How I Got a Credit Score of 815 (and you can too!)

credit rangeI checked my credit score today using the free site, Credit Sesame. More about what that means in a moment. But first, I was pleased–but not surprised–to see that my score today is 815. Here is how I earned the coveted score of over 800.

Payment History = 35% of the credit score

I have zero late payments on my report. (It wasn’t always that way. More about that later.)

Credit Utilization = 30% of the credit score

If your credit cards are maxed out, you get docked a lot of points, even if all payments are made on time. If your credit cards are over 50 percent of the limit, you get docked points. My credit utilization is only 6%; so because it is under 10 percent, I gain points.

Age of Credit History = 15% of the credit score

My oldest active account is 18 years, 1 month old. If I close that account, I will lose points, so I don’t want to do that.

My newest account is 8 months old, because I opened a credit card within the last year. Once an account is open for six months, it is considered old enough to be included in your credit rating. Also, at 8 months, it has aged enough that it is no longer docking me points for “unknown usage,” meaning they don’t know if I will max it out or pay on time when first opened. This is why you don’t want to open a new account right before applying for an auto loan or mortgage.

Account Mix = 10% of the credit score

The credit bureaus prefer a mix of credit cards, installment loan (such as auto or student loan), and mortgage loan. However, you can still get a score of over 800 without a mix; as is my own case. I have five open credit accounts.

Credit Inquiries = 10% of the credit score

I have zero inquires in the past 12 months, according to Credit Sesame. That seems odd since I opened a credit card just eight months ago. Either Credit Sesame is incorrect or the card didn’t result in a hard credit inquiry. I will have to look into that.

Is Credit Sesame Accurate?

Credit Sesame provides one score obtained from the Experian National Credit Equivalency, which means it is one bureau’s consumer credit score. The consumer score is more lenient than the mortgage score, because it is less risky to give someone a credit card than it is to give them a mortgage. The score from Credit Sesame varies from the actual Experian score by an average of 33 points, according to a study conducted by Doctor of Credit.

Using Credit Sesame is free, gives a good ballpark estimate of your score from one of the three bureaus, and will not hurt your score or show as an inquiry on your credit report.

If You Need to Repair Your Credit (Like I Did)

Cover.CreditThere was a time when I did not have an 800 score. I unknowingly made some mistakes, including letting a department store credit card payment slide for a month. On top of that, someone else’s late auto payment was showing up on my report. When I purchased my first home as a young, single woman, I had to take an FHA loan, because my score didn’t qualify for a conventional loan.

I took charge of my situation and raced to the top of the chart. You can do the same!

Certified credit repair specialists and experienced attorneys are one way to go. But if you don’t mind taking the time to do the work yourself, you can save $500 to $2,000 in professional fees. Instructions on how the professionals restore your credit and good name are in my book, which is getting great reader reviews on Amazon, and many more emails to me from folks who don’t post reviews. Feel free to check it out here.


Why Did Mortgage Interest Rates Increase Midday?

yellen 750xx4000-2248-0-15Rule of Thumb: Bad economic news = lower interest rates.

Good economic news = higher interest rates.

November 4, 2015, Federal chairwoman Janet L. Yellen spoke before the House Financial Services Committee. She said the economy is “performing well,” and therefore “it could be appropriate” to raise interest rates mid-December.

A few hours later, William C. Dudley, president of the Federal Reserve Bank of New York, said, “I fully agree with the chair. It is a live possibility, but let’s see what the data shows.”

Mortgage lenders reacted immediately. I was sitting at my desk when the email from our Pricing Dept. came through with the subject line: “RATES WORSENING!!!!” All interest rates were suspended while readjustments were made. New rates posted showed an increase in fee for any particular rate of about 0.3%.

If, for example, you had a $200,000 loan, to get the interest rate you want, it would cost $600 more in fee. (.3% of $200,000)

Lenders felt the need to raise rates immediately, because they don’t want to be holding a lot of loans that are under-priced next month.

Will Rates Go Down Again?

It can appear that a midday rate hike is an over-reaction, a knee-jerk response that went too fast and too high. It often happens that the cost settles back down over the next few days or so. But not always.

Just as lenders were taken by surprise midday, no one can accurately predict on a consistent basis what will happen with interest rates. Experts give educated guesses, but that is all they are.

Yesterday, several representatives urged Janet Yellen to wait longer before raising interest rates. California Democrat Brad Sherman joked, “If you want to be good with the Almighty, you might want to delay until May.”

One thing is for sure: only God Almighty knows for certain what will happen.

Photo credit: Bloomberg Finance

Five Things Your Home Owner’s Insurance Doesn’t Cover

When a faulty drain pipe allowed rain water to seep in to our daylight basement, soak the brand new carpet and ruin the baseboards, we expected our home owner’s insurance to cover the damage. But because the water came from outside (as opposed to an indoor plumbing failure), we were on our own.

