Guilty, Guilty, Guilty Until Proven Innocent!

Don Davis email: dond@htlnw.com Ph: 360-652-9994

You are guilty until proven innocent is the way the credit reports work. It doesn’t matter if the account isn’t your and it doesn’t matter if you can even prove it. If it is on your report… it must be yours. It doesn’t matter if it is reported in error. It doesn’t matter if it isn’t yours. It doesn’t matter if you never missed a payment and it shows you have. If it is on the report…guilty! These are the kinds of errors that exist on credit reports today. Because it is on YOUR report means that it must be yours. This can be an account that is listed as yours but you don’t have what ever it is. For example, I have a client who has an account listed from Honda Finance. This is not his account. It belongs to some one else with the same name. They live in different states and have entirely different social security numbers. It is listed in error on my client’s credit report! I can supply documents that show this belongs to a different person, including phone number, address and everything that clearly shows this doesn’t belong to my client. But it is on the credit report and the lender takes that as the gospel truth, despite documents stating otherwise. Because of this it is preventing him from obtaining financing to buy a home.

Do you think the credit bureau cares? Do you think Honda Finance cares? No. In fact Honda customer service states that they have no mechanism to refute an erroneous entry. Yes they are the ones reporting to the credit bureau and no they don’t have any way to change it. I have personally spent hours on the phone with Honda to correct this problem and to no avail. They can verbally say that the account doesn’t belong to my client with the social security number I gave them, but they cannot put anything in writing! They suggest that we send a request to the credit bureau to correct the error.

Okay, here’s how that one goes. I supply the credit bureau the information to request that the erroneous account be removed. The credit bureau responds with “account verified”. This is because Honda Finance is the one supplying the information. The credit bureau’s computer sends Honda’s computer the challenge as well as the information that it is reporting. The Honda computer compares that with what they send to the credit bureau (how do you think the bureau got the info in the first place) and the account comes back “verified”. That is because it is the same, erroneous information.

So we contact Honda once again and explain that until they correct the information they are reporting, it won’t change the outcome. They say “we’re sorry, we can’t do that”!

A vicious circle

This is a system that is screwing with peoples lives. This particular client has been haunted for years, just because his name is the same as someone else. And it isn’t fixed yet.

As a mortgage professional I do have solutions. This is only available to mortgage lenders and not to the general public or to any other types of lenders. I can get a credit supplement or a rescore. All I have to provide is the documents proving that, in this case, the account belongs to someone else along with supporting documents and in three to seven business days the problem is cured. This is unlike what it would take you to fight this. In fact this same client had spent over two years clearing some other accounts that were listed on his report that were the other person’s accounts. It would have only taken me days. The key is that there needs to be proof that it belongs to someone else. Or in other instances that an account is being reported in error or that the account is paid off or there are no late payments. In virtually every instance, if I have documented proof, it can get remedied in a matter of days.

I have a very big distain for the credit reporting agencies. While everyone may think that their business is reporting, fairly and accurately, your credit history, in fact their main source of revenue comes from selling your information to marketers. Around 50% of their entire income source is generated from selling your information. This is where their time and energy is really spent, making money off of the information they collect about you.

So next time you think the credit bureau should care about you and a fair and accurate report about your credit history, think again.

Questions, comments? Let me know what you think!

Don Davis

dond@htlnw.com

360-652-9994 ext 1

Just A Reminder

Don Davis email: dond@htlnw.com Ph: 360-652-9994

I was going to repost this but didn’t really find it necessary.

 I just want to remind everyone that the clock is ticking on the $8000 tax credit the is set to expire (no one knows if it will be extended or not, why take the risk) November 30^th. 

What that really means is that in order to qualify to get the refund, amend your `08 taxes or wait until you do your `09, you need to have the loan closed.  To assure that will happen in time it really means that you have until the first part of October at the latest.  It is already end of June first of July and that will only leave a few months to take advantage of $8,000 free money.  Of course if you have no ambition to buy a home then this is meaningless.  But if your desire is to own, then you might want to get a move on, pardon the pun.

 If you have any questions or need any help, don’t hesitate to contact me.

 Don Davis

Credit Reports; Garbage In, Garbage Out

Don Davis email: dond@htlnw.com Ph: 360-652-9994

 It seems incredible that something that can control your financial future is   devoted primarily to an automated system.  But yet it seems that this is the way the credit reporting system is designed. 

Somewhere a clerk (data entry, typically not a high paying job) at the lender or creditor sets up your account and what gets reported to the credit bureaus.  Sounds simple enough?  They just make sure that your account is reported with the correct information and you would have to think that they double check things like the spelling of your name, social security number, address and so on…against the information you have listed in your credit report.  WRONG! 

Somewhere the credit bureau receives this information and surely someone would check it against what is on your credit report.  Things like the spelling of your name, address, social security number and so on…WRONG!

 Here’s the way it usually goes.  A clerk enters the information in to a data base that gets sent to the credit bureau.  Never mind that they spelled the name wrong or that it may not even be your account, it just goes in.  Next the credit bureau receives that information and compares it against other people with similar names, address and social security numbers (not necessarily all of those and not necessarily in that order). Sometimes if it seems close the credit bureaus computer puts it on your report.

This is what happens daily and why there are almost 80% of the credit reports with errors.  Almost 30% have errors serious enough to deny credit, even though the report is completely wrong.

Such is the case with Mr. John Spanger (changed the name for privacy reasons, but its close) John Spanger lives in Bothell, Washington and works in Redmond.  There just so happens to be another John Spanger who lives in Idaho (in a suburb outside of Boise).  The Idaho Spanger has a motorcycle loan and two credit cards that are listed on John Spanger of Bothell’s credit report.  Two years ago John Spanger of Bothell mailed and emailed the credit bureaus the errors and asked that they “investigate” and clear the Idaho Spanger items from his credit report. The bureaus send an account challenge to the creditor and the creditor compares what the bureau says and what they say.  Unfortunately the info the bureau has and sent the creditor is what the creditor sent the bureau, so guess what?  They match and the account stays the same.

