Friday, October 31, 2008

Don’t Like Your Credit Score? Get a New One –Quick!

People don’t make it a habit to check their credit scores as often as they should. That’s why sometimes when they apply for a mortgage, they find a few surprises. Sometimes this issue can be remedied quickly.

One of the worst surprises a customer can have is discovering they have a credit score lower than what they thought it should be. It’s funny (not the lower credit score part). People who know they have excellent credit, have always paid their bills on time, etc, sometimes get really nervous when their credit is pulled. That’s because of what they’ve heard has happened to other people- the horror stories of discovering erroneous credit information on reports resulting in a dramatically lower score. Or worse yet, identity theft. When one is sitting across the desk from someone who is getting ready to pull credit, a common reaction is anxiety and fear. Even the most logical people can succumb to these misgivings.

Credit repositories’ information is only as reliable as the information supplied to them by creditors. This part of the equation is subject to human error. People make mistakes - all the time. Also, people drop the ball, get fired or promoted, and loose ends never get taken care of. These life happenings can result in errors on your credit report that can cost you money. Sometimes it’s considerable.

But there is an answer to this dilemma. Most lenders these days have the ability to rescore your credit profile if there are errors on it. Or maybe you have the cash to payoff some old, lingering black mark. A lender can revise a credit score in this case as well. They should be able to do it quickly. There typically is a fee associated with this service, but at times it’s definitely worth it.

Typically it takes 30-60 days for credit updates to hit the credit bureaus via the traditional methods. It could take longer, or never happen if the person in charge of submitting the information drops the ball. In fact, this recently happened to a client of mine. But it has a happy ending.

My client had an excellent credit profile. He was very attention detail oriented, earned an excellent income, and had saved quite a bit of money for a down payment. When he applied for a loan, his credit score was not reflective of his actions. He only had a 679. Still a good score, but his credit score should have been really much higher. When we looked over his history, it appeared that a medical debt had been erroneously accredited to him. He had talked directly with the company, and they were to have taken the actions to address it. But, somewhere along the way, someone got distracted. Instead, this debt ended up with a collection agency. And my customer wasn’t aware. Ouch.

Why wasn’t he aware? Well, it wasn’t a huge debt, and I don’t know how long it had been in transfer limbo between one company and another. And at some point he had addressed it and believed it to be taken care of properly. But it hadn’t. Now it was costing him in interest rate. He was obtaining conventional financing which is credit score driven.

The good news is I was able to do a rapid re-score for him. In three days, his credit score jumped to a 762 credit score. And his interest rate dropped from 6% to 5.5%. Big difference, especially over 30 year’s time.

There’s some scary statistic out there on the internet that says 25% of credit reports have serious errors on them that could result in credit approval denial. I’m not sure it’s that high, at least based on personal experience. But I can tell you, people see errors all the time. They usually can be corrected pretty easily. So, I guess it’s safe to say you should check your credit from a free source at least once a year to review it. Better safe than sorry.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.

Saturday, October 25, 2008

Mortgage Loan Approval: Are you on pins and needles wondering if you might qualify for a loan?

Get Your Answer Automatically. In today’s market, your answer is often times automatic.

Automated underwriting (AU) systems are used to determine most mortgage lending decisions. AU systems have been around since the 1970s for different institutions such as auto dealers and credit card companies. The first AU system for mortgage banking was introduced by Freddie Mac in 1995. It was designed along the same credit tenements that manual traditional underwriting focused upon – credit, capacity (to repay) and collateral.

Today, whether you are Freddie Mac, a big bank, a mortgage lender or a mortgage insurer, all the major players use some type of AU system to mitigate risk and to evaluate the credit worthiness of applicants. These systems have different names like Zippy, Desktop Underwriter, Assetwise and Clout (all registered trademark names), to list a few. They basically are the same systems, but are “tweaked” to each investor’s guidelines. They are also branded by each investor with its own name (that’s where the funny names come in). What does that mean? Well, Fannie Mae may buy a loan over $1M, but perhaps a particular investor doesn’t want to buy loans over $1M. Thus, the investor would “tweak” their system to deny loans larger than that loan amount. So if you are a lender, and have a$1.2M loan, then you would have to find a different investor who would buy that loan or sell it directly to Fannie Mae. The end goal is to put all the loans into pools or buckets in order to package securities. Some lenders can bulk enough loans to sell directly to Fannie, Ginnie or Freddie, and some just sell to an investor who sells to the big guys.

