs and you can qualify at the lower rate 

Eligibility Criteria:   

• Occupy the property as your primary residence
• Do not have sufficient cash for a 20 percent down payment plus pay typical loan closing  
  and relocation expenses
• Be a U.S citizen, a U.S. non-citizen national or a “qualified alien.”      
• Provide stable and dependable income for repayment ability
• Have a credit history that indicates a willingness to meet obligations as they become due.
• Have an adjusted household income that is within Rural Development guidelines based on the number of persons who occupy the home.
• Purchase a residential property that is located in a Rural Development eligible area.  

Scott Hudspeth at Amerifirst can help you with your Rural Development home loan.  For more information      visit                                            
 
www.michiganzerodown.com coming soon
www.scotthudspeth.com
269-488-9530 Office
269-217-4481 Cell
Scott@AmeriFirst.com

http://www.youtube.com/watch?v=1RZVw3no2A4&feature=iv&annotation_id=event_597487

Scott Hudspeth
www.scotthudspeth.com

The easiest and most convenient site to order your FICO credit scores is through Fair Isaac’s consumer website: www.myFICO.com.

TransUnion does sell the legitimate FICO credit score to consumers, but it’s only marketed at their TransUnion Consumer Services website at www.transunioncs.com.

Buy your homeowners and auto policies from the same company. You’ll usually qualify for a discount. But make sure that the savings really yields the lowest price.

Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area.

Keep your home safe. Install smoke detectors, burglar alarms, and dead-bolt locks. All of these will usually qualify for a discount.

Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance.

Stay with the same insurer. Especially in today’s tight insurance market, your current vendor is more likely to give you a good price.

See if you belong to any groups—associations, alumni groups—that offer lower insurance rates.

Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.

See if there’s a government-backed insurance plan. In some high-risk areas, such as the coasts, federal or state governments may back plans to lower rates. Ask your agent.

Chat with Scott Hudspeth  

•It takes more than paying your bills on time. Surprisingly, paying your bills on time makes up on 35 percent of your FICO credit scores, which are what lenders look at to determine credit worthiness. It’s important to teach your kids how the credit scoring system works.

Making mistakes can lead to long-term consequences, with negative activity staying on credit reports for seven to 10 years.

•Begin establishing credit worthiness at a young age. How long we’ve had credit makes up 15 percent of our credit scores. Consider getting your child a credit card as soon as they are eligible. Make sure you choose a major credit card that reports to all three credit reporting agencies (Equifax, TransUnion, Experian). List yourself as the primary user on the account but add your child as the co-borrower. But you don’t want to let your child use the cards. You use them and pay on time and build good credit for your child. Once each of your children has used their good FICO scores to establish their own good credit, you should be able to remove their names from the accounts at times where it won’t lower their scores dramatically. A good time for this might be after they purchase their first homes.Here’s what to ask your lenders:

•Do you report credit limits and timely payments to all the credit reporting agencies?
•Can I add my son or daughter as a secondary cardholder for this account?
•Do you review the secondary cardholder’s credit to make a decision?
•Will you report the account information for the secondary cardholder to all three credit reporting agencies?
•Is it possible to make the secondary cardholder solely responsible for the account when they turn 18?Asking these questions should get you closer to screening appropriate lenders to accomplish your goal.

Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management. Get expert advice on how to handle mistakes, what to pay off and what not to pay off, could be the difference of getting a loan and not.

Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score. The biggest thing is to find out when your credit card company reports your balances to the bureaus. Make sure the payment hits before this date.

Don’t charge your credit cards to the maximum limit. The utilization is 30% of your score, a maxed out credit card can be as bad as a late payment. Try to keep your balances at 50% or less of your available limit.

Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt and they will ask you to explain the credit inquiry. Some loans allow you to role appliances and minor repairs into the loan. Save the credit cards and your credit score.

Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score. A business credit card doesn’t report on your credit, something to think about.

Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time. 14 days is the unwritten rule, shop with in this time period and you it should only count as 1 pull. This also applies when shopping for an auto loan.

Don’t pay off old collections that aren’t reporting anymore, everything goes off date of last activity. If you pay it off, you will update the date of last activity which will hurt you instead of help you.

To sign up for credit repair visit www.amerifirstcreditsolutions.com

Our goal is to provide value to members of the workforce through education and discounts from local businesses.  We’re building a strong network of local HR Directors, employees and services providers in an effort to create a mutually beneficial situation for Everyone.

 The Employees gain Knowledge and discounts. The HR Directors bring value to the workplace. The Venders get new business.

 What can we do for you?
As one of are vendors of Kalamazooworkplace.com, your company will gain exposure to employees of large, High-profile local companies like Stryker, Borgess, Kpep, and more.

 When the employees visit are site, they are given the opportunity to browse and print custom coupon offers from a wide range of local service providers.  They print the coupon and present it at your place of business.

 We also have a growing list of members that subscribe to our Vender updates, so when you join, they’ll know. 

Send me an email at Scott@amerifirst.com or give me a call at 269-488-9530 to get signed up.

www.Kalamazooworkplace.com

Before you apply for a home loan, regardless of your credit, it’s a smart idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it’s easier to address them before you have found a house, than after you have found a house and are trying to close your loan.

If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances - like a loss of a job or medical bills - let them know so that they understand that it is not likely to happen again in the future. I recommend getting your report from www.myfico.com/12

An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, the loan should close.

Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home, than a person who is not approved or is pre-qualified.

While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. It’s having a person plug in a few numbers that you give them - your monthly income and your monthly debt - and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.

Traditionally real estate agents represent the sellers in a transaction. When you are not working with a buyer’s agent, they are less likely to negotiate the best price or contingencies for you.

A buyer’s agent’s job and fiduciary responsibility (meaning legal duty) is to you, the buyer. Before working with an agent, establish if they are a buyer’s agent or a seller’s agent. After spending a lot of time with a Realtor, it’s natural to feel like you’re a team. But if they are not negotiating for you, then they are not on your team.

Often times the house you find may be in a neighborhood that you’re not familiar with, which is ok. It just means that you’ll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great - as the other home prices go up in value, they will pull your home’s value up as well.

Check out the schools - are they sought after? A good school district means your neighborhood will always be valued by families which are a great reassurance to purchase, not to mention the value-add if you have school-age children.

Next, contact the police station and obtain crime statistics? Are they acceptable to you? Sometimes, if they won’t give them to you, it could be a cause for alarm.

Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it.

Check out the location of the shopping, police and fire stations, schools, and air traffic overhead. These are all things that might affect your property value or quality of your life.

Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you’ll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.

There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage.

Emotions are high for both buyers and sellers. - The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don’t want to go. Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.

There is a lot of money at stake for all the parties involved (and that includes the realtors) - Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself: Is there something you missed? Are there comparables that support the price that they want? Are there motivations that might factor into the price they are demanding? In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your move.

No house is perfect - Always get an inspection. It might be a few hundred dollars, but it’s worth it. It’s the inspector’s job to find any problems with the house that could cost you thousands to repair down the road. Some inspectors have a tendency to over play the importance of their role and the items that they find. Get objective opinions that you trust before making a decision on an inspection report. Likewise, if an inspector says a foundation is cracked but its nothing to worry about - get a second opinion. Ask a handyman for an idea of how much repairs will cost and how complicated they are. The home buying process is an emotional, complex and time-consuming process, but it is worth it. Nothing compares to owning your own home in a neighborhood that you chose.

Buyers and sellers are clearly better served when a real estate professional is engaged to assist in the sale or purchase of a property. In today’s market there are dozens of reasons why a Realtor® can give you an edge, beginning with the information and experience necessary to arrive at an appropriate asking price, to the knowledge of state laws and regulations for which both parties to the contract will be held liable.

Given that you as a home seller or buyer have agreed to use a professional to assist you in the transaction, what can you expect in the way of services? How do real estate agents earn their commission? A listing agent engaged to help you sell your home works with you in a number of capacities, including determining your asking price. It is the listing agent who researches the sale prices of similar homes in your area to show you what you might reasonably expect to garner from the sale of your property. The listing agent also will assist you in making your home presentable for sale, offering suggestions about how to best show the property and what, if any, improvements ought to be made before putting the property on the market. The listing agent will inform the seller about laws and regulations such as fair housing requirements, septic regulations and lead paint laws. Any forms or disclosure documents required by law can be obtained through the listing agent. The listing agent will provide you with a yard sign, and advertising - at no extra cost to you.

It is the behind-the-scenes work of your listing agent, however, that may matter most in procuring a buyer for your property. The listing agent most likely will conduct an open house viewing of your home, not only for the public, but for other real estate agents who may know about a potential buyer for your home. Listing agents keep abreast of what other properties in your community are for sale, and how that might affect activity at your home, or the price of your home.

Your listing agent is your advocate during sale negotiations, presenting offers to you and counseling you about the qualifications of potential buyers. The listing agent works hard to bring only qualified buyers into your home, enhancing your ability to sell the property in the most time efficient manner possible. It’s also the listing agent who will assist in coordinating deadlines and closing dates, making sure all documents are signed, sealed and delivered on time.

Buyer’s agents, as well as sub-agents perform many of the same functions on behalf of clients looking to purchase a home. They help buyers determine how much they can afford to spend, research properties available on the market within their price range, and provide important disclosures about the property being shown. Like listing agents, sub-agents and buyer’s agents also can assist prospective buyers in completing legal forms, reviewing the purchase and sale contract, and presenting the offer. Additionally, all three may offer referrals for financing and legal representation, and may accompany buyers to the home inspection. However, only the buyer’s agent can assist in formal price negotiations on behalf of prospective homebuyers.

Today the purchase or sale of a home is an enormous undertaking, filled with complex issues - both legal and financial. Consumers should know that Realtors®, those agents who have voluntarily joined a professional trade association and abide by a National Code of Ethics, are specially trained to attend to all aspects of each transaction, and their experience as professionals’ works for the buyer or seller they represent. The Realtor’s® commission is a small price to pay for the security of knowing your real estate transaction is being ushered through the process by a professional who is trained to foresee potential problems and who will work hard to find solutions that satisfy you.

Many wonder if it’s unethical to attempt to remove valid bad credit.

The credit-ranking system has been unfair to American consumers. “Credit repair” is a term that has gained a negative reputation, and has been connected with fraud. As a result, we’re often put in the position of having to defend our efforts to help others repair the credit.

What can feel like credit prison does have alternatives to the problems contaminating the credit report. A credit report should not be viewed as proof of bad credit, simply as an allegation; consumers rarely challenge the allegation. Our clients that we assist with this basically are entering a plea of not guilty when they sign on to use our preferred attorney network for their defense.

Our society has its roots in capitalism and the credit bureaus use consumer information to their advantage. Our legal system takes an oath to truth, equity and the common good; credit bureaus do not take this oath. Why should any citizen be obliged to support any company, let alone massive public corporations, when doing so could ruin his credit and financial standing? The credit bureaus would cling to every bit of credit data, true or false, forever if federal didn’t force them to delete many items after seven years’ time. If it weren’t for this law, credit bureaus would not have to remove most items from your report after seven years. If you can remove credit accounts in good standing after a short period time, then why can’t you remove them before the seven-year limitation?

You cannot always judge someone’s credit worthiness from their credit history. It damages everyone to have good people tagged as deadbeats. Many policies and approaches used by credit bureaus seem to be abusive to the customer. Due to this, we strongly oppose the current system of credit reporting. The debtor is punished unjustly with seven years credit bondage (10 years for bankruptcy and some court decisions). Credit bureaus have never performed a study determining that seven years is the time it takes to restore good credit. This seven-year mark is completely random. As a matter of fact, according to Dr.Bonnie Guttion, consumer affairs advisor to President Bush, computer models that predict credit information find that “most information that is more than two years old is nonessential”; in addition, our clients feel that seven years is much too long. Within a couple of years, most consumers are able to recover fully from a financial crisis. Despite this, they are often forced to live a reduced life-style and pay high interest on loans while being denied credit based on reports.

Although credit bureaus claim an error rate of less than 1%, that isn’t necessarily true. However, studies not performed by the bureaus show that mistakes occur at a rate much closer to 79%.

The law agencies strongly resist the correction of these errors. It is very costly for them, taking up time and money. Bottom line, credit bureaus make their money selling your credit information. A pool of information this large is not culled by anyone but them. No one respecting privacy can win. Mistakes on credit reports can have disastrous results, including the loss of jobs and reputations.