In this real life instance, John Spanger of Bothell is trying to buy a home.  The motorcycle and credit card of John Spanger of Idaho are paid on time and the payments are not enough to substantially increase his debt load so the application is submitted simply with a letter of explanation stating that the motorcycle loan and the credit card aren’t his. But he has no proof.  The application is submitted, he finds a home and the file is sent to an underwriter to clear the loan and get it closed.  Even with the erroneous accounts there shouldn’t have been a problem.  But, alas, the snake came out of the grass and bit him.  John Spanger of Idaho missed a payment on his motor cycle that showed up when the underwriter pulled a credit report just prior to clearing the loan. (The underwriters do this to make sure that nothing has changed in the borrowers financial life that would add more debt or missed any payments that may lower a score).  The original credit report was clean without any late payments on any account.  5 weeks later the credit report had updated for the prior month and now shoed a 30 day late on the motorcycle.  LOAN DENIED.  

This file isn’t closed yet as this gets written.  We are fighting with the credit bureaus, creditor and underwriter to prove the account is not his.  we have provided each of them information provided by John Spanger of Idaho to help prove the account is not John Spanger of Bothell.  Incredibly the information provided is an entirely different social security number and since John Spanger of Bothell is in the Washington State National Guard we have also provided a history of where he was posted.  Of course the Washington National Guard doesn’t post personnel in Idaho and all the postings and residential addresses were entirely in central and western Washington State.  Was this good enough for the creditor and the bureaus? Not yet.  The challenge once again came back that the account belonged to John Spanger and it remained on both John Spanger’s credit reports.  We are however pretty certain that the underwriter now can see a clear picture and has the original contract from John Spanger in Idaho and it appears that the loan may actually close, albeit a couple of weeks late and an added cost to both the buyer and seller.

The moral of the story is; check your credit reports often.  Make certain absolutely everything on the report is yours.  If there are ANY ERRORS start working to get them corrected now.  Do not give up until the credit report reflects an actual image of what you have and the accounts are yours and yours alone.  If you wait or hope the errors go away, you may wait a very long time.  It can also cost you if any of the information can hurt your score or your chance to obtain credit or insurance or even a job.

 

Don Davis

Why It Is Impossible To Quote You The Interest Rate You’ll Really Get

Don Davis email: dond@htlnw.com Ph: 360-652-9994

I constantly get requests for rate quotes.  Here is the problem with rate quotes, it is fiction.  It does not matter what rates are today. In almost every instance you will never get today’s rates unless you are in the middle of financing your loan.  This means that if you are purchasing a home, you have all the paperwork filled out with the lender, and you have mutual acceptance on a purchase/sale agreement on the home you want.  If you are refinancing, you have filled out and signed all of the initial loan documents.

If you haven’t done any of that yet, you cannot lock a rate and will be offered the rate that is available at the time you have completed those things.

Mortgage interest rates change daily.  Sometimes several times a day and if I quote you a rate that is good right now, even a couple of hours later it might be lower or higher.

There are also several other factors that go in to what rate you might receive. What kind of loan are you getting? Is it conforming, conventional, FHA, VA or USDA?  What are your credit scores (lower scores means often higher rates)? How much are you putting down (lower LTV’s often mean better rates)? What is your Debt to Income (DTI)?  While you may be able to get a loan with a high DTI the rate may also be higher as well.

And then there are the ads you hear and read about. More times than not those are “teaser rates” (more like bait and switch).  If everyone is offering somewhere around 6% and there is this “special rate” at 5.%, there is some catch (if it seems too good to be true…).  It is usually a buy down rate that requires the interest to be pre-paid to get the lower rate.  This can be and usually is an expensive option.  It could also be (depending on the market) a ARM rate.  I’ve heard so may Ads say we have a “fixed rate” at 5%.  They didn’t say 30 yr fixed, just fixed.  With a 5year ARM the first five years are fixed.  So while it may be true that they have a 5% “fixed rate loan”, it is misleading and most people think it is a 30yr.

I can give you many more examples but I think you get the point.

The reality is, find a lender that you trust and have confidence in to help you get a good loan with a good rate.  With the volatility in the rate market changing daily, take your mortgage professional’s advice and lock at the rate that is good for you when you can.  But if you base your home loan shopping for who quotes you the best rate before it can ever be locked in, you are basing your most important financial decision on the wrong thing and you will surely be disappointed when you really can lock in your rate.

 

Don

The Credit Bureaus, Who is Their Customer, Really?

Don Davis www.htlnw.com 360-652-9994

 When it comes to the credit reporting agencies (CRA’s), Equifax, TransUnion and Experian, do you ever wonder how much they care about you and the information they carry about your entire financial life?

Well in reality they don’t care much, if at all.  You are really not their customer. You are profitable data. 

The creditors, lenders, collection agencies and those looking to buy their lists of your information are their customers, NOT you.  You are a commodity to the CRA’s whose main business, contrary to popular belief, is to sell your information.  One of the CRA’s makes almost half of its income from the sale of data lists.

You, in fact, are a cost to them not an income stream.  If you have issues with the information that the CRA’s use to determine your credit score and challenge the report(s), it costs them money to let you be heard.  There are laws that require your information be accurate (as much as 79% of all credit reports contain wrong information).  But enforcing those laws requires you to file suit if the information isn’t changed when you submit the challenging documents. 

A lot of people are surprised when they find out that the CRA’s are just companies that answer only to their shareholders to maintain profitability and a return on their investments not a government agency.  I dare say that nothing in their business plan has anything to do with making you a satisfied Equifax, TransUnion or Experian customer. And their “Customer Service” departments that service your requests are often outsourced somewhere over seas to further reduce costs (and increase your frustration).

So when it comes to your credit report and the CRA’s and their interest in you and doing the right thing by making certain that those three little numbers that determine your financial character is correct, do you think they really care?  After all a customer is someone who pays for a service and by paying for that service they can expect “customer service”.  So now do you still think you are their customer?

