True Cost of Low Credit Scores on a Mortgage

Have you ever considered the cost of damaged or 'bruised' credit?

Missing a payment can't be that big of a deal can it?

Well, take a look at this breakdown of 4 different tiers of credit scores used by Fannie Mae and Freddie Mac to risk base price mortgage loans.

Over the first 10 years of the loan, the differences are staggering and can cost up to $16,000 or more on a $175,000 purchase of a home. Look at the difference between a 699 FICO score and a 700 FICO score.

There has never been a time when credit scoring is more important than it is today in the current state of the credit markets.

Do yourself a favor, get well versed on what actions affect your credit scores. Take care to protect your credit. It is so important and could potentially save you thousands of dollars.

True Cost of Low Credit Scores on a Mortgage

Have you ever considered the cost of damaged or 'bruised' credit?

Missing a payment can't be that big of a deal can it?

Well, take a look at this breakdown of 4 different tiers of credit scores used by Fannie Mae and Freddie Mac to risk base price mortgage loans.

Over the first 10 years of the loan, the differences are staggering and can cost up to $16,000 or more on a $175,000 purchase of a home. Look at the difference between a 699 FICO score and a 700 FICO score.

There has never been a time when credit scoring is more important than it is today in the current state of the credit markets.

Do yourself a favor, get well versed on what actions affect your credit scores. Take care to protect your credit. It is so important and could potentially save you thousands of dollars.

Economic Stimulus & Refi Plus

Refinancing a home these days has been a more difficult task than what we've seen over the last several years when homes were treated much like an ATM machine.

The challenges we are seeing lately are tighter underwriting guidelines which go back to more sound lending practices. Lenders are tightening the credit score requirements to a 620 FICO or better and in many cases as high as 640 before they will lend. If you are not sure what your credit score is, check out your score at Equifax.com.

Another big problem we've seen is house values falling. Although we are seeing a stabilization started to take hold, house values in many cases are now less than what the mortgage balances are. In other cases, the values have fallen and left very little equity in the homes. Homeowners want to take advantage of lower interest rates, but have been unable to do so up until now.

Under the Stimulus package, Fannie Mae brought about a new program called Refi Plus. This new program is allowing homeowners, who have demonstrated "good pay histories on their mortgages but have been unable to refinance due to a decline in home values", take advantage of the lower rates.

The program is brand new and slated to roll out on April 6th. There are still many questions we are working through with the lenders, however, opportunity is right around the corner so they say.

This program is NOT a "BAIL OUT" for people who's values are upside down or for individuals who may be facing foreclosure.

More to come.

Can I buy a Home if I went through Foreclosure?

What an amazing Question!

ABQOLUTELY Yes!

Did you know that FHA requires only 3 years since a foreclosure was fully discharged before they will consider a new home loan? That's right! Only 3 years!

Here's the deal though. This is not a blanket guarantee that someone who faced foreclosure 3 years ago will qualify. There needs to be evidence of improved credit since the foreclosure.

The main problem I see with many clients who face this situation is that they haven't done anything to remedy or repair their credit since. In fact, many of the clients I've counseled have numerous other collection accounts, judgements, or late payments since the foreclosure occurred.

If this describes your personal situation, but you want to buy a new home, perhaps it is time to sit down with someone who can counsel you in cleaning up your credit as well as teaching you how to keep it clean for the future.

As we've already seen, damaged credit can cost thousands of dollars in unnecessary interest or insurance premiums over time on future purchases.

Feel free to visit the Credit Repair link on the right side of my blog here for an affordable credit repair service.

Credit Monitoring Services and You

Did you know that on any given day your credit profile may change? That's right sports fans!

A credit report is only a snapshot of credit performance at any given time. That's why it is extremely important to be proactive in monitoring your credit. This may help you improve and/or maintain your good credit standing. Believe it or not, this may come as a shock to you, but the credit report is an integral part of managing your overall credit standing. If you would like to improve or maintain your credit rating, here are a few positive steps you can take....

1. make all the effort you can to resolve any past due account
Resolving past due accounts does not necessarily mean you have to pay off balances. It is simply a matter of of contacting the creditor and working out a manageable payment plan. As you make these payments, your credit rating can improve as the credit reflects a good payment history of your new plan.

2. reduce the number of accounts with open credit
Trying to manage a multiple accounts can become quite cumbersome. To keep your records easier to manage, close down a few accounts. This may help with making payments on time in the future.

3. not so common, but a lack of credit history may be a factor
Creditors gauge a borrower's credit worthiness through a history of payments made. If you've not taken out any loans or credit accounts, this can affect a creditor's willingness to take a chance on your limited history. You may need to start with some small credit accounts to establish a history of good payment history. Perhaps this is a secured loan or credit card through the bank or a small installment loan.

4. taking action on any items is crucial, but don't expect to reestablish good credit overnight
Most types of adverse credit will remain on the credit profile for up to 7 years and in some cases as long as 10 years. Remember, the credit problem may have happened suddenly, but creditors are looking for patterns of responsible credit use over time in making their decision to extend credit.

With Identity Theft increasing year after year, monitoring your credit has never been more important than it is today. In fact Identity Theft is the fastest growing crime in America. Most companies will charge a nominal monthly fee to monitor your credit. They will send you a copy of your file quarterly or monthly as well as notify you any time a change occurs in your credit profile. If fraud does occur, most monitoring services provide you with a kit to help settle any problems that may arise. They will also have a counselor you can call to talk with for guidance. Some services actually provide all of the cleanup for your rather than giving out a kit. You sign an affidavit and power of attorney, and they handle the rest for you.

Having personally experienced identity theft twice, I recommend the 2nd choice. One place you can visit for this is Identity Theft Shield. They are owned by Kroll Background services. Many times a home owners policy also has a provision to protect for Identity theft. However, be aware that any claims can cause your home owners policy premium to increase. They also provide kits to guide in self-help with the clean up.

Credit is a serious matter and could mean savings of thousands of dollars if monitored closely and carefully. For any questions, please feel free to call me at 505-250-1944 or send me an email at jchristensen2901@gmail.com.

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