There has recently been a large number of the worst type of file errors, mis-merges. These show the need for a large-scale update of the US credit reporting system. A mis-merge adds another person’s information to the wrong file.

Consumer credit reporting systems are not exclusive to America, as they are used in other countries. Most countries base their credit on current credit status. For example, in England, Equifax and Experian are not allowed to keep credit information for more than five years. The American credit reporting system needs revision. It’s not unpatriotic to want to ensure your credit report is accurate. It is NOT wrong or without any values.

Bad credit costs a person thousands of dollars and forces many into a vicious cycle where it’s difficult to escape this punishment. Most people restore their credit to refinance, or to buy “twice the home value” at nearly the same payment. For those who have credit problems paying off someone else’s mortgage is hard for them to do. Many renters have paid off someone else’s mortgage, but still cannot own their own home because of credit problems.

No matter what is happening with the economy, your life goes on. You may be tired of renting, your family may be growing, or you could be getting transferred to another city. Whatever the case may be, buying a home now could be a very smart long-term investment. There are some really attractive 100% financing options still available that everyone needs to know about and take advantage of.

Even if you don’t have a large down payment or perfect credit, there are several lending opportunities, according to Amerifirst lending expert Scott Hudspeth.

FHA MortgagesThe Federal Housing Administration, a government agency created in 1934, provides insurance on some types of mortgage loans. An FHA-insured loan also allows you to buy a house with a zero down payment, ranging from zero to 3 percent and from a single family up to four units as a primary residence.

The home, new or otherwise, has to be located in a “rural” area, defined as being outside a Standard Metropolitan Statistical Area. It must be single family and owner occupied. The loan amount can be up to 100 percent of the property’s cost or appraised value. It is a true “no money down” transaction for the buyer, as the seller is allowed to pay all of the closing costs.

RD loans set limits on the borrower’s maximum adjusted gross income and also set maximum loan amounts based on the current FHA loan limits.

Advantages:

· No down payment required

· 30-year fixed rate

· 102 percent loan-to-value of appraised value allowed to roll in repairs, closing costs.

· Finance closing costs if appraisal is higher than sales contract

· No Monthly Mortgage Insurance

· No cash contribution required from borrower.

· Unrestricted gifts: no need to document source.

· No maximum loan amount

· New manufacture housing allowed: cannot have been lived in.

· With 620 credit Score, no seasoning on bankruptcy or foreclosure: You can buy as soon as your score is at 620 with established credit. Loan expert Scott Hudpseth specializes in credit restoration and has helped 100’s of families with their credit profile.

· Competitive rates (set by underwriting lenders).

VA Home LoansMore than 27 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.

What is a VA-Guaranteed loan?

These loans are made by a lender, such as a mortgage company, savings and loan, or bank. VA’s guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn’t previously used the benefit may be able to obtain a VA loan up to $417,000, depending on the borrower’s income level and the appraised value of the property. Your VA Regional Loan Center can provide more details on guaranty and entitlement amounts.

Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans:

The solution, obviously, is to prevent collections from happening in the first place. You have to protect your credit scores. Start by checking your scores on a regular basis. Go to www.myfico.com/12 today. Collections show up in the Public Records section. This is the bottom line: if a creditor is threatening to send you to collections, you’d better pay attention. I had a client who lived in an apartment with two roommates. They were all on the lease. When they moved out, the apartment complex charged them $400 in damages. Two of them sent in their portion, but the third woman didn’t pay. Well, guess what happened. The assessment showed up as a collection on the credit reports of all three roommates. My client’s score was lowered more than 100 points! Granted, it wasn’t her bill to pay. But was it worth the damage done to her credit score, which took years to recover from?

· Federal and state tax liens (released and not released)

· Judgments and satisfied judgments

· Bankruptcy If you have any of these on your credit report, you can bet it’s lower than average.

Late Payments

You may think you know what a late payment is… It means you don’t have the payment in by the due date, right? Nothing is as it seems in the world of credit reporting, however, so let’s begin by talking about what qualifies as a late payment.

There’s a couple of ways that lenders look at late payments. One is how they view them externally (how they report them to credit reporting agencies.) The other is internally (how they keep track of your payments in your account information). The one we’re most concerned about is external.

The Effect on Your Credit Report

Before you do anything with your credit, you have to think about how it will look on your credit report. You don’t want anything that is going to show up 30-, 60-, 90- or 120-days late. Some lenders are so strict, even a payment that’s processed one day after the due date will show up late on your report. It can show up as a 30-day late payment, which stays on your report for seven years.

You’ll want to avoid this the most: recent late payments. Ones long past will hurt enough…ones from just months ago will drag your score down tremendously.

Pay Early

Because of this, I recommend that you actually send in your payment at least one week before the due date, allowing time for mail and processing. You may want to consider paying by phone or online, which usually process quicker.

Internal Credit Monitoring

It is important to understand how lenders keep track of your payment history-and what they do with it. You’re tracked in something called the “Master File.” Make no mistake…they know everything about your account: average balance, bounced checks, limit increases, credit limit status, payments that have been late (and by how much.) That’s just the start of what they know about you! The information that they have about you in the Master File will be used to determine your ongoing creditworthiness-if they should work with you if you have a financial crisis, if you request a credit limit increase, etc.

FICO Score Simulator

Believe it or not, it is possible to know how much a negative credit action, such as a missed payment, is going to impact your credit score before it happens. It’s called a FICO Score Simulator. You can access it at www.myfico.com. Play around with it, and you’ll see how important it is to make all of your payments on time.

How to protect yourself
Here’s how to manage your accounts to reduce your chances of a late payment:

FHA has done their part. They’ve come up with the FHA Secure. If you are behind on your mortgage and it’s strictly due to the ARMs, they’re allowing you to actually refinance under that program. A website you should mention is www.hopenow.com. If you go there, it has all of the lenders who are trying to help with this. One other thing I want to mention is I’ve talked to a couple of clients that they’re actually giving forebearances to, kind of like student loan, only it’s with mortgages. They don’t sell houses..they sell money. They’re trying to keep everybody in their house. Not only that, they’re trying not to lose thousands and thousands of dollars. They’re taking what’s called a forebearance, moving all the money to the end and recalculating it and giving them a fresh start, if you will.

The Storm Worm virus has capitalized on various holidays in the last year by sending millions of e-mails advertising an e-card link within the text of the spam e-mail. Valentine’s Day has been identified as the next target.

Be wary of any e-mail received from an unknown sender. Do not open any unsolicited e-mail and do not click on any links provided.

If you have received this, or a similar e-mail, please file a complaint at www.ic3.gov.

Borrowers who have tried to get a new loan or refinance the old one lately have found that lenders are tightening requirements, making it difficult to get a loan if the situation is less than perfect. You need better credit than you did before, and many lenders are requiring 15 percent down or 15% in equity before making a loan. They’re especially watching the loan-to-value ratio, which is the ratio between the mortgage loan amount and the value of the property. And the secondary mortgage brokers who purchase initial mortgages, Fannie Mae and Freddie Mac, have also tightened their lending requirements.

Investors are leery of mortgage backed securities, and they’re reluctant to trade there. Instead, they are turning to Treasury bonds — even though they have a lower yield. The Fed lowering rates is not the answer right now; a better solution would be for banks to become more willing to make loans again.

 FHA is becoming the number one loan to go with which I will talk about later.

FREE SEMINAR TO HELP HOME BUYERS ON MARCH 25TH AT THE BEACON CLUB

Cunfused about where to start when buying a new home? A free seminar on Tuesday March 25th at 6:00 p.m. at the Beacon Club in Portage will provide information on Mortgages, credit, avoiding a “money pit,” finding a Real Estate agent and much more.

Scott Hudspeth, Mortgage Specialist with Amerifirst Home Mortgage in Portage and co-host of “Mortgage Matters” on WKZO 590, will share what he has learned backed with 20 years in a complex mortgage industry. 

Topics Will Cover: 

Finding the right home for your family’s needs is hard, but managing to avoid paying too much is a another mastery of skills entirely. The following will show you not only how to make sure you’ve found the right house, but also how to negotiate the right price.

* Know what you’re shopping for before you start -

This first step is understanding what you are seeking. Your family has certain needs which must be fulfilled. Also there are many desires which may or may not ultimately be fulfilled. Take an unemotional look into those needs and desires.

Do you choose a three-bedroom home with room for your family to grow or the one with a large back yard, perfect for entertaining? Is having a large kitchen more important than having an extra room?

Two lists should be created - a wish list (your desires) and a reality list (your needs). The reality list consists of those items which your family really needs. They are “non-negotiables”. On the other hand, the wish list contains those items which would be nice to have. Prioritize the lists and the goal is clear - your next home needs to have most, if not all, of your reality list items and hopefully a few of the top wish list items. These lists will keep your efforts channeling in the proper direction.

* Shop for a mortgage before you shop for a home -

Getting a loan pre-approval is the smart way to shop for a home. It tells the sellers that you’re a serious prospect and you’ll know in advance the maximum mortgage you can afford. Make sure you get a commitment in writing.

It’s easier than ever to qualify for a home loan. Lenders have modified qualification rules and created programs designed to help people even if they have problems in their credit and employment histories. Many programs dramatically reduce down payments, so if money’s tight now you can still make that purchase.

First-time home buyers can benefit from the many lender programs that now exist. Reduced down payment is an example of such programs.

* Pick the right real estate professional -

From finding the right home to selecting a lender to meet your financial needs to getting proper property inspections to negotiating the best deal, it can be taxing for even the hardiest of souls. You need the right Realtor on your side.

The right real estate professional must have the high level of care, skill and due diligence to ensure your best interests are at heart. They also have a team of other professionals to put at your disposal - lenders, lawyers, home inspectors, movers, etc.

Most sellers you encounter will have a team in their corner. Having a professional on your team is the best way to make sure you get the best deal possible.

* Make sure your agent knows what you are looking for -

Once you have a clear understanding of your reality and wish lists make sure your agent has those same lists. This communication is critical. Otherwise you’ll both waste your time looking at home you’re really not interested in and you could possibly miss out on the one that truly meets your needs and desires. Your shared goal is to find a place that meets your needs: your agent will then try to satisfy as many of your desires as possible.

A good agent will ask you many questions about what you’re looking for and what you can afford. And then they’ll listen carefully to your answers.

* Yes, that too… location, location, location -

The desirability and resale of your home-to-be depend on location more than any other single factor. The simple truth is - the value of your home is affected by the homes that surround it.

Assuming you’ve already considered the items that make up a desirable home and community - character, quality of schools, access to work and services, recreational facilities, entertainment, etc. - there are several elements that combine to make a good location.

Your first consideration is the neighborhood. Every neighborhood has its own unique character; you need to make sure you’d be comfortable in the one you’re thinking of living in. Take a long walk and observe carefully. Do people take care of their yards and homes? Are the yards fenced? Do children play in the streets? Talk to the neighbors and ask questions that give you a better feel for the area. Be careful not to appear judgmental - you might be talking to a future neighbor.

If the neighborhood is to your satisfaction, look at homes on the market in the area. Extremely large homes surrounding smaller ones tend to appreciate less than a large home among other large homes. Conversely, the smallest home in a neighborhood tends to be “pulled” up by the other homes on the block. However, it might take longer to sell that smaller home when the time comes because many people are unwilling to pay extra for the neighborhood.

The outer edge of a neighborhood is usually not good for resale value. There are noticeable dividing lines between unlike neighborhood. It could be a difference in architectural styles, home size, property use or something else. Look at a home in the middle of a community of similar homes; it will hold its value better.

An exception to this rule is a home on the edge of a neighborhood bounded by woods, park land, a golf course or other open space. Natural boundaries appeal to most buyers and these ”edge” homes can actually command a higher price. The exception is when there’s an unpleasant use planned for the open space. An open field with a babbling brook is nice; a new freeway, strip mall, or warehouse is not.

Other things that can negatively affect property values are traffic, sounds, smells, etc. Be sure to give the neighborhood a long, hard look. Preview the area at various hours of the day. The home you’re interested in may be perfect, but if the neighborhood has problems, your investment won’t be worth as much when the time comes to sell.

