Three Things You Can’t Do While Buying a Home

If you make one of these mistakes during the home buying process, your approval can be turned into a denial.

Even if you are fully approved and have signed documents, you can be denied — even one minute before closing. The lender has the right to stop the loan from funding if they believe the risk of lending to you has increased.

Here are Three Things You Cannot Do Without Jeopardizing Your Financing

  1. You cannot quit your job or go on furlough. This will turn your approval into a denial
  2. You cannot open a new credit account without possible jeopardizing your approval. Opening a new account increases your debt ratio and possibly lowers your credit score. Yes, they keep a watch on your credit throughout the process.
  3. You cannot buy a car, truck, SUV, or other high ticket item without jeopardizing your approval. Wait until after closing to consider purchasing a vehicle.

Protect your financing during the process. Speak with your loan officer BEFORE making any financial moves or changes in employment.

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Two Pitfalls of Auto-Pay

Setting up automatic payments on your credit cards and other accounts is a good idea. In fact, I just set my own Paypal Mastercard to auto-pay so that I don’t have to worry about slow mail delivery.

However, there are two possible “gotchas” that can catch a person off-guard and create a late payment on the credit report.

I don’t want this to happen to you!

Two Tricky Traps of Automatic Payments

You should not be charged a fee for setting up automatic payments.

  1. If your account is sold to a new creditor and you don’t reset the auto-pay with your bank, your payment can become “late.”
    That’s what happened to someone who had a student loan. They never told him they transferred to a new student loan servicer, so his auto-payment never went out, and the new company reported him as late.
  2. If your pay date happens to fall on a holiday, your payment might go out “late.”
    Check the system with your credit to make sure you have at least 3 days’ buffer or that the funds will transfer even if your bank is closed for the holiday.

Even if you have auto-pay set up, review your accounts to ensure all is as it should be. Then you will have peace of mind and know you are establishing a great credit profile that you can be proud of.

Easter is Resurrection Sunday

Praise be to the God and Father of our Lord Jesus Christ! In his great mercy he has given us new birth into a living hope through the resurrection of Jesus Christ from the dead,

and into an inheritance that can never perish, spoil or fade. This inheritance is kept in heaven for you,

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who through faith are shielded by God’s power until the coming of the salvation that is ready to be revealed in the last time.

In all this you greatly rejoice, though now for a little while you may have had to suffer grief in all kinds of trials.

These have come so that the proven genuineness of your faith—of greater worth than gold, which perishes even though refined by fire—may result in praise, glory and honor when Jesus Christ is revealed

though you have not seen him, you love him; and even though you do not see him now, you believe in him and are filled with an inexpressible and glorious joy,

 for you are receiving the end result of your faith, the salvation of your souls.

I Peter 1:3-9 New International Version

How I Got a Late Fee Removed in 3 Minutes

I couldn’t believe my eyes when I opened my Paypal Mastercard bill last week. What was that late fee doing there? And the interest charge on top of it? I never pay late!

Further scrutiny showed the balance was $25, the late fee was $29 and the interest was $3 and some pennies.

According to the bill, I now owed $57 on a $25 purchase!

My checkbook showed I’d written the check on the 9th, and I knew I’d mailed same day. But the Mastercard statement showed it posted on the 13th, which was one day late.

They’re never going to remove the late charge, I fumed. At least it won’t go on my credit report. I pulled out my checkbook ready to write a payment for $57. But then I paused.

I dialed the phone number instead. Here’s how the conversation went:

Me: I’d like to speak with someone who has the authority to remove a late fee.

Mastercard rep: I have that authority.

Me: Very good! I just received my bill and was shocked to find a late fee of $29 plus $3 interest. You can see my check was written on the 9th, but due to slow mail or slow posting, it shows as one day late. I think it’s not fair that I am charged more than 100% of the balance. As you can see, I’ve had this account for quite a few years and have never paid late. Could I get the $32 penalty charge removed?

Mastercard rep: Yes, I have now removed the late fee and interest.

Me (with a big smile): THANK YOU! I REALLY appreciate it!

A good ending to a bad story, and all taken care of with one short phone call.

Key Points

  • I made the phone call immediately upon receiving the billing statement.
  • I asked upfront for someone who had the authority to remove a late fee.
  • I had a history of paying on time.

If you have a story to share, I would love to hear it.

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Credit Freeze vs. Credit Monitoring

Which is better? To freeze your credit report or get credit monitoring?

