Mortgage Blog

There are exceptions to every rule. When it comes to finding a reputable lender in your area, drawing from more than one source, along with careful comparison is key. However, you can improve your chance of finding a good mortgage company to work with by using caution in how you initiate the loan process. Here are some sources to focus on, and a few others to avoid.

SPAM - Email Offers - Without a doubt, this is the absolute worst way to find a mortgage company. In most cases, the companies sending these spams are not even lenders. They are lead generation companies that sell your personal information to the highest bidder. The real problem is that they don’t care who that bidder is. What worse is that they will generally sell your information over, and over, and over… The best you can expect from responding to spam is being bombarded by more spam. The worst you can expect in credit fraud. Don’t ever respond to mortgage spam.

Tele-marketers- Never-mind that it’s annoying, tele-marketers are usually a bad choice because they leverage the element of surprise. You see, this “sneak attack” keys on the premiss that the people they are calling have not initiated the mortgage process themselves. Because they know you haven’t shopped the competition, it’s easier for them to quote higher fees or rates. Of course the other downside to tele-marketers is that you don’t really have any idea who you are talking to. Lead Generation companies and Criminals looking to steal your credit identity commonly use the phone as a primary tool. If you do respond to a tele-marketer, ask to call them back before you give out any personal information.

Advertising - This includes TV, Radio, Yellow Pages, Web Sites, etc… finding a mortgage company in this manner is a mixed bag. The main advantage over the tele-marketers is that you now have the element of surprise. When you call a mortgage company, they know you are shopping, and more likely to be comparing several different companies. The knowledge of this forces them to quote more aggressive pricing and lower fees. The only problem is that you really don’t know if the promises they make are legitimate. When using these sources, shop several companies, throw out the worst, but also throw out the companies promising the moon.

Bloggers - The difference between a mortgage company with a web site and a mortgage company with a blog should not be overlooked. Professionals like David Porter have harnessed the power of the blog to show off there grasp of the industry. If you are lucky enough to have a dedicated local blogger like David, take the opportunity to read their blog a bit to find out more about the person you’re going to work with, sans a sales pitch.

Family & Friends Referrals - This is one of the best ways to find a good company. First off, your friend has first hand experience with that company. Second, the mortgage company values referrals more than just about any source. When a consumer comes in from a referral, they know they need to make sure the new client is just as happy as the old one. If the new client gets a raw deal, the original referrer is sure to find out about it and the lender will loose a chance at future referrals from both clients.

Realtor Referrals- I think this is the most important referral of all. As a lender, nobody is more important from a referral basis than a real estate agent. Many successful loan originators work almost exclusively with Realtors. Another advantage is that Realtors have a better idea of who is really better to work with than your family or friends. Mom and Dad may be happy to refer the guy who just refinanced them, but what if Mom & Dad didn’t realize they’d been suckered? Realtor’s on the other hand are more familiar with the market and know very well as to who is hot, and who is not. If you are doing a refinance, and don’t with to work with the company that did the original loan, asking a Realtor is often overlooked, but it’s still a good resource.

Once again, remember to shop, shop, shop. Make sure the companies you contact know you are shopping. Don’t feel like you have to commit that second, rates usually do not change drastically overnight. Most of all observe just how much detail a mortgage company inquires about in determining your situation, and the best solution for your needs.

First off, this advice is designed to raise your FICO Score. This will allow you to secure a lower interest rate mortgage for your home. Do not mistake this advice with improving your overall credit health. If you are like me, and have trouble remembering to pay your credit card bills, and always having that feeling that an un-maxed credit card is burning a hole in your pocket, then this may not be the best advice. Anyway, here are some tips to improve your score.

Delinquencies - 35% of your score is based on past delinquencies. How far behind, and how recently you were behind both play heavily on your score. What type of payment you missed also matters. If you had a bad spot, with lots of late pays, sit tight. Every month that goes by without a late pay will lessen the impact. Your score will recover on it’s own.

If you are just coming into a bad spot, and know you will not be able to make all your payments, choose to miss revolving credit before an auto or home loan. The bigger (more important) payments carry more weight than the smaller ones. Your FICO will still go down, just not as bad.

Also, 60 day lates are worse than 30 day lates. Let’s say you have two credit cards. If you can’t make all your payments, let one of the two credit cards slip 30 days late. If you are still in a rough spot the next month, don’t let that card go 60 days late. If anything, pay the card you missed last month, and let the other card go 30 days late. Being 30 days late on two cards is not as bad a 60 days late on one.

Of course, it’s WAY better to pay all your payments on time. The above advice is damage control.

Credit History - 15% of your FICO is based on history. Don’t close your cards out. This is one of the biggest mistakes people trying to improve there FICO make. FICO judges the age of your credit history. If you had a card for 10 years, then switch to a brand new card, but keep the old one open, you average history is five years. If you close the old one out, your history is 0 years. In spite of never missing a payment, your FICO can go down.