*Use your real estate professional to narrow the prospect list -

A good agent brings to the table an in-depth knowledge of the current housing inventory in the area and continually updates that knowledge by touring homes as they are placed on the market. This is to your advantage. Trying to personally see every available home that might fit your needs would be an overwhelming process . If you are thoroughly communicating your needs and desires to your agent, then your agent can help you narrow down the list of prospective homes to those that best suit your family. This will save you much time and energy.

When the time comes to settle on one home, you can do it with the confidence that you’ve made a well-informed choice.

* Show a little interest in everything you see -

As you tour the homes on your short list, find something to admire in each one. If you don’t show any interest until you’ve finally fallen in love with a home, then you’ve put yourself at a competitive disadvantage. Never let anyone know how badly you want a home - it will cost you money!

* Shop with your head, not your heart -

Don’t forget the purpose of your reality and wish lists. Shopping for a home is an emotional process. Your heart will cost you money; using your head will save it.

* Don’t ignore red flags when evaluating a home’s pluses and minuses -

When evaluating the advantages and drawbacks of a particular property, be sure you know the difference between acceptable and unacceptable problems.

Some issues - peeling paint, worn carpeting, ugly wallpaper - are cosmetic and can easily be remedied. In fact, you can use these ”problems” during negotiations to lower the asking price; after all, you’ll need to spend money to bring the house up to date. Make note of what you see that can be used to your advantage. Although hold back from nit-picking. If taken to extremes, you could end up alienating the seller and creating a hostile atmosphere.

Other problems may be warnings to walk away. Major foundation cracks, evidence of previous water damage, signs of serious dry rot or termite damage, antiquated electrical systems or plumbing - any one of these may cause to reconsider your interest.

Don’t let a house’s positive attributes blind you to very real problems. If you do, the chances are good that you’ll end up spending much more than you ever expected down the line.

* Hire a professional home inspector -

Failing to do so, made the biggest home buying mistakes list.

Spending a few hundred dollars for a professional home inspection may be the best investment you’ll ever make. A professional inspector brings experience in examining a great many homes, good evaluation standards and an unbiased perspective. And a written report can be an excellent negotiating tool.

A Typical Inspection Looks at:

* Foundation (slab, crawlspace, basement, etc)

* Electrical, heating and plumbing systems

* Floors, walls and ceilings

* Attic

* Roof

* Siding and trim

* Porches, patios and decks

* Garage

* Property drainage

Make sure you accompany your inspector on the tour. You/ll learn a lot about the home you’re thinking of buying.

Once you have your evaluation, the decision to proceed is yours. A home inspector only gives you a professional opinion of the home’s condition, not advice as to whether or not you should buy.

*Not all fixer-uppers are good buys -

You may be the type who looks at a home in need of significant work as a challenge and an opportunity to make money. Many people have bought fixer- uppers at below market rates, invested a little sweat equity or a little more money on renovations, then eventually put it back on the market at a profit.

But if it isn’t priced low enough, you won’t recoup your investment of time, trouble and expense. Before you proceed , do a careful evaluation of what you’ll have to invest and consult you real estate professional to learn what you can reasonably expect to make when you put the home back on the market. And be sure to include the unexpected. There’s no such thing as a “sure thing”.

* Choose a home with an eye toward future needs -

Buying a home is a large investment. If you can stretch a little today to buy a home that you can grow in - whether it’s having a child, running a home-based business, or having room to build an addition - do it. In the long run, it will probably be less expensive than moving up to a marginally larger home when the need does arise.

* Clarify who your agent is -

Make sure you know who the agent you’re talking to represents. All agents have the responsibility to be open and honest with you and to let you know who they represent - the buyer, seller or both. On-site agents of new communities most often represent the seller (new home builder), not you.

* Ask for a written comparative analysis -

One way to ensure that you don’t offer too much for a home is to ask your agent to prepare a written comparative market analysis. A CMA will show you the sale prices of comparable homes in the neighborhood. It also lists the asking prices of other homes in the area currently on the market.

You may find that the asking price is above what comparable homes in the neighborhood are actually asking for. Or you might even find another home in the area that’s a better choice. When you make an offer, you can use the CMA as evidence to show the seller why you believe your offer is reasonable.

* Learn as much as you can about the seller -

It’s true what they say… Knowledge is power. The reason behind a sale can often be used to your competitive advantage during negotiations. For example, a seller whose company has transferred him to another city is probably more motivated to sell than someone who is still looking for a new home.

Other signs of a motivated seller include a vacant house, or a house that’s been on the market for several months with several reductions in the asking price.

* Keep your own situation to yourself -

Information can be used against you as well. How much you’re willing to spend, the size of mortgage you can afford, your move-in deadlines - it all can be used to extract more money out of your pocket. Be sure to tell your agent everything they need to know to be effective on your behalf, such as, how much you have for a down payment, the size of the mortgage you can afford, etc. However, keep your personal circumstances and timeline to yourself.

* Use time to your advantage -

Just as you have a time frame in which you wish to buy, seller almost certainly has a deadline of his own. If you can learn the seller’s deadline, it’s another piece of information that can be used to negotiate a better deal.

* Check your emotions at the door during negotiations -

One of the costliest mistakes you can make is letting the sellers know how much you love their home. Once you’ve let it slip, you can forget about negotiating the price; the other side knows how motivated you are. In fact, a seller may see it as an opportunity to squeeze a little more money out of you even when you’ve made a good offer to start.

No matter how wonderful a home is, no matter how much you want it, keep it to yourself.

* Don’t be afraid to negotiate -

You may be the type who prefers a hard-and-fast price tag on everything.  I don’t like to haggle is your approach. But negotiation is the key to getting a good deal. If your goal is to get the best home possible for the least amount of money, then you had better be prepared to play the negotiating game.

* Stay out of bidding wars -

Sometimes the seller’s agent will try to scare a hesitant buyer with the threat of another serious potential buyer. Don’t fall into this trap, it will only cost you money.

If there is another buyer, then the seller’s agent will try to get a bidding war going. In these situations, whoever wins also loses because the buyer ends up overpaying.

If there isn’t another buyer, there’s a good chance that the seller’s agent will come back with the other deal fell through. Be sure to let the other side know that you might be interested if that happens before you walk away.

* Know your hidden costs -

There’s more to buying a home than the mortgage. Don’t forget to factor in mortgage insurance, appraisal fees, inspection fees, title insurance and every other dollar you’ll have to spend in order to know what you’re really paying for your home. With the help of a good agent, you should identify all of the costs.

The group, made up of loan servicers and lenders responsible for nine out of 10 subprime loans, has agreed to hold on foreclosure proceedings for up to 30 days as a well to help delinquent borrowers come up with an alternative.

The initiative, called Project Lifeline, was created to assist people 90 days or more behind on mortgage payments. It was announced last week.

The lenders are:

· Bank of America

· Citigroup

· Countrywide Financial Corp.

· Chase

· Washington Mutual

· Wells Fargo

In the plan, eligible borrows will have the option to modify the loan with new terms in order to catch up on payments.

The lenders are also members of the HOPE NOW coalition, created by the Treasury Department to accelerate the process of modifying subprime adjustable-rate mortgage (ARM) loans before interest rate resets. While HOPE NOW members had been focused on modifying subprime ARM loans, Project Lifeline is targeted at nearly all loans, including prime, alt-A, and second-lien mortgages.

In a press release, the Project Lifeline initiative will include every member of the HOPE NOW coalition — an additional 19 lenders and loan servicers.

Borrows who are seriously delinquent with the member lenders may receive letters notifying them of the program. They will need to call their mortgage company or broker within 10 days, agree to participate in financial counseling and provide financial information.

A loan that is 90 days or more delinquent is eligible for Project Lifeline unless the borrower is in active bankruptcy, if a foreclosure sale date is less than 30 days away, or if the home is an investment property or vacant.

Information about the HOPE NOW and Project Lifeline programs is available online at www.hopenow.com or by phone at (888) 995-4673.

Foreclosure Specialist

www.StopMichiganForeclosure.com 

269-685-5921

——————————————————

Kalamazoo Neighborhood Housing Services Inc.

802 S Westnedge Ave
Kalamazoo, MI 49008 Map

http://www.knhs.org/

By Les Christie, CNNMon

NEW YORK (CNNMoney.com) — Six of the nation’s largest mortgage lenders, in a joint effort to cool the raging foreclosure crisis, have agreed to temporarily stop foreclosure proceedings on homeowners who have fallen seriously behind in their house payments.

Under a program unveiled Tuesday, legal efforts to oust seriously delinquent borrowers from their homes will be postponed for 30 days while lenders and borrowers try to work out payment options.

The effort, known as Project Lifeline, will not be confined to borrowers with adjustable rate mortgages. So-called ARMs have recorded the highest rates of delinquencies, even as default for loans of all types have risen dramatically over the past couple of years.

“For many families, Project Lifeline will temporarily pause the foreclosure process long enough to find a way out. Loan modifications may follow,” said Alphonso Jackson, Secretary of Housing and Urban Development. “This program is not only available to subprime borrowers but to people with any kind of home mortgage.”

The banks so far participating in the program are Citigroup (C, Fortune 500), Countrywide (CFC, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Washington Mutual (WM, Fortune 500) and Wells Fargo (WFC, Fortune 500).

Project Lifeline was put together with the backing of Jackson, Treasury Secretary Henry Paulson and Faith Schwartz, director of Hope Now, the government-backed, foreclosure prevention coalition.

Paulson said the effort won’t be a magic bullet.

“There’ll be homeowners who still take no action, and some will still walk away,” Paulson said. “But some borrowers facing immediate foreclosures may find solutions.”

Throwing homeowners a lifelineUnder the program, homeowners 90 days or more behind in their mortgages will get a letter from their lenders asking them to call. Borrowers will be asked if they want to stay in their homes; if so, they will be offered financial counseling.Loan modifications are not automatically granted. Borrowers will have to provide up-to-date information about their wages and debts. At that point, the lenders decide whether to pause the foreclosure process.

During the moratorium, foreclosure prevention specialists will determine if there’s a good possibility that a loan modification will work. In other words, will a borrower be able to regain his footing and start paying his mortgage again?

Any loan modifications - such as lowering interest rates, balances or both - will be provisional. After homeowners make payments on time for three months, the changes to the terms of loans will become permanent.

For lenders, repossessing homes has become an increasingly unprofitable venture. As real estate markets have turned down, many at-risk mortgage borrowers are upside-down - meaning they owe more on their loan than their home is worth.

These days, lenders often lose money when they foreclose on and resell properties - an average of $50,000 per home. It’s cheaper to work out a deal with defaulting borrowers.

Reaction: Applause and questionsThe moratorium idea has been raised before.“Many people have been calling for a moratorium on foreclosures,” said John Taylor, chief executive of the National Community Reinvestment Coalition. “I look on it as a good thing.”

Last April, civil rights groups, noting that minorities were bearing the worst impact of the foreclosure crisis, called for a six month halt in foreclosure proceedings. In May, the California Reinvestment Coalition, a community advocacy group, lobbied state legislatures for a similar, statewide plan. This past December, Sen. Hillary Clinton went on record supporting a 90-day halt.

Jim Rokakis, treasurer of Cuyahoga County in Ohio, which has been hard hit by foreclosures questioned the initiative.

“Does this mean you’re going to do it again in 120 days?” he asked. Subprime resets will peak again in the spring and Hope Now’s effort includes notification of resets 120 days in advance.

“If they really want to make an impact they will require mandatory counseling before foreclosure can be completed. If you can’t do it, you can’t foreclose,” Rokakis said.

As the foreclosure crisis deepened - more than 2.2 million foreclosures were filed in 2007, according to RealtyTrac, an online marketer of foreclosure properties - government forces and industry players expanded the scope of prevention efforts.

Jackson, the HUD secretary, said that Project Lifeline is just one effort to tackle the mortgage crisis. He cited FHASecure, which is refinancing many adjustable rate mortgage borrowers into government insured fixed rate loans; a five-year rate freeze, brokered by the Treasury Department, for many subprime ARM borrowers; and the provisions of the economic stimulus package that increase cap limits for loans eligible for purchase by Freddie Mac and Fannie Mae.

“The sum total of these actions is a powerful correction to the downward spiral of the housing market,” said Jackson.

Still, the nation’s housing crisis is deep and unlikely to ease up soon.