My recommendation is to place a credit freeze, and here’s why…

A credit freeze locks up your credit file so that no one can take any new credit in your name. Even if you apply for a loan, the creditor will not be able to obtain your credit report until after you lift the freeze.

On the other hand, credit monitoring watches your credit report, usually by checking one of the three credit bureaus (Experian, Equifax, TransUnion) each quarter. A credit monitoring service will alert you to fraudulent activity after it has happened.

Which would you rather do: prevent fraud or have help fixing the fraud after it’s happened?

GOOD TO KNOW

You can still receive your free annual credit report with a credit freeze in place.

In addition, your current creditors (your Visa card, your mortgage lender, et. al.) can view your credit report to check for accounts going late, etc., while your credit freeze is in place. This is in accordance with federal law, and it does not create a hard inquiry that affects your credit score.

Should You Place a Fraud Alert on Your Credit Report?

What about placing a Fraud Alert? I would not do so unless you were truly a victim of fraud, and fraudulent accounts appear on your report. With a fraud alert, a mortgage lender is required to go through additional steps to get your loan approved, which will delay your closing. When you want to remove it later, it is a bit of a hassle. If you were not a victim of fraud in the past, there is no reason to place a fraud alert on your report — especially since a credit freeze is better protection anyway.

Available on Amazon.com

https://www.transunion.com/credit-freeze

https://experian.com/freeze

https://www.equifax.com/personal/credit-report-services/

While you are repairing your credit, I recommend having a credit freeze in place.

Can Your $1,400 Relief Money Get Seized By Creditors?

Time Urgent Message!

The government relief deposits have started going out now. The $1,400 funds are being released in batches.

If you owe money to a collection company for an unpaid bill, the collector is allowed to seek a garnishment of your $1,400 Covid Relief check. The previous stimulus checks could not be garnished; but for this round, it is legal. There is no protection this time to prevent a seizure or garnishment.

If you owe your bank overdraft fees, the bank is allowed to automatically collect from your government deposited funds.

If your money is coming by check, then you can protect it from being seized by cashing the check instead of depositing it.

If your money is coming by direct deposit, you should keep a vigilant watch. If you need money to pay rent, a mortgage, your electric or cell phone bill, or to buy food, then you want to withdraw that money and take care of those necessities before a collector grabs it.

If you don’t have collectors or back-owed debt, then you can breathe a sigh of relief. My advice is to use the money for its intended purpose: TAKE CARE OF YOUR BILLS. Pay off credit cards. Pay off your car loan early. Pay whatever account you are being charged high interest on. Fill up your gas tank and get the oil change.

If you have credit card balances, do not be foolish and spend the money on new shoes, clothes, fun toys, and other non-necessities. Don’t blow your money!

Don’t use the money to go into debt! In other words, don’t use it as a down payment on a car or other expensive item that you will end up paying interest on. Don’t give it to a scammer, because they are out thick as thieves right now.

If you have outstanding collections, you can use the money to negotiate a settlement. Make sure you get the offer in writing, make sure the creditor agrees to remove the negative item from your credit file upon the receipt of funds. To learn how to negotiate, including scripts on what to say, read Chapters 15 and 16 in Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete bad credit and restore your good name. It is available here.

Please pass this urgent message onto to others who might need this information. Thank you and have a lovely day!

Buying a House With Imperfect Credit

If you’re tired of paying rent when you could just as well be paying for your own home, but you are concerned about imperfect credit, this message is for you.

Be encouraged, perfect credit is not required to become a home owner!

The Federal Housing Administration has a loan program for good people who fell on hard times in the past. Or made mistakes in the past. Or who have a debt ratio a little too high to qualify for a conventional bank loan. Here are the facts.

Seven Quick Facts About the FHA Loan

  1. Down payment required is 3.5% of the purchase price. On a $350,000 home, that would be $12,250. The down payment can be a gift from family, from your own funds, or from a down payment assistance program offered by your state. (Each state has their down DPA protrams.)

2. FHA does not require a certain credit score. Many lenders go down to a 600 score. Some down to 580. Some lower. The best way to find those lenders is to go to a local mortgage broker who can shop 30 lenders for you.

3. You can get a FHA loan 24 months after a Chapter 7 has been discharged. For a Chapter 13, there is no waiting period after the discharge as long as payments were made to the court on time.

4. You can ignore medical collections.

5. Non-medical collections up to a total of $2,000 can be ignored.

6. Open collections or judgments where you have a monthly payment plan, and have been paying on time for six months, is okay for getting an FHA loan.