Credit Balances - 30% of your FICO is based on balances owed. Try to share your debt among more than one card. If you have three credit cards with two paid off, but one maxed out, you can raise your FICO by using those other two cards to pay down the maxed out card. Also, ask you creditors to raise your credit limit every six months or so. FICO looks at what percent of your card’s limits are being used. It’s not an average though. One maxed out card will hurt your FICO more than 3 cards at 33% of you credit limit.

Reported Credit Limit - Some credit card companies do not publish your credit limit to the credit bureaus. They don’t want other companies to see your report, and realize what a good customer you would be. The result is that it shows up as a zero. To avoid this, pull your own credit and make sure your limit is properly stated. Call your credit card company and complain if it isn’t.

Credit Activity - OK, I understand that having a balance on multiple cards can be more hassle than it’s worth. However, if you have a couple cards that you have paid off, but kept open, use them at least every six months. It can be a very small purchase like a slurpee and candy bar at the Kwickie Mart. Then just pay it off. If your card isn’t used at least every 6 months, it can become inactive. This is the same as closing the account when it comes to calculating your Credit History.

Paying Your Card Off Every Month - If you are financially secure enough to pay all your revolving debt every month, congratulations! This will help your score immensely. However, you can improve your score even more if you pay it before the Statement Date, instead of the Due Date. Lets say you rang up $500 on your card over the month. When your statement is generated, the credit bureau sees your balance as $500. If they see it at $0 instead, your score will improve a bit more. To do this, call your credit card company and find out when your statement date occurs every month. Let’s say it’s the 25th. Now, on the 19th of the month, call and find out what your balance is. Send in a check that day for the balance. By the the statement date, your balance will read $0 (or close to it). This is probably more effort than it’s worth, but it will have a marginal effect on your score.

Piggyback On Somebody Else’s Good Credit - A great way for you to help a young or damaged credit family member is to add that person as an “Authorized User” on one of your credit cards. You can do this, and then keep the card yourself if you aren’t ready to entrust it to the family member. Just remember to use it every 6 months or so (buy them some gas). FICO will see the account, it’s age, and the fact that it is being paid on time every month, even if the borrower is not paying it themselves.

Credit Mix - 10% of you FICO is based on the mix of credit. Ideally FICO would like to see 1 Mortgage, 1 Auto/Installment Loan, and 3-5 Revolving Credit Cards

Get A Mortgage - After the first mortgage payment is made, nearly every first time homebuyer will see a marked improvement in their score.

Inquiries - 10% of you FICO is based on Inquiries. Every time you apply for credit, an inquiry is placed on your credit report. The more you apply, the lower your FICO goes. There are some exceptions though.

Auto and mortgage inquiries work in a buffer. If you apply for a mortgage with three companies at once, FICO knows you are not actually going to do three separate new mortgages. It works the same with a car loan. The buffer system is supposed to work for 30 days. So if you apply for 4 mortgages in 30 days, it only counts as 1 inquiry. One note to be clear. Auto and mortgage buffers are separate. If you apply for one mortgage and one auto loan, it counts as two inquiries.

Personal credit pulls NEVER count against you. This is widely misunderstood. You can and should pull your own credit without penalty. Check out myfico.com for details on how to do this. FICO does not count this against you, because you are doing it for informational purposes only. I personally think FICO should give you a couple brownie points on you score for caring enough about your credit to do so.

In addition, other informational pulls will not hurt you either. Some employers pull credit on new employees, sometimes, your existing creditors check, just to make sure you haven’t driven off the deep end. At any rate, any type of pull that would not directly lead to more credit is not counted against you.

There’s some evidence of inflation coming out. As a result, mortgage rates are ticking higher in anticipation of further rate hikes by the Fed. To get the full scoop, visit the lenderama Mortgage Update.

Mortgage Industry insiders call them trigger leads. When you apply for credit with one mortgage company, the credit bureaus see a new credit inquiry on their system. This triggers them to put you personal data on a leads list and sell this information to other lenders.

What exactly are they selling? Basically, your name, contact info, and the fact that you are applying for credit.

Who are they selling it to? Pretty much anyone.

How can you stop this from happening?. Go to this web site.

For more information check out Behind The Mortgage & Pacesetter Mortgage Blog.

Here’s a press release I recieved from HOMEOWNERS CONSUMER CENTER with some pretty good basic advice for first time homebuyers.

(PRWEB) April 17, 2006 — Americas Watchdog, a national consumer advocacy organization, has just created what is believed to be the first homeowners center where the average homeowner or first time home buyer can pick up useful tips about becoming a better educated homeowner/consumer. To launch this site we have come up with a top five list of things that every homeowner needs to do before purchasing a home. This new web site is called The Homeowners Consumer Center and can be found at Http://HomeownersConsumerCenter.Com. The goal of the Homeowners Consumer Center is to protect homeowners and consumers from being overcharged, misled, or cheated. The intent of the site is to educate consumers/homeowners on a number of important issues. Our top five very important homeowner topics are as follows:

Tip 1. Google Zillow.Com and do some homework on how much homes are selling for in your proposed neighborhood. We want you to become market savvy, so you don’t pay too much, for a home, or sell your home for too little. The average homeowner/consumer would be amazed at how often sellers and most national homebuilders over inflate the values of their homes. If you are about to purchase a new home, please visit our site and learn how to become an expert on home values in your current or proposed neighborhood.