“In terms of subprime, the worst is just beginning,” said Treasury Secretary Paulson. “The loans resetting over the next couple of years - that vintage was done under the most lax underwriting standards.”

ey.com staff writer

February 12 2008: 4:46 PM EST

January 23, 2008 LANSING - Following up on the nation’s most widely attended mortgage foreclosure forum in the nation, Attorney General Mike Cox today announced that his office is holding three more Avoid Foreclosure forums to help at risk homeowners. The new forums will be in Detroit on February 12, Saginaw on February 13, and Grand Rapids on February 14. Cox held the nation’s largest foreclosure forum in Detroit last month, where more than 4,200 homeowners had an opportunity to speak face to face with servicers and independent loan counselors. The forum is open to the public and free of charge.

“If you’re a homeowner who has fallen behind on your mortgage or are at risk of losing your home, then I encourage you to take advantage of this free forum to speak with your loan servicer or an independent loan counselor,” said Cox. “Michigan is currently second only to Texas in the number of foreclosures across the nation. I encourage all homeowners with questions to attend my free forum and learn how they can avoid foreclosure.” Cox organized the first “Avoid Foreclosure Forum” on December 13, 2007, at Cobo Hall. The forum brought together 21 of the nation’s largest loan providers and servicers, as well as 11 HUD-approved nonprofit agencies, representatives from OFIS (Office of Financial and Insurance Services), and local county treasurers’ offices.

As many as 23 servicers have indicated they will participate in the avoid foreclosure forums. For more information on whether your loan servicer or provider will be attending, please visit www.michigan.gov/ag and click on the Avoid Foreclosure button. Statewide, letters from the Attorney General will be mailed out to more than 30,000 homeowners over the next two weeks. These mailings include a letter from the Attorney General, a flyer for free parking, a brochure with tools and tips to help save your home, and a worksheet to help borrowers prepare for their meetings. Homeowners who receive the letters have been identified as persons with whom a lender would like to discuss possible remedies to help the borrowers avoid foreclosure.

“Foreclosure is a problem that affects everyone,” continued Cox. “My goal is to bring the servicers and homeowners together.” The forums will be held:

1. WHAT IS THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT?

Also known as HUD, the U.S. Department of Housing and Urban Development was established in 1965 to develop national policies and programs to address housing needs in the U.S. One of HUD’s primary missions is to create a suitable living environment for all Americans by developing and improving the country’s communities and enforcing fair housing laws

2. HOW DOES HUD HELP HOMEBUYERS AND HOMEOWNERS?

HUD helps people by administering a variety of programs that develop and support affordable housing. Specifically, HUD plays a large role in homeownership by making loans available for lower- and moderate-income families through its FHA mortgage insurance program and its HUD Homes program. HUD owns homes in many communities throughout the U.S. and offers them for sale at attractive prices and economical terms. HUD also seeks to protect consumers through education, Fair Housing Laws, and housing rehabilitation initiatives.

3. WHAT IS THE FHA?

Now an agency within HUD, the Federal Housing Administration was established in 1934 to advance opportunities for Americans to own homes. By providing private lenders with mortgage insurance, the FHA gives them the security they need to lend to first-time buyers who might not be able to qualify for conventional loans. The FHA has helped more than 26 million Americans buy a home.

4. HOW CAN THE FHA ASSIST ME IN BUYING A HOME?

The FHA works to make homeownership a possibility for more Americans. With the FHA, you don’t need perfect credit or a high-paying job to qualify for a loan. The FHA also makes loans more accessible by requiring smaller down payments than conventional loans. In fact, an FHA down payment could be as little as a few months rent. And your monthly payments may not be much more than rent.

5. HOW IS THE FHA FUNDED?

Lender claims paid by the FHA mortgage insurance program are drawn from the Mutual Mortgage Insurance fund. This fund is made up of premiums paid by FHA-insured loan borrowers. No tax dollars are used to fund the program.

6. WHO CAN QUALIFY FOR FHA LOANS

anyone who meets the credit requirements, can afford the mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan.

7. WHAT IS THE FHA LOAN LIMIT?

FHA loan limits vary throughout the country, from $217,075 in low-cost areas to $362,790 in high-cost areas. The loan maximums for multi-unit homes are higher than those for single units and also vary by area.

Because these maximums are linked to the conforming loan limit and average area home prices, FHA loan limits are periodically subject to change. Ask your lender for details and confirmation of current limits.

8. WHAT ARE THE STEPS INVOLVED IN THE FHA LOAN PROCESS?

With the exception of a few additional forms, the FHA loan application process is similar to that of a conventional loan (see Question 47). With new automation measures, FHA loans may be originated more quickly than before. And, if you don’t prefer a face-to-face meeting, you can apply for an FHA loan via mail, telephone, the Internet, or video conference.

9. HOW MUCH INCOME DO I NEED TO HAVE TO QUALIFY FOR AN FHA LOAN?

There is no minimum income requirement. But you must prove steady income for at least three years, and demonstrate that you’ve consistently paid your bills on time.

10. WHAT QUALIFIES AS AN INCOME SOURCE FOR THE FHA?

Seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, Social Security income, alimony, and rent paid by family all qualify as income sources. Part-time pay, overtime, and bonus pay also count as long as they are steady. Special savings plans-such as those set up by a church or community association - qualify, too. Income type is not as important as income steadiness with the FHA.

11. CAN I CARRY DEBT AND STILL QUALIFY FOR FHA LOANS?

Yes. Short-term debt doesn’t count as long as it can be paid off within 10 months. And some regular expenses, like child care costs, are not considered debt. Talk to your lender or real estate agent about meeting the FHA debt-to-income ratio.

12. WHAT IS THE DEBT-TO-INCOME RATIO FOR FHA LOANS?

The FHA allows you to use 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt. With a conventional loan, this qualifying ratio allows only 28% toward housing and 36% towards housing and other debt

13. CAN I EXCEED THIS RATIO?

You may qualify to exceed if you have:

a large down payment
a demonstrated ability to pay more toward your housing expenses
substantial cash reserves
net worth enough to repay the mortgage regardless of income
evidence of acceptable credit history or limited credit use
less-than-maximum mortgage terms
funds provided by an organization
a decrease in monthly housing expenses

14. HOW LARGE A DOWN PAYMENT DO I NEED WITH AN FHA LOAN?

You must have a down payment of at least 3% of the purchase price of the home. Most affordable loan programs offered by private lenders require between a 3%-5% down payment, with a minimum of 3% coming directly from the borrower’s own funds.

15. WHAT CAN I USE TO PAY THE DOWN PAYMENT AND CLOSING COSTS OF AN FHA LOAN?

Besides your own funds, you may use cash gifts or money from a private savings club. If you can do certain repairs and improvements yourself, your labor may be used as part of a down 8 payment (called -sweat equity”). If you are doing a lease purchase, paying extra rent to the seller may also be considered the same as accumulating cash.

16. HOW DOES MY CREDIT HISTORY IMPACT MY ABILITY TO QUALIFY?

The FHA is generally more flexible than conventional lenders in its qualifying guidelines. In fact, the FHA allows you to re-establish credit if:

two years have passed since a bankruptcy has been discharged
all judgments have been paid
any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue
three years have passed since a foreclosure or a deed-in-lieu has been resolved

17. CAN I QUALIFY FOR AN FHA LOAN WITHOUT A CREDIT HISTORY?

Yes. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details.

18. WHAT TYPES OF CLOSING COSTS ARE ASSOCIATED WITH FHA-INSURED LOANS?

Except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan outlined in Question 63. The FHA requires a single, upfront mortgage insurance premium equal to 2.25% of the mortgage to be paid at closing (or 1.75% if you complete the HELP program- see Question 91). This initial premium may be partially refunded if the loan is paid in full during the first seven years of the loan term. After closing, you will then be responsible for an annual premium - paid monthly - if your mortgage is over 15 years or if you have a 15-year loan with an LTV greater than 90%.

19. CAN I ROLL CLOSING COSTS INTO my FHA LOAN?

No. Though you can’t roll closing costs into your FHA loan, you may be able to use the amount you pay for them to help satisfy the down payment requirement. Ask your lender for details.

20. ARE FHA LOANS ASSUMABLE?

Yes. You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can often result in a lower interest rate. The application process consists basically of a credit check and no property appraisal is required. And you must demonstrate that you have enough income to support the mortgage loan. In this way, qualifying to assume a loan is similar to the qualification requirements for a new one.

21. WHAT SHOULD I DO IF I CAN’T MAKE A PAYMENT ON LOAN?

Call or, write to your lender as soon as possible. Clearly explain the situation and be prepared to provide him or her with financial information.

22. ARE THERE ANY OPTIONS IF I FALL BEHIND ON MY LOAN PAYMENTS?

Yes. Talk to your lender or a HUD-approved counseling agency for details. Listed below are a few options that may help you get back on track.

For FHA loans:

Keep living in your home to qualify for assistance.
Contact a HUD-approved housing counseling agency and cooperate with the counselor/lender trying to help you. HUD has a number of special loss mitigation programs available to help you: 1-800-483-2209

Special Forbearance: Your lender will arrange for a revised repayment plan which may Include temporary reduction or suspension of payments; you can qualify by having an Involuntary reduction in your Income or Increase In living expenses.
Mortgage Modification: Allows refinance debt and/or extend the term of the your mortgage loan which may reduce your monthly payments; you can qualify if you have recovered from financial problems, but net Income Is less than before.
Partial Claim: Your lender maybe able to help you obtain an interest-free loan from HUD to bring your mortgage current.
Pre-foreclosure Sale: Allows you to sell your property and pay off your mortgage loan ,to avoid foreclosure.

Deed-in lieu of Foreclosure: Lets you voluntarily “give back” your property to the lender; it won’t save your house but will help you avoid the costs, time, and effort of the foreclosure process.

If you are having difficulty with an-uncooperative lender or feel your loan servicer is not providing you with the most effective loss mitigation options, call the FHA Loss Mitigation Center at 1-888-297-8685 for additional help.

• More Options available of loan programs, better rates, less down payment
• A 1% difference in the rate of a $200,000 30 year fixed loan will cost an extra $60,840 in money thrown out the windo
• Credit score also affect your car insurance rate, your home owners insurance rate, even the ability to get a cell phone.
• Some employers also pull credit, so it may affect what job you get.

What Factors effect our credit score?

1. Payment History.  Has a 35% impact

• Paying on time has the greatest impact
• Late payments and charge offs are negative
• Missing a high payment hurts more than missing a low payment
• Lates in the last 2 years have more of an impact than old late payments

2. Outstanding Credit Balances

• Measures the ration between the outstanding balance and the available credit
• Keep balances as clsoe to zero as possible, 30% is one level, 50% is another and 75% hammers your score almost as much as a late.
• Better to have 3 $1000 card balances, than 1 $3000
• To raise score, either spread out your balances, or increase available balance, but don’t charge on that new available balance

3. Credit History. Has a 15% impact.

• Measures the length of time a particular credit line was opened.  The longer the better
• Don’t cancel cards that have a long history
• Don’t open new accounts

4. Type of credit, has a 10% impact.  Best to have a mix of auto loans, credit cards and mortgages, rather than just credit cards alone.

5. Inquiries. Has a 10% impact. Each credit pull can cost from 10 to 25 points on a credit score. Once there has been 10 pulls, no more pulls will lower the score more. If you pull a credit report on yourself there is no hit, and all pulls done by mortgage companies in a 14 period counts as 1 pull.

How about mistakes on credit reports, is that an issue?

• 79% of the credit reports contain a mistake of some kind
• 25% of the credit reports contain errors serious enough to result in the denial of credit 

So what kind of errors are we talking about here?  

• 54% of the credit reports contained long outdated, or belonged to a stranger
• 30% of the reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.  What do we do about those errors?

You can give me a call and I will give them a very simple process to get all errors off of their credit report.  Here are the 4 steps.

• Make a copy of the report and circle the items you are questioning. Keep your original copy for your own records
• Prepare a letter to the CRA (credit reporting agency) that provided you with the report in question, and request to have the erroneous items removed. If you have proof of payment for an item in question, include a copy of that documentation
• Prepare a letter to the creditor reporting the problem, especially if you feel you are a victim of fraud or identity theft. Inform the creditor that you are disputing an error reported to the CRA, state why the claim is inaccurate, and include any relevant documentation to prove your point
• Send your correspondence via certified mail.

