Simply The Best Loans

For some time now, my credit report provider has offered a service to correct and re-score a credit report within 5 to 10 business days. Considering if you attempt to get your report corrected of some error or derogatory credit by trying to work with the credit bureaus themselves, you might get your credit score improvement within 3 to 6 months. That’s a big difference!

For someone in the process of purchasing a home and a 20 point improvement in their score results in a better interest rate, this is a valuable tool. But it isn’t cheap. My report provider charges $30 per credit bureau per tradeline. For instance, if you had a credit card company reporting late payments, but you have the documentation to show that the bill was paid on time and you wanted to have your report corrected, the cost would be $90 to have it corrected and for your report to be re-scored.

A recent client, who was able to provide documentation that two accounts were paid in full and closed, got a 20 point improvement in her credit score which cost her $180. The improvement of her score resulted in a reduction of her interest rate which saved her over $200 per month on her mortgage payment. For my client, those savings were well worth the fee to have the report re-scored quickly.

The downside is the reporting company makes no guarantee that your score will be improved even after going through their re-scoring process. So it is possible that you could spend the $90 per item and it not impact your score enough to make a difference in the terms of your loan.

That’s when you need the assistance of a mortgage professional to help you evaluate ‘the cost versus the benefit’ and whether or not re-scoring is right for you.

Any application for credit can result in your credit report being pulled by the potential creditor. Whether it’s for a mortgage, a VISA card or a furniture store, it can impact your credit score. One potentially hazardous practice is applying for credit over the internet. If you apply for a mortgage loan or equity line on an internet site that offers “multiple” quotes from different lenders, your information is being distributed via that site to all of those potential lenders. In order for a lender to provide you with a quote for loan terms, they need your credit scores. If your qualifying information is sent to 12 lenders for rate quotes, each one of them can pull a credit report. That’s 12 credit inquiries, which can drop your score. Then, if you seek a loan with several local institutions, they will also pull a credit report. It is very easy for inexperienced borrowers to have their credit pulled excessively because they are “shopping” for the better mortgage rate.

A client was recently referred to me after her loan was denied by an online lender two days before closing. In order to determine whether or not I could help her get a loan, I had to pull her credit report. I discovered that, since she had applied for a mortgage with an online company that offered “competitive” quotes from multiple lenders, her credit had been pulled over 7 times. By the time she found a house, contracted to buy it and scheduled to close, her lender of choice pulled credit again, just prior to closing. The numerous credit pulls earlier had reduced her score to the point that she no longer qualified for their loan program. While I was ultimately able to get her a loan to purchase the house she wanted to buy, her rate was considerably higher than what it would have been with her initial credit scores.

Shopping online for anything can have potential pitfalls but shopping over the internet for mortgages is risky for anyone that isn’t extremely well-versed on credit and the mortgage process. If you are unsure of your credit status or lack a good understanding of the mortgage process, you would do well choosing local bank or mortgage broker to assist you when seeking financing for a home.

Routinely couples, whether married or just in a commited relationship, will come to my office to apply for a mortgage and only one of the parties present is aware of the “family” finances. Or, one member of the couple will come in to get the process started because of work or scheduling conflicts of the other individual, only to discover they don’t know enough about their joint finances to go through the application process.

Do you know where the money is? Do you know how it’s invested? Do you know what interest rate you are paying on your credit accounts and/or current mortgage? Where are your important documents kept? Who is your insurance carrier? These are all fairly basic pieces of financial information but, more often than not, only one member of the couple knows the answer. Show me the money! Let’s talk Turkey! However you want to say it, it boils down to one thing, both individuals should know what their financial picture looks like.

For anyone to be able to maintain a good financial and credit history, they first need to understand what they have, what they owe, how much interest they’re paying for it, how it is insured and where the supporting documentation for everything is kept. It is fine for one member of the couple to handle the details of paying the bills, making the deposits, etc. as long as both are aware of the overall situation. Remember, sharing finances with someone means that you get the good with the bad. If one party is great at making sure the the bills are paid on time each month, then both will benefit. However, if the party responsible for paying the bills isn’t timely, both will suffer the credit consequences.

I hear comments from clients such as “well, he does a better job with that than me” or “she’s just more organized than me” and allowing the person with more organization skills or financial savvy handle the day-to-day responsibilities is fine. But that does not mean that you can abdicate your responsibility in maintaining a good grasp of your financial picture.

