Pam Parton and Joanna Wooley

Archive for the 'Credit score' Category

Short Sale … Is There Life After A Short Sale?

Short Sale effect on Credit

Short Sale effect on Credit

Short Sale GOOD NEWS…THE ANSWER IS YES!

This is such an important question to ask yourself if you are going through a Short Sale.

So many people feel that they will never recover from this type of hardship. Not to worry, there is hope!

Short Sale FHA Guideline:

  • If the borrower/homeowner has a short sale and they are current on their payments prior to the short sale then they are still eligible for FHA financing subject to underwriter discretion.
  • If they are in default at the time of the short sale, then they must wait 3 years, exceptions can be made for extenuating circumstances. These only apply to FHA and VA loans, when it comes to the rules for an exception. Extenuationg circumstances are nonrecurring events that are beyond the borrowers control that resutl in a sudden, significant, and prolonged reduction in inclome or a catastrophic increase in financial obligations.
  • After 3 yrs: Max LTV 96.5%

Short Sale Conventional Guideline:

  • If the borrower / homeowner had a short sale they must wait a minimum of 2 years to repurchase
  • After 2 years: max LTV 80%
  • After 4 years: max LTV 90%
  • After 7 years: max LTV is based on product

Short Sale VA Guideline:

  • If the borrower / homeowner had a short sale they must wait a minimum of 2 years to repurchase
  • After 3 years: max LTV 100% upon VA eligibility

If you or any one you know is struggling to pay their mortgage and would like more information regarding Short Sales, please contact us right away. There are several options available to you now, but the longer you wait, the less choices of solutions are available. Learn about the new short sale laws regarding anti-deficiency protection to ALL 1-4 residential mortgages or deeds of trust where the beneficiary consents to a short sale, whether a first deed of trust or a junior deed of trust.

We are certified SFR, Short Sale Foreclosure Resource and have had 100% success helping our clients navigate through the short sale process. We can help you too.

Pam Parton & Joanna Woolley

760-580-1615 or 760-580-1630

Can A Lender Come After Me For Loan Default?

credit historySOME affluent homeowners have been walking away from a second home or investment property that is worth less than what is owed on the mortgage, even though they can still afford to make the payments.

But dumping that beach condo or country cottage, or even a home bought for an adult child — a practice known in the industry as a “strategic default” — is not the same as discarding a poorly performing stock or bond. Among the lingering effects is wrecked credit that can prevent the homeowner from getting another loan of any kind for 7 to 10 years.

In July, a study by researchers from the European University Institute, Northwestern University and the University of Chicago concluded that the strategic default trend was “large and rising” among homeowners with an equity shortfall of $100,000. As of last March, it said, strategic defaults accounted for 35.6 percent of all foreclosures, compared with 23.6 percent a year earlier.

“I’m increasingly seeing people who are middle class or higher on the pay scale coming to the conclusion that ‘I may be able to carry it, but should I?,’ ” said David Shaev, a bankruptcy lawyer in New York who assists homeowners in distress.

“But the question is, can the bank come after you, and if so, what is your position? What is your liability?”

The answer depends largely on where the property is.

In “recourse” states, a lender can come after you, and usually other assets like a primary residence, for the full mortgage amount. In “nonrecourse” states, a lender agrees to accept whatever the property fetches at a short sale, foreclosure sale, or a deed-in-lieu, in which the property is taken back but not formally foreclosed on, and generally can’t sue for the full loan amount. Florida, Connecticut and Arizona are among the nonrecourse states, while Colorado, Maine, New Jersey and Hawaii are recourse states.

There is a third category of state, called “single-action” or “one-action,” which allows the lender either to foreclose on the owner or file a civil lawsuit for the full loan amount. New York, California and Idaho are in that category.

Even in a nonrecourse state, however, those homeowners who opt for a strategic default on a previously refinanced property may not be protected from lenders, because the mortgage in such a case was not accorded for a first purchase, said Philip Faranda, a mortgage broker for J. Philip Real Estate, in Briarcliff Manor, N.Y.

When home-equity loans are involved, he added, it gets more complicated. In nonrecourse states like Florida and Connecticut, the lender cannot sue to collect any home-equity loan taken out on the property. But in nonrecourse states like Arizona and California, the lender can still sue for repayment of a second mortgage or line of credit.