 Could you give me a couple of sample insider secrets on how to raise a credit score? 

• Distribute debt from revolving credit.Our borrower, Mr. Jones, has a credit score of 664. He has five credit cards, but his Visa account is almost maxed out. His other four credit cards have relatively low balances. Mr. Jones moves the part of the debt from the Visa account to the other major credit card accounts, thus distributing the debt more evenly over five cards. This changes the ratio of debt to available credit (which has a 30% impact on the overall credit score), and Mr. Jones successfully raises his credit score by 20 points with very little effort.Example
• Transfer outstanding balances to new accounts.Our borrower, Mr. Smith, has only two credit cards, but both are pushing the limit of available credit. Mr. Smith opens two new credit card accounts, each with a credit limit of $5,000. He transfers part of his existing balances to the new accounts. While he has acquired two new cards that have no established history, the greater impact is the change in the ratio of debt to available credit.

Finally, could you give me some do’s and don’ts during the loan process in regards to our credit?

When you fill out a credit application, we run a credit report for the underwriter. Each lender and each loan program has different guidelines they must follow. You should not do anything that will have an adverse affect on your credit score while you are in the loan process. We know it’s tempting…if you are moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You’ll want to remain in a stable position until the loan closes and give us the opportunity to help you lock in the best interest rate we can possibly get for you.Don’ts:

• Don’t apply for new credit of any kind- if you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, etc
• Don’t pay off collections or charge-offs- once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan.. The lender is only looking at the last two years of activity.
• Don’t close credit card accounts – if you close a credit card account, it can affect your ratio of debt to unavailable credit which has a 30% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.
• Don’t max out or over charge existing credit cards – running up your credit cards is the fastest way to bring your credit score down, and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit cards below 30% of the available credit limit.
• Don’t consolidate debt to one or two cards – Once again, we don’t want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.
• Don’t raise red flags to the underwriter – don’t co-sign on another person’s loan, or change your name and address. The less activity that occurs while your loan is in process, the better it is for you.

Do’s:  

• Do join a credit watch program – your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. This can a safeguard to help you intervene before the underwriter sees the problem.
• Do stay current on existing accounts – late payments on your existing mortgage, car payment, or anything else that can be reported to a credit reporting agency can cost you dearly. One 30-day late payment can cost anywhere from 30 to 75 points on your credit score.
• Do continue to use your credit as you normally would – red flags are easily raised within the scoring system. If it appears you are diverting from your normal spending patterns, it could cause your score to go down. For example, if you’ve had a monthly service for internet access billed to the same credit card for the past three years, there is really no reason to drop it now. Again, make your changes after the loan funds.

Do call your loan consultant – if you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score, call us so we can try to direct you to the right resources and prevent any derogatory reporting to credit bureaus.  

Would you rate your credit: Good, Fair, Poor, or Excellent? AND, Why?
Do you know your credit score from all three major repositories: Equifax, TransUnion, and Experian?
Have you been more than 30 days late on your rent or mortgage?
Have you been more than 30 days late on your car payment?
Have you been more than 30 days late on your credit cards?
Do you have any collections, judgments, or liens?
Do you have any bankruptcies, foreclosures or repossessions?
Do you have student loans?
Do you have any debts from a previous marriage?
Do you have four lines of credit that are at least 2 years old?

Credit Score:
Most loans on the market today are credit score driven with the exception of FHA (one of the best loan programs on the market for people with minor issues that lower scores) and a very few non-conforming loans. Credit scores range from 300 to 850. A rule of thumb: The higher your score, less risk, lower interest and less down payment required. Lower scores could require a larger down payment and could have higher interest.

Credit scores are just one factor but here is the basic break down for loan qualification:

A score of 620 and above will get you into a conventional conforming loan with the lowest rates available (Fannie Mae and Freddie Mac). These rates are 1% above the 10 year T-Bill.

In the non-conforming market credit scores will determine your interest rate. You may be in this market for many reasons, not just score. It could be because; your loan amount exceeds conventional guidelines (jumbo), the house does not qualify, no down payment, high debt ratios, credit history issues, or you could be self employed and don’t show enough income to qualify.

Credit scores above 620 will get you the best rates in this market which is 1 to 2 points higher than the conforming market, depending on the type of loan you are getting.

Scores from 580 to 620 could put you as much as 3 to 4 points higher in rate, and you can still qualify for a zero down program.

If your score is below 540 you will need at least 20% down and the rate will be 4 or more points higher.

Credit Payment History:
Your payment history contributes about 35% towards your overall credit score but history is also a qualifying factor on it’s own. Underwriters look at the last 7 years and if there are no Glaring issues such as bankruptcies or collections or judgments they are most concerned with the last two years. This is what the underwriters are looking for:

Mortgage/Rent:
This has to be your number one priority. If you have been more than 30 days late on your rent or mortgage in the last 12 months you will not qualify for a Fannie Mae, Freddie Mac, or FHA/VA loan. Again, there are sometimes exceptions. If you have a very high score, lots of assets, and a legitimate excuse. If you can’t get a waiver for a late mortgage payment there are still loans available to you in the non-conforming market. The interest rate will depend on how many times you have been late.

Car payment/installment loans:
Your history should reflect no 60 day late payments and no more than one 30 day late to get a conforming loan. The non-conforming loans allow these and again the rate depends on how many late payments you have had.

Revolving accounts (credit cards):
You must not have any 60 day “lates” and no more than two 30 day “lates” for a conforming loan. Non-conforming loans do allow them and again the rate is dependant on the number.

Collections, Judgments, and Liens:
Fannie Mae, Freddie Mac, FHA and VA require that all be paid in full and they prefer that they be at least two years old. FHA will sometimes make an exception on the length of time or if they are on a current payment plan in which case all other things must be good. Typically, the non-conforming market does not care if they are paid off or not as long as they do not impact title. Some non-conforming lenders want them paid off if they are over a certain amount. This market is a maze of guidelines and they differ from one lender to another. This is another reason why you always want to use a broker.

Bankruptcy:
Fannie Mae and Freddie require 4 years from discharge date. FHA only requires 2 years and a good excuse, and reestablished credit. Actually, you can Qualify for an FHA loan if you are still in chapter 13 (for at least a year) have been paying on time through the courts, and you get court approval which does happen often!

Non conforming lender requirements vary quite a bit. As a general rule they do want to see reestablished credit unless you are putting 20% down. There are some lenders that will lend with one day out of discharge. Your credit score is very important on these programs. Again, you need a broker to sort out the details for you. Guess what, that’s free, and no obligation. They will look at your entire portfolio and if they can’t get you in something now, they will counsel you on the steps you need to take to get in a loan later. Be sure you seek out a broker that has ALL the products on the market including FHA.

Foreclosure:
Generally, a foreclosure of your primary residence must be at least three years old and have been caused by circumstances out of your control: such as, death of the primary wage earner, layoff, or long term serious illness. Non-conforming lenders do vary but will normally require a substantial down payment if it is less than 3 years old.

Repossessions:
The guidelines on this are about the same as a foreclosure except that it cannot have a deficiency balance for a conforming loan. The non-conforming market doesn’t care about the balance if it is more than three years old and again, their guidelines vary from one lender to another.

Student Loans:
Defaulted student loans will haunt you for the rest of your life. Unless they are re-affirmed or paid off you will never get a conforming loan. However, the non-conforming market generally does not care about them at all except in extreme cases to the tune of $50k or more.

Previous Marriage??:
Be careful here. The conforming market could care less about your divorce agreement with respect to your debt. If you signed, you are still accountable. FHA will sometimes make a wavier if you can show the divorce decree that states it is the other parties responsibility and all other things are good. (these debts will also affect your debt to income unless you can prove the other party is paying with 12 months cancelled checks.) The non-conforming lenders will normally except the divorce decree.

Credit Depth:
Generally this term refers to how many trade lines you have, how long you have had them and their amounts. Most lenders want to see at least a two years history and at least 4 trade lines. Some require one of those trade lines to have had a balance over a certain dollar amount ($5,000). In the non-conforming market these requirements vary between lenders.

You can see how poor credit will cost you a lot of money in higher interest. It is important to take care of your credit and monitor often as it sometimes contains errors.

The first thing you should do is order your credit report from each repository (credit reporting agency). Make sure you only order reports that include your score. Your score is very important and you must know what it is. The three major companies are Equifax, TransUnion, and Experian. These are the three companies that major lenders use. They have very informative sites that will explain how credit scores are developed and what they mean. Each also has online communication so you can dispute any errors that may show up. You should start the correction process as soon as possible because it can take several months to get them fixed.

Now lets focus on raising your score

Unpaid Collections Charge Offs or Judgments:
This is really trickey, should you pay these off or leave them alone? If they are more than three years old you might not want to pay them off because the “date of last activity” impacts your credit score. And, the type of loan you are getting may not require it. If the lender does require payment perhaps it can be done at closing through escrow. These items will stay on your report for 7 years from the date of the last activity.

Sometimes the creditor you owe will accept a lesser amount and settle the account showing it paid. If you do this, make sure you get it in writing. When you pay them do it with a cashier’s check and keep a copy of it with your written agreement. It will still be on your report but it will show being paid.

Late Payments:
If they are correct you can’t really fix them but you can increase your score if you start paying on time, consistently!

Major Credit Cards:
Too many credit cards even if they show a zero balance will lower your score and increase your debt ratios. Close some of them out, but keep in mind that the older accounts improve your score as far as capacity and age of the account. Never allow your balance to go over 30% of your available limit. You should never consolidate debt to one or two cards for this reason.

Department Stores:
I knew a lady that had over 15 department store accounts. They all had very small balances. Even though she paid on time her score was low because she had so many. Close some of them out, but keep in mind that the older accounts improve your score as far as capacity and age of the account.

New Accounts:
If you already have established credit and credit depth, don’t open any new accounts. Every time you apply for credit an inquiry is placed in your file. Too many will lower your score. Be aware that when you finance an auto through the car dealer they broadcast your application to MANY lenders who each pull your credit. I recommend you get a car loan pre-approved at your bank before you go shopping for a car.

No Credit:
Unfortunately this is as bad as poor credit. Start off slow with a credit card. Never miss a payment. Maybe a well-known department store. Then a car loan. Make sure your debt to income ratio stays below 36% (including your rent). If you don’t have rent or a mortgage keep your ratio below 10%.

Many people are sometimes confused and even misinformed on what these three terms really mean. A conventional loan is any loan that is not insured by FHA or guaranteed by VA.

A Conforming loan is a loan that meets strict standards concerning loan amount, down payment, income, credit history and property condition. These loans have the lowest rates available, Fannie Mae and Freddie Mac.

Non-conforming loans are those that do not fit into these strict standards and of course they have slightly higher interest rates.

Which mortgage loan is right for me?

FIXED RATE (10, 15, or 30 YEAR) There is very little risk with a fixed rate loan as the interest and payments stay the same. If you can qualify for a shorter term, 10 or 15years, it will save you a small fortune in interest over the life of the loan. Keeping that in mind, a fixed rate mortgage should only be considered if you are planning on staying in the home for 10 years or longer. If not, an adjustable rate mortgage might really be better for you.

ADJUSTABLE RATE loans generally have a lower interest rate than a fixed rate but they are riskier because the rate adjusts to the market and your payments will change. There are only two reasons to get into an adjustable rate mtg. To qualify for a bigger house… lower rate and payments, or if you know you are going to be in the house for a specified period of time. If you know you are going to move in three yrs then a 3/1 arm would be good for you. A 3/1 is fixed for 3 yrs then adjusts every year after that. So… You would have a lower rate and would move before the rate starts adjusting. Adjustable rate mortgages come in all shapes and sizes; 1 year, 3/1, 5/1, 7/1, 10/1. Be sure to give yourself enough room for delays in your plans. Be aware some of these loans have a prepayment penalty you need to ask about.

BALLOON MORTGAGES are very very risky loans. If anything happens in your life that changes your ability to pay off the balloon or refinance it, you could lose your home. It happens! Balloons usually have lower rates and the balloon or balance is due in 5, 7, or 10 years. Which ever you choose. When the balloon is due and you refinance, you will have to pay closing cost on a new loan so I’m not sure you will really save any money on the implied lower rate.

