Friday, September 7, 2012

Should You Dispute a Credit Account?

Many credit repair companies advise their clients to dispute accounts on their credit report, telling them the accounts will be removed from their report.  That is horrible advice.  Here's why:

When you dispute a credit account, lenders are now required to underwrite loans manually, rather than using the software that allows higher debt-to-income ratios.  The underwriting software frequently allows debt-to-income ratios as high as 45% for conventional loans and as high as 50% for government (VA and FHA) loans.  However, if a borrower is approved for a loan by the software with a 45% or 50% debt-to-income ratio and they have disputed an account, the underwriting guidelines say that the debt-to-income ratio must be lowered to:
  • 36% for conventional loans
  • 41% for VA loans
  • 43% for FHA loans
This means that a borrower may not be able to qualify for the mortgage they thought they could qualify for.

In addition, if you dispute an old, unpaid collection account, the collection company will now know you are trying to improve your scores, and they may start trying to collect from you again.  Your credit scores will drop.

So stay away from anyone who advises you to dispute credit accounts!

Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

What Does POC Mean?


We get a lot of calls from people who have looked at our blog and web site.  The most common question we've had this past week is, "What does POC mean on a Settlement Statement?"  Here's the answer:

POC stands for Paid Outside of Closing, and refers to any fee that is not being disbursed at the closing. The two most common POC charges are the appraisal fee (if it has been paid by the borrower before the closing) and the yield spread premium (the rebate that the lender pays the mortgage broker).

When POC is listed on the Settlement Statement, the letters are often followed by the words Borrower, Seller, Broker, or Lender. This refers to who paid the fee. For example, if the borrower paid for the appraisal before the closing, the fee would be marked as "POC Borrower" on the Settlement Statement.

If a fee is marked as POC, it is not included in the bottom line on the settlement statement because someone has already paid it (in the case of a paid appraisal) or the borrower does not owe it (in the case of a yield spread premium).

POC fees are listed on the Settlement Statement because the Real Estate Settlement Procedures Act (RESPA) states that all fees associated with a federally regulated mortgage must be shown on the Settlement Statement, regardless of whether they have already been paid or not.


Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Conventional Vs. FHA Loans

Here are the main differences between conventional loans and FHA loans:

Conventional Loans
  • Minimum down payment is 3% of the purchase price.  You can get a cheaper rate if you put 5% down.
  • You need mortgage insurance if you don't have 20% down.  The mortgage insurance is paid to a Private Mortgage Insurance company.  The premium for mortgage insurance depends on your down payment and your credit score.
  • There is no limit to the size of the loan.  If it is $417,000 or more, it is called a jumbo loan and you need a larger down payment.
  • You get the cheapest interest rate if your credit score is 740 or higher. 
  • The maximum debt-to-income ratio is 45%.

FHA Loans
  • Minimum down payment is 3.5% of the purchase price.
  • You always have to pay mortgage insurance for the first 5 years, regardless of how much you put down.  The premium for mortgage insurance is the same for everyone, regardless of their credit score.
  • The maximum loan size depends on the county you live in.  For Metro Denver counties, it is $406,250.  For Boulder County, it is $460,000.
  • You get the cheapest interest rate if your credit score is 640 or higher. 
  • The maximum debt-to-income ratio for most lenders is 50%.
Make sure your lender is allowed to sell both conventional loans and FHA loans (not all lenders are), and then ask them which one is going to be cheaper for you.


Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Down Payment Requirements

Here are the latest down payment requirements for mortgages in the US:

Primary residence (your main house):
  • 3% for conventional loans
  • 3.5% for FHA loans
  • 0% for VA loans
With primary residences, you can get a gift from a relative to cover the down payment!

Second homes (a second home that you do not rent to others):
  • 10% for conventional loans
Investment properties (houses that you rent to others):
  • 20% for conventional loans
  
Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Does Net Worth Affect Your Mortgage?

People often ask us if their net worth affects whether they will be approved for a mortgage.  The simple answer is NO.

Net worth is defined as a borrower's assets minus their liabilities.  In other words, their net worth is the value of the things they own (including money in the bank) minus the amount of money they owe.

As an example, if someone has $5,000 in the bank and owns a car worth $15,000, their assets are $20,000.  If they have $15,000 in credit card debt and owe $10,000 on a car loan, they have $25,000 in liabilities.  Assets ($20,000) minus liabilities ($25,000) gives them a net worth of -$5,000.  So they have a negative net worth of $5,000. 

Does a mortgage lender care that they owe more than they have in assets?  Nope - not at all. 

The only thing a lender cares about is whether a borrower makes enough money to pay the mortgage, and whether they have a history of paying their bills on time.  Net worth has nothing to do with income or paying bills, so no one should worry about their net worth when applying for a mortgage.  Having a positive net worth does not help, and having a negative net worth does not hurt.  Mortgage lenders just don't care.

  
Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Don't Forget the Property Tax Credit

Now that we're well into the second half of the year, it's a good time to remember that the property tax credit that the seller gives to the buyer will affect the amount of money the buyer needs for closing costs.

At the closing, the seller will credit the buyer one day of taxes from January 1 until the closing date.  If the taxes on a property are $2,400 a year, the tax credit will be about $1,600 if the closing is at the end of August, and about $200 more every month after that.

If the buyer is asking the seller to pay some of the buyer's closing costs, the tax credit needs to be included in the calculations when deciding how much to ask the seller to pay.  If the buyer doesn't consider the tax credit and asks for more than the buyer will actually have to pay at closing, the seller gets to keep the excess money.  Good for the seller, but bad for the buyer.

If you're going to be asking a seller to pay some of the closing costs for your buyer, make sure you ask your lender if they have considered the tax credit when they tell you the amount to ask for.

  
Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Quick Way to Make Closings Go Smoother


"I don't sign my name that way!"  Is that a common complaint from your buyers at closings?   We hear it all the time.

Did you know that the lender and the title company take the buyers' names from the sales contract? 

If you want to make your closings just a little bit easier and keep your buyers a little bit happier (always good for referrals), then ask them how they normally sign their names when you are writing a sales contract.  


Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:



By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.