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By Trevor Huntingford | Broker in Port Townsend, WA
  • Learn A Little Something About FICO Scores

    Posted Under: Home Buying in Jefferson County, Financing in Jefferson County, Credit Score in Jefferson County  |  July 31, 2011 8:56 PM  |  527 views  |  No comments
    Credit scores are one of the largest factors that lenders use in evaluating whether or not to lend money to a borrower. Credit scores are designed to measure the risk of someone defaulting by taking into account various factors in a person’s financial history.

    If you are considering purchasing a home one of the things you want to be sure of is the accuracy of your credit report.  The economic down turn of the last five years has vastly changed the mortgage landscape all across the country.

    If you ask any mortgage broker they will tell you that things have changed in the mortgage industry on a monthly basis. Given the increase in foreclosures and short sales lenders have increased their standards when evaluating the potential for default of every borrower.

    One of the tools that lenders use to evaluate the borrower to repay a loan is what’s know as their FICO score. The FICO score was developed by the Fair Issac Corporation. The company was founded in 1956 and their scoring programs are often used to assist lenders in managing credit accounts, detecting credit fraud and automating lending decisions. The FICO score is a standardized approach that helps lenders deliver decisions on loans in an efficient manner.

    FICO scores can range from 300 to 850 with 850 being the maximum possible score. According to the FICO scoring system there are five factors that determine a borrowers score:

    • 35% — A borrowers payment history carries the most weight – Late payments on bills including  a mortgage, credit card or automobile loan, can cause a consumer’s FICO score to go down. Paying your bills according to the contract you signed will over time help improve a consumer’s FICO score.
    • 30% — The borrowers credit utilization – The ratio of current outstanding debts such as credit card balances to the total available revolving credit ( your credit limit). You can improve your FICO score by paying off  debts and lowering your utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on your FICO score.
    • 15% — The length of credit history – As your credit history gets longer, assuming you pay your bills on time, it can have a positive impact on your FICO score.
    • 10% — The types of credit used (installment, revolving, or consumer finance) – There is some credit given to having a history of managing different types of credit.
    • 10% — A recent search for credit or amount of credit obtained recently-  If you have multiple credit inquiries as a consumer seeking to open new credit, such as credit cards, retail store accounts, or personal loans, it can hurt an your score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score. What should be noted however is that if you are shopping for a mortgage or auto loan over a short period of time you should not experience a decrease in your scores as a result of these types of inquiries. So if you are buying a home and apply to multiple lenders and they all do their credit checks you are not supposed to be penalized.

    FICO scores do not take into account a borrowers salary, employment history, where they work, rental agreements, child support or other such obligations or interest rates on any current loans.

    Generally speaking a credit score that is over 720 is often considered an excellent credit score.  A score of 680 – 719 is considered good. A score that falls between the range of 620-679 will usually make the lender scrutinize the file further. Having a score that falls between 585-619 will typically disqualify you from getting the best rates. A score below 584 will make many lenders question whether or not they want to do business with you.

    There are actually three companies that report credit scores to lenders. They are Equifax, Experion and Transunion. The scoring of these agencies can often vary quite a bit. Each of the bureaus collects different information on the borrowers which can change the final score. Given how the credit scores can differ from the various agencies if you are falling on the edge of one of the credit ranges it may be prudent to apply to more than one lender. For example if you had a score of 675 at one agency it is quite possible you could be 700 somewhere else which could give you a better rate!

    It should be noted that the credit scoring model was slightly altered in 2009 and could effect your score either up or down by 20 points.

    In the new model credit problems and issues are ranked according to number and magnitude more specifically than before. The new FICO scoring system also focuses less on how many accounts a borrower has and more on the amount of balances carried.

    The statistical models that are used for generating credit scores are subject to federal regulation. The Federal Reserve Board’s Regulation B (implementing the Equal Credit Opportunity Act), expressly prohibits a credit-scoring model considering “prohibited biases” such as race,  national origin, sex, religion and marital status. The law also states that credit-scoring models must be empirical and statistically sound. In addition, if a borrower is denied a loan based on credit, the lender must state to the specific reasons for the denial. A statement that the person did not score high enough is not acceptable. Thee reasons for denial must be specific. For example  there were too many late payments of 60 days or longer.


