Mortgage Loans

6/19/2013

Fix Your Credit

Marah Macrocarpus Laguna Canyon,

Fix your Credit
Everything spiny and thorny can be repaired

This post is one of several where I offer consumers methods to improve their FICO score to get a mortgage loan. FICO scores determine a part of the interest rate you can get on a home loan. If you are shopping for a house in Newport Beach, Laguna Niguel, or anywhere it is time to do a tune up on your FICO BEFORE you get into contract or apply for a mortgage.

· Opt out don’t let them pull your credit and leave your information in a dumpster, don’t give people your full social security number and full driver’s license number.

http://www.consumer.ftc.gov/articles/0148-prescreened-credit-and-insurance-offers/

· Apply for a secured credit card: If your situation is that you will not qualify for an unsecured credit card, than a secured credit card may be a great option. Secured credit cards require a deposit into an account to serve as security for the card ($500 or terms according each individual bank). Make all payments on time, as months pass the history boosts your score.

·
Become an authorized user on a family members’ credit card: Being added as an authorized user on a family members’ credit card can help add positive credit. When added as an authorized user, you will be issued a credit card (which I would encourage you DO NOT use) and that trade line will begin being reported on your credit bureau. As time goes forward, you can benefit from the family member’s positive credit. Make sure the family member is using that credit card responsibly so that you are benefiting from a positive score.

· Credit Unions: Establishing positive credit requires a mix of credit types (revolving and installment). Often times, credit unions are a more gracious in dealing with consumers with less than stellar credit. Apply for a small ($500 or less), short term (12 months or less) installment loan which, when properly repaid, can add valuable points to the credit score.

Here are some other suggestions on how you can begin making some changes.

· Pay your bills on time. This sounds simple, but this is the biggest thing you can do to keep your score high. Delinquent payments and collections have a major negative impact on your score.
· Keep your balances low on unsecured revolving debt like credit cards. High balances still owed can affect a score.
· The amount of unused credit is an important factor in calculating your score. You should only apply for credit you need.
· Make sure the information on your credit report is correct. If it is not, dispute it with the Bureau Company or lender directly.
· Removing negative accounts on your credit report has the biggest impact on your score.

How Credit Is Counted:

· 35% Payment history
· 30% Amounts owed
· 15% Length of credit history
· 10% New credit
· 10% Type of credit

Stay away from small department store cards; they have a low limit and tend to bring down your overall score.
You must use credit in order for it to report to the bureaus

Stay away from Finance Cards- HSBC, furniture, mattress stores and such. Larry is not a good credit reference, it looks as if you were desperate to get no payments for six months.

If you do not use a card it may be cancelled by the bank – this WILL hurt your score, closed accounts are not positive.

Never use more than 60% of your available credit line

Do not trust car dealers such as CARMAX here in Orange County that tell you they will only soft pull your credit. They will pull ten to fourteen inquiries to purposely make your score go down so you cannot get a car loan anywhere else.

You have a legal rights to dispute anything on your credit profile.

The Fair Credit Reporting Act gives you the legal right to dispute items on your credit reports that may be inaccurate, out of date, incomplete or unverifiable. This process must be completed in writing.

Exercise your legal rights pursuant to the Fair Credit Reporting Act, the Fair Credit Billing Act, Truth in Lending Act, and Fair Debt Collection Practices Act, as well as other applicable Federal Statues. Borrowers with higher FICO scores get lower interest rates.

this is one of 4 posts about credit repair also see http://cgbarbeau.blogspot.com/2010/05/fix-your-fico-free.html

6/17/2013

USDA Mortgage Takes Weaker Credit

Begonia in my yard blooming in blue pot

USDA Mortgage can help you buy an owner occupied home with no down payment!

Cash reserves are not required

The minimum FICO score requirement 640.

This mortgage loan is also easy on the credit items:

· Foreclosure or deed-in-lieu of foreclosure allowed after three years from completion

· Outstanding tax liens or delinquent government debt with no satisfactory arrangements

· No court-created or affirmed obligation (judgment) caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months.

