What affects credit scores? Seven Misconceptions

If you’re trying to raise your cred­it score to get a good rate for a refinance, you might be surprised by what affects—or doesn’t af­fect—your score.

More money improves your credit score.

False. Your level or sources of income don’t affect your cred­it score, although lenders may look at it when making loan deci­sions, according to the Fair Isaac Corp., the company that issues the commonly used FICO credit scores.

Ownership of several cred­it cards can hurt your credit score.

Mostly false. Having many cred­it lines isn’t necessarily a bad thing. Multiple lines give you a favorable debt-to-available-credit ratio. But use them correctly: It’s best to keep any balances below 10% or 20% of the total credit line. Anything more will affect the ratio of debt-to-available-credit, which can decrease your credit score.

Opening and closing credit lines can hurt your credit score.

True. New credit applications can decrease your credit score, so be careful about applying for new credit cards or personal loans before applying for a second mortgage, automobile loan, or other large line of credit.

Consolidating credit lines will help your credit score.

Mostly false. Although it may seem like a good idea to move all your balances to one card, that can actually hurt your credit score, since your debt-to-avail­able-credit ratio will spike on that card.

Changing jobs can hurt your credit score.

Partly true. Taking a new job or losing your job doesn’t affect your credit score. However, if you have a spotty employment histo­ry, lenders may hold that against you in making a loan. 

Co-signing for others can hurt your credit score.

Partly true. Simply co-signing on a loan for someone else may not affect your score, but if that per­son is late on paying the loan, it’s likely to show up on your report. And that’s a nasty surprise if you didn’t know the person was late.

Judgments and liens aren’t con­sidered in your credit score.

False. If you’ve had a judgment or lien filed against you, it’s con­sidered in your payment history, which represents 35% of your score.

Similarly, while most utility com­panies don’t report payment history to credit bureaus, your account will likely be reported if it is seriously delinquent and re­ferred to a collection agency. 

Do you have additional ques­tions? Contact me and we can discuss your specific situation and what can be done to raise your credit to refinance!

Short Sales 101

A short sale is when the lender accepts a lower mortgage pay­off from a seller because the ho­meowner owes more than the home is currently worth. They’re notoriously complicated to com­plete (unless you are dealing with a professional), but with more and more Americans underwater on their mortgages, they may be getting a closer look by lenders. 

“We’re starting to see that ser­vicers and lenders are viewing short sales as a better alternative than they had in the past,” said Daren Blomquist, spokesman for RealtyTrac, an online market­place for foreclosures. “Some of that relates to the fact that it’s getting harder to foreclose. There are additional requirements in terms of paperwork and require­ments that states and judges are imposing.” 

Short sales are gradually rising. This year, short sales are mak­ing up about 8% of total home sales, up from 7% in 2010, 5.5% in 2009 and 3% in 2008, said Mark Fleming, chief economist of CoreLogic, a provider of housing market data. 

“Short sales are sometimes referred to as a kinder, gen­tler foreclosure,” Fleming said. “Borrowers never get evicted, you never have the vacancy is­sue for the home, so it’s good for the market around it.”

Short sales also typically sell at less of a discount than foreclo­sures, and many say that a short sale is much less damaging to a homeowner’s credit than a foreclosure.

But often a short sale can’t be completed in a snap.

“In general, it is a totally differ­ent type of transaction. You’re not only selling a house, you’re negotiating debt. This is why working with an agent that has specific short sale experience is helpful,” said Jeff Osborne, Broker, RE/MAX Capital City. 

Selling via short sale

To qualify for a short sale, there has to be some sort of hom­eowner hardship that makes it impossible to continue mak­ing payments, Osborne said. A big misconception is that you can attempt a short sale simply because you’re underwater, he said. 

A homeowner interested in this approach should first be in con­tact with a qualified real estate agent and a real estate attorney, he said. Often, listing the home is the first step, but the bank also should be contacted at the start to request a short sale package, Osborne said. 

You definitely want to enlist the help of a real estate agent who deals with short sales on a regu­lar basis, since they’ll have more experience in dealing with lend­ers through the process. At RE/MAX Capital City many of the agents are experienced in deal­ing with short sales and also car­ry the CDPE (Certified Distressed Property Expert) designation.

Then prepare for a process that could take awhile. 

