FICO Scores Not a Simple Concept to Grasp

"Does the Mortgage Industry Rely Too Heavily on Credit Scoring Models?

Few factors affect the mortgage lending process as much as a borrower's credit score.

Mortgage bankers and their Wall Street counterparts have long relied on the FICO score to judge the ‘credit worthiness’ of the borrower.

For individual borrowers, their credit score at the time of loan application has a major influence over the amount of interest they pay or the next 30 years, not to mention the amount of cash required to close and whether or not they even qualify for the loan"…Read the entire article by Cindy Dixon at Mortgage News Daily.

Bad Credit-Construction Loans

Summary: Good people with bad credit can find solutions for homeowner loans and home mortgage loan needs. Poor credit is not a problem forever.

Carl, I have gone down the road of debt and have gotten myself in a lot of trouble. I no longer have the credit for a construction loan, or any loan.

Is it possible with an above average job, and a lot of extra time to build a house out of your pocket? I.E. pay cash for site prep, save, pay cash for foundation, save, etc.

Thank you!!
Jason

Hi Jason,

It is almost impossible to build a new home “out of pocket”. It is also almost impossible to get a mortgage with bad credit and unfortunately while they are secured loans, construction loans are mortgages.

Secured loans are usually considered by lenders as safe loans and even though construction loans are secured loans they are considered the riskiest of secured loans.

Even if you could find a mortgage with bad credit, the mortgage rates for bad credit would be very high…too high.

So, what I would do if I were you is…read the rest HERE.

(A house left unprotected & exposed to the elements)

Freddie Mac Suspends Evictions

If rolling 30 day lates have evolved into a Notice of Default and you are counting down the days until you are "served" with a request to vacate the premises, you can breath easy until after the New Year (Freddie Mac Suspends Evictions From December 20 to January 3, 2011)

McLean, VA – Freddie Mac (OTC: FMCC) today announced it has ordered all evictions involving foreclosed occupied single family and 2-4 unit properties that had Freddie Mac mortgages to be suspended from December 20, 2010 to January 3, 2011.

"If the property is occupied, our foreclosure attorneys will suspend the eviction to provide a greater measure of certainty to families during the holidays," said Anthony Renzi, Executive Vice President of Single Family Portfolio Management at Freddie Mac.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders.

Over the years, Freddie Mac has made homes possible for one in six home buyers and more than five million renters.

Mortgages after Bankruptcy

Summary: With at least two years from discharge of a bankruptcy and reestablished credit with improved credit scores you should be able to apply for a construction loan to build a new home or a home mortgage loan to buy a home.

Carl,

...the bills piled up and we had no choice but to declare bankruptcy.

I have a good job now, and have had it for a little over three years.

We don't have many debts, just one car and one credit card, plus our rent.

Is there any hope of getting a loan to build?

Gabe


Hi Gabe,

Bankruptcy is not the end of the world...read the rest HERE.

All Mortgage Lenders and Mortgage Brokers Must be Licensed

Now, all mortgage lenders, mortgage brokers, and mortgage loan originators must be licensed.

It may seem like "closing the barn door after the horse escapes", but better late than never
Be sure you deal with only licensed mortgage lenders, mortgage brokers, and mortgage loan originators.

Here is a free service for you to confirm that the mortgage company or mortgage professional with whom you wish to conduct business is licensed in your state.

Welcome to NMLS Consumer Access^SM

Carl

ATTENTION: Mortgage Rates Hit New Lows

If you've been floating your loan or have yet to apply for a refinance because it just didn't seem worth the hassle, congratulations, mortgage rates hit new lows today. If you've refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money, again!... Some lenders will even go as low as 3.875%...Read the rest from Adam Quinones, Managing Editor, Mortgage News Daily.

Gifted or Free Land

My parents are giving us an acre of land free and clear to build our house on.

How can this benefit us in acquiring a loan or any other benefit?

Anonymous

You have nice parents.

It used to be that having your land Free & Clear (Jargon for “paid for”) was as good as a construction loan approval. Not so anymore I‘m afraid.

Some mortgage lenders have gone back to being so conservative (afraid) that they consider gifted real estate equivalent to you gambling in Las Vegas with some one else’s money…you don’t really care if you lose because you don’t really have any “skin in the game”.

But, some mortgage lenders will still consider that gift as an asset that lowers their risk in making you a loan.

Your mission, should you decide to accept it, is to find the construction mortgage lender who will consider that gift not only as an asset, but as all or part of your down payment.

Are they out there? Yes, but it now takes perseverance and a bit of luck to find one…exactly like it did when I started in the home building business.

Of course I hope it goes without saying that today any borrower must have good, even stellar credit, sufficient income, etc. to get any loan.

Most mortgage lenders, in today’s market, do not consider land value in their construction lending ratios.

They will only lend a percentage, usually 75% of the cost of the home building project, or a percentage, usually 75% of the “Appraised Value, WHICHEVER IS LESS!

Let me give you a best case-worst case scenario.

In both cases, the bank’s appraisal states that the land is worth $50,000, cost of construction is $150,000 and the finished house plus the land will be worth $200,000.

Your best case: Bank will lend 75% of value or $150,000, utilizing your land as the down payment.

Your worst case: Bank will only lend 75% of the actual cost of $150,000 or $112,500, requiring a down payment from you of $37,500. The land is omitted from the equation since it cost you nothing.

If you live in one of the states that NORMANDY CORPORATION lends in, you may have lucked out as they will lend up to 90% of the “Appraised Value”, which therefore should include the current value of your “gifted” land.

You should also visit small local banks, credit unions, and mortgage brokers. They may be more likely to help you.

Good luck,
Carl

Homebuyer Tax Credit Closing Deadline Finally Extended

Late Wednesday night the Senate followed the lead of the House of Representatives and voted to extend the closing deadline for the popular homebuyer tax...MND NewsWire

FINALLY! And to think we actually pay these "people" in Congress to "work" for us...HA!..Carl

Mortgage Rates Sink to Lowest Level on Record!

Toll Brothers houses

WASHINGTON – By ALAN ZIBEL, AP Real Estate Writer

Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.

The average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday...more

Mortgage Tip of the Month

Different lender, different mortgage rate!

The mortgage rates you'll be offered will depend not only on the mortgage lender, but other factors too.

Your credit score, debt-to-income ratio and down payment or home equity will affect the mortgage interest rates that a lender can offer you.

If you have good credit, a lender may offer you more attractive rates or fees.

A lender may also offer you better rates and fees if you have adequate income to repay your debts and a down payment or some equity.

Mortgage rates and fees may be negotiable!

That's another reason why you should shop for a mortgage and compare mortgage products and rates.

Rates also differ depending on whether you pay points.

A point = 1% of the loan amount. For example, on a $100,000 mortgage loan one point would be $1,000, 1 &1/2 points would be $1,500, and so on.

Pay more points, and a lender probably will offer you lower rates.

Pay fewer or no points, and a lender likely will offer you higher rates.

LendingTree can help you get customized mortgage offers from different lenders so you can compare the interest rates and fees. When Banks Compete, You Win.®