Besides standard loan programs, there are a large number of unique programs:

· 0 down payment
· Piggyback loans 80-10-10 or 80-15-5. No PMI payments even with 5% or 10% down.
· No income, No asset verification
· Lease Purchase
· Debt consolidation programs
· Home Improvement loans
· Home Equity Line of Credit
· Stated Income

FHA loans are some of the best loan products on the market. If you have slightly less than perfect credit you may still qualify for these loans. The rates may be slightly higher than conventional/conforming loans, but MUCH lower than nonconforming loans. They require only 3% down payment and have special programs that will allow the 3% down to be a gift. FHA is really a blessing to a large percentage of homebuyers. In fact, that is why they were created, to expand the American dream of home ownership. Even low credit scores will work with FHA if payment history and other guidelines fall into place. FHA does allow some late payments. Believe it or not, …it is possible to get a loan with FHA even if you are in chapter 13 bankruptcy!!

FHA guidelines are very complicated and so different from conventional loans that I could never cover it all. That is why it is so important that you find a mortgage company that offers FHA loans. Not all mortgage companies or banks do them because they are so different and because they must be specially approved to offer these products.

If you go to a company that does not offer FHA. You could be put into a loan with a much higher rate than you qualify for. I have seen it countless times!!

VA Loans: VA loan credit requirements are much stricter than FHA and closely resemble conventional loans. I think the only major advantage to VA is the zero down payment requirement, and you can refinance VA to VA quickly at a much lower cost. . VA loans may take longer to close than other loans and their appraisal and inspections requirements are also very strict. Many sellers will not consider selling VA because of the home repairs and red tape.

• 2ND Mortgages
• High Interest Credit Cards
• Pool Loans
• Personal Loans
• Student Loans
• Medical Bills
• Car Loans
• Boat Loans
• Furniture Loans…
• …and much more!

Equity can also be ” Cashed Out ” from a refinance loan and used in full or in part for home improvement, or even deposited into 401k investments, or stocks/money market funds

Some of the key advantages associated with Debt Consolidation;

• Paying off high interest rate credit cards.
• One loan, with one low monthly payment.
• Interest portion of mortgage payments are tax deductible.
• 2ND Mortgages can be rolled into the reduced rate 1ST Mortgage. 

There are no significant drawbacks to Consolidating Debt, or cashing out equity. However, it should be noted that a considerable amount of equity is necessary to maximize the potential benefits and savings.

First, make sure your credit history is being reported accurately. Don’t be fooled or ripped off by companies that will charge you a lot of money and promise to remove negative credit from your report. You cannot remove accurately reported information. But, you can make sure what is there is correct. And there are ways to improve your score. The section on credit repair goes into greater detail and will show you how to do this. Remember, You can do it yourself.

FUNDS TO CLOSE:
The money you are going to use for your down payment and closing cost typically have to be sourced and seasoned for three months. If you already have your money in an institution (bank, CD, 401k,) you are ok. However, if you have $20,000 under your mattress and intend to buy a house with it today, you would be turned down. Lenders must see that you have had the money for three months, they must see where it came from. So, put the money in the bank and leave it there for three months. Some loan programs will allow a gift. (FHA and a few non-conforming lenders) However, even the gift must be sourced and seasoned in some cases. The are a few programs that do not source and season funds but the interest rate is considerably higher.

RENT:
If you are renting your home or apartment, ALWAYS pay by check. It is the only way you have proof that you paid on time. Some loan programs require twelve months cancelled checks! I have seen people turned down because they can’t produce 12 cancelled checks. Money orders usually will not work. And of course, Always pay on time.

MORTGAGE:
The same applies here as rent payments, ALWAYS pay by check. If a lender miss-reports your payment history, cancelled checks are the only way to correct it. Or if your mortgage is with a private party the cancelled checks will be mandatory.

BILLS:
Calculate your debt to income. If it is a little high, pay off some of your smaller bills. Installment loans are not counted if you owe less than 9 payments. Revolving accounts must actually be closed or the minimum payment will be used to calculate your DTI even if you have a 0 balance. Lenders don’t like to see a lot of revolving accounts. Get rid of them. It will also increase your credit score.

COLLECT YOUR DOCUMENTS:
You will be required to bring to your broker the following documents. They cannot even start your loan without them and they must see the originals so don’t bother making copies, your loan officer will do that for you. Don’t leave the originals with them. You will need to collect: 3 months bank statements, all pages, all accounts. Last 2 years W2’s and or complete tax returns if you are self employed or paid on commission. One full month of pay stubs from your job. Divorce papers. Bankruptcy papers. 12 months cancelled checks if your rent/mortgage is paid to a private party. There may be other documentation requirements depending on the type of loan and your situation.

DON’T:
Change Jobs. Open any new accounts. Be late on any payment. Have any NSF checks show up on your bank statements.

DO:
Make your mortgage payment. No matter what your loan officer tells you or when you think your new loan is going to close. ANYTHING can happen and if your loan is delayed, and your payment shows up late not only will your credit suffer, but you may no longer qualify for the new loan.

Here is the process:

APPLICATION:
The application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements. (Bank statements, pay stubs, W2s, etc…) Obviously if you are doing this through the mail it can take a week or more but if you go into the office it usually only takes an hour or so. You should understand that the next process cannot begin until these documents are completed and or received.

PROCESSING:
When all of your documentation is received it then goes to a processor who verifies and validates all of the information to be true and correct. Verification requests may be sent to your employers, mortgage holder/landlord and lending institutions. This is done by fax when possible. It is usually during this time frame that the appraisal and the title policy are ordered. When all the information is collected the processor then verifies that basic lender loan requirements have been met, then the file is packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department either in house or to a lender-specified location. The processing of your loan usually takes about a week but it is often delayed when third parties do not respond to the validation requests or appraisals are delayed. If your loan qualifies for DU (Desk top Underwriting) or Loan Prospector, these are computer automated systems, the documentation requirements are often cut in half and the process can be completed in one to three days depending on the volume of loans the processor has.

UNDERWRITING:
The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit. And, anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded I have seen it take two weeks but under normal conditions it only takes one to three days.

AUTOMATED UNDERWRITING:
Most lenders today use Automated Underwriting (by computer).The advantage is less documentation and it speeds up the process. The computer actually makes the approval decision and the underwriter only reviews the supporting documentation and the appraisal. However, if any documentation is missing, inaccurate, or does not agree with the 1003 (application), the loan will be kicked out of this system until documentation requirements are met or the loan is turned down or resubmitted. This can cause delays but they are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours. But, ..If the market is flooded expect it to take longer.

CONDITIONS TO CLOSE:
When the underwriter is done reviewing your loan she will send “conditions to close” to your loan officer. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and “clear to close”.

CLEAR TO CLOSE:
When the loan officer gets the clear to close he then schedules and coordinates with all the parties the time and location to sign the final documents to close the loan. This normally only takes an hour.

DRAW DOCUMENTS:
When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery, fax, or electronically. It can take one to two days. You meet, sign the papers, and pick up the keys. 

1. You need to find out what your home is actually worth?  Use a local appraiser or your local Mortgage banker may be able to help.

2. You need to get approved for that amount or 97.75% of the appraised value, your best bet is an FHA loan which will allow you to refinance up to 97.75% of the value of your home into one 30 year fixed rate loan. There are other options but this is by far the best program for you.

3. Give your lender a call letting them know that your home is only worth a certain amount but less than what you owe, tell them that you are approved for 97.75% of the appraised value and that you have to refinance that amount into a new fixed rate mortgage or you will loose the home. Hopefully the lender will agree to hold a 2nd for the difference of the appraised value and what is owed and put the difference into a fixed rate 2nd Mortgage like the first.

You ask why would the lender except this? Put your self in there shoes, I (The Bank) have a good client that is paying which is you and they (the client) might loose the home if I don’t allow this to happen. If I don’t allow it to happen (the bank) then I could loose 10-40k what ever the amount might be. You are giving the bank a win / win solution. They help you keep the payment down allowing you to keep your home and the bank gets to keep you as a client and not loose a bunch of money. They are not into taking back homes and selling them they are in the business of lending money.

I hope this idea help you get out of your adjustable rate mortgage and saves your home. Please give me a call if you have any questions or need my assistance with any financing needs.

In a financial version of Night of the Living Dead, debts forgiven by bankruptcy courts are springing back to life to haunt consumers. Fueling these miniature horror stories is an unlikely market in which seemingly extinguished debts are avidly bought and sold.

The case of Van Rathavongsa illustrates how canceled debts regain vitality. The Raleigh (N.C.) factory worker pulled himself out from beneath a mountain of bills by means of a bankruptcy proceeding that wrapped up in 2002. One of the debts the judge canceled, or “discharged,” was $9,523 Rathavongsa owed to Capital One Financial (COF), the big credit-card company. But Capital One continued to report the factory worker’s discharged debt to credit bureaus as a live balance, according to documents filed in U.S. Bankruptcy Court in Raleigh…To obtain the home loan, Rathavongsa eventually did what many consumers in this situation do. He gave in and paid Capital One $9,523 he no longer legally owed.

The full article can be found here:

Prisoners of Debt

It’s actually quite scary to think about some of the tactics that these institutions are utilizing. If you are in a similar situation and have some questions please feel free to contact me. I am not an attorney but have had a fair amount of experience working with clients to improve their credit. If it’s beyond my area of expertise I will happily refer you to a qualified attorney.

7 Commonly Asked Questions that you should know the answer to.

1. How Much money can I receive?

• The amount of money you receive is dependent upon several factors: your age, the value of your home, current interest rates and the specific plan your choose.  Your loan advisor can help you determine which plan best meets your needs.  While each individual’s situation is different, as a rule of thumb the older you are and the higher your home’s appraised value, the more money you receive.

2. What are the Costs?

• costs vary from one program to another,  That’s why we offer a variety of programs to meet a variety of needs.   Most reverse mortgages, however, have costs similar to traditional mortgages such as interest charges, origination fees, closing costs, inspections and insurance.

3.  When does the loan become due and payable?

• As long as property taxes and home insurance are paid, and the home is kept in good working order, the loan is due and payable when the borrower sells the property, permanently leaves the home, or passes away.

4.  Can we make the process easy?

• We have worked hard over the past several years to simplify the process.  We believe the first step is the most imporant.  That’s when you and your loan advisor review your goals and objectives and decide which plan best meets your needs.  Once you are comfortable that you are making a good decision the process moves forward.

5.  Who Should I look to for Advice?

• Decide who you trust, then discuss your intentions with them.  It may be your attorney, a financial advisor, AARP, a family member or close friend.  We want you to feel confident in your decision.  Even if you don’t go through me I would be happy to answer any questions you might have about the program.

6.  Are there any restriction on what I can do with the money?

• You can use the proceeds to whatever end you choose.  After all, it is your money.

7.  Whose name is on the home’s title?

• Yours.  The borrower retains title to the property.  A reverse Mortgage is a lien just like a traditional mortgage.  It’s your money, your title and your home.

Most us us love our home.  We have put a lot of ourselves into it.  Perhaps raised our families there, worked hard to keep it in good repair, lived, loved, laughed and cried there.

     Our home is one of the biggest financial commitments we make.  And it represents one of our biggest and often most overlooked sources of extra income.

     the ability to remain in our home while taking care of ourselves financially is important.  A reverse mortgage could give many of us that opportunity.  If you own your home outright or have built up equity, and if you could benefit from extra cash to supplement your existing income, reduce credit card debt, cover medical expenses, help a loved one or just enjoy life a bit more, a reverse mortgage may be right for you.

The good news: The plan will reach far more struggling homeowners than housing counselors have been able to help so far (they’ve been negotiating with mortgage servicers on a case-by-case basis). That’s thanks to the specific guidelines established by the American Securitization Forum, the organization that represents mortgage issuers, servicers and investors. Servicers will now be able to quickly determine which homeowners qualify for help and the type of help they will receive, based on specific factors like the type and size of their mortgage, their payment history and FICO scores.

An estimated 1.2 million homeowners could qualify for help under this plan, according to the Homeownership Preservation Foundation, which negotiates on behalf of consumers. Some will be able to refinance into loans with better terms, while others will qualify for a much quicker five-year freeze on their current mortgage rates.

