As we approach the peak of this year's Atlantic hurricane season, home improvement expert Danny Lipford explains the importance of having a backup generator during power outages caused by severe weather.
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Despite earlier reports to the contrary, it turns out that your mortgage lender will not have to pull a second full credit report on you hours before closing on your home purchase or refinancing.
In a clarification of a policy announced earlier this year, mortgage giant Fannie Mae now says applicants will need to come clean about any debts they have incurred since they submitted their mortgage application — or debts they never disclosed on the application. But a formal pre-closing credit report will not be mandatory to confirm creditworthiness.
Instead, loan officers can use other techniques to verify that you haven't financed a new car, taken out a personal loan or even applied for new credit in any amount that might make it more difficult for you to afford your monthly mortgage payments.
Although Fannie made no reference to specific services in its recent clarification letter to lenders, some commercially available programs claim to be able to monitor mortgage borrowers' credit activities on a 24/7 basis, flagging such things as inquiries, new credit accounts and previous accounts that did not show up on the credit report that was pulled at the time of initial application.
One of those services is marketed by national credit bureau Equifax and dubbed "Undisclosed Debt Monitoring." Aimed at what Equifax calls "the quiet period" between application and closing — often one month to three months — the system is "always on," the company says in marketing pitches to mortgage lenders.
Fannie's new policy puts the burden of detecting these debts squarely on lenders or loan officers. Whether they pull additional credit reports — still an option allowed under the revised policy — or use some form of monitoring service, lenders must guarantee that the debt loads stated in any mortgage package submitted for purchase by Fannie Mae are scrupulously accurate as of the moment of closing. If not, the lender probably will be forced to endure the most painful form of punishment in the financial industry: a forced "buyback" of the entire mortgage from Fannie Mae.
What does this mean if you're planning to finance a home purchase or refinance your existing mortgage into a new loan with a lower interest rate? Tops on the list: Be aware that sophisticated credit surveillance systems are now being used in the mortgage industry.
Next, try not to inquire about, shop for or take on new credit obligations during the period between your application and the scheduled closing. If you seriously want that new loan, keep your credit picture simple — no significant changes, no additions — until you settle on the mortgage.
Buying a home is an expensive proposition, regardless of your financial situation, so we want to give you a few pointers to keep in mind when buying your next home.
Your first step is to save for the down payment. The more money you are able to put down, the greater your chances of being able to negotiate a lower price for your home. Also, you’ll be able to save more on your mortgage.
A good rule of thumb when purchasing a home is to have at least 20% of the total value (if not more) for your down payment. You’ll also need some extra funds for the closing of the house.
Start saving now, don’t procrastinate. Put the money you are saving for a home aside so you don't spend it, by putting it in a savings account. Try to find a bank with a good compound interest rate for it’s saving accounts so while that money is being stowed away and saved, you are earning a little interest on it as well.
If your salary is not enough to save up for the house, consider the possibility of a second job. That salary, a long with the 20% you are saving will be a big help financially when getting ready to buy the house.
Remember, even while you are saving, you need to also keep up with bills you already have. Staying financially stable while saving for your house is important, as it will have a major impact on your credit score, and eventually your mortgage approval or not.
With these simple steps, you will be on your way to buying the house of your dreams.
About 1/3 of your FICO score is based on how much of your available credit you are using. This is called your "credit utilization".
The higher your utilization rate… the lower your credit score. The credit scoring models view this as you getting closer to maxing out your credit lines and becoming a higher risk.
If your credit limit is cut by your credit card issuer and has caused your credit utilization measure to drop, it subsequently lowers your credit score without you doing anything on your part.
If, however, your credit card company reduces your credit line on a credit card that you do not carry a balance on… then there is virtually no impact to your score.
Have you had credit lines decreased through no fault of your own? Let us hear about it. Click the comment link below and sound off. Your email address is NEVER published on this site, even though it is required (to prevent spam bots from posting here) to post your comment. We'd love to hear from you about this credit card limit lowering situation.
Our September 2010 Cincinnati Real Estate Newsletter is now online…
