credit Archives - Page 7 of 9

Credit Cards Take Precedence Over Mortgage

Continuing a three year trend, the consumer continues to pay credit cards before they make mortgage payments, according to MSNBC.com. This demonstrates the drop in housing values and increase in the numbers of unemployed.

The persistence of the reversal shows that consumers don’t want to lose access to credit on their cards, especially if they depend on using them to make necessary purchases. “You can’t buy groceries with your house,” [Sean] Reardon said.

Further, because a credit card payment is so much lower than a house payment, it’s easier to make. As the consumer remains cash strapped, the trend is expected to continue.

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Not As Many Walking Away

by Kathy T. Leave a Comment

The new reality is that if people do walk away from their homes, given the very challenging climate to get a new home loan – they may be better off staying put, making those house payments, and waiting (perhaps years) for the real estate market to return.

More people may be realizing this, according to CNN Money,

“There are two effects that suggest [walk aways] won’t happen so easily,” he says. “The first is the endowment effect. People tend to value their own house above its market price. Owners don’t want to sell at a loss. They have what we call a loss aversion.”

The second is that people weigh the importance of immediate outcomes more heavily than long-term effects. Walking away involves upfront expenditures of time, money and effort, while the benefits of walking away are back-loaded.

It is refreshing to see that people are recognizing the devastating reality of walking away from a home loan. As long as people have the ability to make the payments, they should

Photo by nikcname via flickr creative commons.

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Friday Video: Tips for First Time Buyers

by Kathy T. Leave a Comment

There’s a fine line for first tie buyers doing their homework. Don’t do so much that it scares you off, but do enough so you will not get taken advantage of by an unscrupulous builder or lender. Here’s a good video to start with,

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Maintain Credit Status When Buying

by Kathy T. Leave a Comment

I helped a buyer close on a house a couple of weeks ago and while we did our final walk-through, she told me about her great buy on a refrigerator, washer, and clothes dryer. I probably looked like a deer in the head lights when I stammered, “NO! STOP!” I suggested that the buyer not buy any more big ticket items and that she should wait until after she closes before spending more money on furniture, blinds, and other new house items.

There are some very specific do’s and don’ts when in the middle of purchasing a house. Realtor Charles Dailey of Minneapolis, Minnesota helps us to break it down. Here are a couple that really resonate,

DO NOT charge any new items on your charge cards (higher balances will lower credit scores).
DO NOT change employment may result in loan denial.
DO continue to make all payments on time.

All good advice. Take it seriously.

Photo by jim212jim via flickr creative commons.

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Dud Dates Equal Dud Mortgages

by Kathy T. Leave a Comment

While Money Blue Book probably didn’t mean this to be funny, I found humor in the post Dating Tips for the Financially Savvy Person (or 6 Signs Your Date is a Financial Dud). This can easily be paralleled to people also unable to qualify for a mortgage loan. For example,

If your date seems overly impressed by their own spending, it may be that they are forgetting an important fact: Eventually they have to pay for it all.

As stated, this is what happened in the mortgage crisis of the 2007-2010 (and now) years. People overspent – they could not afford what they bought. Of course, not all was their fault. When the job market took a big hit, job loss caused a huge volume of foreclosures as well.

Here’s another… won’t save for a rainy day,

But a little advance planning can go a long way when trying to pay for a wedding, a vacation or your first house. It takes a little discipline and an ability to go against the crowd. If your date thinks keeping a savings account at a bank is uncool, you know they may not be very adept at long term financial planning.

Forget this person! They’ll lead you to financial hardship if you stick around long enough!

Photo by Andrew Magill via flickr creative commons.

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What is a Good Credit Score?

by Kathy T. Leave a Comment

My credit score has almost reached 800. It may have wavered a bit because I’ve missed a credit card “pay by” date a couple of times this year … I hate it when I make little mistakes like that can have a huge impact. The impact would be greater, though, for lower scores.

What is a good credit score? Previously 600 could get you in a house. Although still possible, a 600 score is almost impossible to get financing for a house since most lenders have already switched to the 620 minimum. Today, a score between 650 and 700 is viewed as fairly solid. According to Everything Finance, holding on to that score should be the major objective of any person whose finances matter.

When you have a good credit score, don’t try to raise it any more. If you reach a mark of 650 or 700, stop and simply keep your balances below 25% of your credit limit and make your payments on time each month.

Read more of their tips on increasing your credit score here.

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Home Ownership After Foreclosure

by Kathy T. Leave a Comment

The great recession of the 2000-aught-years was one for the record-books. Fine, upstanding citizens from all across the country lost their jobs and then their homes. While some of those who faced foreclosure were n’er-do-wells, most were dedicated to keeping their finances in good order.