However, many homeowners — particularly those already in trouble — will not be eligible for any help at all. Here are the criteria homeowners have to meet to qualify and the solutions available to them.

The basics

To qualify for assistance from your mortgage servicer — the company that receives your payments and disburses them to investors — you will have to hold a subprime adjustable rate mortgage, or ARM, that has an initial fixed-rate period of three years or fewer. (This includes the so-called 2/28 and 3/27 mortgages, which carry fixed rates for the first two or three years, respectively, that then reset to higher levels afterwards.)

Your loan must have originated between Jan. 1, 2005, and July 31, 2007. More importantly, your initial reset must occur between Jan. 1, 2008, and July 31, 2010. This leaves out the hundreds of thousands of homeowners who have already faced a rate reset this year, including those who took out 2/28 loans in 2005.

If I am the one to receive the home in the settlement, does it make sense?  Take into consideration home size, utilities, payments, family needs, etc.  You will now be entirely responsible for the house payment, upkeep and other related bills.  Your income will most likely be decreasing, so it is imperative that you be aware of what your expenses will be.

Will my spouse receive marital interest in the home?   If so, the equity in the home needs to be determined by an appraiser.  The appraised value - less the costs of selling (commissions and seller closing costs) equals equity to be split between the parties.  This is the amount you will be obligated to give to your ex-spouse.

With the divorce, your spouse may put a marital lien on the property or there may be a court ordered mandate for distribution of the equity.  This means that you have a specified amount of time to obtain the funds needed to give the ex-spouse their portion of the equity.   This can be done by cashing out the equity in the home with a new mortgage or selling the home.

If you choose to stay in the home, you have two financing options to pay your ex-spouse.  You can refinance your home to get cash out or you can obtain a new home equity loan.  This is where you will want the advice of a trusted mortgage professional. 

There are specific rules to qualifying for a new mortgage.  With good credit and income you can qualify on your own (child support and alimony can be counted if received for three months and likelihood of continuance for at least three years.) 

What if I am the one leaving the home?  It is important to know that even though the divorce decree awarded the home to your spouse, you are still obligated for this debt in the eyes of the mortgage company! 

Many people assume that by filing a quit claim deed removing themselves, they are no longer responsible for the mortgage.  A quit claim eliminates your name from the title of the property, not the mortgage.  The benefit of a quit claim deed is that if the one on title passes away, the property will go to their heirs rather than the ex-spouse.

 How might it impact my credit - what can I do?  Unfortunately for many, divorce is a time of great financial hardship and credit challenges.  Because you are obligated on the mortgage until it is paid in full, it is imperative that the person responsible for the payment remains current.  One possibility you have is to do a name delete assumption.  If this is done as a none-qualifying assumption, the spouse not receiving the property can have their name removed from statements, but the financial obligation remains the same.  This process can also be used if you are staying in the property and changing back to your maiden name or a new married name.  There is a way to do a qualifying name delete assumption that would relieve the non-occupying spouse from their obligation, but you would have to check with your mortgage servicing company for their procedure and fees. 

What about if I want to go buy a home – am I still obligated because I am on the other loan?  Once you have your final divorce decree, a lender will look at your income and credit to qualify you on your own.  Again, in most situations, child support and alimony must have been received for three months and have at least a three year likelihood of continuance for this income to be used for qualifying.   If the divorce decree states that you are not obligated for the mortgage and the mortgage on the home awarded to your ex-spouse has not been delinquent during the last 12 months, you may be able to qualify without this obligation.

If you want to purchase a home prior to the divorce becoming final, you may be allowed to do this, but be aware that since you are in a community property state your spouse will have a marital interest.  Be very careful with this situation!  You will also have to qualify with the full debt from the current home because there is not a final divorce decree

Taking the time to talk with a mortgage lender before your divorce or before you decide to start looking at a new home can help eliminate much of the concerns and problems that surface in these situations.  Choosing to work with a Trusted Advisor as a mortgage lender is crucial to your financial well being.  Especially during this difficult time.

Take advantage of our FREE mortgage analysis and financial consultation.  Let me help you with all your homeownership needs.

Scott’s Answer:  This is a common problem many people face in a divorce. A court order directing division of the equity of the home in no way affects an outstanding mortgage. To change the mortgage, there needs to be a re-finance or a sale. There is no other solution. If your husband was ordered to assume the mortgage, it was his responsibility to refinance. Should he fail to make mortgage payments and if the bank should come after you, your recourse would be to take him back to court to compensate you for what you were forced to pay the mortgage company.  The bank had no responsibility to explain the situation to you - this is why you need a lawyer in a divorce. 

1. Which Type of Loan is Best?

Reputable lenders will find out more about you before throwing out loan options. You wouldn’t expect a doctor to suggest surgery before she assessed your medical situation, would you? Choose a lender who gathers enough information from you before she suggests a certain type of loan. Don’t be afraid to ask a lender to explain the pros and cons about:

• Fixed Rate Loans 
• Adjustable Rate Loans 
• Interest Only Loans
• Negative-amoritization loans

2. What is the Interest Rate & Annual Percentage Rate

The annual percentage rate (APR) is derived by a complex calculation that includes the interest rate and all the other related lender fees divided by the loan’s term. However, bear in mind that:

• Many lenders do not compute APR correctly.
• There is no way to accurately compute an APR rate for an adjustable loan.
• It does not account for early payoffs.

If your interest rate is adjustable, ask about its:

• Adjustment frequency
• Maximum annual adjustment
• Highest Rate (Cap)
• Index
• Margin 

3. What are the Discount Points and Origination Fees?

Each “point” is equal to 1 percent of the loan amount. Therefore, 2 points on a $100,000 loan cost $2,000.

• Sometimes lenders charge origination fees in addition to points.
• Points “buy down” the interest rate, meaning the more points you pay, the lower the interest rate.
• Points are also tax deductible, even if the seller pays some or all of the points.

4. What Are All the Costs?

All the costs of a loan include not only fees that go into the lender’s pocket but also related third-party vendor fees such as:

• Appraisal
• Credit report
• Lender’s title policy
• Pest inspection report
• Escrow (where applicable)
• Recording Fees
• Taxes

An estimate of these fees constitutes the Good Faith Estimate or GFE, which the lender is required by federal law to give to you.

5. Will the Lender Guarantee the GFE?

According to the Real Estate Settlement and Procedures Act (RESPA), lenders have three days after you’ve applied for a loan to give you the Good Faith Estimate, containing all the costs of your loan. Points to consider:

• Since lenders are not required to guarantee GFEs, this document is worth about the cost of the paper on which it is printed.
• However, there is a lot of pressure on lenders by consumers to guarantee their GFEs.
• If your lender refuses to stand behind its estimate, go elsewhere.

6. Do You Offer Loan Rate Locks?

Interest rates fluctuate and change daily. If you have reason to believe that interest rates are moving up, you might want to lock your loan. Lenders typically charge zero to one point to lock a loan rate and points. Ask your lender:

• Do you charge a fee to lock my interest rate?
• Does the lock-in protect all the loan costs?
• For how long will you lock this rate?
• Will you give me the loan lock in writing?

The alternative is to pay the prevailing rate and points on the day your loan funds.

7. Is There a Prepayment Penalty?

In some states, prepayment penalties are no longer allowed, so ask. Typically, prepayment penalties let the lender collect an additional six months of “unearned interest” if you pay the loan off early through a refinance of sale of the property. Be sure to ask:

• How much is the prepayment penalty?
• What are the terms of the prepay? Some are in effect only during the first 2 to 5 years of the loan.
• Would the prepayment penalty apply if I refinanced through you at a later date?

8. Are You Equipped to Approve Loans In-House?

Underwriters review loans and issue conditions before approving or rejecting a loan.

• Ask if a lender can handle its own underwriting.
• VA and FHA Loans typically take longer to process, but some lenders meet government requirements to automatically approve or disapprove a loan without sending it to the VA or FHA.

9. How Much Time Do You Need to Fund?

Average loan processing time periods fall between 21 and 45 days. To properly write a purchase contract, you will need to include a closing date, and that date should be coordinated with your lender. Find out:

• What is your anticipated turnaround time?
• What obstacles could possibly hold up closing?
• How long after final application approval will the loan Fund?

FHA loans are becoming popular again! It’s an institution that has been around for a long time, since June 27, 1934. The Department of Housing & Urban Development folded the Federal Housing Administration (FHA) under its umbrella in 1965.

FHA loans began to lose favor in the late 1990s, when home values began to inch upwards, surpassing FHA mortgage limits, and sellers balked at FHA’s stringent appraisal guidelines.

How FHA Loans Work
Now, FHA does not make loans or guarantee loans. It insures loans. The insurance removes or minimizes the default risk lenders face when buyers put down less than 20 percent. Without further approval from FHA, its approved lenders are authorized to:

• Take loan applications
• Process loan applications
• Underwrite and close the loan

It’s almost inconceivable to think of a home costing that today. As a result, FHA periodically increases its mortgage limits. As of July, 2006, mortgage limits range from:

• $362,790 for high-cost areas
• $200,160 for low-cost areas
• $544,185 in Alaska, Guam, Hawaii and the Virgin Islands

Blemished Credit History
If your credit is less than perfect, FHA might be the loan for you. You may qualify for an FHA loan even though you have had financial problems.

• Fico Scores do not apply.
• Bankruptcy. You can obtain an FHA loan two years from the date of your bankruptcy discharge, as long as you’ve maintained good credit since your debts were discharged.
• Foreclosure. If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you two years from the final date of your foreclosure.

Competitive Rates & Terms
Today’s terms are pretty straightforward. In fact, in many markets the rates and terms are better than those for 80% / 20% Piggy Back loans.

• There is little or no adjustment to the interest rate for an FHA loan, as the rates vary within .125 percent of a conventional loan.
• Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance premiums.
• Borrowers can finance 97% of the purchase price and put down 3 percent. In some instances, when combined with other types of loans, the down payment can be zero.
• Allowable debt ratios are higher than the debt-ratio limits imposed for conventional loans.

Fewer Required Repairs
At one point, FHA repair demands were so excessive that sellers would discount the list price to buyers who would agree to obtain conventional loans over FHA loans. Today the requirements appear more reasonable.

• Defective roofs that leak still need to be replaced but an older roof does not necessitate replacement if it doesn’t leak.
• Windows that stick upon opening or have cracked panes do not require replacement.
• FHA appraisals do not take the place of a home inspection, never have. Buyers should still obtain a professional home inspection.

FHA loans are available to anybody but are used most often by first-time home buyers and low- to moderate-income buyers.

1. The mortgage being refinanced must be a non-FHA ARM that has reset.
2. The borrower’s payment history on the non-FHA ARM must show that prior to the reset, the borrower was current in making monthly mortgage payments.
3. Under certain conditions, if there is sufficient equity in the home, FHA will insure mortgages that include missed mortgage payments. FHA will permit first liens, purchase money seconds, closing costs, pre-paids, discount points, prepayment penalties and late charges. The amount of the FHA Secure Mortgage may not exceed either the geographical maximum mortgage limits or the standard maximum LTV ratios set by FHA.
4. Lender must document that the reset of the non-FHA ARM monthly payments caused the borrower’s inability to make the monthly payments and that the borrower has sufficient income and resources to make the monthly payments under the new FHA insured refinance.
5. FHA encourages the use of Total Mortgage Scorecard to obtain risk classification. If TOTAL renders an “accept/approve”, the underwriter will not need to perform review of the borrower’s credit history and capacity to repay. In the more likely event that the risk class is a “refer”, the underwriter must determine borrower has the capacity to pay, and ratios should remain 31/43. Compensating factors are to be provided to underwriter when ratios are exceeded.
6. The FHA Secure initiative is for refinancing borrowers that were harmed by non-FHA ARMs that have recently reset. It is not to be used to solicit homeowners to cease making timely mortgage payments. FHA reserves the right to reject applications where it appears that a loan officer or other mortgage employee suggested that the homeowners could stop making their payments; refinance into an FHA insured mortgage and keep the amount of payments not made on time.

Amerifirst Home Mortgage also notes that this program is temporary and requires applications be signed no later than December 31, 2008.  This program subject to change at anytime.

But why is HUD trying to shut these programs down when their name just sounds so good…”down payment assistance”? 

You first have to understand how the DPAs work with FHA financing. 