Don

Going Up?

Don Davis email: dond@htlnw.com Ph: 360-652-9994

  Those that have waited for the market to improve or think they were   waiting for the “bottom” to hit, it has and is probably past that, on the way up.   There are two things that you have to consider when looking for a home, one is the price and the other is the interest rate you’ll pay. Earlier this year is when the bottom hit. The prices stabilized early in 2009 and the interest rates were in the low 5 or high 4% range. This prices haven’t gone down since then, and in a few local neighborhoods they have actually improved. And now the interest rates are going up. Currently it is getting harder to lock a rate even in the high 5% range and it looks like soon we will be solidly in the 6% range. Now 6% or even 6.5% isn’t a bad rate, and historically it is on the low side. But if you take a look at what that ½ to 1 point difference makes on a $300,000 loan, it is significant. My advice is to ignore the news reports citing National statistics and markets out of our area and look at the data for your own county or even your own town. Locally housing inventories are down and remarkably there are even homes getting multiple offers again. Homes are and will be priced according to market and if the market continues to deplete the inventory then prices will reflect that and the “bargain” you were hoping for is gone forever. Now on to the rates. As the economy suffered bond yields reflected lower returns, since a lot of money was moving in to them. That meant lower interest rates for you. As the economy picks up steam and the stock market continues its uphill climb, band rates will go up and so will your interest rates. That is what has occurred over the past month or so and it looks like it will continue on that trend. My advise, lock, lock, lock your rates. If you have a FHA or VA home loan and you locked at a rate that is higher than what you could get later, there is a “streamline” rate/term refinance that allows you to inexpensively refinance and lower your rate. So you have protection with a simple and cheap refinance if rates ever do go back down. The experts are saying BUY NOW! Don

Things You Don’t Know About Credit Reports

Let me apologize first that this is longer than most of my postings, but I think you will find it informative.

Don Davis dond@htlnw.com Ph:360-652-9994

 Credit Reporting Agencies (CRA’s), Experian, Transunion and Equifax, will report whatever the creditor sends them.  In a recent article in SmartMoney (The Wall Street Journal), a spokesman for one of the agencies stated that ““We’re the library,” says Maxine Sweet, Experian’s director of public education. “We don’t write the book.”. 

But yet it is that very credit report that will determine whether or not you get a loan, whatever it is that you applied for, or not or the rates and terms, good or bad.  When you go to challenge the accuracy of the account listed on the report, the CRA’s do little, if anything, to investigate the account as to the validity and the accuracy. 

The scenario goes like this; you find an error on your report, perhaps it is an account that is reporting in error or in this example, not your account, you send a letter to the CRA and request that the account be “investigated” and updated to report accurate information or, if not yours, deleted.

The CRA receives the letter.  The CRA sends it to their “investigation” department.  (This almost makes me laugh because they outsource this part to reduce costs.  Equifax reduced its per-dispute cost from $4.50 to 50 cents by outsourcing the work to Costa Rica and the Philippines.)  the “investigator” takes your letter and reduces the comments to a two character code (in this example, ‘not my account” might be a G7 code) and emails it to the creditor. The creditor looks at the code explanation and name on the report, compares the name (Smith on the report, Smithe on their records) they maycompare it with what they report. If it is what they report, they send it back to the “investigator” as verified data and it remains on your credit record.  It doesn’t matter if you sent additional documents to the “investigator”  as those wouldn’t have been forwarded. And most of the time there would have been no further “investigation”.  Almost all of the time the creditor will simply “parrot” what the CRA states is being reported. 

What is even sadder is that most of the communication between the CRA and the creditor is all automated.  The CRA’s computer sends the creditors computer the information that it has on file. (this came from the creditor originally) the creditors computer campares this information with the information on file and bingo, it is a match.  The creditor’s computer sends back “information verified as accurate” and the report remains unchanged.

 Here is where the real problem lies.  It costs both the creditor and especially the CRA money to validate the data on your credit report.  The CRA is a publicly trades company responsible to it’s stockholders and to produce revenue (a profit).  The CRA makes money by charging the creditors to list your account every time it’s updated or to make any changes.  The CRA’s also make money by selling your information to whoever is willing to pay for the list. (who says you have any privacy and where do you think all that junk mail comes from).  This is a highly profitable segment of their business.  Publicly traded Equifax, founded in 1898 by a Tennessee grocer who sold his customers’ payment records to fellow shopkeepers, calls itself a “global leader in information solutions” with businesses as diverse as risk detection and database management. (According to its income statements, its consumer data unit remains its most profitable, boasting a 40 percent pretax profit margin.) Consumer data unit means the unit that sells your information.  By the way, you can stop this simply by going to http://www.optoutprescreen.com/ that will prevent them from selling your info.

The “credit reporting” end of their business is a gateway for collecting information, not their main profit center and verifying data on your credit report costs them money they don’t want to spend.

So why is all of this important to you?  Well if it isn’t obvious by now, all of your financial well being is in the hands of someone who doesn’t care about you or the accuracy of your information.  It doesn’t care what your score is nor what you pay for an interest rate or what terms you get.  On the other side, the lenders like the system because they can lay on their own credit guidelines like, if your score is under 680 you will pay a point more in interest than someone whose score is 680 or higher. That could mean as little a one point lower in your credit score, 679, could cost you a higher interest rate.  Take the type of loan and the length of time the loan is for and multiply the difference and you pay more.  Considering that the average score in the US is under 680 and the majority of consumers fall in to the lower range of scores, you can see why the lenders like it, because they make more in interest rates and fees.