As a couple, it is imperative in sharing finances that you have shared goals for your financial future. Most people argue over money because they are not in agreement on what should be done with it, how it should be invested or what it is spent on. If you take the time to sit down together, review your finances regularly and agree on what your finanical goals are and the process you plan to use to achieve them, then the likelihood of arguments over money is greatly reduced. It may mean you have to agree to compromise. One individual believes in the need to save funds in safe, insured accounts, while one individual believes in the need to invest in potentially riskier ventures, you may have to agree to do a little of both. Or you may agree to be more conservative now in order to have the flexibility for more adventurous investing later. It doesn’t matter how you decide to compromise as long as you both understand the ups and downs of the decisions you make.

This is where the help of a good financial advisor and/or CPA can be beneficial. Also, there are numerous good books readily available, at the local bookstore or library, to assist you in understanding and developing your plan. Whatever you want your financial picture to be, it can be realized if you are willing to invest the time, focus and research necessary to make it happen.

Few people go into a marriage with thoughts of what they need to do once the marriage is culminating in divorce, unfortunately, in most cases that’s exactly what they should do. Statistics show that more than 50% of all marriages end in divorce. While there are numerous issues that have to be addressed when a marriage is ending, since a home and its mortgage are most couples’ biggest financial commitment, it is one of the most important.

For those that haven’t faced this situation before, let me clear up a couple of common misconceptions:

If the mortgage is in both names, both parties are fully responsible for the payments. Even if the decision is made for one party to accept responsibility for the payments while going through the divorce process, whether through a verbal agreement, a legal separation agreement or by court order, should that party not make the payments timely, it will affect the credit of both. Lenders do not overlook late payments reported on a mortgage or any other credit line just because you have an agreement, even if legally binding, stating your estranged spouse is responsible for the payments. If the credit is joint, you are 100% accountable for the debt and that’s the way the lender views it.

I’ve had more than one client attempt to purchase a new home after going through a divorce only to discover their credit has been severely damaged due to their former spouse’s late payments on their old marital residence mortgage. The best advice I can offer is to personally check each month, even after payment responsibility has been assigned to the other party, to ensure the payment is timely. While it may be a tremendous financial burden, if you find the other party has not made a payment timely, make it yourself before the payment can be reported as 30 days late. In the long run, it can mean the difference between maintaining your good credit history over having credit that is too damaged to allow you to qualify for another mortgage.

Lenders can repeat credit checks at anytime before a loan closes even after loan approval for certain terms has been given.

Many individuals facing divorce don’t want to wait for it to be final before attempting to purchase another home. Often individuals in this situation want to quickly re-establish a home for themselves and/or their children. One common assumption is that when a lender checks a borrower’s credit at the time the loan is submitted and outlines the terms they are willing to offer, the borrower doesn’t have to worry that something derogatory might show up on their credit later. Unfortunately, many lenders routinely pull credit again, just prior to closing. If the credit scores have dropped at all or late payments, previously unknown, appear, the lender can deny the loan or change the terms. There is nothing worse than being a day away from closing and getting a call from the lender saying that they are denying the loan or raising the interest rate or increasing the required down payment amount or some combination thereof.

The best course of action for anyone, regardless of their personal situation, is to make sure they are careful to maintain their credit history while they are going through the mortgage process. Make sure to pay all bills on time and avoid applying for any new credit during the process. Then if the lender does pull a new credit report 2 days before closing, the new report should be the same and the lender will have no cause to change the terms of the loan.

Again, there are no easy answers when a marriage is ending, but, with the help of a qualified legal advisor, some issues can be resolved easily by considering one or several of the following options:

1. The spouse that has agreed or been ordered to make the mortgage payment can refinance the mortgage into their name solely, thus eliminating the joint mortgage account and risks associated with it.
2. Close out any other joint accounts immediately ensuring that each individual’s history is protected from activity of the other.
3. If the above are not options for any reason, each party should personally check that any joint accounts are being kept current. If a delinquency is discovered, make sure the payment is made, even if you have to wait to recover the money from the responsible party later. Protecting your credit is paramount.

Armed with the knowledge of how to avoid potential financing and credit pitfalls when going through a divorce can mean the difference between a positive credit history and a poor one. A poor credit history can impact your finances and credit options for a long time after the divorce is final.

Loan programs require certain criteria for qualification. In addition to meeting this criteria, the borrower’s particular financial picture such as credit score, the loan amount, the loan-to-value (the percentage of the loan amount as it relates to the sale price or appraised value), the choice of loan program, and/or the type of property can all contribute to changing the cost of the loan.

