VETERANS...THIS BLOG'S FOR YOU

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  Today I want to take a moment to remind Veterans of the military services of the best mortgage possibility available-the VA loan. If you are a veteran and you are considering purchasing a home there is no better mortgage loan than the VA loan. This loan has a LOW fixed rate, is for 100% of the value of the property being purchased and has NO monthly mortgage insurance.  The requirements are relatively simple-you must be on active duty, or have been honorably discharged from one of the military services or have been in the National Guard or Reserves. Depending on when you served or in what capacity there are time requirements, but the majority of veterans can access this loan.

  You will need to be working, and have a credit score of 580 or above. Other credit criteria also applies but now more than ever, Tippecanoe Mortgage is in a position to provide VA loans to as many veterans as possible.

  If you already have a VA home loan and are considering refinancing into a lower rate we can do  that too.  VA has a terrific rate and term refinance-the VA Interest Rate Reduction Loan.  If all you want to do is lower your payment-this is the loan for you. It features no appraisal and the ability to roll your closing costs into the new loan.

  Do you need some cash to pay off some pesky credit cards?  If you have equity in your home we can obtain a VA cash out refinance for up to 100% of your home's value.

  So the next thing you are probably wondering is how do you go about getting a VA loan?  The first thing is to check on your certificate of eligibility.   You can call the Atlanta Eligibility Center at 888-768-2132 to check on your eligibility.  Because of the current demand for VA loans it is taking about ten days to obtain the certificate of eligibility.  In many cases we can also obtain he COE however, we can't solve any problems related to its issuance.  Since it can take up to ten days it is recommended to do this prior to writing an offer on a home so you aren't waiting to close because a COE is hung up somewhere.  You will  need the information on your DD2-14 discharge form to obtain your COE.

 

  One other misconception about the VA loan is that you can only use the entitlement once.  If you had a VA loan and sold and closed the former mortgage, you can purchase another home using the VA loan. Once in awhile we run into issues with correct records on the sale of the previous home, but assuming you still have proof of the sale this can be corrected.  In addition it is also possible to obtain more than one VA loan at a time, though the second mortgage must be for $144,000 or more.

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  And the good news is, even if you are an older veteran-there is no age limit.  25 or 65 you can still use your VA eligibility to qualify for a VA loan. 

  Sometimes you hear that the VA loan is hard to get because the property has to be in pristine condition.  While the property has to be in decent condition, the days of a VA inspector looking at a property for defects are long gone.  VA has much the same requirements as FHA with regard to property condition.  Most of us would want to have 100 amp electrical service, heating and cooling that work when turned on, a roof that has five years of life and a basement that doesn't resemble a swimming pool. And more good news is that if you have a great job and can qualify for the payments you can borrow up to $417,000, assuming full eligibility.  Currently the only inspection requirements are for a termite inspection and a well test if water is provided by a private well.

  Don't let anyone tell you differently-this is a great loan!

TOP 8 CONSUMER MORTGAGE CONCERNS

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  I think it is fair to say that obtaining a mortgage loan is a stressful process. It is especially true if it is your first rodeo, but a veteran can also run into issues with the sale of a current home, multiple home ownership and other complications that occur during a real estate transaction.  So today I thought I would address the top ten concerns in the mortgage loan process and see if I can ease some fears.

1)  Will I be approved?  This stands out as the number one question that I receive from first time buyers.  For many this is the first time they have realized the importance of credit scores, a savings pattern, and stable employment.  Once a loan originator has  the chance to go through all the documentation we have a pretty fair idea of whether or not the loan will ultimately be approved. I am not always right but most of the loans we originate close.  The ones that don't are seldom surprises.  A good originator will be sure the borrower knows where the pot holes in the road are and what it takes to get around. over, or through them.