With FHA, the buyer is required to have 3% into the deal.  When the borrower lacks 3% to put into the deal the obvious answer in the FHA world is to utilize a DPA program.
The DPA would provide the buyer their 3% investment in the form of a gift, from a non-for profit organization.  In return the seller would pay the DPA program the 3% plus a fee. 

So what would the seller do? 

They would either, A) raise the price of the home to cover the DPA costs or B) not lower the price as much as they would have, to cover the DPA.

So in essence, the buyer was obtaining 100%, which is not something FHA wants — or will want (I’ll be discussing possible changes to FHA in a future blog).

In the past, when prices of homes were appreciating rapidly, this would not normally be a problem.  In many cases, by the time the deal actually closed, the 3% had been earned (and then some) and the buyer would have equity built in already.  However, now the market has turned and home prices are now stagnant to declining in most markets across the country. 

In today’s market, if a buyer uses a DPA to get into a home, by the time the home closes now, it may be worth less than what it was when they purchased the home.  If the buyer were to be forced to sell the home, they would not be able to sell it for what they paid for it.  In those cases the buyer/borrower is more likely to just walk away from the home.

This issue with DPAs is not a new one.  It has always been a hot button issue with HUD.  But when the market was good, it was easier to overlook.  Now is the appropriate time to examine what can be done.

With the market changing and FHA financing coming back onto borrowers and lenders radar, changes to the DPAs had to come.  What the ultimate outcome will be is yet to be seen, but it does not look good for Ameridream and Nehemiah.  You may still be able to take advantage of these programs for the next few months, but maybe not much longer.  The elimination of the DPAs is sad, as the program has helped hundreds of thousands of people get into their homes. 

It is also another reason that FHA must change to be more accommodating to those with lesser means.  FHA must modernize, to be able to continue to provide homeowners and lenders the types of financing that is attractive to both.  Look for more information about “FHA Modernization” soon to come.

But how do you compare rates to know if you’re getting a good deal on a refinance? The best way is to compare Good Faith Estimates and work with a reputable lender who will guarantee its fees to refinance. Not all lenders will stand behind Good Faith Estimates and there are no laws at present that require it, which means the estimate borrowers receive might not mean diddlysquat . . Let me look at what your doing even if I’m not doing your loan to make sure what your doing is in your best interest.

http://www.epa.gov/iaq/radon/pubs/hmbyguid.html

Most people don’t realize that over 90% of business credit cards do not get reported to personal credit reports. If they are not reported, they are not scored, period.

Many people run their businesses from their personal credit cards and as a result their credit score suffers. You don’t need a big company to get approved for a business credit card; it is much easier to get approved than most people think.

Once approved, you can move your personal credit card debt over to the business credit cards and watch their credit score go through the roof once everything is updated on the credit report.

You need to pick your battles as to which accounts you focus on during the credit crunch to assure your credit score increases enough for you to get their loan approved.

When payment is made on a collection account that is less than 24 months old, the score will either stay about the same or increase a few points. Settling in exchange for deletion is ideal, but not always possible. Given the fact that the collection account will keep selling to other collection agencies in the future, it is best to deal with it while it is still young.

Once an account goes beyond 24 months you need to be careful when settling because the account may erroneously have the date of last activity updated to the current date and bring the score down as a result.

Within the delinquent accounts on your credit report, there is a column called “Past Due”. Credit Scoring software penalizes clients for keeping accounts past due, so past dues destroy a credit score.

If you see an amount in this column,  pay the creditor the past due amount reported, unless that amount belongs to an account that is charged-off or in collection. If that is the case, use the advice in number 1 above to determine the best action.

Your need to be persistent if they refuse to remove the late payments at first.  You should remind the creditors that you have been a good customer and would deeply appreciate their help.

Credit scoring software likes to see borrowers carry credit card balances as close to zero as possible and also see that you have been trusted with a lot of credit - which is why increasing their limits is good.

If your can’t afford to pay down your credit card balances, evenly distribute your credit card balances among all of your credit cards rather than carry a large balance on one credit card to maximize their score.

Closing a credit card can hurt your credit score, since doing so effects your debt to available credit ratio. For example, if you owe a total credit card debt of $10,000 and the total credit available is $20,000, they are using 50% of the total credit.

If you close a credit card with a $5,000 credit limit, you will reduce you credit available to $15,000 and change your ratio to using 66% of their available credit.

15% of a credit score is determined by the age of the credit file. Fair Isaac’s credit scoring software assumes people who have had credit for a longer time are at less risk of defaulting on payments. Therefore, even if old credit cards have horrible interest rates, closing those cards will decrease the average length of time a client has had credit.

Use old cards at least once every six months to avoid the account rating changing to “Inactive”. Keeping old cards active can be as simple as pumping gas or purchasing groceries every few months, then paying the balance down.

An inactive account is given less weight by Fair Isaac’s credit scoring software, so you won’t get the benefit of the positive payment history and low balance that card may have as much as if the account were active.

Most people don’t realize that owing more than the original amount borrowed on a loan is a negative event to the credit score. If possible, pay down the balance on any and all negative amortization loans that you owe more than the original loan amount. This includes mortgages and student loans. Once you bring the balances below the original amounts borrowed, a credit score increase of 5 to 10 points is very common.

Don’t confuse this advice with labeling a negative amortization loan as being bad. They can be a great financial tool when used appropriately and make otherwise unaffordable payments affordable. They can be great as long as your not in the middle of a refinance, but if you are, paying these balances below the original amount owed can maximize their credit score.

Rent to Own Option:

A ‘Rent To Own’ program, also known as ‘Lease Option Purchase’

Gives you the necessary time to clear up any potential credit issues, while you already live in the property of your dreams. You will make a small down-payment and start to accrue additional money while renting. After having cured your credit, you may exercise the option anytime between month 12 and 36. You apply for a mortgage with an lending institution of your choice, and, after a regular closing with a reputable title company, you transfer the property into your name.

Stop renting now, and realize the American dream by moving into your own 4 walls!

Our Rent-To-Own Program Benefits Include:

-  Imperfect credit accepted!
-  No waiting periods, move in right away! Live in your dream home while you repair your credit
-  Our ‘No Obligation’- confidential service is completely FREE for you!
-  Smaller down payments than banks and conventional lenders!
-  Receive monthly rent credits and build up funds toward the purchase price!

2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.

3. File Chapter 7 bankruptcy: If you can’t get caught up in time, you will not be able to keep the house — but you’ll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.

4. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.

5. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won’t be paid. Be careful — the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. Why might a bank agree to either of these? Lenders spend $30,000 or more to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.

6. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You’d be wise to speak to an attorney before taking this step.

Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.

2 Don’ts when Foreclosure Looms:

1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.

2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you’ll blow the money and default — which allows them to take the property from you.

When facing foreclosure, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.

Visit www.scotthudspeth.com to apply now and get out of the rat race.

Your home provides many tax benefits — from the time you buy it right on through to when you decide to sell. Here’s a summary; for details, visit the IRS website at www.irs.gov.

1. Mortgage Interest

If you’re filing jointly, you can deduct all your interest payments on a maximum of $1 million in mortgage debt secured by a first or second home. The maximums are halved for married taxpayers filing separately.

You can’t use the $1 million deduction if you pay cash for your home and later use it as collateral for an equity loan. Learn more from IRS Publication 936, Home Mortgage Interest Deduction, available at www.irs.gov.

2. Points

Your mortgage lender will charge you a variety of fees, one of which is called “points,” calculated at 1% of the loan principal. One to three points are common on home loans, which can easily add up to thousands of dollars. You can fully deduct points associated with a home purchase mortgage. Refinanced mortgage points are also deductible, but only over the life of the loan, not all at once. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new.

3. Equity Loan Interest

You may be able to deduct some of the interest you pay on a home equity loan or line of credit. However, the IRS places a limit on the amount of debt you can treat as “home equity” for this deduction. Your total is limited to the smaller of:

• $100,000 (or $50,000 for each member of a married couple if they file separately), or
• the total of your home’s fair market value — that is, what you’d get for your house on the open market — minus certain other outstanding debts against it.

IRS Publication 936, Home Mortgage Interest Deduction, available at www.irs.gov, explains the details.

4. Home Improvement Loan Interest

If you take out a loan to make substantial home improvements, you can deduct the interest, with no dollar limit. However, the work must be a “capital improvement” rather than ordinary repairs.

Qualifying capital improvements are those that increase your home’s value, prolong its life, or adapt it to new uses. For example, qualifying improvements might include adding a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems, landscaping, or more. (Keep in mind that increasing the square footage of your home could trigger a reassessment and higher property taxes though.)

Work that doesn’t qualify you for an interest deduction includes such repairs as repainting, plastering, wallpapering, replacing broken or cracked tiles, patching your roof, repairing broken windows, and fixing minor leaks. Wait until you are about to sell your home to gain tax benefits from repair work.  However, you can use a home equity loan up to the limits discussed above to make repairs, and deduct the interest.

5. Property Taxes

Often referred to as “real estate taxes,” property taxes are fully deductible from your income. If you have an impound or escrow account, you can’t deduct escrow money held for property taxes until the money is actually used to pay your property taxes. And a city or state property tax refund reduces your federal deduction by a like amount.

6. Home Office Deduction

If you use a portion of your home exclusively for business purposes, you may be able to deduct home costs related to that portion, such as a percentage of your insurance and repair costs, and depreciation.

7. Selling Costs

If you decide to sell your home, you’ll be able to reduce your taxable capital gain by the amount of your selling costs.

Real estate broker’s commissions, title insurance, legal fees, advertising costs, administrative costs, and inspection fees are all considered selling costs. In addition, the IRS recognizes that costs ordinarily attributed to decorating or repairs — painting, wallpapering, planting flowers, maintenance, and the like — are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable.

All selling costs are deducted from your gain. Your gain is your home’s selling price, minus deductible closing costs, selling costs, and your tax basis in the property. (Your basis is the original purchase price, plus the cost of capital improvements, minus any depreciation.)

8. Capital Gains Exclusion

Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. Single folks and married taxpayers who file separately get to keep up to $250,000 each tax free.

9. Moving Costs

If you move because you got a new job, you may be able to deduct some of your moving costs. To qualify for these deductions you must meet several IRS requirements, including that your new job must be at least 50 miles farther from your old home than your old job was. Moving cost deductions can include travel or transportation costs, expenses for lodging, and fees for storing your household goods.

Short Video for the First time Home Buyer, 2nd Time Home Buyer and Invester.  This explains the Get Mortgage Ready program.   With me there is no reason to wait.  Get into this program and get started in the right direction.  It will put you into home owner ship now or in 2 years which ever you prefer but get into this program.  Sure you can rent and pay someone else’s mortgage but why?  Get started now and live the American Dream, you won’t be sorry you did and neither will your family.

FHA is currently doing a significant business in refinancing non-FHA mortgages for borrowers who are current under their existing mortgage. This mortgagee letter extends eligibility to borrowers who are delinquent under their current mortgage following the reset of the interest rate. FHA recognizes that many lenders are engaged in a variety of loss mitigation activities to keep borrowers in their homes, and applauds these efforts. This mortgagee letter explains credit policies for refinance transactions involving Non-FHA adjustable rate mortgages.

These instructions are designed to permit homeowners, who previous to their reset, demonstrated an ability to meet their mortgage obligations, an opportunity to refinance into a prime-rate FHA-insured mortgage. In many cases homeowners may be permitted to include mortgage payment arrearages into the new loan amount, subject to existing geographical mortgage limits and the loan-to-value limit shown below.

Eligibility Highlights of the FHASecure Initiative

• The mortgage being refinanced must be a non-FHA ARM that has reset.

• The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments.

• If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.

• Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.

• Mortgagees must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

 •  Maximum FHA loan-to-value ratios

• 98.75 percent: For properties with appraised values equal to or less than $50,000.

• 97.65 percent: For properties with appraised values in excess of $50,000 up to $125,000

• 97.15 percent: For properties with appraised values in excess of $125,000.

• 98.75 percent: For properties with appraised values equal to or less than $50,000

• 97.75 percent: For properties with appraised values in excess of $50,000

 •  Calculating the Maximum FHA Mortgage Amount

 •  Subordinate Financing Under the FHASecure Initiative

 •  Underwriting the Mortgage/Qualifying the Borrower