7. The Seller can pay some or all of your closing costs.

If this all sounds encouraging, but you aren’t quite there yet, don’t be discouraged. Get your copy of the self-help credit repair book that explains how you can Repair Your Credit Like the Pros.

Knowledge is power and power brings success. Get started now, and who knows, you might be opening the door to YOUR OWN HOME (!) before the summer is over.

(Many thanks to a book reader for sending this photo.)

Remember these two rules: (1) Get preapproved for financing before house shopping. (2) Get a professional real estate agent to represent you, as the buyer.

Buying a House with 3% Down

My favorite loan for people who need a minimal down payment is called HomePossible or HomeReady.

It is a 30-year fixed rate conventional loan. HomePossible is backed by Freddie Mac and HomeReady is backed by Fannie Mae. These loans have the identical requirements and identical interest rate, so either one is awesome.

Here’s why I love this loan:

  1. Only 3% down and the seller can pay some or all of your closing costs.
  2. You get the same interest rate as if you were putting 20% down.
  3. You get a reduced monthly mortgage insurance payment.

Requirements:

  • You must show income to cover the total mortgage payment (includes property taxes and insurance) plus your monthly obligations that show on the credit report with a 43% Debt-to-Income ratio. This is very reasonable.
  • If you are a W2 employee, you must show a two-year history of working. It’s okay if you switched jobs.
  • If you are self-employed, you must show 24 months of being self-employed and show sufficient Adjusted Gross Income on your 1040 tax returns.
  • You must have a credit score of 620+ for your middle score of three. The lowest score is thrown out.
  • A former bankruptcy Chapter 7 must be discharged for four years.
  • Your household income cannot be more than 80% of the median income for your area. This is often surprisingly high.
    For example, if the home is in Fairfax, VA, you can make up to $95,920.

To check the income limit for your area, you must input an actual address into the search space. You can check it here.

If your income is too high to qualify, then take the 5% down conventional loan instead.

If your credit score is too low to qualify, take the 3.5% down FHA loan instead.

REMEMBER: Always get preapproved with your mortgage broker before making an offer on a property.

REMEMBER: Get a licensed real estate agent to present your offer and negotiate terms. The Buyer’s agent is free to you (paid by the seller), and everyone needs the advantage of a professional real estate advocate to avoid costly mistakes.

Credit Repair Tip: Is your settled account still showing negative on your credit report?

This is a tip for people who negotiated a settlement on a collection.

If you and the collector agreed on a settlement amount, and then you paid as per your agreement, then you have “paid as agreed.” Simple as that.

Best case is that you got in writing from the collector that they would delete the account from your credit report upon receiving payment in full.

But what if you forgot to get that all-important letter? Or what if you did, but the credit bureaus are still reporting it (and it’s been over 30 days)?

You can write a letter to the credit bureaus that says this:

<Company Name> made an arrangement with me regarding account # 1234. I PAID AS AGREED. This account was not delinquent as shown on my credit report; but was, in fact, paid according to our Agreement. This account is a violation of FACTA, because it is not accurate nor is it fair. Delete this account from my credit file permanently.

The Fair and Accurate Credit Transaction Act is in violation when erroneous and/or unfair information is posted on your credit report. You have the right to request an investigation and correction of anything you believe is in violation.

For detailed information about repairing your credit and restoring your good name, please see Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete bad credit and restore your good name

“Does Illness Impact My Ability to Get a Mortgage?”

This is a timely question. A person might be afraid to ask their lender, for fear they might jeopardize their ability to get approved for a home loan. So, I will answer here, publicly, for all.

No, a loan officer may NOT inquire about your health. It is illegal to ask if you have an illness.

Similarly, it is illegal to ask if you are pregnant or plan to get pregnant in the future.

However, if your W-2 income has recently changed, then that might be an issue. Does your income still qualify for the loan at the new, lower rate of pay? If so, then you should have no problem with debt-to-income ratio approval.

If you lose your employment and income, then your approval can and probably will turn into a denial. Even if previously approved. Even if it’s 10 minutes before the loan is to close. The lender has the right to deny the loan at any time if it looks like you cannot make the payment.

If you are a 1099 employee or self-employed, then declining income is a significant issue. Lenders are very concerned right now with ability to pay if your business has taken a hit due to the economy. For approval, “worse case” is used when calculating income for approval. This would be something to address with your loan officer right up front so you don’t waste anyone’s time.

I hope this helps explain that an illness does not directly affect your ability to get a mortgage. Only if your income changes does it become a concern to the lender in order to verify Ability to Pay.