 There are ways to get information deleted from your credit report.  NO, not by using a “credit repair company”.  Most of them are illegal and the vast majority of the time you pay up front for services yet to be rendered and receive nothing for it.  The FTC strictly forbids companies from charging for services that they haven’t performed yet, thus rendering them illegal.  If you have the money, a bona fide attorney who specializes in credit law is a reliable source.  It can get expensive depending on the amount of accounts that you have to challenge.  However if the CRA receives a real challenge letter from a real attorney chances are they will treat it as “VIP” and it will have a much higher success rate of deletion. For those of your, including me, that can’t spend the money on an attorney, the next best way is to challenge it yourself.  By law, the Fair Credit Reporting Act (FCRA) requires that information challenged on your report be “investigated” and either verified, updated or deleted within 30 days of receipt of the challenge.  Send your challenge documents to all three CRA’s certified mail, return receipt requested and the clock starts.  Do not use a form letter that you found on the Internet that looks like every other letter (click here for a sample letter).

 This is where the work starts.  It does not matter whether or not the information on your report is true or not.  The vast majority of accounts cannot be verified in the time allotted.  Again according to SmartMoney (The Wall Street journal) “One TransUnion manager testified that workers were expected to complete up to 22 cases an hour. An Equifax worker estimated she was allotted four minutes per dispute. To process the letters so rapidly, the workers summarize every complaint with a two-digit code selected from a menu of 26 options. The code “A3,” for example, stands for “belongs to another individual with a similar name.” The worker can also add a single line of commentary. The two-digit code and short comment is the only information the lender receives about the dispute.”

Document everything.  Keep all correspondence and receipts.  These are your weapons in this battle.  Chances are the first letter will not get results and you’ll need to send a second.  The second needs to do more that restate the first or it will be dismissed as “frivolous”. The best document, weapon, is if the account is an error and you can get a letter from the lender or creditor stating that.  It would need to be on their letterhead along with their contact information, phone number, address, account number and names.

 Personally I hate this system.  It is voluntary for the lenders or creditors to participate.  Rarely are they or the CRA’s held accountable for the validity of the information contained in a report that summarizes your character.  Gone are the days of sitting face to face with a loan officer who will listen to your side and make intelligent decisions based on facts.  In the mid 1990’s the software was developed and those three little numbers soon became the basis for rates and terms and whether you were granted credit or not. If you don’t have the score, you don’t get the loan. Furthermore this is a system that you never asked for or were requested to participate in. They collect your information (right or wrong) and sell it so they can profit.  And if there is incorrect information, you’ll never be able to talk to a human to help you correct it.

 Protect yourself and follow these simple tips;

• Keep all your account statements for at least two years
• Keep all paid off statements for at least two years
• Keep all correspondence and documents for at least two years
• Check your credit report at least every for months http://www.annualcreditreport.com/allows for you to obtain one free report from each CRA every year so once every four months get one from one of them, four months later get one from another and so on. This way you can monitor the accuracy of what is listed.
• If you have your ID stolen or even suspect anyone is using your ID, put a “freeze” on your report.  If you are a ID theft victim get a police report. (the police don’t want to take the time, but make them do it)
• If you have had past credit problems, even bankruptcy, repossession and foreclosures, reestablish credit NOW.  Even if it is a secured credit card it will start building positive accounts and start offsetting the negative information.
• Go to http://www.optoutprescreen.com/ and keep them from selling you.
• Challenge anything and everything negative on your credit report.  Remember this is a voluntary system that you didn’t volunteer to participate in it.  This is a reflection of your character and decisions will be made for what is in that report regarding any loan you will ever apply for, your insurance rates, credit cards and yes even employment opportunities.  The system is flawed and it is up to you to protect yourself, nobody else will care.
• Don’t be a credit score victim.  If you don’t care about the rates you pay, you wouldn’t have read this far.  It may take a while but be persistent and get your scores elevated and maintained in the 700 range.
• Use only the credit you need.  You should have no more than three to five credit cards and you should be able to pay them off within a month or two.  The credit card companies know that if you can’t pay it off in two months you couldn’t afford it and they got you.  The cards are for managing your scores not for acquiring debt.
• Contact me if you have any questions or concerns.  If you live outside of the Puget Sound are I can help you find local help.  If you live around here I’ll help you.

 

Don Davis

Credit Question For Don

Dear Don,

We had a bankruptcy about 9 years ago, ( we both came out of other marriages with financial disaster spouses) and since that time my husband has pretty much paid cash, and “does not have enough credit activity to get a score.” I have re-established pretty good credit. We currently live in a 55 Senior Mobile Home Park in a manufactured home.  We would really like to own our own home.  I cannot believe in this day and age we would be punished for living within our means for the past 9 years and not having a bunch of credit debt! We even have money for a down payment. Anyway, if you think there are some programs and you can help, please help us. Thanks.

James & Gayle

 

Hi James and Gayle,

Don Davis

No you shouldn’t get punished for living within your means and not “racking up a bunch of debt”.  However, in order for the credit report to show a score you do need to have active credit to register for the system.  Now this does not mean taking on debt.  it means you manage your credit and thus managing your score.  Having a credit card or two doesn’t mean you have to have a balance on them.  All you need to do is once every other month put a $5. charge on the card and pay it off at or before the statement.  You have credit and no debt! I will contact you to discuss some strategy for positioning you to get a home loan at today’s great rates and terms.

Don

Here’s The Low Down on No Down Home Loans

Don Davis

In an effort to help people better understand USDA/Rural home loans, here is a brief break down.

USDA/Rural is one of only two true zero down loans on the market.  The other is a VA home loan.

USDA guaranteed home loan financing is a government guaranteed (not insured) home loan. This means that there is no monthly mortgage insurance to drive up your payments.

 There are several restrictions to the program however.

1. Location. For a map click on this link: USDA property eligibility map.  Click on accept and then click on your state and area that you are considering buying in. the dark yellow areas are ineligible and the lighter yellow areas are eligible.  In the Puget Sound area for example, King County, areas like Duvall, Carnation, Fall City, Snoqualmie etc all qualify. In Snohomish County from the King County line north, everything EAST of highway 9 is eligible up to 140^th in Marysville, and then everything west north and east is also. In Skagit County all areas except Mt Vernon City limits area is eligible.  About half of Pierce and Thurston counties qualify.  Refer to the map if you are considering any area of the State of Washington.