As the job market slowly recovers, people again want to buy their own home. The question arises about when they will be able to do this. While foreclosures stay on a credit history for at least seven years, it could take only three years to qualify again to buy a home.

According to Steve McLindon of Bankrate.com, there are conventional loans to be had. But you’ll need to save ahead to put 20 percent down in order to qualify,

Even though a foreclosure lingers on your credit report for seven years, it’s very unlikely you’ll be shut out from a conventional mortgage loan for that long. Fannie Mae, America’s largest mortgage buyer, has said the waiting period is a minimum of three years before you can get a mortgage loan again following a foreclosure due to extenuating circumstances. It’s roughly the same time frame you’ll find for Federal Housing Administration- and Freddie Mac-backed conventional mortgage loans. All three are considered conforming lenders.

The advice columnist goes on to say that continuing to pay your bills on-time and pay-off old debts (or dispute those that are laid unfairly at your feet) will also help you get back into home ownership.

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Tips to Improve Your Credit Score

by Kathy T. Leave a Comment

I love it when I take a continuing education course and learn lots to bring back to readers of the Shakadoo sites! Today I took a class on helping working- or low-income buyers find financing. There were some great ideas tossed around, but what I found most interesting is that in this new lending world, seems are not the way they used to be.

Here are some ways to improve your credit score – with some *asterisks* explaining what has changed.

1) Pay down your credit card balances. Of course these regular payments will show that you pay in a timely, responsible way.

2) Always pay your bills on time. What I said up there! When you pay responsibly, a lender will feel more inclined to give you a large amount of money because it increases their chance of getting it paid back!

3) Leave all accounts open. You read that right and it’s the FIRST big change of this brave new loan world. When you pay off the account, leave it open. A commenter on another site said that leaving it open improves your net to debt ratio, “If you have a lot, and you want to close a couple, then ok, but leave the accounts open that you have had the longest.”

4) Try to have available credit lines increase. Number TWO big change. Previously having available credit lines meant that you had more potential debt available to you. Why? An established history of good credit goes a long way.

5) Take no action on charged off accounts. If someone you owe a debt to finally writes off (or charges off) your account as “noncollectable” do not take any further action. You’ve already gotten one black eye from it, so just let it season. By continuing to make payments, your credit score will be constantly pinged – a negative affect on you.

6) And finally, opt out of pre-screened credit offers! When someone generously sends you a junk note in the mail that says you’ve been pre-approved for a credit card, they already checked your credit to see if you were qualified. PING! Opt out by going here.

Hoping this will help you get positioned to either buy a house or refinance!

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Casting Out Credit Cards

by Kathy T. Leave a Comment

I am one of those people who have stopped using my credit card. In the past it was too easy to run up huge bills, so I finally took a long, hard look at the road I was on and put the card away. If I paid my minimum amount each month, it would take me over 20 years to balance out to $0.00. I am making much higher payments than the minimum and am seeing great progress in pulling the balance down.

I am like a lot of people in that I’ve stopped using my credit card. I am like 8 million people, in fact. The reasons behind people not using the cards may not always be good, though. For example, if they’re forced to stop because their financial position has declined.

In addition credit cards can be good for you, according to Miranda Marquit,

Cutting up your cards and swearing never to use them again might be a bit premature. This is especially true if you plan to get a loan sometime to do something like buy a house. Credit cards can be quite useful if you use them with discretion and discipline. Plus, the right rewards program can help you improve your financial situation.

While this may be true, I’m still glad to be rid of my card. I have plenty of other credit sources to tap into for future loans.

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Sure, Borrow… If You Have Any Credit

by Kathy T. Leave a Comment

I just talked with one of my former clients who told me she is trying to get her Wells Fargo home loan modified. She has been very cooperative – a study in opposites from how the company has treated her. She said the last round ended with her loan modification being denied because all of the paperwork she sent – every single page – hadn’t been signed and dated. Never had they told her to do that. She has finally hired attorneys to help her through the process because the company seems to be stalling in order to turn her down. In the end, they will have a full year of every paycheck stub and bank statements. Is that really necessary?

Meanwhile, the process has decimated her credit score. She had a conversation with Equifax, though, and that representative told her that credit scores are tanking throughout the country by nearly everyone. So good luck in getting a new loan, which seem to be highly desirable right now according to MSNBC,

For homeowners who qualify, it’s a good time to refinance. The average rate on a 30-year fixed rate mortgage dipped this week to the lowest rate of the year — 4.84 percent, down from 4.93 percent a week earlier. Homeowners who took out adjustable-rate loans at 4.5 percent in 2005 are now seeing their rates fall to 3 percent to 3.25 percent, McBride says. As a result, they have extra cash to spend.

I’d rather see the economy in a strong, steady recovery, frankly.

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