Filing Chapter 13 bankruptcy protection, in which the homeowner arranges to pay off debts at lowered amounts over a maximum of five years, is typically the only way to avoid being on the hook for the second loan, mortgage experts say. Affluent homeowners who strategically default on a second home often don’t qualify for Chapter 7 bankruptcy, which leads to liquidation but limits eligibility to those earning no more than state median income levels.

Though not illegal, strategic defaults are controversial, because they are viewed in some circles as unethical. The practice is common among property developers.

For homeowners under water, experts say, it can make economic sense. “It’s a business cash-flow decision,” Mr. Faranda said, “but the risk is that you’re rolling dice with your future credit.”

A foreclosure from default stays on a homeowner’s credit report for 7 years, while filing for bankruptcy stays on the report for 7 to 10 years, he said. A default can lower a credit score by 85 to 160 points, according to FICO, the company that created the scoring method.

With that said, there are still hundreds of homeowners that are legitimately under water and are struggling or unable to make their mortgage payments each month.  For these homeowners there are solutions, and that is where we come in.

We have committed to helping 100 homeowners save their homes from foreclosure this year.  Whether they want to keep their home or need to sell their home we have solutions!  The best part is, there is no charge to the homeowner for our help.

Who might you know that is facing a financial hardship and maybe struggling to keep their home?  Send them this information and have them give us a call right away to determine which solution will be best for them.

Pam Parton and Joanna Woolley
Windermere Exclusive Properties
760-580-1615 or 760-580-1630

Lynnley Brown of New York Times
Contributed to this article

 

 

FHA Loans – Down Payment, Reserves and Mortgage Insurance

This is the fourth and final post in a series that deals with important aspects of FHA financing.

CB107112Minimum Down Payment
In today’s challenging market, this is probably the most attractive feature of the FHA home loan – the minimal down payment requirement.  The minimum allowable down payment is 3.5% of the purchase price.  This benefit is enhanced further by the flexibility allowed for the source of those down payment funds, as discussed below:

Reserve Requirements
Reserves are funds that a buyer has “left over” after purchasing the home.  Most conventional home loans require enough reserve funds to cover at least two months of mortgage payments including property taxes, insurance, mortgage insurance and home owner’s association (HOA) dues if required.

FHA financing does not have a reserve requirement if purchasing a 1 or 2 family property (a 3 or 4 family property requires at least three months of reserve funds).

Acceptable Sources of Funds

  • Borrower’s depository funds – Funds owned by the Borrower in bank accounts, stocks and bonds, Certificates of deposit, retirement accounts such as 401k plans
  • Gift funds – Can come from a wide variety of sources, including family members, a close friend with established close ties to the borrower, an employer or labor union, charitable or non-profit organization, government agency or a public entity such as a city through a homebuyer’s assistance program. A couple important caveats: the gift funds must be thoroughly documented and provide a clear paper-trail. Depending upon the source of the gift funds, such documentation will include a detailed “gift letter”, copies of cancelled checks and bank withdrawal slips or evidence of bank wire transfer. There must be reasonable evidence that the qualified donor has the financial ability to give the gift. As of October 1st, 2008, funds from certain non-profit organizations which are matched by donations from the home seller can no longer be gifted to the buyer
  • Sale of existing home – proceeds from the sale of an existing home may be used to purchase a new home with FHA financing
  • Sale of personal property – the sale of a car or other personal property is acceptable as long as the funds can be paper-trailed to the sale
  • Cash or “mattress money” – this requires a written explanation describing the source of the cash, how it was accumulated and how long it took to accumulate. Such cash accumulation must make sense for the borrower, such as not having a checking or savings account or credit accounts.
  • Commission from sale of property – acceptable if the borrower/buyer is a licensed real estate agent and entitled to a commission from the sale

Mortgage Insurance
A lesser appreciated, but very vital benefit of FHA financing, has to do with mortgage insurance, or MI. Until recently, it was generally easy to avoid having to pay for mortgage insurance when purchasing a home with less than 20% down payment. This was accomplished by getting a second mortgage to “piggy back” with an 80% first mortgage. Thus a qualified buyer could buy a home with little or no money down by obtaining two mortgages. In the reality of today’s markets such second mortgages are all but non-existant or exorbitantly priced.

CB026210The only remaining option for a homebuyer with less than 20% for a down payment is to pay for mortgage insurance. In certain areas such as California and Florida, most companies that provide such insurance have limited the maximum coverage to 90% (or less) of the purchase price. In addition, they have tightened their underwriting guidelines and it is indeed more difficult to actually qualify for the insurance.

