Mary's Blog

Buying Foreclosure, REO, & Short Sale Real Estate

Mary Supinger (General Mortgage Corporation) — Mon, 11 Aug 2008 21:53:37 -0500

Everyone hears about the problems in real estate; that there are many homes on the market and many more being lost to foreclosure every day.

In California, this is much more prevalent than in other parts of the country. California has a higher rate of foreclosure than average and values have declined in many neighborhoods. According to Realty Trac, a California based company that tracks the Nation's real estate transactions, one in every 171 households in the California were either in foreclosure, received a Notice of Default, or had been warned of pending action. This is a 121% increase in foreclosure activity over the same period in July of 2007.

Fortunately, there is always an upside to any downside. The upside to this problem is that home values have worked their way down to becoming more affordable to more buyers.

In the years between 2002 and 2005, we experienced a hot seller's market. This began to cool in 2006 and to become a buyer's market. 2007 and 2008 have brought a record number of foreclosures in California. The reasons for this are many, but it is mostly agreed that lenders were using some loan programs that made it too easy for people to buy real estate.

The market has now corrected itself and buying real estate has gone back to the buyer needing more down payment and proof of income.

Because the values have dropped and there are more foreclosure properties available, many first time home buyers are seeking out these types of properties. In addition, 150,000 to 180,000 homes have been sold to Canadians flocking here to take advantage of our buyers' market.

There is a lot of inventory on the market and the majority of it is either pre-foreclosure, auction sales, or REO properties. In the mix are also homeowner's who are not distressed, but need to make a move for one reason or another.

There are three types of distressed sale properties:

Short Sale: This property will have a seller who is likely still living in the property but is having trouble making their payments. The value of the property has declined to the point that the property is up-side down. The seller owes more than the property is worth and will need to negotiate with the current lender to take a loss on the property in order for the new buyer to close the escrow.

The advantage of a short sale property is that the seller will provide you with disclosure reports regarding the condition of the property. The new buyer can ask for repairs to be made to the property.

The disadvantage of a short sale is that they take a very long time to close. As a loan officer, my clients have to wait as long as five months for the lender to agree to terms the buyer is requesting. During that time, the property may have lost thousands of dollars in value. Buyers notice this and will tend to make offers on more than one property.

Auction Sale: Many of us have seen commercials and even, infomercials regarding buying properties at auctions.

While it is possible to get some bargains, I don't recommend it for anyone who is inexperienced at this. You will need to have all cash, payable within four days of the auction closing.

Usually, you will not be able to even see inside the property. You purchase the property as-is. There is no warranty or statement from the seller as to the condition of the property.

This is a huge drawback because many times there are significant problems that will need to be corrected. Your bargain could become a huge expense if all of the rooms have been stripped and you find that you need to add a new kitchen and bathrooms.

The most experienced, buyers are usually attracted to these properties because they are able to handle a heavy duty fixer. Repairing walls, plumbing, electrical, and other heavy duty work isn't uncommon for them and a buyer like this can make a lot of profit on an auction home.

REO Sale: Properties that the lender has had to purchase back because no one bid on them at auction are called REO properties. REO stands for real estate owned.

An REO property can be found on the MLS and most real estate agents can show you these properties. You will be able to look at the property and see the floor plan and other features the property has to offer. There is no disclosure from the seller as to the condition, but you would be allowed to have your own inspector look at the property when you have made an offer.

Many of these properties are in great condition. There are a great variety of homes available. The bargain in this property is that anyone can buy their next home and know what they are getting when they buy the property. You will usually pay less than what a seller-occupied, non distressed property would cost. This makes REO listings a great idea to look into, if the properties come up in your price range and needs list.

Those who are investing in real estate or are looking for their next homes will benefit from looking at REO and foreclosure properties.

In all cases, the seller is very motivated to sell. A buyer can get very attractive terms when they negotiate well. I recommend to my clients that they ask the seller to pay some or all of their closing costs. I work with the agent to present this to the seller in a way where we get to the bottom line benefit to the seller.

Once everyone wins, then the purchase is truly a great value.

For more information contact the author, Mary Supinger, at 619.701.4321

TIPS ON PUMPING GAS

Mary Supinger (General Mortgage Corporation) — Mon, 30 Jun 2008 03:07:56 -0500

TIPS ON PUMPING GAS

I received this in my e-mail. I don't know who the author is, but it's a great article!

I don't know what you guys are paying for gasoline...but here in California we are also paying higher, up to $.50 per gallon. But my line of work is in petroleum for about 31 years now, so here are some tricks to get more of your money's worth for every gallon...

