Chad Scoggins's Blog

Feb 7th. One of the biggest Rivalries in Basketball Duke VS. UNC

Chad Scoggins (BB&T) — Tue, 06 Feb 2007 00:24:57 -0800

Well it is a matter of a few days away. One of the biggest games that both teams have had circled on their calendars since the beginning of the season. But I'm sure neither team planned for the outcome of their last game leading up to Wednesday's 9:05 tip off. Both teams are coming off losses and a win is needed by both teams to help push on to March Madness. Here in the Chapel Hill office, the junk talking has started to take on more steam. Who's it going to be? I know the answer, and I will tell you on Thursday.

What is in the numbers?

Chad Scoggins (BB&T) — Mon, 05 Feb 2007 20:27:05 -0800

Home / Real Estate

What is in the numbers?

Chad Scoggins Have you ever wondered what your credit score meant? How it affects your ability to qualify? Do inquiries hurt you score?

Before we dive into the true meaning of the credit scores, we need to do a little catching up on where these scores come from. There are three different main depositories used by the credit companies to report dealings that they have had with consumers. Equifax, Trans Union and Experian calculate and report the scores to consumers and other lending institutions that inquire about the credit-worthiness of a client.

Each of these depositories have its own unique formula used to calculate the scores based on the information provided by credit companies (called tradelines). The results that come from these calculations are processed into a score that is known as the credit score.

So what does it mean? The whole purpose of the credit score is to determine the likelihood of the consumer in question getting a 90-day late payment in the next 24 months on a tradeline. The scores range from 850 to 300. So the higher the score, the less likely a borrower will be to get a late payment on one of his tradelines.

The average score of Americans across the nation recently has been reported to be close to 720. While geographical areas have vast differing scores, I have found that this is close to the consumers in this area that I have helped with a mortgage.

Just because a score is less than 720 does not make the score bad or cause the client to have an inflated interest rate due to a higher risk. Many loan programs have lower credit score requirements that they are comfortable offering to below-average scored borrows as they do to the ones with higher scores. Where the score can have a significant impact is in the streamlining of approvals, less documentation and the turn times in getting the loan to the closing table.

You may have heard from friends or family not to let too many people pull your credit as it will lower the score. There is some truth to this, but the mortgage industry has a caveat that protects the consumer. While numerous inquires can hurt your over score, if the purposes were for a mortgage, then the credit depository will only count multiple mortgage inquires as 1 as long as it was within 30 days of the original mortgage inquire.

Simply stated, if you got to one mortgage broker on Monday and he pulls credit and then you go to another mortgage broker on Friday and he also pulls credit, the credit depository will only count this as one inquire on your report.

This provision was put into effect to allow consumers to shop for the right fit for their needs.

Always keep in mind when dealing with your credit score that it is only a snapshot of a period of time. Things on there can be fixed and time can heal any issue that is on the report. With help from a knowledgeable mortgage professional, you can help fast forward some of the issues, which will allow you to own a home faster.

Chad Scoggins is a mortgage loan officer in Chapel Hill. He can be reached at chad.k.scoggins@homesvclending.com or www.mortgagewithchad.com.

Should you talk to a mortgage professional before house hunting?

Chad Scoggins (BB&T) — Tue, 16 Jan 2007 23:11:09 -0800

Absolutely! Even if you haven't so much as picked out houses to visit yet, it's important to see your mortgage professional first. Why? What can I do for you if you haven't negotiated a price, and don't know yet how much you want to borrow?

When I pre-qualify you, I help you determine how much of a monthly mortgage payment you can afford, and how much I can loan you. I do this by considering your income and debts, your employment and residence situations, your available funds for down payment and required reserves, and some other things. It's short and to the point, and I keep the pre approval paperwork to a minimum!

Once you qualify, I give you what's called a Pre-Qualification Letter (your real estate agent might call it a "pre-qual"), which says that I am working with you to find the best loan to meet your needs and that I'm confident you'll qualify for a loan for a certain amount.

When you find a house that catches your eye, and you decide to make an offer, being pre-qualified for a mortgage will do a couple of things. First, it lets you know how much you can offer. Your real estate agent will help you decide on an appropriate offer, but being pre-qualified gives you the confidence to know you can follow through.

More importantly, to a home seller, your being pre-qualified is like you walked into their house with a suitcase full of cash to make the deal! They won't have to wonder if they're wasting their time because you'll never qualify for a mortgage to finance the amount you're offering for the home. You have the clout of a buyer ready to make the deal right now!

You can always use the calculators available on my site to get an idea of how much mortgage you can afford -- but it's important to meet with me as soon as possible. For one thing, you'll need a Pre-Qualification Letter! For another thing, I may be able to find a different mortgage program that fits your needs better.

What type of letter is needed?

Chad Scoggins (BB&T) — Mon, 08 Jan 2007 15:57:12 -0800

What type of letter is needed?
LOAN ARRANGER

After you've done the research needed to learn all the latest trends, mortgage jargon and interest rates, you may discover that you have to figure out what type of letter will be required by a seller.