2)  Is my credit good enough to obtain mortgage financing? 95% of the time the answer to this is clear from the beginning of the pre-approval process.  However, the issue can be more of if the credit is good enough for one particular loan type over another or even whether it is acceptable from lender to lender. We work with lenders that will not accept a score under 640, but we also work with lenders that do-so no across the board generalization can be made. Nor is it about credit score alone. A borrower can have a great credit score over 700 but not have any credit open, or only one or two credit accounts open. Sometimes even thought the score is good there isn't enough history reporting to guarantee loan approval.

3) I have to be on my job for two years before I qualify for a mortgage loan, right?

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 While two years on your job is a plus, it is not necessarily a requirement.  Depending on your past job history, it may be perfectly okay to have only thirty days on your new job.  If you have just begun a new job your employment history for the past two years will be examined. Do you job hop every few months or were you working for one company and received a higher paying opportunity doing the same type of work at a new company? Is there a probationary period? Is this your first job since graduating from college or a technical school? Are you working at the subject you majored in while at school. All of these factors come into play when discussing job history. If you just graduated high school and have only been on your job for a month or two it is fairly safe to assume that the lender will want at least a year of job time to show that you can maintain steady employment.

4) How much house can I buy?  It is a good idea to speak with a lender before you go out looking at houses not only for pre-approval purposes, but also so you know what your price range is. Many first time buyers gauge what they can afford based on their current rent. While this may be accurate in some cases, in many cases it is not. The lender will take a look at your total monthly consumer debt and your gross income to determine what you would be approved for. Sometimes what you can be approved for is more than what you want to spend and sometimes it is less than you thought. It is all in a calculation known as debt to income ratio.

5) What if the house I buy appraises lower than the sale price?  If you home doesn't appraise for what you contracted to purchase it for, the lender will only loan against the appraised value. So if you are paying $100,000 and the appraisal comes back at $95,000 and you were planning on putting 5% down, you will only be allowed a value of $95,000, not the $100,000. Your choices are to come up with the extra money between the sale price and the appraised value though most people don't want to pay more than a property is worth-or you can renegotiate the sale price with the seller. Most of the time this is what happens. It is to the seller's advantage to keep you as a buyer as long as they can afford to sell the home for the lower price rather than go to the time and trouble to put it back on the market.

6) Will my loan be a fixed rate loan?  If that is what you want that is what it will be.  While adjustable rate mortgages still exist, very few people are using them. Part of this is that interest rates are low, but even when they aren't, adjustable rate mortgages work best if a borrower doesn't intend to keep a property for very long.

7) Will there be a pre-payment penalty fee? There are no loans in existence offered by banks, credit unions, mortgage bankers or mortgage brokers that require penalty fees to pay off early. There are a few private investors that do loan mortgage money that may charge them-but these are private loans, not loans acquired through normal channels.

8) How much money will I need at closing?  The amount of money needed at closing is a function of how much down payment is required by your loan as well as whether nor not you have seller paid closing costs, and any credits for tax pro-ration. Your loan originator should be able to give you a good estimate of how much you will need when they do your pre-approval.

  These are the top eight questions that I hear when people call to inquire about mortgages.  However there are a couple more questions they should be asking.

1) How much money will I need upfront prior to closing my loan?  Typically anywhere from $800 to $1000 to cover the cost of inspections, earnest money, and appraisal all of which are paid up front.

2) I live from pay check to pay check. My credit is pretty good. I don't like the idea of throwing my money away on rent, is it time to buy a house?  While I have closed loans for folks that have little in the way of savings because they qualify for either VA or USDA loans, it is always with misgivings.  The difference between home ownership and renting is that where you rent, you have a landlord and the land lord is responsible for repairing the property. When you own a house, you are responsible for repairs and maintenance.  So just because your lease is coming up for renewal does not necessarily mean that buying a home is the best choice.  Save a little money to have put back in case of emergencies.

3) I have found a house for $30,000 that I want to buy. Can I get a mortgage?  It is a rare house in our area that is in habitable condition if the asking price is $30,000.  It may cost $30,000 up front but have $60 or $70 thousand needed in repairs. Due to government restrictions it is impossible for most lenders to legally lend on purchases this low. Most properties in this price range are sold for cash.