So that you aren’t taken by surprise, here are five things most home owner’s insurance (also called hazard insurance) does not cover:

  1. Sewer back-up.
    As with outside-in water damage, the standard homeowner’s policy doesn’t cover a clogged sewer or backed-up sump pump.
  2. Mold.
    The companion to moisture is mold. Spores can embed in air ducts and behind drywall. If a home renovation project reveals a mold issue, your standard insurance policy won’t help.
  3. Termites.
    This is why mortgage lenders require a termite inspection before closing on the loan, if you live in an area prone to these pests. Once you are in the house, keep a watch for signs of wood destroying pests and act swiftly if needed.
  4. Trampolines, tree houses, and swimming pools.
    104,691 people a made trip to the ER last year due to injuries associated with trampolines. (The Consumer Product Safety Commission) Speaking of backyard hazards, your liability coverage might not be sufficient for swimming pool damage either. In addition, if your pool freezes and causes structural damage, your insurance won’t help.
  5. Earthquakes.
    Unless you have special earthquake insurance, earthquake damage is not covered. Should you add earthquake insurance to your policy? That is a personal judgment call. Personally, I figure that if an earthquake happens, my address won’t be the only one hit — it will affect the entire area; thus, state and federal funds will become available. Knowing how insurance companies like to fight, I’d rather not take a chance on prolonging help. But please, speak to your insurance agent to find out what makes the most sense for your home and neighborhood.

Good to Know

If you have a mortgage, hazard insurance is required. Once you pay off your mortgage, then you are responsible for continuing coverage.

If your down payment is 20% or more, you may choose to pay hazard insurance (and property taxes) outside of the loan if desired. However, there might be a fee of .125 to .25 percent of the loan amount if the lender risks trusting you to keep up payments.

If you have a mortgage and opt to pay insurance outside of the loan and then let your payments and policy lapse, the lender will find out. Then the lender will select and instate an insurance policy and bill you for it with your next mortgage statement. (This will likely be a more expensive policy than the one you had before.)

When my own home suffered water damage, we had sufficient savings to cover the clean-up and repair. Be sure that you, too, have a financial safety net to protect you from unforeseen hazards.

When Can You Drop Private Mortgage Insurance/ PMI?

Private mortgage insurance (PMI) is a monthly charge added to your payment when you take a

Image source: Torrington Savings Bank

Image source: Torrington Savings Bank

conventional loan with less than 20 percent down. The purpose is to protect the lender in case you default on your mortgage.

PMI is not a scam. It enables people to buy a home without having a large down payment. This, in turn, promotes home ownership, real estate wealth through leveraging, better quality neighborhoods, and greater stability in the U.S. economy. Because of PMI, you can get more house for your money.

Even still, you want to stop paying this extra charge as soon as possible. Here’s how it works.

With a conventional loan, you can stop paying the monthly PMI when either:

1) You notify the lender that you have 20 percent equity and then the lender verifies it by ordering an appraisal. You cannot order your own appraisal, because that would open the door to possible bias. However, you do pay for the appraisal, so you want to be certain of the value and your equity.

2) Your PMI will be automatically dropped when you have 22 percent equity with your loan balance being at 78 percent of purchase price. This law (enacted for loans funded after

July 1999) prevents lenders from collecting PMI long after the risk factor has been reduced. However, with real estate values rising in many areas, you want to keep a look-out for what similar homes in your neighborhood are selling for. That way, you can stop the PMI payments sooner.

FHA Has MI, not PMI.

With an FHA loan, you take mortgage insurance, not private mortgage insurance. The rate is calculated differently, and MI remains for the life of the loan, regardless of equity, if your down payment was less than 10 percent. With less than 10 percent down, the only way to eliminate MI on an FHA loan is to refinance into a conventional loan. If you were one of the rare individuals who took an FHA loan with 10 percent or more down payment, then MI can be dropped after 11 years.

Should You Refinance to Drop MI or PMI?

If you can drop MI or even PMI and lower your term and/or interest rate at the same time, then refinancing probably makes good financial sense. However, you need to look at both your new monthly payment and your loan term in order to make that determination.

If you are in California or Washington state and would like me to take a look at your situation to see whether or not refinancing is a good move, send me an email via my Ask a Question page or contact me using the info below.

Email Banner Carolynequal housing logo

Where are Home Values (and Prices) Headed?

home victorianShould you buy a home now or wait? Should you sell or stay put?

In order to make the best decision, let’s look at where real estate values are headed. They say celebrity opinions make headlines, but let’s skip the sensationalism and see what a panel of 100 economists, investment & marketing strategists, and real estate experts had to say.