This leaves a lot of options to find a home and still have quick access to the cities.  Over half of the county areas surrounding Puget Sound qualify.  And, of course, this is where any new housing is going to get built as the urban areas are essentially built out.

1. Income limits.  This program is designed for middle income households.  So there will be income restrictions.  Most of our Puget Sound area limit families of four or less to a maximum monthly adjusted income of under $7500 per month and families of 5 or over to about $10,000 per month.  There are adjustments that can be made for children under 18, child care, elderly living in the home and other adjustments to help bring the income in to qualification range.
2. 620 minimum credit score.  Of your three credit scores, Equifax, TransUnion and Experian, two of the three need to be over 620.  Your past credit history (collections, charge offs, bankruptcies, repossessions and so forth) is of little concern. If your score is below the 620, we can help show you how to increase your score in a fairly short period of time.  It is usually lack of current, positive credit that is keeping your score down vs. anything in your past that is older than 2 years ago.

 

Those are really the only restrictions. There is no restriction on the price of the home as you will only be able to qualify, based on income, for what will work for you. Keep in mind that you will be limited to about 41% of your gross, pre-tax, income, including all other reported debt (car payments, credit cards etc…) for your combined debt ratio including your house payment.  So if your household income is $5000 per month you’ll be limited to about $2,100 in combined debt.  

 

As far as any other qualifications, it would be about the same as any other home loan.

 

So essentially to get a USDA ZERO Down home loan, you can’t make too much money and would buy in a non-metro area.

 

We would be happy to help you understand your options and help you make this opportunity work for you.  Just give us a call at 360-652-9994 or email me at dond@htlnw.com.

 

Don

The Clock Is Ticking

Don Davis www.htlnw.com 360-652-9994

 Time is ticking away on the $8,000 tax credit (rebate) for home buyers.  While December 1^st seems like a long way away, remember that the loan needs to be closed by December 1^st so that you can qualify for a free $8,000.

 Right now if you made and offer on a home it would be June at the earliest and most likely July before the sale would close.  If you were to close by the 1^st of December then your offer would need to be made by about the middle of October.  That is really only about a four month window left to take advantage of this government tax credit program.  There is currently no talk about any extension of the tax credit, so this will probably be it.

 If you are even thinking about buying a home in time to take advantage of the tax credit, let me suggest that you get on it soon or it could be gone forever and $8,000 will be money that you don’t get. 

 This $8,000 is for “first time” home buyers.  By definition, all you need is to NOT have owned a home in the past three years to qualify.  So even if you owned other homes prior to that, you can still qualify for the tax credit.

 There are no strings attached to the money either.  You can amend your ‘08 tax returns and get the money soon or wait until you file your ‘09 returns and get your money early next year.  You can use the $8,000 any way you want! If you borrowed against your 401K or IRA you can use it to pay it back.  You can buy new furniture, lawn mower, surround sound, or put it away for your emergency fund. (Not a bad idea)

 So if you’re interested in getting your $8,000 you might consider getting the ball rolling soon.

 We can help you get pre-approved for financing so you know how much home you can qualify to buy.  Just give us a call at 360-652-9994 and we’ll do our best to help you get your dream home and your $8,000.

 Don

Why Doesn’t My Bank Have These Loans

Don Davis

 

Don Davis 360-652-9994 www.htlnw.com

I do a lot of posting on Craigslist to promote current loan programs to help you take advantage of the Buyers market.

 What is interesting is that I get a lot of comments that people hope this isn’t a scam.  Or they are skeptical as to how I can offer a home loan that their own bank or credit union doesn’t.  I can only imagine what some people do in this world to try to get people to part with their money. And one of the biggest fears is that we’re offering “sub-prime” home loans.

 Well we don’t have any “sub-prime” home loans, and I’m not even sure if any of those lenders or loans are even still available.  Our interest is to make sure you have the best home loan to fit your needs. We also don’t charge any up front fees to submit loans.  If we can’t get someone financed, we don’t get paid a dime.  We feel that if we earn some ones business, then we have earned a living. So our goal is a mutual one and that is get the loan funded.

 Our residential “niche” if you will, is government home loans.  I know why some people are skeptical and one reason is that most banks and credit unions don’t offer the full array of government home loans.  I can name a bunch of them here in Snohomish and King Counties that only offer conventional home financing.  That means you need a substantial down payment and better than excellent credit scores. 

To do government backed home loans the lending institution needs to be properly licensed and have the proper endorsements.  We have those.

 Government home loans however, aren’t nearly as stringent.  FHA home loans only require a 3.5% down payment. That money can come from virtually any source except the seller. You can use your own money, you can borrow it from a 401K or IRA, a relative can gift you the money, and there are employers and local government entities that can help as well. FHA has an up front funding fee (mortgage insurance) and a monthly mortgage insurance premium added to your mortgage payments.  This is a very viable home loan program and is geared toward first time home buyers or people that will only own one home. Also your credit does not need to be perfect.  In fact even if you have had a bankruptcy, if older than two years, and credit scores over 620 you can still obtain FHA financing.

 VA is the second government loan we offer.  This is for active duty and veterans of all branches of the armed forces including the Coast Guard and National Guard as well as selected Dept of Defense civilian employees.  This is a VA guaranteed, true zero down payment home loan and requires a 2 to 2.5% up front funding fee that can be financed in the loan.  The seller can contribute up to 4% toward closing costs and an additional 4% toward helping the borrower pay off other debts. (I’ll get in to this more in a future posting).  This means that someone who is VA eligible can buy a home without any money out of their pocket. Once again perfect credit is not necessary, two years past bankruptcy and credit scores over 620 and you should be able to access this program

 The third is a USDA/RDH home loan.  This loan used to be through FHA but is now administered through the USDA.  It is designed for less populated areas of the country.  In Washington State for example, every county in the state has areas that qualify for this loan program.  It just needs to be outside of the metro areas.  Depending on the county it could be all, most or some areas of the county that qualify.  The RDH guaranteed home loan is a true zero down payment home loan with a 2% funding fee that can also be financed.  The RDH also allows the seller to pay up to 6% toward the buyers closing costs allowing for a home loan that you can buy a home with absolutely no money out of your pocket.  Other than the area available, there is also income limits designed for moderate and lower incomes.  As with the loans above, perfect credit isn’t necessary.  In fact with the RDH one year out of bankruptcy is all you need with credit scores over 620.  I’ll also get in to more detail in a future posting.