Tip 2. There are exceptional real estate agents and there not so exceptional real estate agents. Our second tip for homeowners is to do reasearch and hire the best possible agent, who really will represent your best interests. Our web site also suggests specific items you should require of your real estate agent when buying, or selling a home. If you are a member of the National Association of Realtors and you would like to participate in our Honest Real Estate Agent Program in your state, please visit our web site and contact us.

Tip 3. Home inspections are a must for buyers of all existing or new homes. Have the home inspected regardless if it is brand new or existing. Do not buy someone else’s problem. Construction defects are very common with new construction. Our web site also covers the things your home inspector must have before you retain their services.

Tip 4. Do not get over charged or cheated on a home loan. Ask your Bank, mortgage banker or broker what your mortgage par rate is (the best mortgage rate for your credit) & ask if they are getting a yield spread premium for increasing your interest rate over par? Our web site also has numerous helpful do’s and don’ts every homeowner needs to know, when refinancing or financing a home. Our affiliate group is the National Mortgage Complaint Center, and the average consumer would be amazed at how easy it is, to get over charged or cheated, when obtaining a new mortgage, or getting a refinance on an existing home. Our mortgage page has a top 10 do’s & don’ts when it comes to financing or refinancing your home. If you are an honest mortgage broker and a member of the National Association of Mortgage Brokers and you would like to participate in our Honest Mortgage Brokers program in your state, please visit our web site and contact us.

Tip 5. Don’t go cheap on your homeowners insurance coverage. Our web site also contains information related to why you need homeowners insurance and the types of coverage that should be included in your homeowners insurance policy. The homeowners insurance page also covers a number of do’s and don’ts when it comes to homeowners insurance coverage. We went through Hurricane Katrina, so we think our insurance information is vital for every homeowner in America. If you are an honest and experienced insurance agent, a member of the Independent Insurance Agents & Brokers of America, and you would like to participate in our Honest Insurance Agent Program in your state please visit our web site and contact us.

We at the Homeowners Consumer Center believe that the right of homeownership is the American Dream, and we are here to protect it. We intend to constantly update the Homeowners Consumer Center with additional tips for getting the most out of your dollar, for not getting cheated or short changed, and for protecting your American Dream. New areas will soon be added and will contain facts about, buying a vaction/second home, tax tips for homeowners, how to’s on hiring a contractor, and other useful information. We value consumer input so we would like to hear from you if you have any suggestions. We also believe that word of mouth is the best form of advertising, so if you could mention our web site to your friends, family and co-workers we would be very grateful. If you are an honest real estate agent, insurance agent, mortgage lender, home inspector or consumer group please feel free to include a link to the homeowners consumer Center on your home page or web site. The web address for the Homeowners Consumer Center is Http://HomeownersConsumerCenter.Com

Whenever you apply for a loan, the lender has to provide you with a Good Faith Estimate (GFE) and a Truth In Lending (TIL) disclosure. The GFE is a list of all the different fees involved in processing your loan. It also list what funds you’ll need to advance for homeowners insurance, taxes, etc… but that’s a subject for another day.

Instead let’s discuss the TIL, more specifically, let’s discuss the APR. If you’ve financed a home before, maybe you remember this little box on the TIL. Maybe it didn’t make any sense, and maybe the Loan Officer did his best to gloss over it. The APR is the REAL, or effective cost of the loan. It takes into account all of those fees listed on the GFE and converts them into an adjustment to the interest rate.

Confused? Okay, let’s pretend I am 8 years old. I want to borrow $10 dollars from one of my brothers so I can buy the GI Joe with the Kung-Fu Grip. My 14 year old brother offers to lend me the 10 bucks, but I have to pay 5% interest. My 17 year old brother offers to lend me the money at 0% interest, but I have to pay an upfront $1 processing fee. The 17 year old’s deal sounds better at first because it’s zero interest, but if he had to provide a TIL, we’d see that his $1 fee raises the APR from 0% to 10%* Typical sneaky brother stuff.

APR is important, don’t let the Loan Officer tell you any different. If you want a more detailed explanation of how APR works on a full mortgage, read on.

Here’s an example of a30 year fixed rate loan:

Loan Amount $100,000
Number of Payments 360 (for a 30 year loan)
Monthly payment $804.62
Interest Rate 9%

Now, let’s say the lender charges you a 1% Origination Fee and $500.00 processing fee. To keep it simple, lets say those are the only fees you pay. 1% of $100,000 is $1000, plus $500 is $1500 dollars in fees. So, if you have to pay $1500 dollars up front to get a $100,000 loan, you really only got $98,500. Now apply the new loan amount to the original payments:

Loan Amount $98,500
Number of Payments 360
Monthly payment $804.62
Interest Rate 9.17% - This is your APR.

If all of this makes sense, you now know more about how APR works than about a third of all loan officers. Now that you see how important this number is when comparing loan offers, you’re better prepared to pick the best one.

* There’s more to the math, but I’m keeping it simple for the sake of explaining the concept.