SURVEY RESULTS: Where Are Home Prices Headed?

The average annual appreciation will be 3.6% over the next five years. This means the cumulative appreciation will be 19.4% by 2019.

Now consider this: a home valued at $100,000 today will be worth $119,400 by 2019. You can buy a $100,000 home with a down payment of $3,000 to $3,500 (conventional or FHA loan).

So in approximately four years, you turn $3,000 into $19,400 real estate value.

For a $200,000 home, double that.

For a $500,000 home, multiply that by five.

Do I need to explain why I am a fan of buying your own home? Not to mention, the price of rent keeps going up. And, renters don’t qualify for the mortgage tax deduction.

Even the experts making the most bearish experts predicted a cumulative appreciation of 11.8% by 2019.

If you are in California or Washington state, I am state licensed to do mortgage loans in equal housing logothose states. NMLS # 1284134 Sponsored by VITEK Mortgage Group

Source: KeepingCurrentMatters

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Three Reasons to Get Your Mortgage Loan Application Submitted Before TRID Happens October 3, 2015.

Oct 2You must get your loan application into your lender by October 2nd if you want to avoid the new lending laws commonly called TRID.* There are three reasons why you would want to do so.

First, TRID requires new waiting periods in the loan process that are predicted to turn 30-day closings into 45 days. This is especially true if your lender is a big slow-moving bank, or if you don’t submit absolutely all of your documentation into your loan officer right at the start, or if your closing attorney/escrow agent isn’t onboard with the new pace.

Second, TRID will strip away your ability to change your mind regarding loan size, the loan program, or interest rate-lender credit, because doing so will trigger new waiting periods that could push you out of contract. TRID will also force you to lock in your interest rate sooner than with the present system.

Third, you probably don’t want to be the October 3rd guinea pig. Or the October 4th guinea pig. My advice is to do what you can to negotiate a mutually signed contract and get it in to your loan officer before the close of business Friday, October 2nd.

Heads-Up! An application is not what you submitted for your pre-approval. According to TRID, an application means there is a specific property address included.

I have to wonder how busy October 2 will be! Speaking for myself, I will work until midnight if needed–and I will do so with the biggest smile you ever saw.

They say there is a silver lining to every cloud. One good thing about TRID is that it has forced lenders to hire more compliance officers (the watchdogs who make sure the lender doesn’t accidentally overstep a guideline, miss a signature on a form, or fail to adhere to a waiting period).

I saw a sign that reads, “TRID: Keeping America employed one compliance officer at a time.”

True enough.

*TRID stands for Truth-in-Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure. (Credit goes to the Feds for coming up with that mouthful.)

Email Banner Carolyn

State licensed in CA, WA

No Interest Rate Hike Today!

The Federal Reserve Board announced today that they will not raise interest rates at this time, as previously predicted.

The change in direction (to leave rates alone) was due to concerns with the economic growth and inflation.

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the statement said.

For more details, see here.



Four Ways Credit Cards Affect Your FICO Score

cat with credit cardIf you’re so cute you don’t need to work for a living, then don’t worry about having a credit score. For the rest of us, we need to be smart about how the system works.

Here are four things you should know about how credit cards affect your FICO score:

1) If you carry a balance that is over 50 percent of the limit, you will lose credit points.

To remedy, either call your creditor and ask to have the limit raised, or spread out your spending over an additional card. I am assuming, of course, that you are not overspending for your income and budget. That is another topic altogether!

2) If you pay off your balance in full each month, you will be rewarded with additional credit points.

The credit system recognizes the proper use of credit and adds points to your FICO score when you don’t carry a balance from month-to-month. Moreover, you don’t waste your money paying interest that is non-tax deductible.

3) If your total use of credit is below 50 percent of your total available credit, you will gain points.*

Not only does the system look at your individual credit card balance-to-limit ratio, but it also looks at the total of all your available credit cards. So if you are maxing out all your cards, your score will receive a double whammy in point subtraction.

4) Any payment that is 30 days late will dock your score. If you’re 60 days late, it gets worse, and ditto for 90 days.

If you are 31 days late for the first time and call your creditor immediately, they might give you grace and not report you as late, especially if you are a long-time, perfect-paying customer.

If your one-off late payment has already reported, then you should take steps to get that removed from your credit report. The law gives you the right to dispute the late payment, and many creditors are happy to remove the late payment when you send the right type of letter through the good old-fashioned USPS mail system. Why? Because it is a good business practice for them, and it is within their legal right to do so. As the creditor, they own your credit information.

When you understand how the system works, you are in control of your own credit score.

* If you reduce the 50% credit usage to 30%, you gain even more points.