  With a little financial planning many people can put themselves in a position to purchase a home. We hope to take your call soon.

PARENTAL ASSISTANCE

  Everyone can use a little help from Mom and Dad from time to time, particularly when it comes to purchasing a home.   Many parents like the idea of assisting their children with their first home purchase.  Today I want to talk about how parents may and may not assist their children with buying a home.

  Currently home purchases by first time home buyers 35 years old and younger is down 22%. The biggest chunk of the home buying market is normally made up of first time home buyers.  But lately the first timers have been staying in Mom's basement or renting.  Some of that has to do with the job market and student loan liability.  However, the economy is picking up, and many Millennial are beginning to find work. Rents are rapidly rising so it is only a matter of time before these folks begin to dip their toes into the home buying waters.

  One question I get frequently has to do with whether or not parents can co-sign the mortgage in a situation where the son or daughter doesn't have credit scores that qualify him or her to purchase the home. Unfortunately the answer to that is no.  Credit is evaluated using the lowest middle score of how ever many borrowers are on the mortgage. So good credit on the part of the parent doesn't offset bad or no credit on the part of their offspring.

  But there is some good news in that if the issue is one of debt to income, a non occupying co-borrower can be added to lower debt ratios and bolster income if the 5% down payment is coming from the occupying borrower. So if the child has their own 5% to put down, but has a high debt ratio due to an entry level income, Mom and Dad can add their buying power to assist.

  If the buyer is qualified for an FHA loan parents can help in two possible ways.  FHA allows parents to be non occupying co-borrowers AND gift the money for the down payment.

 

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It is important to note, however, that anyone who is on the mortgage has payment responsibility towards the property. So if junior is delinquent in his mortgage payment, Mom and Dad's credit will be affected. And in the case of junior blowing off the payment all together, Mom and Dad are responsible for making that payment.  As parents you also can't purchase the home for your child as a primary residence.  This is viewed as an investment property -even though it is your child occupying and in many cases making the actual payment. Just one of those rules set down by Fannie Mae, Freddie Mac and Government loans.

Currently we are affiliated with two lenders that allow a 5% gift from parents for conventional lending.  This is a help for borrowers with excellent credit scores as conventional lending is typically less costly than FHA due to the mortgage insurance requirements.

  On any type of loan parents are allowed to gift funds for closing costs, inspections, etc.  However, those funds will have to be sourced. In some cases depending on when the funds were put into the child's bank account, the parents may have to produce their own bank statement showing the transfer of funds.

    Hooray for parents!  Assisting your child in the purchase of a home is a large step on the way to a stable financial future.  Keep it up Mom and Dad!

CREDIT RELIEF!

    No one likes a blot on their credit. A negative item on a credit file, depending on what it is can kill a mortgage loan file.  One would like to assume that credit issues are discovered in the process leading up to pre-approval but that isn't always the case.  Credit is a moving target and the consumer's credit activity is constantly changing the picture.

  One of the forms in my loan package even addresses this issue.  If a consumer applies for new credit in the process of a loan application the lender will find out about it. Depending on what that inquiry entails - - particularly if it results in more debt, the borrower can find him or herself without a loan. The payment for the new credit account will have to be integrated into the debt ratio.  For people that are close to the debt limit, a little more may be too much.

  Added credit inquires can also reduce scores - - not what you want to do while a mortgage loan is in progress.

  A new collection or a late payment can send a credit score spiraling downward - - which in turn can end with the borrower no longer qualifying for a mortgage.
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  I think we could all use some.  So here it is:  The Consumer Financial Protection Bureau has been doing an investigation on credit reporting practices and has come up with some new rules for reporting credit.

  Under current rules a collection remains on a credit report whether it is paid or unpaid for seven years.  According to the Wall Street Journal 106.5 million Americans have a collections reporting on their credit reports.  64.3 million of these were due to medical collections.