Here at the Kinder Morgan Pipeline where I work in San Jose, CA we deliver about 4 million gallons in a 24-hour period thru the pipeline. One day is diesel the next day is jet fuel, and gasoline, regular and premium grades. We have 34- storage tanks here with a total capacity of 16,800,000 gallons.

Only buy or fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried below ground. The colder the ground the more dense the gasoline, when it gets warmer gasoline expands, so buying in the afternoon or in the evening...your gallon is not exactly a gallon. In the petroleum business, the specific gravity and the temperature of the gasoline, diesel and jet fuel, ethanol and other petroleum products plays an important role. A 1-degree rise in temperature is a big deal for this business. But the service stations do not have temperature compensation at the pumps.

When you're filling up do not squeeze the trigger of the nozzle to a fast mode. If you look you will see that the trigger has three (3) stages: low, medium, and high. In slow mode you should be pumping on low speed, thereby minimizing the vapors that are created while you are pumping. All hoses at the pump have a vapor return. If you are pumping on the fast rate, some of the liquid that goes to your tank becomes vapor. Those vapors are being sucked up and back into the underground storage tank so you're getting less fuel for your money.

One of the most important tips is to fill up when your gas tank is HALF FULL or HALF EMPTY. The reason for this is, the more gas you have in your tank the less air occupying its empty space. Gasoline evaporates faster than you can imagine. Gasoline storage tanks have an internal floating roof. This roof serves as a zero clearance between the gas and the atmosphere, so it minimizes the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every gallon is actually the exact amount.

Another reminder, if there is a gasoline truck pumping into the storage tanks when you stop to buy gas, DO NOT fill up- most likely the gasoline is being stirred up as gas is being delivered, and you might pick up some of the dirt that normally settles on the bottom. Hope this will help you get the most value for your money.

Author Unknown

Increasing Your Credit Scores By 15 to 60 Points

Mary Supinger (General Mortgage Corporation) — Mon, 30 Jun 2008 02:00:54 -0500

A quick way to add points to a credit score is to pay the credit card bills the DAY THEY ARRIVE in the mail.

Creditors rate slow pays, 30, 60, and 90 days lates, along with those who have to pay a late fee because they waited until the last minute. Those who faithfully pay right away have better scores.

So, if you are looking to add 15 to 60 points on your scores, pay those credit card bills right away for at least four months prior to taking out your home loan.

As always, remember that taking care of your credit report as a regular habit will keep your scores at their highest all the time! Check out my book, Credit Reports and Credit Scores: Step By Step Instruction For Dramatic Improvement at www.CreditFitness.net.

Refinance Without the Typical Refi "Rules"!

Mary Supinger (General Mortgage Corporation) — Sun, 22 Jun 2008 15:44:22 -0500

The following article is the contents of an answer that I gave to another blog contributor today.

I would love to hear any comments from other professionals who are helping homeowners to keep their homes by way of a Loan Modification.

A "modification" is the end result of negotiating with the current lender or investor for a home loan that isn't working well for the homeowner.

Those homeowners who are facing foreclosure do have an option that is finally getting some attention from the public and the lenders themselves. That option typically means that the current lender may bring the interest rate down, fix an adjustable interest rate, reduce the amount of the loan, or allow the homeowner to add one to four house payments to the back end of their loans.

Many owners cannot refinance their adjusting ARM loan. They have made their payments on time and have good jobs. However, they've had a few late payments because the house payment soared upward by $600. This homeowner is a great scenario for looking into a load modification. The lender will typically want to avoid foreclosure, so a modification to the original loan is in everyone's best interest. This is just an everyday scenario, there are many others.

I like to recommend that an owner check out loan modification first. If that clearly will not work out, then consider a short sale. If a short sale will not work out, then letting the house go to foreclosure may be the only option available to the owner.

There is a method for dealing with staying in a home during the foreclosure process. That would take another long post.

Back to our original topic:

Hi SoCalGal:

It's great to hear from you. I hope that you will share your experiences in this area with me. I am always interested in knowing what others are working on.

On Sat, Jun 21, 2008 at 8:24 PM, (e-mail address not provided) wrote:

SoCalGal has posted a response to your message titled
Re: Do I tell the bank I want to go in foreclosure???? in Foreclosure Discussion.

The posted reply can be found at the following URL:

http://www.all-foreclosure.com/forums/foreclosures/messages/7710.html

If the reply pertains to an ongoing discussion, it is
requested you go to the above URL to post any response.

The posted reply reads as follows:

Dated : June 21, 2008 at 20:24:41

Subject: Re: Do I tell the bank I want to go in foreclosure????