Having a score of 740+ puts you in the top tier for a conventional mortgage loan. If your score is 800 or higher, you gain respect, bragging rights, and may qualify for slightly better terms, depending on the lender and loan program.

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Unless you’re as cute as a cat or have just won the lottery and plan to pay cash for everything for the rest of your life, you need excellent credit and a high FICO score in order to obtain the best financing, the cheapest insurance premiums, and save money.

Last Month for the Good Faith Estimate

RIPSeptember 2015 is the last month for the Good Faith Estimate.

Beginning October 3, 2015, the Loan Estimate (LE) replaces the GFE, per federal law.

There will be no more HUD-1 Settlement Statement. That is being replaced by the Closing Disclosure (CD).

Why? The Consumer Finance Protection Bureau has determined that the GFE they designed in 2010 is confusing borrowers. It has taken the committee more than four years to come up with a new form — but finally it is ready to roll out. The LE and CD will be mandatory for all mortgage lenders, including banks, brokers, direct lenders, and credit unions.

Along with the improved LE and CD, come new regulations (commonly called TRID).

Important rules to be aware of are the following:

  • A lender may not close your loan until you have had at least seven days to review the Loan Estimate.
  • If you do not respond with an Intent to Proceed within 10 days, the lender has the right to change their lender fees.
  • You are not allowed to sign your final loan documents until you have had at least three days to review the Closing Disclosure.
  • You do not have the right to waive these waiting periods unless there is a genuine emergency. The fact that your rate lock is expiring or that the seller refuses to extend the closing date because he has a better back-up offer is not considered an emergency, according to the feds.
  • If you change your loan program or loan amount, you are required to start over with the waiting period. Ditto if your credit score or credit quality changes.
  • You will need to tell your loan officer whether or not you shopped for the title company and settlement company (escrow or attorney), because it impacts the tolerance for their fee accuracy.

If you’d like to read the condensed “Reader’s Digest” version of the new law, the CFPB has released 91 pages here.

Stay tuned for more information about the ever-changing world of getting a mortgage. I will post updated information as we get closer to October 3rd.

What I Learned From the House with the White Picket Fence

white picket fence2The first house I bought as a young, single woman was a smelly little house with stained floors, dingy walls, and a stove covered in black baked-on gunk. Part of the roof was rotten, and the refrigerator was disgusting. It was ugly for sure, but it was all I could afford with my pre-approval of $80,000. The best thing it had going for it was the charming white picket fence.

Before you feel sorry for me, let me state that this turned out to be one of the best real estate purchases I ever made. Here’s why.

Ten Things I Learned From My Ugly House

  1. After ripping up the dog-stained carpet, I discovered the hardwood floors were permanently damaged. There went my vision of having beautiful hardwoods as I couldn’t afford to replace them. It was much cheaper to install a nice wall-to-wall carpet.
  2. Fresh paint in a light neutral color completely brightened up the home. My daughter chose pale pink for her bedroom, and my son wanted green. Letting them choose their bedroom colors gave them a sense of personal ownership in the new house.
  3. It made more sense to have the disgusting appliances hauled to the dump than to try to renovate them. New appliances made me feel like I had a new kitchen even though the cabinets and counter tops were the same.
  4. I splurged on pretty light switch covers and I could not believe how many compliments I got on those little things.
  5. Before my loan could close, the lender required the seller to replace the rotten roof. (It showed up on the appraisal report.) This delayed the closing of my loan, but it was worth the inconvenience. (Thanks again, Mom, for letting me crash at your place for a month after I had to be out of my apartment.)
  6. I chose an FHA Adjustable Rate Mortgage. This turned out to be a very smart choice, because I saved a significant amount of money on my payments for the three years I was there. Because this wasn’t my dream home, I knew I wouldn’t live there a long time, so taking a 30-year fixed rate would not have made sense. Why pay more interest than needed?
  7. Because I got a lower interest rate with the ARM, my payments paid down the principal balance faster. Thus, when I sold the house three years later, my loan pay-off was smaller and I netted more profit than I would have if I’d taken the fixed rate mortgage.
  8. It doesn’t take a dream house to be happy. I discovered a great deal of satisfaction by cleaning up that little house. When my friends came to visit, they exclaimed, “What a cute house!” And it was.
  9. If the bedroom window won’t open on a hot summer night, don’t give it a little smack with your hand. I tried that and my hand went right through the glass, which cut my wrist pretty badly. It took a bath towel to stop the bleeding. Fortunately, 9-1-1 sent out a handsome fireman to wrap me up and take me in for stitches.
  10. A smelly, little house can bring in a nice profit after you clean it up and live there for three years. I sold the house for $125,000. After subtracting the money I put into the  house and subtracting the payments I’d made, I calculated that I earned over $300 per month just for living there.

How’s that for a happy ending?



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