  Most of the people I know have had it happen.  There is a medical procedure.  The bill comes from the hospital which states "pending insurance" and that is the last you hear of it until you are contacted by the collection company.  What happens is that medical billing companies in their haste to collect, wait 30 days.  Insurance claims can take more than 30 days to process. If the payment isn't made within 30 days the bills go to collections. It can be thousands of dollars in bills-or the portions of bills that the insurance doesn't pay and the information is never updated. The paid ones still report open, and there is never another bill generated for the consumer for the unpaid portion.  All of this can whack your credit score. 

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 And it drops like a stone - -even if you pay all your other consumer debt on time.  But under the new rules, once a collection is paid it must be removed from the credit report and medical collections will not count as much against total credit as other types of collections.  The change to these rules may make as much as a 25 point difference to the better in credit scoring. 25 points is huge.  It can make the difference in being about to be approved for a loan and improve the interest rate.

  Unfortunately this change won't occur overnight. I have read two reports one saying changes are due to occur in 6-8 months the other 12-18 months.  Whichever it is, it is about time.

  I have run into several people lately who don't like credit cards and I don't blame them.  However, it is important to realize that revolving credit has the biggest effect of any item on credit for good or bad.  So if you only have one or two credit lines on your credit report, if one of them is paid late even once, there is a disproportionate effect on your credit score.  The reason is essentially the law of averages. There just isn't that much on the credit report to average out the damage of the late payment.  A healthy report with two credit cards, a car loan, and maybe a student loan or an installment loan of some type and being paid on time, with credit balances maintained at 50% or lower on the credit cards should reflect a good credit score.

  Meanwhile I encourage everyone to pay rent, utility companies, and consumer credit on time.  As a bit of added information, while I would advise you to speak with your creditors if you know you are in a situation in which you will be behind in your payments.  But, even though you make alternate arrangements, the creditor will still report you late.

 

 

So be of good cheer, there is a bandaid coming for what ails your credit report.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LET'S CHAT ABOUT REGULATION

  I don't know about you but I don't much like rules - especially rules that seem to have no purpose such as being required to stand behind some arbitrary line at the bureau of motor vehicles when there is no one else there.

  You could starve to death waiting.  In any event, while I have trouble with rules, living without them can become problematic.  Such as what happened with mortgage lending in the years prior to 2008.  We hear a lot about deregulation and letting private industry live or die based upon competition and that it is a good thing.  The years directly preceding October 2008 were a brilliant example of industry deregulation -  in this case mortgage banking and the real estate industry and we all saw how that turned out.

  In response to the Wild West atmosphere that pervaded lending at that time the Federal Government via the Dodd-Frank Financial Reform Act has changed the way mortgages are originated, processed, closed and sold.  Following in close succession were the Consumer Financial Protection Act as well as the establishment of the Consumer Financial Protections Bureau (CFPB) that have changed the lending industry from a very under regulated industry to one of the most highly regulated industries around. I sometimes think the nuclear industry doesn't have to navigate the maze that both consumers and lenders are required to follow to reach the promised land of a closed mortgage loan.

  In order to prepare you for your mortgage process let me lead you through some of the new regulations as they relate to what we as mortgage professionals can and cannot do.

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 This is the situation with regard to our relationship to appraisers.  Our relationship to appraisers is that we order the appraisal and that is it. We don't choose the appraiser either. The reforms have required the formation of Appraisal Management Companies (AMCs) to which appraisers can affiliate. Each lender has one or two AMCs that are used for the appraisal process.  So when we order an appraisal we order it from the AMC that is affiliated with whichever lender we are using for the mortgage. That is the extent of our involvement in the process. We aren't necessarily told (though some notify us) when the appointment is made. When the appraisal is complete we are sent a copy. If the appraisal is low, there is an appeal process however, in the instances I have been involved with no changes have been made. The lender does have the latitude to accept the appraisal  or ask for more complete information if the underwriter doesn't feel the report supports the value. Typically I see this happen when the underwriter thinks the value may be too high with regard to the information given-not the other way around.