Mary, can you tell us under what circumstances the lenders are reducing loan balances?

My response:

Hi SoCalGal:

Thanks for writing!

To answer your question: Any loan balances being reduced are usually due to the property being at the highest risk of foreclosure and what that foreclosure will do to/for the investor. Where it is on the lenders' books is another factor. The number of requests for a reduction will also give the investor the current "climate" of the market.

An example:

A million dollar home that has lost 30% of its' value: a borrower who made the fixed period payments on time, who wants to remain in the home, and who has steady income.

Those factors would make it easier for a lender to write down part of the mortgage loan amount to avoid the average foreclosure costs and to avoid the loss of income on the note for a period of six to 18 months.

Any file submitted to the investor/representative of investor must "stand on it's own". The negotiator for the modification must present a clear picture of where we are today, what the cost of a "No" answer will have on the investor, and what the Borrower can live with.

This is an example of a scenario that did work for a balance reduction. A write down between 5 to 25% of the note with a borrower who is capable of performing NOW keeps a foreclosure off the lender's default list and makes the lender look better to the investor. I am not going to disclose the exact amount of the write down, but it was more than 5% of the mortgage balance. (Your mileage may vary)

This is NOT standard operating procedure. Having said that.......one could act "as if it was" when approaching the lender and being willing to wait for an answer without caving in. In my humble opinion, that is the hardest part for the property owner, which is why a representative for the owner is the best idea. A good one will pay for himself with good negotiating skills and presentation of the borrowers information which will ultimately "pay" or save the owner on his loan.

Our processing unit has been successful in the above scenario. Please remember that this is not a typical case and that each scenario for each homeowner should be reviewed by a professional with a history of mortgage and real estate expertise. This person must also represent a company history of good performance and service.

There are many Loan Modification "experts" popping up to help people with their homes. No license is required. Please check them out before you sign any contract or pay any fee. Don't give your property up to ANYONE without the advice of an attorney that has been referred to you by a trusted source. Remember, that if the homeowner has been advised by their lender with a Notice of Default, that it is a felony to accept a fee from the owner until an agreement has been obtained for a loan modification or forbearance.

Standard Disclosure: Please seek individual, professional advice in your personal situation. This article is not intended to advise or counsel any particular person. It is intended as notice of current events. The above article is authored by Mary Supinger and is protected by copyright laws. Credit Fitness is a registered trademark of www.CreditFitness.net.

Tougher Underwriting Standards Ahead for Fannie Mae (FNMA)

Mary Supinger (General Mortgage Corporation) — Thu, 12 Jun 2008 12:08:29 -0500

This past Monday, June 9^th, was the first day's use of the new software for underwriting Fannie Mae loans. Version 7 of the Desktop Underwriting® software was upgraded with lenders over the past weekend.

This new version of the underwriting process will take a much longer and more conservative look at borrowers. By longer, I mean that additional documentation will be required in order to get an approval. Fewer approvals will be given as well.

The bar has been raised as to what makes for an approvable loan.

The entire underwriting process for mortgage loans has snapped back into the days prior to any credit scores being used. In those days, a human being reviewed the loan application for the lender. At times, even two humans beings did the underwriting; once for the lender and again for the mortgage insurance company. Those were the days when, as a loan officer, you hoped your underwriter was having a "good" day and wouldn't hit you with a page long list of conditions for a full loan approval.

This new version of the software is crankier than previous versions. It demands more proof of what is stated in the actual loan application. The loan officer will need to be more careful that information is entered correctly onto the application because this software won't allow the loan officer to change the information repeatedly based on what one thinks the lender wants to hear. This will prevent a lot of the fraud that has caused some of the problems we are living with today.

This newer, more conservative software will look at the borrower s with a much more critical eye. More will have to be proven. Risks in the file will have to be balanced with additional "compensating factors". As an example, fewer years in a line of work could be balanced with having substantial savings or reserves.

This new software will mean there will be fewer loan approvals.

It also means that the bar for loan officers has also been raised. The average loan officer has less than five years of experience. Many of the "newbies" have left the profession. I recommend that you "prequalify" your loan officer at the time he or she prequalifies you.

Tax Relief for Homeowners in Foreclosure

Mary Supinger (General Mortgage Corporation) — Mon, 19 Nov 2007 18:07:23 -0600

Homeowners facing foreclosure and any shortfall of funds due to their lender were subject to tax by the Internal Revenue Service.

A person could lose their home in foreclosure and the lender could suffer of loss of say, $100,000. According to a tax law enacted in 1986, the lender was required to mail a 1099 to that ex-homeowner the dollar amount of loss suffered by the lender.