· Two or more rent payments paid 30 days or more past due within the last 3 years

· Accounts which have been converted to collections within the last 12 months (utility

· bills, hospitals bills, etc.)

· Collection accounts outstanding, with no satisfactory arrangements for payments, no

· matter what their age as long as they are currently delinquent and/or due and payable.

· The lender is responsible to determine what collection accounts, if any, should be paid

· in full by the applicant prior to or at closing based upon the strength of the credit profile.

· Evidence of meaningful financial reserves and if the accounts have the potential to

· affect the lien position or diminish the borrower’s equity must be considered.

· Any debts written off within the last 36 months.

· A bankruptcy in which applicant was discharged more than 36 months before

· application

· A satisfied judgment completed more than 12 months before the date of mortgage application

· _ The lender may consider mitigating circumstances to establish the borrower’s intent for

· USDA mortgages accept weaker credit than FHA and case by case when the applicant provides documentation that:

· The circumstances were of a temporary nature, were beyond the applicant’s control,

· and have been removed (e.g., loss of job; delay or reduction in government benefits or

· other loss of income; increased expenses due to illness, death, etc.); or

· The adverse action or delinquency was the result of a refusal to make full payment

· because of defective goods or services or as a result of some other justifiable dispute

· relating to the goods or services purchased or contracted for.

· _ A 24-month history of residency is required on all files.

· _ Non-purchasing spouse in Community Property States: Except for obligations specifically

· excluded by state law, the debts of NPS must be included in the applicant’s qualifying ratios when

· the applicant resides in a community property state or the property guaranteed is located in a

· community property state. The NPS credit history is not considered a reason to deny a loan

· application. However, the NPS obligations must be considered in the debt-to-income ratio unless

· excluded by state law. A credit report must be obtained for the NPS in order to accurately

· determine the debts that must be counted in the total debt ratio.

· _ Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New

· Mexico, Texas, Washington and Wisconsin.

· _ If borrower is legally separated in a community property state, the Legal Separation

· Agreement signed by the judge is accepted the same as a divorce decree.

· _ If the non-borrowing spouse has no Social Security number, due diligence must be

· completed to assure that indeed there is no SS# assigned. Indications may show up on the

· tax transcripts or other misc. documentation in the file. The required credit report is run with

· only zero’s (0) in the SS# fields. It is not acceptable to run the credit report using an ITIN

· number.

_ Short Sales: Evaluation of a borrower’s creditworthiness for borrower(s) who have pursued a

short sale

Collections: Underwriter discretion as to whether they will be required to be paid off or not. Must

not affect first lien position and cannot affect the ability to repay the mortgage debt. If the Underwriter

determines collection accounts may remain open, they must document an adverse credit waiver

and addressing the circumstances surrounding each collection account; specifically,

that the situation was temporary in nature, and beyond the mortgage applicant’s control.

_ Child care expenses are not required to be considered as a recurring liability when calculating

debt-to-income ratios. Child care expenses are utilized to calculate the adjusted gross income in

determining mortgage program eligibility.

Declared Disaster Areas _ From time to time, FEMA announces counties that are affected by natural disasters. For example after the Laguna Beach fire of 1993.

Certain areas of Orange County that are within the scope of this type of mortgage such as Silverado Canyon and Trabuco Canyon.

Property must be located in a rural area as defined by the RHS

o Populations of 10,000 or fewer

o Populations up to 20,000 if located outside a Metropolitan Statistical Area (MSA)

_ To determine if a property is located in a designated rural area, visit the RHS Web site at:

http://eligibility.sc.egov.usda.gov/eligibility/. Click on “Single Family Housing” under

“Property Eligibility”.

oBorrowers adjusted income may not exceed 115% of the Area Median Income (AMI)

_ To determine the income and eligibility limits, the following website walks through the household

members, income, etc. and determines if it fits within the 115% requirement:

http://eligibility.sc.egov.usda.gov. Click on “Guaranteed” under “Income Limits”.

6/14/2013

Why Orange County Home Prices Are Soaring

Robert Shiller says: recovery for housing is in process.

