Well maybe not today! But after you're done reading the next series of posts and you apply the knowledge you've gained to your credit, you certainly will.
One of the major hurdles you will have to get over when applying for a home mortgage is your credit and your credit score, or "FICO" score. There's just no getting around it, if you want to borrower money today, you have to have great credit. Never has this been more true. Banks and other lenders have tightened up guidelines significantly and are now requiring a 620 minimum FICO on an FHA mortgage - a program that has no FICO minimum! Even if you have a great job, and a big downpayment, you still won't be able to get a home mortgage loan without at least good credit. Fair or "OK" credit just won't cut it anymore.
First let's tackle the FICO score. FICO is an acronym for Fair, Isaac and COmpany. Fair, Isaac and Company, after analyzing millions of credit reports, developed a statistical model which has proven to be quite accurate at predicting the risk of default on a particular type of loan like an auto loan or mortgage loan. The higher the score, the lower the chance of default. Scores range from around 300 to 850. To get a home mortgage today, you must get above 620 (this is the Fannie Mae and Freddie Mac minimum) and if you can get to 740 credit probably won't be an issue. For a really good and concise overview of the components of the FICO score check out the following link, http://www.mbda.gov/?bucket_id=131&content_id=2287§ion_id=3
The median FICO according to MSN Money and http://www.bankrate.com/ is 723. That means that have fall above and half fall below that number. More specifically the the distribution of scores is as follows:
300-499 2%
500-549 5%
550-599 8%
600-649 12%
650-699 15%
700-749 18%
750-799 27%
>800 13%
I have a friend who says, "If you are trying to get from point 'A' to point 'B' you first must know what point 'A' is." You need to know where you are before you can make a plan to get where you want to go. So the first thing you will need to do is get a copy of your credit reports. There are three credit bureaus or repositories and each of them have slightly different information on your report so you must get a copy of each one. Because they have different information, they will also have different scores on you. A mortgage lender will use the middle of three scores when determining if your credit is acceptable for a mortgage loan.
One way to find out your FICO scores is simply to apply for a mortgage. By law, the FACT Act or FACTA, every lender needs to disclose your FICO scores when you apply for a home mortgage. The problem however is that you won't get any details as to why each of the three scores are what they are. The solution is to get a full copy of your credit reports with FICOs. You can do this by either going to each of the credit bureaus' websites and ordering a free copy of each report individually (you can get one free one per year) or you can go to one of the branded websites and get a copy of all three reports at once. Following is a list of the various websites of interest.
http://www.transunion.com/
http://www.experian.com/
http://www.equifax.com/
http://www.myfico.com/
http://www.truecredit.com/
http://www.freecreditreport.com/
http://www.freecredit.com/
www.ftc.gov/bcp/edu/pubs/consumer/credit.cre34.shtm
http://www.annualcreditreport.com/
www.ftc.gov/credit
Obviously there are hundreds of websites related to your credit, but the above are the most relevant. The most helpful and utilitarian in my opinion is http://www.myfico.com/ as this site is owned and operated by Fair, Isaac and Company therefore has many features that will aid in your quest for an 800 FICO score. In my next post I will delve much deeper into the actual mechanics of improving your FICO score in the hopes of getting a VA, FHA, or Conventional Mortgage.
Sunday, November 22, 2009
Wednesday, November 11, 2009
New Homebuyer Tax Credit - Not For Any Yahoo
Great news! The United States Government just extended the previous $8,000 Homebuyer Tax Credit until April 30, 2010 and added another group of people who may qualify for a slightly lesser amount making it easier for both to qualify for a purchase money mortgage loan.
Previously, only first time homebuyers (those who hadn't owned a home in the last 3 years) were eligible for the tax credit of up to $8,000. But now, even those who've owned in the last three years can purchase a new 'primary residence' and get up $6500 if they have owned and lived in the same house for 5 of the last 8 years.
