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The Most Common Credit Myths Revealed

23 Feb

The Most Common Credit Myths Revealed.   One of the most challenging things to grasp in the home buying process is your credit score and how it works.  Many people “assume” they have good credit because they pay their bills on time etc.  However, the credit bureaus do not look at credit like you and I do.  So let’s talk about exactly what it is they do think and exactly what “they” consider “good” credit.    Read on .  .  . you might be surprised!
Common Credit Myths

• You may think that if you  have a lot of cash and you have a great income or that you have a good amount of equity in your home that your FICO score will not matter.   In reality your credit score will determine whether or not you qualify for a loan and what your interest rate will be.  There are a few exceptions to this:  if you pay cash or if you put down a much larger than normal down payment

• You may think that if you do not have any debt and no late payments that you have good credit.  This is the myth that shocks almost everyone because it doesn’t make much sense.  The credit lenders look a credit differently.  They consider financial responsibility and good credit two separate issues.  Your FICO score is used to measure how you manage your debt.  So if you have credit accounts they look to see if you use them regularly or if you abuse them

• Here is the tricky part of credit scoring that most people don’t understand.  If you have no credit and no debt does not mean you have good credit.  On the other hand, if you have credit and you are maxed out on many of your accounts or if you are constantly applying for credit; they consider this to be an indicator of credit abuse

• Believe it or not FICO will give you a top score if you keep your credit account balances  at 30% of your credit limit and you make your payments on time

• When was the last time you checked your credit?  If you are thinking about buying a home, now is the time to check your credit.  This will allow you time to fix any inaccuracies so that there are no surprises when you apply for your loan.

Additionally, the higher you are able to get your credit score could quite possibly get you a lower interest rate and over 30 years that can really add up.  FYI – make sure you check all three credit bureaus because each of them can have differing information

• Some people think that if they have had a foreclosure or a short sale that their credit report will be bad for seven to ten years.  However, some of the items on your credit report like late mortgage payments,  derogatory credit items, foreclosures and short sales will show up for seven to ten years, but your actual credit “score” can be fixed at least enough for you to buy another home.  Of course, this depends on several factors such as how much cash you have to put down, what type of loan are you trying to get and if you had any extenuating circumstances that caused you to lose your first home

• You may think that a short sale has much less effect on your credit score than a foreclosure does.   The fact is that short sales and foreclosures have the same negative impact on your credit score

Well there you have it.  The most common credit myths revealed.  If you are thinking about buying a home and you have credit issues that you are concerned about, contact your realtor to help you sort things out.  Your realtor has quite a bit of experience in helping people just like you buy a home.

About the Author:  Millie Gil has been a successful Licensed Real Estate agent for over 25 years in Florida.  Millie is Vice President of Bold Real Estate Group, a boutique agency committed to concierge personalized service for discerning buyers, sellers and renters of residential and commercial properties.  For more information please forward your request to communityinfo@comcast.net

Serving Locally and Globally.  View thousands of new and resale homes:  www.Northeast-Florida-Relocation.comwww.BoldRealEstateGroup.com,  www.NewYork-Florida-RealEstate.com, www.PGAVillage-Homes.com a Golf Style Private Community,  www.TheCascadesAtStLucieWest.com  a 55+ Resort Lifestyle Community, www.HealthcareRelocationServices.com

Avoiding Mortgage Junk Fees

12 Sep

Avoiding Mortgage Junk Fees.  If you look down your long, long list of closing costs at your lender’s office, you probably won’t find one labeled “junk.”

That’s because lenders don’t like to admit that some of the charges they’re passing off as “necessary’ are really “junk”.
Actually, they aren’t junk to the lender because they represent an important stream of profit. But we certainly don’t need those added fees. Junk fees are a good place to negotiate with the lender for a better deal. But the time to negotiate is before you sign the loan application. Once you’ve signed, you’ve sealed your deal for better or worse.

The lender does have legitimate costs that are passed along to you, the borrower, in the form of closing costs and fees; however, by the time you see the fees they’ve been inflated. For example, if the lender has an electronic appraisal done on your property, it might cost him $25, but he’ll charge you $125.

Lenders are required to give you a good faith estimate of your closing costs when you first contact them, but it’s not required to be completely accurate! So they often give a lower estimate to get your business, and then increase fees once you have committed. Thankfully, new mortgage legislation has limited the amount by which your fees can change once disclosed.

Inflated costs are  just one example of junk fees and costs that get built into your loan without you knowing it. A more egregious example is the charges for made-up things, like “underwriting fees” or “document preparation.”

• A lender will tell you an underwriting fee is the cost that they incur to underwrite your loan. They need someone to go through your whole package to make sure it complies with secondary underwriting requirements.

But an underwriting fee is purely a junk fee because the whole point of applying for the loan is so that it gets underwritten. You’re being charged an extra fee on top of all the other fees to do exactly the same thing.

• Another common junk fee is the cost for document preparation. Basically, computer programs print all the necessary paperwork at the touch of a button. Someone will key in the necessary information. But again, underwriting the loan and preparing the paperwork is within the general scope of, well, getting the loan approved for you.

The problem with junk fees is that they all sound so legitimate. It’s difficult to tell what’s real and what isn’t. As the borrower, you’re entitled to an explanation of each and every charge in a way you can understand. If the lender throws some jargon your way, stop and ask for a detailed explanation.

To avoid the problem of bait and switch, talk to several lenders, and don’t just compare interest rates — compare fees.

About the Author:  Millie Gil has been a successful Florida Licensed Real Estate agent for over 25 years.  Millie is Vice President of Bold Real Estate Group, a boutique agency committed to concierge personalized service for discerning buyers, sellers and renters of residential and commercial properties.  For real estate service and information please forward your request to communityinfo@comcast.net

View thousands of listings  www.Northeast-Florida-Relocation.comwww.BoldRealEstateGroup.com,  www.NewYork-Florida-RealEstate.com, www.PGAVillage-Homes.com, www.TheCascadesAtStLucieWest.com, www.HealthcareRelocationServices.com

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