With the numbers of foreclosures, and notice of defaults shrinking in Orange County the real estate market is soaring.

Keep growing Orange County Real Estate Prices!

The shortage of homes for sale and rising home sale prices are being driven by three forces: 1. Banks and Wall Street Investors 2. Foreign buyers and 3. Fearful owner occupants who wait to sell or can’t sell because they are upside-down.

The major banks and Wall Street good old boy firms, (many were subprime lenders five years ago) now have reorganized themselves into real estate “investors.” These all-cash investors are buying distressed property at the low end of the price scale, muscling out first-time homebuyers and smaller mom-and-pop investors. Big investors, like Blackstone, Colony and others, are snatching up low-priced housing units in bulk and renting them out to people who can’t buy. By amassing thousands of rentals, the Wall Street landlords are putting a crunch on housing supply, driving up prices and making millions of dollars. Thank you stodgy bankers for hoarding all the homes under $200000.

The second influence is the increase of foreign nationals buying investment properties in California, Arizona, Florida and Texas. Foreign investors driven by a multitude of Ponzi seminars and gurus who wrote a book on “get rich quick flipping properties in the United States” are buying cheaper housing units sight unseen. I see more Canadian investors than in the past fifteen year cycle. Right behind them are Chinese, Taiwanese, Australian, and Middle Eastern buyers all eager to find properties on the internet and make all cash offers.

As a mortgage lender I am getting several calls a day about our foreign investor loan programs. The biggest problem with these buyers is they have been told nonsense ideas to vest each property in separate LLC’s or entities. They often have complex financials with one parent trust. Unfortunately, with layered financials, their package appears often too complicated to actually show income enough to close on a traditionally priced loan. Canadians don’t have to go through all the fiery paperwork hoops that Americans do to get a home loan. They send in about twenty percent of the information and begin to argue about why so many items are required. The obvious solution is for foreign investors to close with a low documentation loan. Foreign investors are not required to go through the income tests that Americans must complete, but the cost is not in the four percent range. These loans cost around eleven percent and have larger upfront fees due to the high level of risk.

Unfortunately for stability in the market: home sales and prices are up, but home ownership is down because it’s investors — not first-time homebuyers — who are buying up the majority of homes. RealtyTrac shows 3.5 percent of all home purchases in the first quarter of 2013 were closed by “institutional investors.” Institutional purchases are up 34 percent from a year ago.

Meanwhile, the housing “scarcity” is a result of two factors: 1) borrowers who are “upsidedown” -they can’t sell, but have hung on making payments out of pride or job reasons, and 2) banks refusing to modify underwater mortgages. Since more than 25 percent of all borrowers — or 11.3 million homeowners— are underwater, these homeowners can’t sell, can’t refinance and can’t get a loan modification.

Many homeowners are waiting to sell because prices are rising in many markets. In Laguna Beach the single family house under a million dollars is gone. A home on Santa Ana that I looked at sixteen months ago listed for $ 850000. They did not get an offer and took it off the market. This month they re-listed for $ 950000 and received multiple offers for larger than full price. No improvements where done to the home.

Sitting vacant are 14.2 million homes, this creates hardship, crime and a giant sink hole in a community. Would you want to live next to the vacant house that squatters are making a fire out of scraps to keep warm in Detroit?

Mortgage Blue Jay in my window, he is ready to soar.

(Curbside appeal of these two planters with waterfalls of flowers in Corona Del Mar)

Still buyers are interested in homeownership. We all dream big.

Orange County California has turned the corner with few foreclosures and a trickle of notice of defaults. Most notice of defaults are located inland Orange County. A number of these properties are unimproved land. Here is a list of the locations that still are upside-down often with two lenders and not listed for sale:

East hill, Coto De Caza

W Martha Lane, Santa Ana

San Antonio, Fountain Valley

N Genesse St, Orange

Mount Neota, Fountain Valley

Mohave Way, Rancho Santa Margarita

Granada, Newport Beach

N Fairview, Santa Ana

Walker Lane, Fullerton

Cabrosa, Mission Viejo

Foxtail Drive, Yorba Linda

W Palmyra, Orange