As previously outlined, lenders quote interest rates with corresponding yield spread premiums. Then the lender has pricing adjustments for all the different variables possible for one loan. Pricing adjustments can be as little as .125 percent of the loan amount up to 5% percent or more of the loan amount. Calculating these pricing adjustments correctly for a specific loan can be one of a loan officers biggest challenges.

Rate sheets vary from lender to lender, program adjustments vary from program to program and everyone’s financial picture is different. With so many variables going into the determination of loan terms, it is virtually impossible for a consumer to compare apples to apples in shopping for a mortgage. It can also be counter-productive for a borrower to attempt to do so.

If a borrower is “shopping” a mortgage with multiple companies s/he risks having too many credit checks, getting confusing or misleading information and possibly having duplication of upfront service fees for appraisals, credit reports, etc. The advantage to working with a professional mortgage broker is to have an experienced professional do the shopping and evaluating for you and then give you an overview of your best options. The broker’s focus is to get the borrower the best possible terms for his/her financial circumstances and needs.

Is Fed tightening of interest rates over? Has the bond market gone bust? At first glance, it would seem that rising interest rates and lower yields are driving the economy into a recession. However, a recession isn’t an inevitable event when yields flatten and rates go up, it’s just an indication of changing market conditions.

To protect and build your assets, no matter what market conditions exist, you have to be realistic and disciplined. First and foremost, assess your income and your spending. Are you saving at least 10% of what you earn? If you own a home, are you paying toward the principal balance each month, even if you have an interest-only loan? Do you have unsecured debt, such as multiple credit cards? Do you make more than the minimum payment on them each month?

It doesn’t matter what your income is. I have clients that have six-figure incomes who live paycheck to paycheck and I have clients that make as little as $25,000 a year who have enough liquid assets to live comfortably for a year or more, if they lost their jobs. The difference? Preparation and planning!

An investment advisor I know once told me that the right investment is just like the right mortgage, it is dependent on numerous varibles that are highly individualized. Think about it— a lottery ticket is a great investment if you have the winning number—the odds of having the winning number, however, are not very high. If your preparation and planning efforts are like those of playing the lottery—one small effort with expectations of one big payoff—your finances are probably not well-protected against either a recession or unexpected income loss, such as a disability or lack of employement.

Tax season is a great time to think about recession-proofing your finances because it’s the time of year that most everyone is reviewing and evaluating their overall financial picture. Did you invest this past year for retirement? Did you put money into a liquid asset fund to be available if you find yourself suddenly without a job? Are you paying down the principal on your mortgage to build equity instead of counting on appreciation to create equity?

Find yourself a professional financial planner that can assist you in creating a realistic savings plan. With his/her help, choose low-risk investment opportunities that provide solid returns year in and year out, despite changing market conditions. Pay down the principal balance on your mortgage. Pay off unsecured credit cards and use them sparingly or only in emergencies in the future.

Plan and save now for the life you want in the future! It’ll be here sooner than you think!

It’s that time of year again when everyone is digging out paperwork from various drawers, desks, cubbyholes, etc. to be able to create their annual tax return. For the best tax advice, seek the assistance of a tax professional, but for quick reference guide for some of the most common deductions allowed, see the following Washington Post article, Steps Toward a Happier Return

While yield spread premiums (YSP) are rebates offered each day by lenders for any interest rate over the daily par rate, the YSP is also the tool loan officers use to offset lender adjustment fees to the consumer. Every loan program with every lender can have “adjustments” to the interest rate or hits as they are called by loan officers. Whenever a loan officer issues a good faith estimate to a client, s/he must be sure to either charge for these adjustments or cover the cost by quoting a rate with YSP that will offset it.

The amount of loan program rate hits can be based on numerous factors such as credit score, loan size, loan-to-value (LTV), property location, loan type (cash-out refinance versus rate/term refinance), etc. These adjustments can total as little as .125% of the loan amount and go up to several percentage points of the loan amount. If paid by the borrower, this could mean thousands in extra fees for closing.

Industry practice is to cover the adjustments by the YSP rather than charge them directly to the borrower. Since YSP’s are usually odd numbers, if the hits or adjustments on a loan are .75% and closest YSP to offset this charge is .875%, the loan officer would be paid the .125% net rebate at settlement. This net rebate is paid outside of closing or POC and does not come out of the borrower’s funds at settlement. It is paid to the loan officer by the lender.

Next, loan program adjustments and their affect on interest rates.