 The upshot of this is that when a low appraisal comes back to us we cannot call the appraiser to question them on the report. Sometimes one of the real estate agents involved can obtain some answers but as far as the legalities go-the lender has no input in the matter and in fact, it is illegal for us to speak directly with the appraiser.

 

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  How many times in your life have you been upset with the service you were getting, a mistake has been made or some situation that began well ended badly and when you complained to management you were offered a discount, a gift card, a free meal or some financial inducement aimed at alleviating your irritation?  Probably more than once. (I had a two week stretch of particularly bad service, errors, etc. that as a result of my whining resulted in $100 in gift cards to placate me and get me to come back and do business.)  However, all the complaining, foot stamping, name calling, and threats will not get you a discount or help with the fees on your mortgage loan.  Why? Well, because it is just   that's all.

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  And because paying any part of  a borrower's lending fees is not approved of by the Federal Government we don't want to get sidewise with the G-men because the penalties are severe.   That would be large fines as well as the J word.

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  Yup-we have the potential to become jail birds and I can tell you with no hesitation that orange jail jammies do not look good on me. The orange clashes with my eyes.  Many people don't believe me when I say that, including some real estate professionals but it is a violation of the Real Estate Settlement and Procedures Act.  (Google that one up if you have trouble sleeping tonight.)

  Also illegal is collecting fees when I take a loan application with the exception of the credit report fee.

  And yet another illegal act is money crossing the palm for referral fees. So let's say I have a former client who knows a lot of people. And he wants to refer those people to me or my company but he wants me to pay him a portion of the commission for the names of those people.  We can't do that. We can't do that for our real estate partners and we can't do that for another lender, say if Bank XYZ refers someone and wants a piece of the action for that referral.  We can't own a portion of a credit reporting bureau that we use, or an insurance company. All of these things were allowed before the regulation that came after the 2008 real estate crash.

  The upshot is that sometimes the new rules make obtaining a mortgage loan take longer, require a higher standard of proof of ability to repay on the part of the borrower, or cost more, but that is the lay of the land these days and it is unlikely that it is going to change anytime soon.

  Remember these new laws were put into place to rein in a complex industry that is difficult for most consumers to understand. In reality the recognition by the Federal Government is that borrowers are dependent on their lenders to deal from the top of the deck.  So while these new laws do complicate things for consumers, the reason they are in place is to protect consumers.  And that, it is a good thing.

 

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THE DREADED PRIVATE MORTGAGE INSURANCE

 

  This is what most of us think of when we think about paying private mortgage insurance. We all think it is

BAD!  Right?  It makes your payment higher.  To begin the discussion on private mortgage insurance let me ask you-do you know what it does?  What is it really for?

  Private mortgage insurance is insurance provided at borrower expense on behalf of the lender on mortgages with less than 20% down payment to insure against foreclosure.   This shouldn't be confused with home owner's insurance which protects you and the lender against loss due to fire or forces of nature on the physical property itself.  In fact, over the past few years with the housing disaster beginning in 2008, some private mortgage insurance companies went bankrupt paying out and some almost went under.  The FHA program which has it's own version of mortgage insurance had to raise their premiums considerably in order to remain afloat as FHA with its low down payment requirements was hit extremely hard with foreclosures.

 If I conducted a poll today, I can be pretty certain that the results would be that very few people want to pay private mortgage insurance in their house payment.  So then the question must be asked - -
who wants to put

 No one of course.

 But the statistics are that folks that put less than 20% down have a higher default rate than those that don't.  Why? Maybe because if you have less money to put down you have less money saved in case of a catastrophic emergency or job loss.  Some say that it is because there is less of an investment that people are more likely to walk away from their home that those who have a higher monetary commitment.  Maybe a few, but I never took a loan application from anyone that thought they were going to default on their mortgage loan.  In any event, unless everyone wants to save 20% to put down on a home, private mortgage insurance will be with us.  So let's take a moment to look at it in a different light. 