While we can also do conventional home loans, most people today need the flexibility that these government home loans can provide.

 I would be more than happy to explore these as well as any other financing options that apply to help you get the most bang for your buck.  Feel free to contact me at 360-652-9994 or email me at dond@htlnw.com and for more information about these loan programs and a lot of other info go to my website at www.htlnw.com

 Don Davis

You Said You Wanted Lower Interest Rates!

Don Davis www.htlnw.com Ph:360-652-9994

If lower rates are what you’ve been waiting for, wait no more! 

At least for now interest rates for mortgages are as low or the lowest they have been all year, thanks to the stock market waffling.  This is because as the stock market slows, investors move their money to more secure, less risky investments to preserve their capital.  And they move it to the bond market.  As bonds rally, rates decrease (supply and demand) and mortgage rates go down.

 

Currently as of today it is possible to get a 30 year fixed rate mortgage in the 4% range!  If you have been waiting for rates to go down to make a decision to buy, then this is your time.  Home prices are stable and the housing market is starting to heat up. Inventories are decreasing so that means that demand is increasing and supply is decreasing.  It probably won’t be long now before we see some modest improvement in the appreciation in home values locally.

 

As with any market there are ebbs and flows.  Through this century we have seem many times where the housing market has rallied and many time that it has fallen only to once again go back up. 

 

This is a magic time for those who want to own a home of their own.  With the prices of homes where they are and the rates as low as they are, there may never, ever be a time again that housing is more affordable than it is right now.  All it takes is studying the local data for you to evaluate whether or not this is the right time for you.  If it is, now is the time to make your move.

 

As always feel free to comment on this post or email me with your thoughts.

 

Don Davis

dond@htlnw.com

360-652-9994

The Times They Are A Changin’

Don Davis www.htlnw.com

 The housing market, locally, is heating up.  I emphasis locally because what happens in other parts of the country to their real estate markets has nothing to do with ours.  If theirs, like Florida or California or Arizona goes up or down, it has absolutely nothing to do with our market.  What drives a local housing market are the local economy and the local employment. If employment is stable and the population increases, then that puts upward stress on the local housing market.

 

That is what we are once again starting to experience, locally.

Here are a few statistics from the NorthWest Multiple Listing Service (MLS)

 

April of 2009 saw an overall 23% increase of pending sales over April ’08 for single family and condos.

Single family alone saw a 28% increase in pending sales. 28%!

 

Single family and condos realized 1,111 pending sales in April with 5,592 total active listings.  That puts the inventory under 5 months supply.  In single family (stand alone houses) there were 934 pending sales with 4,500 total listings.  That would make about a 4.7 month inventory.  April of ’08 there was almost 8 months inventory.

 

In addition to that local economist Bill Conerly believes the worst is over.  Businesses have already cut back on inventory and ordering.  Most of them have long ago trimmed payrolls and adjusted to the current economy. Even more telling is that population continues to grow in areas around the Metro areas by as much as 25% in the last eight years.  That puts a huge upward strain on the housing market.  The more people, the more housing we will need. He also sites that the stock market has past its bottom and is more stable and consumer confidence is increasing.

 

When you step back and take a look at the available LOCAL data you find several things.  One is that most employers are past the critical stage and you should start feeling more comfortable in your current job.  The employment prospects will increase for those displaced.

 

If you are thinking about selling your home, you might consider waiting a few more months as prices firm up a little more and possibly even start to increase based on demand.  If you are considering buying a home, this may be your best chance, ever.  Interest rates are at or near historic lows and prices of homes are not predicted to suffer any more major declines, locally.  Your purchasing power is as good as it gets.  If you wait until the local market recovers completely then you will pay more for the house, possibly pay a higher interest rate or both.  The old saying goes; “Buy Low and Sell High” look at the statistics and tell me where you think we are right now.

 

Your comments are always welcome.

Email me at dond@htlnw.com

 

Don

Your Credit Score

Don Davis www.htlnw.com

 

If your credit score is under 720 you will pay a higher rate.  If it under 660 it will be higher yet and if your score is under 620 you will be just plain hard to get a loan.

 

About seven months ago FHA/VA tried to risk base their loans but were thwarted at the time.  Fannie and Freddie have had a similar system in place for almost a year.  That’s one of the reasons why fewer conventional loans are done today.

 

If you are thinking about financing or refinancing a home, you need to start working on getting your scores increased now.  This is not something that can or will be easy to fix quickly in many cases. 

 

The first thing you need to do is to obtain a copy of your credit report and make sure that everything on that report is yours.  You also need to understand what, in your report, matters to your score and what doesn’t.  If you need help just call and we can explain the factors that control your score.

 

The one thing that usually get most people is the balances carried on revolving credit (credit cards and lines of credit)  this accounts for 30% of your score (600 X 30% = 180 points.  That could be the difference between a 600 score and a 780 score)  this is a huge deal and something that you need to get control of, otherwise you will not only pay more for a mortgage, but it will cost you higher rates on credit card, car and truck loans, RV loans, insurance premiums, installment loans, anything that depends on your credit score.  If you have absolutely no revolving accounts, you will need one or two.  It is not to have debt; it is a tool to manage your credit scores.  You don’t need a balance on a credit card, just a $5 charge once every other month will keep the card active and updating on your report.