Yield Spread Premium—a percentage of a point that is offered as a rebate on particular rate of interest by a lender. Rate Discount—a percentage of a point charged to the borrower for a particular rate of interest.

Recent news on mortgage industry practices indicates consumers must become not only more educated about the borrowing process but more vigilant in reviewing the information provided to them by lenders. While regulators attempt to protect consumers with an ever increasing number of forms and mandated disclosures, real protection for consumers will only come when they are educated about the process and able to easily decipher the information they are given about their loan terms and settlement fees.

Hidden costs continue to be the bane of most consumers. One item that some consider hidden is the yield spread premium (YSP) that lenders quote on their daily rate sheets. There are those that would claim the YSP is a hidden fee even when it is disclosed on every settlement statement and clearly indicated as being paid outside of closing (POC).

While it is possible for unscrupulous loan officers to use this as a means to make more money on a loan than they would otherwise, reputable loan officers and mortgage brokers make borrowers aware of the YSP and disclose when and where it comes into play during their loan process.

To fully explain how this works, you must understand how lenders quote interest rates on a daily basis. Most lenders publish a rate sheet which shows a rate spread of somewhere between 1 and 2 points. On the lower end, a given interest rate will either cost the borrower a percentage of a point or will offer a YSP of a percentage of a point. The rate closest to or at 0.0 is considered the par rate for that day.

To illustrate, the chart below is what a lender will issue to its loan officers at the opening of each day. Rates can also fluctuate numerous times throughout the day as market conditions change. New rate sheets are re-issued during the course of the day as well. The following rate chart is from a rate sheet issued by a lender this past Friday. These rates are for a conventional conforming 30-year fixed rate mortgage.

Rate 15-Day 30-Day
5.125 3.125 3.250
5.250 2.375 2.500
5.375 1.750 1.875
5.500 1.125 1.250
5.625 0.500 0.625
5.750 0.000 0.125
5.875 (0.500) (0.375)
6.000 (1.000) (0.875)
6.125 (1.500) (1.375)
6.250 (2.000) (1.875)
6.375 (2.500) (2.375)
6.500 (2.625) (2.500)
6.625 (3.000) (2.875)
6.750 (3.125) (3.000)

Reading this chart a loan officer would know a borrower buying a new home wanting to lock a 5.25% interest rate for 30 days would have to pay the lender 2.5% in discount points plus any other adjustments the lender requires for property location, loan size, credit scores, program costs, etc. Par rate for this lender was 5.75% for a 15-day lock. If the borrower wanted 5.75% and to lock for 30 days, it would cost the borrower .125% of the loan amount in discount points.

If the borrower did not want to pay any points for loan origination or loan adjustment fees, the loan officer could quote the borrower a rate that offered a YSP to cover those costs. The yield spread is indicated by the parentheses around the numbers following the interest based on either a 15- or 30-day lock period. If the cost of origination and lender adjustments for credit, program, property location, etc. added up to 2.5% in points, the loan officer could quote a 6.5% rate of interest and lock for 30 days. With this rate, the borrower would have no fees for origination or lender loan adjustments at settlement which would significantly lower his/her closing costs.

Next, lender loan adjustments offset by YSP.

Insidious and subtle, software vulnerability and self-profligating viruses and worms are a danger to anyone with a personal computer. Whether you are an avid internet user or not, these programs can weaken and/or destroy your ability to maintain your computer’s security. An associate who is a principal with a local technology group has posted the following security warnings on their company website. The links below will take you to the group’s main webpage and to the security announcement page.

Anyone that utilizes a computer, for business or personal use, can click on the links provided and take advantage of the security warnings and/or solutions offered there. Forewarned is forearmed. If you are unsure about your computer’s vulnerability or the solutions offered, contact your system administrator or technology consultant for assistance in protecting your PC from exposure to these new threats.

The following Security Announcement is from the website of Convergent Technologies in Richmond, Virginia.

Security Announcements

Windows WMF Exploit

A serious new remotely exploitable vulnerability has been discovered in Microsoft Windows’ image processing code.

UNTIL THIS IS REPAIRED BY MICROSOFT, ANY ATTEMPT
TO DISPLAY A MALICIOUS IMAGE IN WINDOWS COULD
INSTALL MALICIOUS SOFTWARE INTO THE COMPUTER.

Sober Worm to Launch on January 6, 2005

W32.Sober.X@mm is a mass-mailing worm that uses its own SMTP engine to spread and lowers security settings. It sends itself as an email attachment to addresses gathered from the compromised computer. The email may be in either English or German.