How does an AU system work? When you speak with a lender, they listen and help you determine what financing options best suit your needs. The lender collects your relevant information by asking you the questions from a loan application. Basically, a lender inputs the loan application information with regard to where the applicant lives, how much money they make, what other properties they may own, what reserves they have, as well as some government mandated questions. The lender pulls a tri-merged credit report (credit from three reporting agencies), and combines all the information, in addition to loan specifics, together in the system. Then, the lender pushes a button and waits for an answer. The system analyzes the data input as well as mortgage loan data, such as loan to value ratios, property type and debt ratios. And, ta-da! You have pre-qualified for a loan. That’s why you can get a quick answer these days. Of course, more often than not, it’s never quite that simple. There are perfect applicants out there who have worked at the same job and lived in the same place for the last 20 years, who have $100K in the bank. But more often than not, an applicant’s situation has its own special nuances.

Which brings me to my next point. AU systems don’t remove the need for a real underwriter in the mortgage approval process. A real, live underwriter reviews all documentation and data to ensure its accuracy. And a good loan office will anticipate what the underwriter will require. Let’s face it, if I were personally lending someone $200,000, I wouldn’t want to leave that decision completely up to a computer. Would you?

It’s safe to say that AU systems have made the lending process more concise, efficient and effective. But regardless, underwriting approval these days is never cut and dried!

Let My Experience Work For You!

Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.

Wednesday, October 22, 2008

Mortgage Lending and Identity Theft: What You Should Know

When you apply for a mortgage these days, lending institutions gather enough information on you to form an independent DNA sample (not really, but you get the picture). What steps should these organizations take to protect you from identity theft?

If you’ve ever applied for a mortgage, particularly since credit guidelines have tightened in the past few months, you know that the amount of information you must divulge to your lender could sink you financially if it were to get into the wrong hands. That’s really kind of scary when you ponder it a bit. I mean, after all, they have your social security number, your birth date, your bank account numbers, and a hair sample (just kidding on the last one). But, really. How do you know that you’re protected?

The Gramm-Leach-Bliley (GLB) Act requires companies defined under the law as “financial institutions” to ensure confidentiality and security of your personal information. Which includes mortgage lenders. In addition as part of this act, the Federal Trade Commission (FTC) issued the Safeguards Rule, which mandates measures to keep customer information safe.

So, if you apply for a mortgage and you’re concerned, your lender should be able to provide you with a written security plan that describes their program to protect you. The plan’s appropriateness should vary in relation to the company’s size and complexity, and the nature and scope of its activities. You wouldn’t expect a company with 20 employees to have the same guidelines as a company with 2000 employees. But there will be some similarities.

The written plan should outline that all staff be trained and informed of the policies. That’s important. How good is a plan if no one knows how to implement it? Typically, a lender should have several methods to detect identity theft apart from suspicious documentation or squirrelly applicants. Most use third party sources to verify a customer’s identity beyond driver’s license or government issued identification. These are background search programs with weird names like Lexis Nexus and Interthinx. And they work.

The company’s policy should require employees to change their various passwords regularly and have good security systems in place to prevent “hackers” from accessing your information. We hear time and time again the horror stories of hackers and their nasty activities. Furthermore, the company should shred documents and lock away files at night. Who wants their W-2 showing up in a company’s dumpster? Who wants the nosy cleaning crew thumbing through their file? Not me. Not anyone.

Furthermore, the staff needs to be educated as to how to detect fraudulent documentation or suspicious activity. And they need to understand they shouldn’t discuss your information with any other employees that don’t need access to your file, nor should they discuss your profile with the spousal unit at home. It’s kind of like being a doctor. They can’t discuss patient’s medical records. A lender can’t discuss your financial records.

And what happens if a lender suspects a borrower has been the victim of, or even creepier, is committing identity theft? The lender should have clear guidelines as to how the individual discovering the discrepancy should handle the “red flag.” After all, when the red flag arises, how does the lender know if she’s talking to a victim or a perpetrator at the time of discovery? So, it has to be handled correctly. And the lender’s employees need to have a clear understanding as to exactly how to handle these situations.

So, when you apply for a loan, find out upfront if you’re being protected properly. You’ve got enough to contend with these days when obtaining a mortgage. You deserve a lender who complies with these regulations and acts. We all deserve this protection.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.

Tuesday, October 14, 2008

Subject: letter of appreciation

Dear Kristin,

I just wanted to say thank you for all of your help with refinancing my home.
In today’s market it is not the easiest thing to do but you made it seem effortless.
I know you worked very hard for my family by getting us the best rates possible
and I wanted you to know how much we appreciated your dedication.
I will be sure to refer you without hesitation to anyone I meet that needs
help with their mortgage. And of course you will be the first person I call
when my children are ready for their first home.

Sincerely Jim Johnson
Jim Johnson

Monday, October 13, 2008

Eeny, Meeny, Miny, Moe? Which Lender Do You Choose?

You’re ready to buy a house, and you’ve spoken with 3 different lenders. All of their offers seem comparable. How do you choose just one?