So what this means is that if you haven't owned a home for the last 3 years, you are probably eligible. If you have owned a home in the last 8 years or multiple homes in the last 8 years, you just need to figure out if you have lived in one of those homes for at least 5 years all told. If you bought a home in January of 2006 and have been living in it ever since you don't qualify. But if you bought a home in late 2001 and lived in it for 3 years, rented it for 2, and then moved back into it until now, you probably DO qualify for the tax credit. If you need a mortgage which is probably the case, and you end up qualifying for and getting an FHA mortgage, the credit could end up reimbursing you for the entire downpayment.
There are some income caps which can eliminate eligibility, but the vast majority of buyers will not affected by them. In fact, the caps are so high that you probably won't be too upset if you make too much money to qualify for the tax credit. Contact your mortgage broker for more specific details on the tax credit.
The bottom line is that if you WANT to buy a home, there really isn't a better time than now to do so. Prices are low - so low actually that you can buy a home below what it would cost to build it! Sellers are motivated, financing is available, and the government may reimburse you for the downpayment. So what are you waiting for? Buy, Buy, Buy!
Previously, only first time homebuyers (those who hadn't owned a home in the last 3 years) were eligible for the tax credit of up to $8,000. But now, even those who've owned in the last three years can purchase a new 'primary residence' and get up $6500 if they have owned and lived in the same house for 5 of the last 8 years.
So what this means is that if you haven't owned a home for the last 3 years, you are probably eligible. If you have owned a home in the last 8 years or multiple homes in the last 8 years, you just need to figure out if you have lived in one of those homes for at least 5 years all told. If you bought a home in January of 2006 and have been living in it ever since you don't qualify. But if you bought a home in late 2001 and lived in it for 3 years, rented it for 2, and then moved back into it until now, you probably DO qualify for the tax credit. If you need a mortgage which is probably the case, and you end up qualifying for and getting an FHA mortgage, the credit could end up reimbursing you for the entire downpayment.
There are some income caps which can eliminate eligibility, but the vast majority of buyers will not affected by them. In fact, the caps are so high that you probably won't be too upset if you make too much money to qualify for the tax credit. Contact your mortgage broker for more specific details on the tax credit.
The bottom line is that if you WANT to buy a home, there really isn't a better time than now to do so. Prices are low - so low actually that you can buy a home below what it would cost to build it! Sellers are motivated, financing is available, and the government may reimburse you for the downpayment. So what are you waiting for? Buy, Buy, Buy!
Thursday, November 5, 2009
Welcome Home Buyers and Mortgagors!
Hi everybody, my name is Jeff Mallas and this is my first post to "All About Mortgages." On this blog, you will find answers to every question you can possibly think of about mortgages. You may even find answers to questions you didn't even know you had! You see many times "we don't know what we don't know," and "All About Mortgages" is here to put an end to that.
Let me first introduce myself. As I said previously, my name is Jeff Mallas and I live and work in Las Vegas, Nevada. Over the past 18 years, I've started three mortgage companies and closed over a billion dollars in mortgage loans. I've been a mortgage consultant, processor, sales manager, underwriter, and secondary marketing executive. During my career, I've learned some things that I really think can benefit you.
But rather than start regurgitating myriad nuggets of wisdom and tell you what I think you need to know, I want you to tell me what you want to know. I'd like this blog to develop or grow organically, so I'm opening up the floor to you, my readers, and asking that you post a question on "All About Mortgages." Let me know what you want to know and let's get this blog growing!
Let me first introduce myself. As I said previously, my name is Jeff Mallas and I live and work in Las Vegas, Nevada. Over the past 18 years, I've started three mortgage companies and closed over a billion dollars in mortgage loans. I've been a mortgage consultant, processor, sales manager, underwriter, and secondary marketing executive. During my career, I've learned some things that I really think can benefit you.
But rather than start regurgitating myriad nuggets of wisdom and tell you what I think you need to know, I want you to tell me what you want to know. I'd like this blog to develop or grow organically, so I'm opening up the floor to you, my readers, and asking that you post a question on "All About Mortgages." Let me know what you want to know and let's get this blog growing!
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