As an example:

A loss of $100,000 is reported on the foreclosed homeowner. That $100,000 would be added to their other W-2 and 1099 income. If our ex-home owner usually made $50,000, the $100,000 1099 would then increase their income to $150,000 and would be taxed at 50%. It is possible that the tax bill would be $75,000 for the tax year.

Essentially, someone in a very bad situation could go from the frying pan into the fire! The Bill H.R. 3648 relieves the homeowner from that tax liability for the owner-occupied foreclosed property.

I am several proven methods to keep homeowners in their homes, but this legislation brings a huge sigh of relief for many, many homeowners across the country.

My next installment will be regarding relief for tenants impacted by a foreclosed property.

Please come back again soon!

Check Washing & Identity Theft

Mary Supinger (General Mortgage Corporation) — Sun, 04 Nov 2007 02:42:50 -0600

Keeping your personal paperwork private is very important.

Most of identity thefts occur because of thieves going through your trash. Another trick is checking your mailbox to find outgoing checks that you may write to pay your bills.

Checks can be stolen and then "washed". The payment amount and payee can be changed and a check with your own signature can be cashed for whatever amount the thief chooses. Of course, this is very worrisome to anyone who pays their bills by check and doesn't take them to the post office.

There is one of the simple remedies that can help you avoid becoming a victim of this crime:

Frank W. Abagnale, a Secure Document Expert and reformed identity theft thief, recommended the use of Uni-ball 207 gel pens for writing checks. Mr. Abagnale was the subject of the movie Catch Me If You Can, which is about a thief and imposter who is really good at what he does.

On their package, the manufacturer states that "Many Uni-ball pens , such as the Uni-ball 207, use specially formulated inks that contain color pigments that are absorbed into the check's paper fibers, trapping it from check washing."

On his web-site, Mr. Abagnale states that being caught and convicted of identity theft is so rare that prevention is the very best course.

Do any of the readers have experience with these pens or ID theft?

Are 125% Loans a Viable Option for Borrowers Needing to Refinance?

Mary Supinger (General Mortgage Corporation) — Mon, 30 Jul 2007 16:48:27 -0500

Back in the day, homeowners were able to get a 2nd trust deed mortgage loan that actually covered up to 125% of the value of the property.

The cash out was convenient for home improvement, consolidating credit card date, or some other investment. Many of these loans were really helpful in getting cash out of the house to make some additional cash available for other expenses.

The rates were quite high and the interest rate was dependant on a borrower's credit score. At that time, loans were not priced according to credit scores as strongly as they are today.

The borrower had to qualify for these loans by showing their ability to repay the debt. The back-end ratio might determine pricing. The back-end ratio on a loan is the percentage of a borrowers' debt which includes principal and interest on the first, property taxes, hazard insurance, and any long term debt payments.

Now-a-days your interest rate is determined by credit score, combined loan to value, and whether you are going with Stated Income or Full Doc financing.

I've thought about these 125% loans over the past two weeks as we have had to turn away so many borrowers who need to refinance. The turn downs were because the property was purchased in the past two years and property values have declined.

I'm not sure if these will be brought back or not. I am sure that if an investor believes that they can make money on them, they will reappear!

FNMA (Fannie Mae) is working on methods to help consumers refinance their loans should their interest rates become unmanageable for staying in the property. As yet, there are few public details available as to what FNMA has or will come up with.

Your knowledge, comments, suggestions are very welcome! Let's blog!

Credit Piggybacking: Don't Play With Fire!

Mary Supinger (General Mortgage Corporation) — Thu, 14 Jun 2007 19:40:38 -0500

For many years, parents have been adding their children to their VISA account. The title given the child is "Authorized User".

This gave their child the ability to use a credit card now and again. It also enabled the child to develop credit scores. If the parent had held the account for 15 years, an eighteen year old could actually have a 15 year credit history! In the credit score game, that gave the 18 year old the benefits of having a long credit history. Credit history is 15% of the credit score. The balances held, and paid on time for those accounts, make up another 35% of the score.

The bottom line to that statement is that the 18 year old benefits without every actually having an account in their own name. It makes the multitude of credit card offers to them quadruple if Mom and Dad have great credit.

This great trick has also been used to help borrowers the ability to generate a credit score that was good enough to meet lender standards.

Since a young adult is considered "new" to credit for the first ten years of their history, piggybacking onto a family member's credit really helped with getting no down payment loans. Among family members, it was perfectly acceptable.

