What hurt your credit score tremendously
[09/07/2009 8:05 pm]

The Wall Street Journal - If you’re looking for a new 30-year mortgage, last week’s events from the financial markets carry a very simple message: Get ‘em cheap while you still can.

Rates on conforming 30-year loans jumped dramatically in just a few days, ending the week at an average of 5.27% according to Bankrate.com. That’s still OK by historic standards, but it’s a jump from the levels seen just a few weeks ago, when you could get loans at 4.75% or below.

The underlying cause isn’t hard to find. Rising government debts, and burgeoning hopes of an economic recovery, are pushing up long-term interest rates on government debt. The yield on the 10-Year Treasury, which was barely 2% near the end of last year, surged to 3.67% late last week before settling back slightly. And that, in turn, pushes up rates on other long-term loans.

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What does this mean for you?

Your credit history has a giant impact on the mortgage that you get and the terms that it will have。 Lenders will go over your entire history with a fine-toothed comb. They will focus on your credit report, and your credit score. Your credit report is where all of the details concerning how you handle credit is kept.

This report will show any debts that you have had in the past years and how, when and if you have paid them according to schedule on time every month. This report will also show if you have ever filed for bankruptcy. Your credit score is derived from the information on your credit report. The lender will have a formula that they use in order to find your exact score. Some lenders use a slightly different formula for their own purposes. Your credit score will tell the lender whether or not they should trust you with a loan of any size. These scores range from around 300 to 900 and most people fall somewhere in the middle of these two numbers.

Your credit score is come to by putting together several different factors. The lender will look at how well you have been at paying your debts on time. If you have a habit of paying your bills late each month this will hurt your credit score tremendously and the worse your credit score is the worse the terms of your loan will be.

If you have had credit for a long time this looks good on your credit report and will help your credit score, assuming of course that you have been responsible with your credit. And the more available credit that you have the better you will look to lenders. If you have maxed out all of your credit they might think that you are too close to being unable to pay off your debts therefore less likely to be able to pay them back according to schedule.

Before you apply for a mortgage or any other type of loan you should take some time to go over your credit report. The lender is going to and if you can get to it first and then do some damage control. Sometimes credit reports have errors on them and if your does there are some things that you can do to fix this problem. You do need to take care of this though because your credit report is key to you getting approved for a good mortgage loan.

You will need to get a copy of your credit report from all three of the big credit bureaus. They d sometimes differ somewhat and you need to make all of these reports look fabulous.

When you are going over your credit report you need to look for any inconsistencies in the payment dates or amounts. If you have made any late payments or missed any payments recently write them down as well as an explanation because you will probably need this for the lender. And the number one way to get your credit report and your credit score in better shape is to start paying all of your bills on time each and every month.

   bad news in the short term for homebuyers
[18/07/2009 2:04 am]

Today Bank of America and Citigroup made news by reporting some healthy profits Debt Consolidation . Bank of America reported a $3.2 billion profit for the second quarter. Citigroup said it earned $4.3 billion during the same period. This follows other good news earlier this week issued by Goldman Sachs and JP Morgan Chase. This may not be good news for current mortgage rates.

Good news from banks is always good news for our economy and we need that. Unfortunately good news from banks is quite often bad news in the short term for homebuyers out there purchasing their new home. As a rule, when I am coaching my clients and discussing their interest rate on their mortgage, I tell them to follow along at home. Usually, a good day in the stock market is bad for my mortgage rates and vice versa.

This is an oversimplified rule of thumb of course but it is a good general rule for the typical borrower who has many other details to follow and digest during the home buying process. The thinking here is that if we have a good economy and more people are in a position to buy, this creates more demand for mortgages and rates go up. If the economy is sluggish, there is less demand for mortgages which forces banks to lower mortgage rates to attract business.

Another way to show the impact of good and bad economy on homebuyers is to demonstrate this with a few numbers. One of my clients this week went to contract on Wednesday. He is looking at a home purchase in the amount of $315,000 with 20% down. He started the week with a quote of 4.875% and may end the week at 5.125%. (Depending how mortgage rates come out this morning.) This customer, who is getting a mortgage of $ 252,000, just saw his payment go up $39 per month. This is not enough to break him, but it is enough for him to trim his spending somewhere else.

Currently we have an interesting tug of war going on in the mortgage markets with regard to interest rate. We have huge deficit spending which will push interest rates up. We have a weak economy that will help keep them down. We have a government that is purchasing huge amounts of mortgage back securities ensuring that our banks are liquid and ready to continue lending which has helped keep mortgage rates down. No doubt Washington will do everything in its power to keep our rates low to help get rid of the glut of houses out there and also continue to receive the stimulus that occurs when consumers refinance into a lower rate.

In an effort to proactively help answer questions for customers, I have created three auto-responder series on my website.* They are entitled “The Mortgage Process”, “First Time Homebuyer Workshop” and “Debt Relief”. You will see a separate subscription box for each series. They are of course free and include video of myself describing what to expect during each phase of the home buying or refinancing process. “The Mortgage Process” describes what to expect once your loan is at the bank. The “First Time Homebuyer Workshop” is a tool that coaches FHA customers who need to put their affairs in order before they go house hunting. The “Debt Relief” series describes alternatives for customers who are in need of debt settlement or credit repair.

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