 

Look, this is clearly a choice you are going to have to start making.  Either get control of your finances and your credit scores and get the better rates and terms, or not. If you don’t, you have no one to blame but yourself.  You do not have to be a victim of the credit reports.  If you have never paid a bill on time and have no intention, you will get what you have gotten.  On the other hand, if you have had a rough patch and need to get back on track, just give us a call and we’ll help you through it. It’s your choice, but don’t say we didn’t tell you so.

Don

It Is Official! New Income Limits For USDA/Rural Home Loans

Don Davis

April 20th 2009 and the income limits for USDA/Rural RDH Home loans has been updated and raised.

The new income limits are substantially higher for people looking to buy a home with no money down.

In Snohomish County the income limits are $7,666 per month (adjusted) for one to four person households and $10,120 per month for five to eight person households.

This means you can make up to these limits and can buy a home in the geographical areas that qualify for the RDH program.  

This is an excellent opportunity for people to take advantage of the current market conditions and get a real bargain and very low interest rates! 

The RDH is a true ZERO down payment program that is guaranteed by the government and does not have mortgage insurance.  These are 30 years fixed rate home loans that are probably one of the best home loans on the market today.

For more information and to see if you qualify, feel free to contact us at 360-652-9994 or visit www.htlnw.com

Don

More People Can Qualify For Home Loans!

Don Davis

As of April 20^th ’09 more people will qualify for USDA/Rural (RDH) zero down, 100% home loan financing. The only other true zero down is a VA home loan.

 

As other loan products have tightened up, the USDA/Rural loan program is loosening up.  They are changing their income guidelines from 1 to 8 person households to 1-4 and 5-8.  that means now instead of a single individual or a couple qualifying at a lower income threshold they now will qualify at a higher income threshold. 

 

In Snohomish County, for example a single person buying a home with the RDH program couldn’t make more that about $5,100 per month, and a Couple not more than about $5,800 per month.  The new limits are one, two three and four person household income limit is now about $7,300 per month and households with five to eight people can now make up to $9,700 per month.  And that is after deducting for dependents and child care and any other qualified RDH deductions.  In many instances gross income could exceed these limits, but after qualifying deductions they might be under the limit.

 

The only other catch is location.  The homes need to be in non-metro areas (thus rural). Once again, in Snohomish County, that area is from the King/Sno County line-east of highway 9 up to 140^th in Marysville. At 140^th in Marysville, the area is all areas north, east and west. If that seems confusing just give me a call and I can email you the map. But it leaves a huge amount of the County wide open for these loans as long as you don’t make more than the income limits.  In King County it is a good portion of the east side of the county. In Skagit County it is almost the whole County except for Mt Vernon proper and the same goes for Whatcom County except for Bellingham. RDH figures that if you make more than that, then you could come up with the 3.5% down payment for an FHA loan.

 

This is very good news for anyone looking to buy a home in today’s market.  With the current interest rates either near or at historic lows and the prices of homes at a very affordable range, a lot of people will be able to buy a home for less money down than renting and in a lot of cases the payments may even be less than what landlords are requiring in this market. Oh did I mention that there is no mortgage insurance on these loans either. Couple that with rates that are comparable to convention rates and your payments are about as low as they are going to get.

 

Once the inventory of homes decreases, that will put pressure on the prices again and you may never find a home as affordable as they are today, not to mention if the rates go up, even just a little.

 

Your credit only needs to be ok.  The lenders will consider past bankruptcies (over a year old) and open collection and charge offs.  You only need to have two of your credit scores over 620. Those guidelines are much more lenient than just about any other home loan out there.

 

To find out more or to see if you qualify, just give me a call, 360-652-9994 and we can help you own a home of your own.

Enough Already

Don Davis www.htlnw.com

The media’s job is to report news, and unless they can make it headlines and thus make it bad, it won’t be news.  Yes the economy is in the toilet and yes there are concerns about personal finances. But really, badgering us day in and day out with comments like, “as if the economy isn’t bad enough”.   Well enough already.

 

 

 

Take a break from all the bad news.  Turn it off.  If you’re going to watch TV turn on a movie or watch a ball game (yes the Mariners are off to a great start, and the Sounders are actually exciting to watch). 

With the weather warming up you could take an evening stroll or go to one of the many events that are happing through out the area.  Take up a hobby, read a good book or two, spend time talking with your family members or maybe reach out to old friends. Play some games, get involved in the community.

 

In other words there is nothing you can do about the state of the economy (you can’t possibly spend enough to make a dent) and the media will not let up. So do something else with your time and energy instead of being the prey for the media talking heads. This will not last forever.  This country has been through similar problems before and we have and will come out of it, stronger than before.

 

From my end of things I can tell you that with all that has happened to the housing market, there may never be a better opportunity to buy a home ever again.  That may be pretty bold but consider this.  Interest rates are at historic lows.  That means that ever since records have been kept there have never been better interest rates than we have right now. The prices of homes have adjusted to below average income levels.  They won’t drop any more without a major depression and if that happens then none of us need to concern ourselves with much other than hunting and gathering for survival.  Not likely to happen.

 

For all the negative that has happened and for whatever reasons it happened, there is incredible opportunity that springs from it and if buying a home is something you’ve considered, this might just be the best time ever.

 

As for the media, enough already.

 

Don

Zero Down Home Loans; the “Joe Six Pack Loan”

In the midst of all the stimulus bailouts, credit crunch, tougher lending guideline and requirements for higher scores, there emerges one bright light; USDA, Rural Zero Down Home Loans. That’s right Zero down. No down payment. And the closing costs can be paid by the seller or financed in the loan if the appraisal is high enough so that it is very possible (almost every one) to buy a home with no money out of your pocket!

For all the hassle it takes to get an FHA or Conventional loan today, and they require a down payment, the Rural home loan program is by far the easiest. These loans are for the outlying areas of King, Snohomish, Pierce, Thurston, Skagit and Whatcom Counties (actually all “rural areas of the US). These areas aren’t the remote hinterlands, but rather skirting the city limits of the larger towns and cities in the area. This is the first of several conditions to qualifying for one of these home loans.