    So how does one go about improving a FICO credit score to purchase a home and get the best rates that lenders offer? The answers are actually pretty simple! 

    • Pay all of your bills on time every month.
    • Pay off all of your existing debt.
    • Unused credit cards should not be closed. This can sometimes lower your credit score.
    • Do not open a bunch of new credit card accounts in a short period of time.

    A few years ago it was not uncommon to hear of mortgage brokers or credit repair companies doing what was known as “doctoring” a persons credit.

    A major portion of the FICO score is set by the ratio of credit used to credit limit.  What was happening was they would increase the score by simply increasing your credit limit. Some of the credit-repair agencies, for a fee, would report to the credit bureaus that they have opened an account with a high credit limit. The customer could not actually use this account but it would improve the customer’s FICO score due to lowering the balance-to-credit-limit ratio. This is no longer allowed!

    When you are starting your home search and getting your pre-approval from a lender one of the other things you should do is get a copy of your credit report from each of the three report bureaus. As a consumer you are allowed to get one free credit report each year from Equifax, Experion and TransUnion.

    With this knowledge is hand you should be well armed to position yourself for the best mortgage rate possible.

  • USDA Awesome Option In Jefferson County

    Posted Under: Home Buying in Jefferson County, Financing in Jefferson County, Property Q&A in Jefferson County  |  July 21, 2011 1:58 PM  |  344 views  |  No comments
    Take a look at some of the outstanding features of USDA financing! Contact me direct if you need a referal to a trusted lender


    Features Benefits

    Down Payment is not required

    Borrowers without savings, or who wish to retain their savings qualify

    100% financing

    More Americans become homeowners

    No reserves are required

    Buyers do not need to provide bank statements

    Expanded qualifying ratios

    Buyers with satisfactory credit may qualify with higher Debt-to-Income ratios to accommodate high cost housing areas, etc

    Seller is allowed to pay Buyer's Closing Cost (ask USDA Specialist for details)

    Reduces out of pocket costs for Buyers

    Low minimum credit score (640 minimum credit score required)


    Buyers with non-traditional or no credit histories may qualify

    Streamlined processing with 640 credit score

    No explanations on credit with 640+ score

    No monthly PMI

    No monthly mortgage insurance means a lower monthly payment for the Buyers and additional cash each month

    Generous income limits based on 115% US median (not HUD)

    Deductions are available for dependents, daycare, elderly households, etc. to assist more individuals and families in qualifying

    No maximum purchase price limit

    Buyers choose the home that meets their needs and repayment ability

    NOT just for first time buyers

    All homebuyers are eligible for benefits

    Modular Homes may be eligible

    Purchases only (Manufactured Homes are NOT Eligible)

    Education/training substitute for job tenure

    Income history for ratios is waived.

    USDA is the lowest payment loan option for buyers wanting a FIXED Rate

    No MI, very low 30 YEAR FIXED rates and very easy to qualify

  • Want to by a FannieMae Home? Use HomePath Financing

    Posted Under: Home Buying in Jefferson County, Financing in Jefferson County, Foreclosure in Jefferson County  |  July 13, 2011 7:39 PM  |  328 views  |  No comments

    The HomePath Mortgage is a phenomenal option if you are looking to by a bank owned Fannie Mae home. The dow payment is low, the no lender ordered appraisal and no MI makes this an affordable and simple option when trying to purchase a Fannie Mae REO.

    Take a look at the detailed overview:

    HomePath Mortgage
    allows a borrower to purchase a Fannie Mae-owned property with a low down payment, flexible mortgage terms, no lender-requested appraisal and no mortgage insurance. Expanded seller contributions to closing costs are allowed.