 

 

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Change the perspective, if you will.

 

  What we know is that not all of us can afford to put 20% down - - unless we save until we are 80 years old.  The way I prefer to look at pmi is that it allows a borrower to put less than 20% down.  In essence, the home buyer is paying their 20% over the long term.  In the case of a conventional mortgage over about eleven years, if the mortgage is paid as scheduled would be about 78% of the value of the original purchase price.. At 78% the private mortgage insurance drops off automatically.  In cases of strong appreciation in an area or if the home owner makes improvements to the property the home may increase in value more quickly.  In those cases the home owner can petition the lender to allow the private mortgage insurance to drop off early.  In many cases the home can be refinanced to drop the private mortgage insurance.

Let's talk for a minute about a couple of government loans that have their own  mortgage insurance structure - - FHA and USDA.  Both of these loans charge an upfront fee that rolls into the mortgage. FHA calls it up front mortgage insurance and USDA calls it a funding fee. FHA's is 1.75% of the loan amount and USDA's is 2.0%.  So on a $100,000 loan the actual loan amount in each case would be $102,000 for USDA and $101,750 for FHA.  Both of these loans also have monthly mortgage insurance. USDA charges a factor of .400% of the mortgage amount which in the $100,000 example would add $33.51 to the monthly payment.  FHA's factor is 1.350 which adds $114.42-ouch!  And both of those loans require the mortgage insurance for the life of the loan. Double ouch! And putting 20% down on an FHA loan does reduce the amount of mortgage insurance but it doesn't eliminate it - triple ouch.  Those who can put 20% down on a USDA loan are not eligible for the loan.

  Contrast that to a conventional mortgage in which the private mortgage insurance is factored by credit score, the amount of down payment, and the term of the loan.  Typically mortgage insurance wise the conventional mortgage is the better way to go if one qualifies for this type of loan.  In addition conventional lending offers another type of loan -one with no mortgage insurance - it is called Lender Paid Mortgage Insurance.

  Lender Paid? We all like the sound of that! Makes us smile!

 The lender paid option is not without it's cost - as you know - lenders do nothing for free.  The lender paid option has a higher interest rate. So let's look at the

 

 

 

 numbers.

 

That same $100,000 mortgage payment would look like this:  If we used a traditional mortgage insurance factor base upon a credit score of 720 and 5% down the payment would be:

Interest rate 4.375% = P&I of $508.02 plus PMI of  $51.67 = $559.69

 

 

Lender Paid mortgage insurance at an interest rate of  4.75%

Payment equals $530.78

 

Even though the rate is higher (and partially tax deductible I might add) the payment is lower.

 

I think we can conclude that there are some positives about paying private mortgage insurance, biggest among them the fact that you don't have to spend the best years of your life hoarding pennies to be able to buy a house. While I can't say wholeheartedly that private mortgage insurance is your friend exactly, it does allow you to buy a home without a stash of money.

 

 

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CREDIT-WHERE IT ALL BEGINS

  I have written on this topic before but lately I have had quite a few people who wish to purchase homes today, right now, who haven't given a lot of thought to their credit status.  As I have tried to relay in past blogs, purchasing a home is a process.  It likely is the largest financial investment of your life, not really something that should be a spur of the moment decision.  While deciding to purchase a home isn't exactly rocket science...

 

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  It is something you want to give some thought to - - not an impulse decision.  But similar to what a rocket scientist is engaging in, when it comes to buying a home you must

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 Part of that preparation is checking out your credit to be sure you have the credit history you need to qualify for a purchase of the magnitude of a home.

  You see, while you are thinking this will be "your home," for the first thirty years or so it is also the bank's home.  While ultimately you are promising to pay the bank back, it is their money that is at risk - - in the beginning at least. So it is not unreasonable for the source of the funds to want to be relatively sure you can pay them back.