There are three types of mortgage letters: the pre-qualification letter (pre-qual), the pre-approval letter and the commitment letter. Here is how mortgage letters typically work.

Pre-qualification letter -- This is a letter that is used in the early stages of the mortgage process. In the Triangle, this is typically what is requested by the seller from the potential buyer after an offer is submitted on a home. The seller wants to know whether the potential buyer can qualify, and is not just wasting time submitting offers on a home that does not fit the budget.

This letter process starts by the buyer having a conversation with a mortgage professional. Both the buyer and the mortgage professional will develop a plan based on the buyer's needs. If the program is acceptable to the buyer and he or she does in fact qualify based on the opinion of the mortgage professional, a pre-qualification letter is issued.

A good letter should include loan-to-value (amount borrowed divided by the value of the house), type of mortgage (30-year fixed, ARM, etc.), property address and sometimes a rate. This letter is then issued to the real estate agent or buyer to submit with the offer on a home.

Pre-approval letter -- Typically, this letter is a step up on the comfort scale for the seller. This letter requires all of the steps of the pre-qualification letter, but instead of getting the opinion of the mortgage professional, the information is run through an automated system to deliver an approval or denial based on the provided information.

The basic information provided in the letter remains the same as the pre-qualification letter. As a rule of thumb, both of these letters are one and the same, because if you were dealing with a reputable mortgage professional, he or she would be able to tell whether the loan would fit the guidelines of the mortgage programs discussed. If there are questions concerning the situation of the buyers, then the mortgage professional should run the file so as to alleviate potential issues down the road.

Commitment letter -- This letter is issued toward the end of the mortgage process. Many buyers have in the contract that the commitment letter is due 10 to 14 days from the closing date. At that point in time, the loan should have been submitted to an underwriter and been approved. The commitment letter is stating that the borrowers have officially been approved for the loan after the underwriters have verified the supporting documentation provided with the application.

A commitment letter can list stipulations for the loan if there is still outstanding documentation needed. Ideally, all parties want to have a free and clear letter not showing any stipulations remaining when the letter is issued.

No matter what type of letter you are required to come up with, the bottom line is usually the same for all of these letters: "Can the buyers of my house close on their loan?"

Chad Scoggins is a mortgage loan officer in Chapel Hill. He can be reached at c.scoggins@hsf-nc.com or http://www.mortgagewithchad.com/.

My ARMs are getting so tired!

Chad Scoggins (BB&T) — Mon, 08 Jan 2007 11:11:40 -0800

My ARMs are getting so tired!
Loan arranger

While a 5/1 adjustable rate mortgage (ARM) may have allowed homebuyers to buy more home and keep payments down, that is not the case anymore.

Over the last two years, the savings gap between fixed-rate mortgages and ARMs has diminished. Just three years ago, there was easily a point difference between the two options. Times have changed and ARMs do not look as tasty to Chapel Hill home buyers as they did a short time ago.

Many home buyers have heard the stories of how their friends and family were able to buy nice houses in the Chapel Hill area and keep their payments in line with their budgets by utilizing ARMs. It appeared that this product started to become the first choice when considering a mortgage solution.

But over the last two years, the Fed (Federal Reserve Bank) has continued to increase the Federal Fund rate, causing short-term rates to increase. While other market conditions also have contributed, this has been a big reason why short-term rates have out-paced the slower-moving fixed-rate options. At the beginning of August, the difference between the fixed rates and the ARMs is only about a quarter of a point. The savings is not there any longer, and home buyers are not the only ones that are noticing this.

People who refinanced a house during the refinance boom in the early 2000s will start taking notice as their payment starts to move from the fixed rate to new higher current-market conditions that force payments to possibly uncomfortable levels. An example of where an ARM would adjust to is around 7.5 percent to 7.75 percent based on current indices and margins subject to annual caps. Meaning, this is what your new interest rate would be based on future payments until the next adjustable period.

Economists in the housing arena are predicting that 2007 and 2008 are going to be big refinance years. This is due largely because homeowners are going to want to get out of the ARMs that are coming to the adjustable phase, and change over to a fixed-rate option to secure their monthly payments. There are signs of this happening already in the Chapel Hill area.

Over the last few weeks, I have received an increasing number of calls inquiring about options for getting out of ARMs. Some people want to get out of ARMs before they come due in hopes of catching the market at a lower point. This thought is a way to capitalize on the current market rates and get rid of some of the unknown in the future markets.

Chad Scoggins is a mortgage loan officer in Chapel Hill. He can be reached at mailto:c.scoggins@hsf-nc.com or http://www.mortgagewithchad.com/ ARMs have their place in the mortgage industry. But if they are used wrong or if situations have changed since one was obtained, a home buyer can find himself in a world of uneasiness for a few years. Now is a good time to talk about your situation and plan for the future. It is not always about the rate you are getting on a mortgage, but how that mortgage product will work for you in your financial plan for the future.
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