    Benefits to You, the Borrower

    • Low down payment and flexible mortgage terms (fixed–rate, adjustable rate, or interest–only).
    • Down payment (at least 3 percent) can be funded by the borrower’s own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
    • No lender-requested appraisal.
    • No mortgage insurance; ask your lender for cost details on loans without mortgage insurance.
    • Expanded seller contributions for closing costs allowed.
    • Available for primary residences, second homes and investment properties.
    • Many condo project requirements are waived; ask your lender for details.
    • For more information, contact a me for a HomePath Mortgage lender.
  • 10 Mistakes A First Time Buyer Can Make

    Posted Under: Home Buying, Home Selling, Financing  |  April 22, 2011 7:44 AM  |  326 views  |  No comments

    1. Not Knowing What You Can Afford
    As we've all learned from the subprime mortgage mess, what the bank says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. If you don't already have a budget, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings and so on. Don't forget major expenses that only occur once a year, like any insurance premiums you pay annually or annual vacations. Subtract this total from your take-home pay and you'll know how much you can spend on your new home each month.

    If you end up looking at homes that are outside your price range, you'll end up desiring something you can't afford, which can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can afford. You may even learn that you can't afford the type or size of home that you desire and that you need to work on reducing your monthly expenses and/or increasing your income before you even start looking.

    2. Skipping Mortgage Qualification
    What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income, so make sure to get pre-approved for a loan before placing an offer on a home. If you don't, you'll be wasting the seller's  time, the seller's agent's time, and your agent's time if you sign a contract and then discover later that the bank won't lend you what you need, or that it's only willing to give you a mortgage that you find unacceptable.

    Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase. If you cause the deal to fall through, you may have to forfeit the several thousand dollars that you put up when you went under contract.

    3. Failing to Consider Additional Expenses
    Once you're a homeowner, you'll have additional expenses on top of your monthly payment. Unlike when you were a renter, you'll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs (which will occasionally include expensive items like a new roof or a new furnace).

    If you're interested in purchasing a condo, you'll have to pay maintenance costs monthly regardless of whether anything needs fixing because you'll be part of a homeowner's association, which collects a couple hundred dollars a month from the owners of each unit in the building in the form of condominium fees.

    4. Being Too Picky
    Go ahead and put everything you can think of on your new home wish list, but don't be so inflexible that you end up continuing to rent for significantly longer than you really want to. First time buyers often have to compromise on something because their funds are limited. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or forgo that extra bedroom. Of course, you can always choose to continue renting until you can afford everything on your list - you'll just have to decide how important it is for you to become a homeowner now rather than in a couple of years.

    5. Lacking Vision
    Even if you can't afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford. If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don't let physical imperfections turn you away. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.

    6. Being Swept Away
    Minor upgrades and cosmetic fixes are inexpensive tricks are a seller's dream for playing on your emotions and eliciting a much higher price tag. Sellers may pay $2,000 for minimal upgrades or staging that you'll end up paying $40,000 for. If you're on a budget, look for homes whose full potential has yet to be realized. Also, first-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.

    7. Compromising on the Important Things
    Don't get a two-bedroom home when you know you're planning to have kids and will want three bedrooms. By the same token, don't buy a condo just because it's cheaper when one of the main reasons you're over apartment life is because you hate sharing walls with neighbors. It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain.

    8. Neglecting to Inspect
    It's tempting to think that you're a homeowner the moment you go into escrow, but not so fast - before you close on the sale, you need to know what kind of shape the house is in. You don't want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. Keeping your feelings in check until you have a full picture of the house's physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.

    9. Not Choosing to Hire an Agent or Using the Seller's Agent
    Once you're seriously shopping for a home, don't walk into an open house without having an agent (or at least being prepared to tell them you have representation. Agents are held to the ethical rule that they must act in both the seller and the buyer parties' best interests, but you can see how that might not work in your best interest if you start dealing with a seller's agent before contacting one of your own.

    10. Not Thinking About the Future
    It's impossible to perfectly predict the future of your chosen neighborhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road.

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