  Many people, particularly after being able to score a good job believe that since they have a nice sum of money coming in every month that puts them in a position to buy a home. They are paying rent after all. What's so different about owning a home? You pay for it every month, just like your current apartment.

  It is true that income is part of the picture, but a larger part of the picture is the snapshot of how you  deal with credit. Do you pay back other loans or credit accounts that you have open?  You don't have any open?  That means your credit picture looks like this:

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 Hmmm...a blank page.  The good news is that there is nothing bad on that page. The bad news is that there is nothing good either. There is no way to assess how a potential borrower will deal with credit if there is no credit to evaluate.

  Your mom always told you to pay your bills in cash. If you can't pay for it, don't buy it. Not bad advice at all, and we love moms. (In fact, some of us are moms.)

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 However, when it comes to mortgages that advice is out of date. Having no credit score doesn't work for you, not at all. It used to be that lenders could take what was referred to as "alternate credit" for some government loans.( Alternate credit consists of the history of some of the bills you pay every month - - utilities and the like.) You may have heard that is enough. But the truth is those days are done. Taking alternate credit in lieu of consumer credit payments was part of the big mortgage undoing in 2008. While alternate credit may be used to support light credit-alone and of itself it will not get you approved for a mortgage loan.

  What lenders are looking for is three consumer credit lines that have been reporting an average of 12 months. So credit cards, student loans, car loans, or any other type of installment debt - - maybe the monthly payments you are making on that big screen television to your local electronics store.  If you are in the habit of being somewhat casual about getting the payment to those places on time that will negate all the good work you have done establishing the accounts. So if you take out consumer credit, you need to pay it on time. That will give you a pretty good credit score and the lender a solid snapshot of how you deal with credit.

   If you currently have no consumer credit and you wish to buy a home, you are probably minimally nine to twelve months away from that goal. The time is now to begin building credit. You do that one credit card or loan at a time. When you have no credit, it is hard to get credit cards so you may have to obtain a secured card or have obtain a joint card with a co-signer. A secured card is a card that you give money to the credit card company or bank to hold as security against payment of the card. If you do that for a couple of cards the third shouldn't be too hard to obtain.  Many banks offer secured cards and you can search online to find companies that offer them.  Use them sparingly. I am not advising people to run up big credit card balances. Use them to buy something you would buy anyway-such as one tank of gas. Wait for the bill to come, pay it off and repeat the process.

  So what if you don't have any credit cards or consumer debt but you have some collections - - maybe medical?  You will still need to obtain positive credit to offset the negative effect those collections will have on your credit reporting.  If there was a specific event tied to those medical collections such as an accident or a surgery in which you were underinsured or not insured you may not have to pay them off, it depends on the circumstances and how old they are.  But if those collections are utility bills or past collections by landlords - those will need to be paid in full or possibly have payment arrangements made that are in effect prior to you being eligible for a mortgage.  If you have an open judgment or tax lien-it has to be paid. Those two items go ahead of the lender's lien on the title to your house. Since the lender is the largest stake holder of your home they want payoff first in the event you sell the house or Heaven forbid, are foreclosed upon.

 

 

 

  Now here is the thing you have to realize if you have some negative credit items on your report - -
they won't disappear by themselves.

 Nope, no matter how much you fuss about it - those negative items, like unwanted houseguests  are there to stay; collections for seven years and any legal or tax related item for ten years. So if you just think, well, okay, I will wait and try again next year, I can assure you, if nothing else has changed, next year will be no different.

   Another good thing about making a plan is that if you have any of these pesky items on credit you can deal with them before you have a purchase agreement in effect and have fallen in love with your dream home and then find out that you can't really buy it. (That is probably what those boys pictured above are really wailing about.)

  The important idea to take from today's blog is that you need to plan. It might be that your credit is great and you are ready to roll on purchasing a home. But let's face it - - the economy has been tough lately. Some folks need help getting back on the financial horse.  So while putting your financial house in order isn't the sexy part of buying a home, it is a necessary component. Until that is in place all the rest is fluff.

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