The second condition is income. Unlike every other loan that wants you to make more money, this is for moderate to low income brackets. This is based on the county median income and for your county. Snohomish County for example a family of four can make up to $88,400 adjusted gross income per year and still qualify (you could actually make more). The incomes currently are tiered by number of people in the house hold from one to eight and the income limits vary by the number of people residing in the house. This is supposed to change soon to a two tier income platform (allowing even more people to qualify). With a simple phone call we can tell you what you can qualify with your income.

There are no restrictions on the price of the home you would consider, as the price will be restricted by what you can qualify for with your income. So the 750,000 McMansion probably won’t work.

Another condition is credit scores. The Rural Home loan is much less stringent and everyone gets the same great low rate. The Rural home loan will take the middle score of your three credit reports, Equifax, Experian and Transunion. Essentially it doesn’t matter how low one of your scores are as long as two of them are over 620. A lot of people can qualify for a loan with these standards but even better is that they really don’t consider the past credit history to be very important. Even bankruptcy, repossessions and foreclosures have little to no impact on qualification. If you are over two years out of bankruptcy then you still have a chance to finance a home. As well as if you have current collections and charge offs, as long as your score is over 620 it really doesn’t matter. If it isn’t, we can help those that really want to raise their scores.

With the price of homes where they are today, interest rates at record lows and less than perfect credit considered, there couldn’t be a better time to buy a home. The Rural loan program is really the home loan for “Joe Six Pack”. It is the one home loan that can still give you the chance at the American Dream.

As always feel free to contact us regarding any of the current home loan programs at 360-652-9994. or email me at dond@htlnw.com

The New “BailOut” package for Home Owners

Gee, I really wish I could say that they have finally figured this one out, but alas, I fear that it is just more of the same.

“When it is all said and done, there will be more said than done”

I think that about says it all.  The new package, from what I have been able to garner from what I have read, will probably do little if anything to stem the tide of inevitble foreclosures looming on the horizon.  The Government cannot stop the value of home from declining.  Neither can the lenders.  What will stop it is home buyers coming back on the market and buying up the excessive inventory of homes to stabolize the market.

This is already happening in some areas, my local area included, and has for some time.  What controls the value of home in any market is the supply and demand. (that is the same for any commodity. Just look at what happens to the price of anything when the demand goes up and the lupply is limited)  That is what happened in ‘04 and ‘05 and ‘06, there were more buyers than sellers.  The sellers were able to ask full price and often times had multiple offers driving the price up even further.  Not now.

The President and Congress can’t make a market strong if it doesn’t possess the one vital element, and that is a strong local economy. If the local economy is strong and more people are moving in than out of the area then the demand for homes goes up and the prices follow.  If there are more people moving out than in then the demand weakens and so does the prices. supply and demand, it’s just basic economics.

So from what I’ve read about the new package, the current home owner still will not be able to refinance to a lower rate or different terms if they own more than what the house is worth and the lender still has to cooperate.  Not to mention you, as a home owner, has to qualify for the loan.  I dare say that to qualify now vs. when you first obtained the loan, the guidelines have changed so much that it may not work even if you owe less than the value.

Once the final verion is rolled out and the market is tested to make these new programs work, then we’ll se what kind of results come in, if any.  Most of this looks and sounds like the tried and failed FHA Secure. 

My advise is if you are seeking to refinance and you can’t qualify for a new loan with a traditional refinance then contact your current lender and see if you can qualify for the “new ” program.

More Lenders Raise The Credit Score Bar

As 2009 progresses, more and more mortgage lenders are raising the bar on credit scores for government loans FHA, VA and USDA/Rural.

While the government agency backing the loan may not have a minimum credit score requirment, or a lower requirement, the lender can have more stringent requirments.  That is the case most of the lenders are following now.

620 is almost the universal target for a minimum credit score to obtain a government home loan today.  There are a few, us included, that still will consider a minimum of 580, it probably won’t last for long.  And with a score between 580 and 620 there will be a higher interest rate.

So what do you do, and how can you control  the scores?

First of all you must understand the credit scoring system in order to get and KEEP a higher credit score, and to do that you need to have credit to get a score.  A lot of people run in to credit problems at one time or another in their lives, and often times when that happens, they reduce or eliminate credit from their financial lives.  If the Credit bureau has no current credit to rate then your scores will suffer greatly.

It is possible, even with past credit problems including bankrucptcy, to have credit scores in the 700 range with just one or two small credit cards.  Those cards can be secured or unsecured and the credit limit has no effect.  The limit could be $300, $3000 or $30,000 and none will make your score higher than the other.  It is the balance ratio that you carry on that card that will effect the score.  Ideally you should have no balance on the card but make a nominal charge at least once every other month to keep the card active and to maintain a current update on the bureau.  The real purpose of a credit card is not to have debt, but to have a positive credit rating.  Credit cards are loans that have the highest rates and fees of virtually any kind of loan you can get. It is considered bad debt.  But you need to have the cards to show that you can effectively manage debt and keep it paid off.

The credit cards, revolving debt, account for 30% of your credit score.  In other words if you use a 600 score and you pay off your one maxed out credit card your score could, in theory, go up 180 points in one day to 780. There are other factors that can inhibit that much of an increase, but the increase will still be substantial.

This is the Biggest bugaboo most people have in controlling their credit scores is managing their revolving debt.

Working with a competant mortgage professional, we can help you devise a strategy to help increase and manage your credit score to not only obtain a mortgage at favorable rates and terms, but higher scores will also save you considerale money on anything else you finance, including, cars, trucks,RV’s, motorcycles, credit cards, installment loans, lines of credit, insurance and even possible employment and medical care.  YES your credit score is that important.

Be sure to visit our web site at www.htlnw.com for more information and helpful tips on controlling your credit score.

Feel free to comment on this or any of my other postings.

Don Davis