Enter the FHA home loan. It is generally considered easier to qualify for MI under the FHA and it will go to 96.5% of the purchase price. In short there is a significant portion of the home-buying population who have no other option than FHA financing just for these two reasons alone.

In a Nutshell…
FHA financing may not necessarily be the best fit for everyone in the home-buying market. However, these hallmark features of the FHA home loan – minimal down payment and reserve requirements, flexible sources of funds and availability of mortgage insurance – are far and away the primary reasons that many home buyers, particularly younger first-time home buyers, seek FHA financing. It’s clear to see why.

For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com

Credit Do’s & Dont’s To Help Secure Your Home Loan

How is your credit?

How is your credit?

Most people at one time or another try to improve their credit to be able to secure the best rate for a mortgage, car loan or to just repair their damaged credit.

Here are some helpful tips to improve your credit score;

DO pay your bills before the payment is due preferably as soon as you get the bill.  For millionaire credit building, this does have an impact on your credit score.  Additionally, it keeps your average daily balance low and saves you money on interest when determining interest and insurance rates.

DO keep your account balances less than 40-60% of the limit.  Potential creditors like to see that you use your credit appropriately, but not excessively.  The old adage “The best way to get approved for credit is to not need the money” is true.

DO pay your biggest bills first.  The larger the missed payment, the more it hurts your credit score.  Simiarly, if you are forced to juggle bills, choose to skip the payments for the creditors who don’t report to the credit bureaus like utility companies and pay the ones who will report to the bureaus.

DO pay your mortgage or home loan every month.  Lenders frown on late payments on your old home loan when you are applying for new loans.

DO maintain a variety of types of loans.  A previous mortgage or auto loan will increase your chances of getting the next mortgage or auto loan.

DON’T cancel your credit cards.  Even unused cards help your credit score.  It is not until you have a long credit history with a large number of accounts that lenders start to be concerned that you are possibly overextending yourself.  If you have trouble not using  your cards wisely, freeze them in a block of ice, even cut up the cards.  But don’t cancel the account!

DON’T sign up for more cards or get too many rate requests over an extended period of time .  Strategically plan and concentrate your efforts when applying for additional credit or loans.

DON’T pay old unpaid bills.  This will draw attention to the old accounts.  Showing recent activity can keep the information on your report for an extended period of time.  Sometimes it is better to leave sleeping dogs lie.

For more information on home buying or selling, give us a call!

Pam Parton & Joanna Woolley
760-580-1615 or 760-580-1630

Brian Olenik of
Corinthian Title
contributed to this
article

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What Is Your FICO Score

Understanding your FICO score and how it affects your ability to obtain credit.

 

FICO scores

FICO scores

 

REMOVING SOME OF THE MYSTERY ABOUT CREDIT SCORING
Fair, Isaac Co., the major provider of credit scoring systems to lenders, revealed how it determines credit scores, also know as FICO scores.  Many lenders use these scores to predict how likely a borrower is to repay a loan.

 

 

 FIVE MAIN FACTORS INFLUENCE YOUR FICO SCORE:

1) PAYMENT HISTORY
     Payment history accounts for about 35 percent of your score.  Paying     your bills on time is the best way for you to receive a high FICO score.

2) YOUR CURRENT DEBT
      About 30% of your score is determined by how much you currently owe.  If you owe a lot of money in relatio lto your available credit limits, you may appear over extended.  The key is to keep your balances low on unsecured debt such as credit cards.  Even closing unused accounts may not improve your score.

3) HOW LONG YOU’VE HAD CREDIT
     The longer you’ve had credit and handled it responsibly, the better your FICO score will be.  The length of your credit history accounts for 15% of your score

4) APPLICATIONS FOR NEW CREDIT
     Applying for several credit accounts in a short period of time could indicated that you may soon be over extended and may lower your score.  This is about 10% of your score.

5) MIX YOUR CREDIT
     The final 10% of your score is determined by the kinds of credit accounts you have, such as credit cards, retail accounts, installment loans, finance company loans and mortgage loans, and how many of each.

    Ther are other elements, mostly subcategories of the items listed above, that go into your score, including your occupations, time at present job, time at your current address, home ownership and much more.  For more information or to obtain a copy of your FICO score, visit www.fairisaac.com

Following these guidelines will help you obtain better financing rates when you are ready to purchase your next home.

Give us a call with any real estate questions you may have, we’re here to help and we answer our phones!

Pam Parton and Joanna Woolley
760-580-1615 or 7605801630

Brian Olenik of
Corinthian Title
contributed to this article