Businesses have sprung up that will actually find you a "mom" or other "family member" who will allow you to become an authorized user on their credit profile. In the best circumstances, the receiver of the "authorization" never really gets the bank card, only the credit history. Many perfectly honest people are talked into going along with this scenario in order to help someone out.

At best, it's a little shady. At worst, it can be considered fraud. Paying someone to do this for you is playing with fire.

A few good credit accounts will not make up for a poor credit history. You cannot erase years of spotty credit with two or three credit accounts. In addition, Fair Isaac will be removing the Authorized User from it's computation in arriving at credit scores.

Pumping Up Your Credit Scores

Mary Supinger (General Mortgage Corporation) — Thu, 07 Jun 2007 19:24:51 -0500

As a loan officer, people ask me all the time, "What can I do to increase my credit scores?"

The answer to that question often depends on what the details of their credit report shows and how long they have had credit. Those who have had credit for over twenty years or more will have higher scores than someone with only two years of credit history, assuming that the past two years of each person's credit contains no recent late payments.

The most recent two years are what weigh the most on credit scores, but a person's overall credit history has great bearing too.

35% of a person's score is determined by their track record. The payment history shows how you have handled your credit. Have you paid your bills when they were due or before? This part of the score will reflect if there are any judgements, tax liens, collections, or wage attachments.

30% of a person's score is based on how much is owed. If all of your eight credit cards are up to their maximum levels, then your scores are dramatically lower than they could be.

15% of a person's score is based on how long they have credit history. As was stated before, 20 years of good credit will help a person to bear a few dings than someone who has a short credit history.

10% of a credit score is based on the recent activity and new accounts. Inquiries occur if new accounts have been added, if a person has applied for lots of credit, and/or if you are "shopping" for various lenders.

Lastly, 10% of the score reflects the types of credit that exist on the credit report. A healthy mix of credit would be a real estate loan, car loan, and a few credit cards with 75% of their limits available.

People who know the rules of credit will get better rates and service. Most of us need to perform regular maintenance on our credit reports. Check out my website at www.CreditFitness.net for information on improving your credit scores. Everyone needs this: if you have great credit, you need to protect it. If you have not-so-great credit, we can help with that!

The Dollar Value of High Credit Scores

Mary Supinger (General Mortgage Corporation) — Tue, 03 Apr 2007 03:45:59 -0500

As you are likely aware, the mortgage industry is going through big changes. As expected, the freely granted credit has, and will continue to become much more conservative.

Loans that cover 100% of the value of a property are still available. Quick action on your part could mean the difference of obtaining approval on this type of loan or simply being unable to obtain a 2nd with a single digit interest rate.

Many lenders who formerly did 2nd trust deeds or mortgages for 20% on a combined loan to value (CLTV) have discontinued allowing any combined financing that is above 95% of the value of the property. New Century Financial Corporation officially declared bankruptcy yesterday. The Irvine based company is just one of the sub-prime lenders who will likely close their doors this year.

Lending is all about risk and the higher risk borrowers pay higher interest rates all around.

This brings me to the point of this article:

If you are not actively working on your credit prior to applying for a mortgage or car loan, you WILL pay a higher interest rate. The true cost of the credit will be disclosed in the Annual Percentage Rate (APR). The Annual Percentage Rate reflects the true cost of the credit.

In past years, I would say that you might pay a higher interest rate. Unless your credit scores are above 740 for the middle score, 100% financing at the best interest rates may not be available to you. In addition, all other loan scenarios will have tighter guidelines and possibly higher rates.

The entire mortgage industry has been moving to a wider "tiered" interest rate.

The tiers allow for credit offered to someone with a 740 credit score to obtain the best rate and terms on loans. That borrower might save 1 point on the cost of their loan. The lower scores, at tiers of 720, 710, 680, 660, 640, 620, and so on will add incremental additional fees or interest rate to the cost of your mortgage.

A person with a 720 score might pay 6.25% with no origination points and one with a 640 score might need to pay 1 point in order to get the 6.25% interest rate.

I wrote a book a few years ago about improving you credit and increasing your credit scores. (my Mom is proud) It is an easy to understand guide to improve your credit scores and help you to avoid the many scenarios that will actually hurt your credit scores. Read this post for a summary of what goes into a credit score.

The book is $24.95 if you buy it as a download. In the scenario above, I talked about the borrower with the 740 score paying zero points for their loan and the 640 score borrower paying 1 point for origination. If the 640 score borrower had spent three months manicuring and performing a borrowing strategy, they might have moved up into the 680 score range. Their $24.95 payment for the book might have saved them half a point. On a $350,000 loan, the savings would be $1,750. Sounds like a good deal to me!