Ok, so you don’t have a particular relationship with any one lender, and you need to get a home loan. Being the prudent shopper that you are, you’ve called around to various lenders, and you’ve obtained 3 very competitive good faith estimates. In fact, these estimates are so competitive, you wonder if the three lenders are in cahoots with each other. (Trust me, they’re not). So, how do you decide?

First, you should consider the reputations of the companies involved. You can check out the company/lender online. How long have they been in business? In today’s volatile market, you want to make sure that whom ever you are obtaining your loan through is in business on the day of closing. When times are tough, mortgage shops have been known to close their doors overnight. Don’t laugh, it happens. Even a good lender may close its door if it is relatively new or poorly managed. Look at the sub prime market. When the bottom fell out of it last year, lenders disappeared right before our very eyes. Ok, I’m exaggerating a bit, but many consumers found themselves shopping for new mortgage at the last minute. And those that were unable to produce one probably lost a bit of cash, not to mention experienced a lot of turmoil and stress. After all, many plans are made by many different people when a home changes hands. Movers are booked, rent is cancelled, new school enrollment is arranged. It can become a logistical nightmare if a closing date is moved.

Secondly, one lender may be able to offer you something another cannot. I’m not talking about anything directly related to the lender’s fees or charges. But some lenders offer discounts or services from other vendors. It can be anything from a coupon for a free appraisal to a gift certificate to Home Depot. Ask your lender if there are any other benefits or advantages to using them. You never know.

A third thing to consider is service. Has one lender been more responsive than the others? Do you get the feeling that one will get the job done over another? A person can have a completely different experience with the exact same loan from one lender to a next. Why is this possible? Because once your loan is out of your lenders hands, it flows through different departments. Many, many people will work on your loan before it is all over. It takes a village to close a loan (not really, but it was fun to say). Seriously, though. A good support staff is what keeps a loan officer on top of the pack. So, take into account a lender’s reputation. A good one is earned for good reason.

And finally, is there a lender you just click with over the rest? Sometimes, it’s a question of personality fit. I’ve heard from countless customers that this aspect is what tipped the scales for them. And it makes sense, when you think about it. After all, if you’re making the biggest purchase of your existence, you really want to work with a person with whom you feel comfortable. Trust me, even seasoned homeowners have questions and misgivings. Thus, the answer of whom you choose may just come down to who you like.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.

Wednesday, October 8, 2008

Mortgage Lending: It’s a History Lesson

When applying for a loan, a mortgage lender cares more about your past than your future. And sometimes, a lender cares more about your past than the present……

When a mortgage underwriter reviews customers’ credit profiles and income histories, what’s happened in the past two years holds a lot of weight as to what their future will be. And what the future may hold for them doesn’t always count for much at all. At least when assessing risk in mortgage lending.

If your future is difficult to substantiate, your past history is what a mortgage underwriter considers. That’s why it can be difficult these days for newly self-employed people to obtain loans. If you start a new business, you have no track record. Couple this fact with the other odds reflecting it’s highly likely you’ll lose money your first year in business, and you can see why you have to be out of the gate two years before you’re not considered a risk anymore.

The history theory is also a hard lesson for people who earn tips as a large part of their income to learn A lender will ask these individuals what Uncle Sam has on record for their earnings for the last two years. There’s no way to soundly document what they’ve earned year to date, except for base pay and their two year history. So, if they’re making a ton of more money in their third year of business, typically a lender can’t substantiate the marked difference in income. The same can be said for people who are self employed and have multiple business expense and depreciation deductions. Lenders count the bottom line when the dust settles. And again, a lender can’t look at year to date earnings to offset what’s on historical record. Year to date earnings might strengthen your profile, but basically, it is what it is.

Of course, your credit score is a reflection of your past. It’s a great indicator of what your future will be. I guess that’s pretty self explanatory when you think in terms of lending. Statistics prove that this number pretty much tells a lender how likely it is you’ll pay on time in the future. It’s a good crystal ball, in general. So if you have an iffy credit score, you need to work to improve it, and reapply for a mortgage in the future.

Sometimes a lender can look to the future, and it’s to your advantage. For instance, if you have a debt, like a car payment, that will be completely satisfied in 10 months or less, it won’t count against you when calculating your monthly debt. The same can be said for child support or alimony that’s about to expire (or at least the legal obligation is about to expire). Likewise, certain payments sometimes won’t count if they’re deferred for a couple of years, like student loans. In addition, generally, a person can just have started a salary job and provide a pay stub after loan closing. However, some programs may be more stringent than others where these areas are concerned.

You see, a lender is going to always count what can be verified, not what the future will hold – no matter how rosy it appears. And most programs these days would require that an applicant be prepared to verify the information, even if the underwriter doesn’t ask for it. So, be informed when you consider buying a house. Your credit history can mean the difference between an A+ and a C- in your interest rate secured and ability to obtain a loan.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.