However, others that have gone through the short sale process with a RE/MAX Capital City agent say it’s worth it. Your credit score may take a hit, but rebuilding it without a foreclosure will be much easier.

If you know someone that may be contemplating a short sale, do them a favor and put them in contact with me, a professional real estate agent that knows how to navigate the complexities of a short

Austin Home Prices Projected to rise 0.9%

Austin home prices are projected to grow 0.9 percent next year, according to the latest Fiserv Case-Shiller Home Price Index.

These same projections show Austin home prices rising 0.9 percent by spring 2012 and another 0.3 percent from first quarter 2012 to first quarter 2013.

Zero Down Loan Programs

A lot of people are under the impression that the days of a $0 Down Loan are over. Well, I’m here to tell you they are not!

$0 Down Loans can be a great option for many people. What you need to do is consider the Pros and Cons for each type of loan or program and determine if it makes sense for you and your specific situation. If you would like to get additional information or just discuss your options, contact me and I can put you in touch with a reputable loan officer who can explain these loans/programs in greater detail.

Let’s break down some of those Pros and Cons of a few different types of $0 Down Loans and Programs!

USDA Loans

Pros:

·        $0 Down payment

·        No monthly Mortgage Insurance (MI) – however this is changing October 1, 2011

·        Credit Scores down to 620

·        Ratios as high as 54% (this is on a case by case basis)

·        Easy to qualify for

·        DO NOT have to be a first time buyer!!

Cons:

·        There is an upfront funding fee (currently at 3.6%)

·        Geographically restrictive (wondering if a home is in a USDA location? Call or email and I can look it up!)

·        There are income limits – this can be tricky because everyone who lives at the property (parents, adult children, etc.), their income is included in this

VA Loans – Returning Service Men and Women from Overseas

Pros:

·        $0 Down payment

·        No monthly MI

·        Credit Scores down to 620

·        Ratios as high as 56% (this is on a case by case basis)

·        Easy to qualify for

·        DO NOT have to be a first time buyer

·        NOT geographically restrictive

·        NO income limits

·        Max loan amount $417K

Cons:

·        There is an upfront funding fee

·        Must be VA Eligible

MCC – Mortgage Credit Certificate (Bond Program)

Pros:

·        You can use this with FHA, Conventional, and VA loans

·        Can help in qualifying for a loan

·        Reduces Federal Income Tax liability yearly based on amount paid in interest on mortgage loan

Cons:

·        There are income limits

·        Cannot be used in conjunction with other Bond programs (ex. the Bond 77 program)

·        Does not reduce mortgage payment

·        You may be subject to a Recapture tax

NOTE: this is not a tax credit

Bond 77

Pros:

·        There are no geographic restrictions

·        DO NOT have to be a first time buyer (targeted areas only, check in with me to see if an area qualifies)

·        Provides down payment assistance

·        You can use this program with FHA, Conventional, VA, and USDA loans

Cons:

·        There are sales price limits

·        There are income limits – this can be tricky because everyone who lives at the property (parents, adult children, etc.), their income is included in this

·        You may be subject to a Recapture tax

·        You must complete a pre-purchase homebuyer education course

J.D. Power Ranks RE/MAX #1 in Customer Satisfaction for Buyers and Sellers

Results from the J.D. Power and Associates 2011 Home Buyer/Seller StudySM, recognize RE/MAX for providing the highest overall consumer satisfaction for both home buyers and home sellers. In last year’s study, two different companies ranked the highest in each category, but this year home buyers and sellers both rated RE/MAX the highest.

“It all comes down to professionalism and a commitment to a premier level of customer service,” said RE/MAX Chairman and Co-Founder Dave Liniger. “Because RE/MAX agents average more experience and training than other agents, they are better prepared to deal with home buyers and sellers in any kind of market. And, consumer preferences tell the story . . . nobody sells more real estate than
RE/MAX.”

This is the fourth annual study of home buyer and seller satisfaction with the largest national real estate companies, conducted by J.D. Power and Associates. For the home buying experience, three factors were considered: agent/salesperson, office and a variety of additional services. Four factors were examined for the home-selling experience: agent/salesperson, marketing, office and a variety of additional services.

As a full-time, professional RE/MAX Capital City Agent, I am proud to know that our customers appreciate all we do for them.

If you or someone you know is looking to buy or sell I would love the opportunity to speak with them.