I haven't actively pitched my book on any of the blogs that I participate in, but it really makes a difference today. I have written a lot about ways to improve and protect your credit in my blog posts, but an overall and personal view will obtain the best results. Whether you buy and use my book or call me for a consultation, please find something that will help you improve and protect your credit profile. If you are a Realtor, you need to stress this to all of your clients.

Everyone needs to maintain and manicure their credit profile. If you have low scores, you need to work on your profile and if you have high scores, you need to protect your credit from identity theft.

Even working on your credit profile will improve your credit scores. Check out my blog site at www.SouthernCaliforniaMortgageBlog.com for lots more information.

CreditFitness is a registered trademark of www.CreditFitness.net

My Opinion on Deductible PMI

Mary Supinger (General Mortgage Corporation) — Wed, 21 Mar 2007 02:21:50 -0500

This is additional information with regard to my previous post on PMI becoming tax deductible.

Please be aware the ability to deduct private mortgage insurance (PMI) is only available for loans originated in 2007 and only for PMI paid in 2007. The bill that passed this piece of legislation had this benefit tucked into larger legislation. Unless the lawmakers agree to extend this benefit to coming years; in my view, the entire thing is a big, flat balloon. I certainly would not recommend it to my loan clients without additional laws being passed or the current legislation being extended indefinitely.

Here are a couple of different ways you can go to get the long term benefit you are seeking:

1. Find a lender who will include the PMI into the rate. If you have put 10% down, the bump in your interest rate on the loan is likely to be .500%. If your initial note rate is 6%, then the rate with the included PMI is 6.50%.

2. Continue on with the accepted practice of a HELOC or a CLOSED END Second. I would recommend that a borrower go with a fixed rate home equity line of credit or simply doing a 2nd trust deed or mortgage. Those with adjustable rate 2nds need to seek a fixed rate! Speak with your bank or trusty loan officer. Another benefit of this scenario is that once this loan is paid off, your house payment declines by that payment amount OR in some cases, you can take additional cash out after paying down the balance.

Either one of these scenarios will guarantee your ability to deduct the cost of "PMI" over the life of your loan; regardless of whether additional legislation is introduced.

Shopping For a Mortgage & a Mortgage Specialist

Mary Supinger (General Mortgage Corporation) — Sun, 11 Mar 2007 07:43:18 -0500

You can save yourself thousands of dollars over the life of your mortgage if you spend an hour setting up your goals for the type of mortgage you want. Spend some time to consider the kind of loan you need and how long you will keep the property. Listen to your inner voice; what does it tell you about the future of interest rates and home appreciation?

Ask your friends and family for referrals to loan officers who took good care of them.

Once you find a few, give each loan officer a call. While the loan officer is prequalifying you for a loan, I recommend that you prequalify the loan officer. This is no time to go without doing your homework and interviewing different loan officers. Trust your gut and go with the loan officer who listens to you. Ask all the questions that you have, be sure you understand their explanations about their recommendations. Don't hold back.

The average loan officer has only been in the business for five years. That means that most of them do not know how to deal with a difficult market like this. A promise of a better rate means nothing if the loan that they recommend to you will cost you more down the road. Going through hell to get the promised rate and then being declined or unhappy with the loan that is presented at closing is no savings at all. Appraisals that you have paid for only to find out later that your value is not sufficient to complete your refinance can be maddening.

I talk with so many homeowners who have been placed in terrible adjustable rate mortgages that become monsters at the first adjustment period. Ask what your loan will or will not do. Grill your loan officer with any concerns that you have. If he or she cannot answer your questions, move on to another loan officer.

When you do feel comfortable with a loan officer, move forward to obtaining your credit reports. Always assume that if you give someone your Social Security number and address you have pretty much given them permission to run your credit. Please do not do this casually; it could cost you thousands of dollars. Calculate the difference in interest rates based on a range of credit scores.

All of the big three credit repositories have their own different credit models and usually will come up with slightly different scores. At the present time, the score is the score. No adjustments are made for obvious errors on the report. What you see is what you get. You can, however, preview your credit report and take care of anything that might be pulling down your scores.

In the mortgage business, we look at all three scores and use the middle score as the number that determines what rate you can expect to be offered for a specific loan. Down payment or equity in the property is also considered.

Be aware that the credit report may be pulled an additional two or three times during the course of the loan being processed. If you are working with a broker, that broker will pull their own credit report and the lender that the loan is placed with will pull his or her own report.

If you are using one of the companies advertised on the Internet where your loan scenario is submitted to say, five or more lenders, please be aware that five different lenders will pull five different credit reports. All those inquiries can knock down your credit scores, if only a few points. A few points can mean the difference between 6.25% and 6.5% on the interest rate of your mortgage. It is awful to find out that your score dropped five or ten points because of inquiries. Those with scores below 620 will be especially hard hit by all those inquiries.

If you have had a long escrow, credit reports may also be run at the end of the process. If your scores are between 500 and 680, you will be hit will a drop in your score if there are many credit inquires obtained. Check out our sister website to calculate the difference in interest rates by various credit scores.

Before you allow any mortgage company to run your credit, be aware that if your report contains any collections you will not be able to negotiate with the collection agency as to paying only part of the balance due. Your report is tagged as a mortgage inquiry and the collection agencies will not budge because they now believe you are house shopping. I do believe that paying off the collection for the entire amount due will reward you with much better rates on all types of credit.

Tell your loan officer if you think you may have collections. Unfortunately, most loan officers are not aware of the problem they can create when running your credit report without first discussing collections and charge-offs.

Paying off any collections is tricky business. If I am suspicious that my client may have any collections, I have them sit at my desk and we use the website for a consumer Free Annual credit report. At the very least, we request those reports by telephone or a letter that I prepare for them. Once the reports are received in the mail, we work on anything that might need fine-tuning or correction.

Delicately handle any collections that pop up on your report. If you simply pay them off, you have knocked between 30 to 80 points off your score! Pay them off after your loan has closed.

Even speaking with the collection agency can make the black mark your credit profile "new" again. By the term "new", I mean that the reporting of it now becomes current. All credit scores are based on the most recent two years credit. If you have a five-year-old collection account that you pay off in 2007, you will have made the reporting new again. Even calling the collection agency yourself to discuss your collection will make the reporting new again and tank your credit scores.

You need a qualified loan officer or attorney to speak on your behalf. They may very well be able to negotiate that you pay the debt in exchange for them deleting the account from your credit profile. I typically have my clients sign a credit authorization and I negotiate with the collection agency for them. You can also hire a good attorney for this. A good attorney can save you from paying the inflated balance and pay for themselves in the process.

The goal is to negotiate the payment and get the collection agency to completely remove the item. That way, it never existed and your score just became about thirty to eighty points higher. Press hard to get something in writing for the collection agency prior to sending the payment. Ask that the agreement is faxed to your representative.

Of course you can do this yourself, but the third party help from an attorney or loan officer means that your current address and phone number never make it into the collection agencies' files.

The collection on your report can, though not always, go away after seven years. If the creditor renews it, accept even a penny in payment on it the clock starts again and creates a terrible drag on your score. I don't advise that you use this tactic if you are looking to improve your credit profile.

The next step to preparing for a new mortgage is to gather your income tax returns with the W-2s and your paycheck stubs for the past month. You will need those for all of the borrowers. You will also need bank statements from all of your checking and savings accounts for the past 90 days. Investment statements and any credit card bills and statements for car loans are also a good idea. Write down the name, phone and fax number for your homeowners insurance. This is a simple list of what might be needed on a conventional loan. Additional information may be needed for your personal situation.

I hope that your loan officer will get 90% of what is needed at your initial loan application. It is not uncommon for a lender to ask for additional bank statements and such if your loan process goes on for over 60 days. You can do the actual loan application on the phone, on the lender's website, by mail, or with a visit to your loan officer's office. In complicated cases, it is sometimes wise to make the appointment to meet face to face.

I hope this will give you a good start on getting ready for a new mortgage. A good, experienced, and ethical loan officer will place you in a loan that can ultimately save you thousands of dollars.

The Strategy In Sub-Prime Mortgages

Mary Supinger (General Mortgage Corporation) — Thu, 01 Mar 2007 23:32:52 -0600

In my practice as a loan officer, I have occasion to recommend what I call a "Strategy Loan" or "Band-Aid" loan.

The purpose of the loan is to get the client out of a financial hardship while we spend time rehabilitating their credit. In the past five years, a 2 year fixed rate, adjustable mortgage fit the plan. In markets like we are experiencing now, I would place a client into at least a 3/1 or 5/1 ARM loan.

For most people, those with really low scores who faithfully work a credit rehabilitation program, credit scores can be built up and credit repaired over the first two years. This would get the borrower ready to refinance to an "A Paper loan".

Another option can be a 30 year fixed that pays a rebate of interest to the borrower for perfect payment history. AS an example, a full year of perfect payments can knock the interst rate on the loan down from say, 7.5% to 7%. The second year of perfect payment history would bring it down to 6.5%. This way, and remember this is on an example, there is no need to refinance.

It is really important to work with a loan officer who listens to you and what you have planned for the next five years. Most home owners do not keep a mortgage longer than five years, (historically over the past 15 years) but with appreciation in home value slowing up, it is likely that the average will stay within that five years again.

With the high cost of everything now-a-days, it's even more important to plan ahead. Be sure that your loan officer is listening to you and aksing you the types of questions that will get you the best loan for your needs. And if they aren't doing that, then give me a call.

Learn to rehabilitate your own credit or that of your clients at http://www.creditfitness.net.

No Home Buying For Illegal Imigrants?

Mary Supinger (General Mortgage Corporation) — Mon, 26 Feb 2007 03:36:50 -0600

I was reading the San Diego Union Tribune Sunday Home edition this morning and came across an interesting article by Kenneth Harney.

Given that Bank of America has rolled out a pilot program for those legal or illegal aliens without Social Security numbers to obtain new VISA cards, it raises the question, "Is credit too easy to get in the United States?"

All that person needs to do is to apply for an Individual Taxpayer Identification Number with the Social Security Administration. A person having an ITIN number can apply for a VISA card with Bank of America and get credit.
A person with a ITIN number can also obtain a home mortgage. Real estate loans for those with Green Cards have been the case for many years. The credit cards are a new idea for which Wells Fargo and other banks may follow suit.

ANYWAY...The article, written by Mr. Harney, discussed a bill being proposed by Rep. John T. Doolittle, R-California that would amend the Truth In Lending Act to make ITIN mortgages illegal. This would close off some mortgages being obtained for those who are in the works of getting citizenship or legally working in the United States. This could affect millions working in the United States and make them unable to purchase homes. They would not be able to take advantage of the tax write offs for home ownership in this country.

What do you think?

Simple Things You Can Do To Boost Your Credit Scores & Get Ready For A Mortgage

Mary Supinger (General Mortgage Corporation) — Mon, 11 Dec 2006 00:13:12 -0600

Are you considering buying a home next year? Or are you planning to refinance out of your ARM loan?

Since the past six months are most important to your credit scores and there are a few things you can start doing today that will bring them up:

Pay your credit card bills the very day that you receive them in the mail. This is a great way to get an easy 20 to 30 points on your scores when done for at least six months in a row.

Pay off or pay down all of your credit card debt, if you can.

Pay off debt rather than moving it around. Moving it around means new inquiries and new accounts, which will drag down your scores.

Don't consolidate your credit cards into one or two cards. You will throw the ratio off between your available credit and your balances. Please don't ask your creditor to increase your credit card limits to establish the 25% or lower ratio. This backfires a lot more often than it ever helps.

Don't open any new accounts before applying for your mortgage loan.

Don't close accounts unless you absolutely have to in order to protect yourself from an ex-spouse or significant other who may use or abuse jointly held credit. Closing a single account can cost 80 points!

Don't pay off a collection account. Paying it off will make it brand new again and drop your score as much as 75 to 80 points. The only way around this is to negotiate payment for a full deletion of the collection from any reporting at the time of payment. Most lenders will allow you to pay collections off at the closing as they know that it will hurt your scores.

Don't buy or even shop for a timeshare, car, motorcycle, boat or recreational vehicle before you buy the house or refinance. You can do this right afterwards and it won't throw you out of qualifying for the best rate on your loan.

Don't co-sign on loans (or at least avoid it). You are fully responsible for the debt if the other person does not pay. In addition, it adds another inquiry on your report and adds another account to your credit profile.

Don't freak out about credit inquiries due to shopping for the best lender. Don't be overly concerned; but don't be too casual either. Those with scores between 500 and 639 should be the most careful as those scores are most impacted by inquiries.

Please remember that your home loan lender may pull your credit report as many as four times during your loan process. When this is done within a 45 day period of time, it will usually only score-out as just one inquiry.

Also, remember that your homeowner's insurance company could also pull your credit report and create an inquiry on your credit profile.

Don't change jobs while your loan is in process without discussing it with your loan officer. If you are moving up into the same field it can be a very positive part of your loan qualification process.

If you are changing the kind of work or going into self employment, it is possible that this could create a problem. It might be best to close your loan and then make your move.

If you lose your job, it is urgent to address this right away with the loan officer. Quick information can save the entire loan process for you. Your loan officer may be able to help you with restructuring your loan.

Any and all of things will help you with obtaining the highest credit scores for yourself. Those who make these suggestions a regular habit when dealing with credit will build your scores up to their highest achievable levels.