For the first time ever, the U.S. government will back mortgage loans that are over a million dollars.
FHFA (Federal Housing Finance Admin.) has raised the ceiling in high-cost counties (hello California and Western WA) to $1,089,300 for 2023.
For the rest of the counrty, the allowed loan amount has gone up to $726,200.
Some lenders will put those higher loan amounts into effect almost immediately, especially the wholesale lenders (that you can take advantage of by going through a local mortgage broker).
What this means is that more people can get a higher priced home without having to go for a Jumbo loan. Jumbos have higher interest rates, larger down payment requirements, and stricter underwriting rules, so this change is good for buyers, sellers, and everyone in the real estate or mortgage business.
These higher loans are for owner-occupied, one-unit properties.
The FHA conforming loan limit for 2023 has not yet been announced, but the expectation is for $472,040.
If you need work to get your credit score over 700 for the best conventional loan interest rate (or over 620 for FHA), start now so you’ll be ready to purchase a home next year.
While you’re shopping for others, pick up a little something to make your own life better: Repair Your Credit Like the Proshere.
I will be presenting a class that qualifies for one Continuing Education Credit*, hosted by Vanport Escrow and Title this Wednesday, November 30th, at 10: a.m. Pacific Standard Time. The one hour class is free.
All are welcome: Realtors, Loan Officers, Homebuyers, and anyone who is interested in this topic.
Here is what I’ll cover:
1) What information is on your credit report (the one that mortgage lenders get)?
2) How many credit scores do you have?
3) How is your credit score calculated? (Know this and control your own credit rating!) * Plus, the big change coming to credit reports and scores.
4) What if you have no score? (You can still buy a house, but beware….)
5) What is a surefire way to improve your score fast?
6) What is the worst thing a homebuyer can do when they’re just about to buy a home or are in the process of buying a home that will instantly blow them out of the water and turn their approval into a denial — even if they’ve already signed documents?
I have been a follower and a fan of Carolyn for many years, and what I have learned from her over the years has helped me serve my clients and give better advice to people that I have met. I encourage you to attend the class and feel free to invite people you are working with or wish to work with if that will help your relationship with them or serve them better. I am very excited about this class.
Fred Stewart, President, Vanport Escrow and Title Company Inc.
Vanport Escrow and Title Company Inc. is the first Veteran and Black-owned escrow company in Oregon state. I am honored to be hosted by them for this class.
A few weeks ago, I wrote about Fannie Mae and Freddie Mac (finally!) updating their underwriting programs to accept the updated FICO 10T and Vantage 4.0 credit scores.
All this time, for decades, the big mortgage lenders have stuck with FICO 2, 4, 5 — never upgrading to any of the changes.
Finally, Congress told them to get with it and update, because the new scoring systems are both more accurate and fairer to all people. So October 23, they announced they are now accepting FICO 10T and Vantage 4.0. However…
The mortgage lenders need time to change their credit report software, so this has not yet happened.
No firm date has been announced, but one national credit reporting agency has given the timeline of two years. I called the two largest wholesale mortgage lenders in the nation and asked them for a date. Both told me, “I will check and get back to you.” It’s been three days and no word has come back. I take this to mean “we don’t know.”
When it does happen, I will post an update. In the meantime, we can be thankful this change is coming. The newer scoring system is predicted to help tens of thousands more people become home owners, especially people with thin credit files.
Happy Thanksgiving, everyone! I will be back with more news next week.
Don’t live your life by looking back on all your mistakes and regrets. You have someplace great to go, and that road takes you forward!
Throw off your old view of yourself like you would throw off an old, tattered, dirty coat. Throw it off and into the incinerator. You don’t need that opinion of yourself anymore! You have a new identity, and it is beautiful and worthy of respect.
The problem with keeping your old coat is that you will see it every time you look in the mirror. You can only wear one coat at a time. Practice seeing yourself as an Overcomer, a person who can overcome mistakes of the past, and a person who can remove the false posts on your credit report. You have the right to a fair and accurate credit report.
Anything that is erroneous, unverified, or outdated must be removed.
If it takes some time to get your report polished up, do not be dismayed. That is normal. A bestselling author cannot write a book in a day, and it takes some time to restore credit. You are in the process now of creating that good report.
From today, forward you will act like a person with top-tier credit, because that is where you are headed. Take on the habits of a person with A+ credit and create a good record for yourself.
You are becoming better each day. Speak to that end, not to your mistakes. Your words are a powerful influencer for your behavior.
DECLARATION: Each day, I become wiser, stronger, and better.
SCRIPTURE: So let’s not get tired of doing what is good. At just the right time we will reap a harvest of blessing if we don’t give up. ~ Galatians 6:9 NLT
Taken from Chapter 10, Credit Repair MINDSET available here.
Yesterday, the Feds increased interest rates — AGAIN! This means credit card companies will be charging even higher rates, so it’s important that you DON’T CARRY A BALANCE from month to month on your credit cards.
That item you got on sale is no longer any kind of a good deal when you pay 20% to 26% on credit.
The proper way to use a credit card is to pay off the entire balance each month when the bill is due. That way, you don’t waste your precious hard work on interest.
If you are currently carry a balance on your credit card, do everything in your power to pay it down ASAP. Here are some ideas:
Ask for overtime and use all that extra money to pay off credit card debt. (But leave the card open.)
Work a side gig, such as yard work, dog walking, hair cutting, child care, baking, painting, or whatever skills you have.
Create something to sell during holiday gift-giving season.
Set up a gift shopping service and post fliers in business offices. (Those busy people need help.)
Set up a mobile service to offices where busy executives could use some extra help, such as gift wrapping, car detailing.
Get your mental wheels turning and I expect you will come up with a doable idea!
Going forward, don’t charge more on your credit card if you are struggling to pay off the balance. Put a self-imposed freeze on credit spending.
DO NOT CLOSE your credit card — even if it has a $0 balance! Keep the card open, because that’s good for your credit profile and credit score.
BEWARE of overspending for gifts. In my new Journal book, Credit Repair Mindset Journal, I tell about a time when I overspent on gifts for my kids during Christmas. I was carrying that debt for the next 9 months, and I hated paying interest, especially because I was a struggling single mom. I learned a big Life Lesson from that experience.
I learned that the best gift we can give our children is our time, attention, and love. Kids don’t need a zillion presents on Christmas Day. Set the expectation and your kiddos will be just fine.
Did you know that Alfred Kelly, CEO of Visa, made $30.94 Million last year? Do you really want to add to his big bonus by paying high interest on your Visa card? I hope that fires you up to cut spending and your balance.
IF YOU ARE IN FINANCIAL TROUBLE and can’t pay off your credit card debt. I understand what it means to live at the poverty level and qualify for the food bank. I’ve been there, as I tell in Credit Repair Mindset Journal. This post is not to judge you. Just do the best you can to survive, and know that better days are ahead.
God bless you and keep smart and savvy about your money and credit! (The Journal tells a lot of my personal story, including how I went from a broke single mom on food stamps to a licensed mortgage broker. Only $6.99 on Amazon.)
On October 24th, the mortgage industry announced that they are changing credit report and credit scoring models. This is HUGE!
For the past 20 years, the mortgage industry has stuck with the old, tired FICO 2, 4, and 5 models. No updates or upgrades to any of the new models over the years. They didn’t want to spend the money to convert, and they said the old models were working just fine.
Except that as new data came in, they weren’t working so well for everybody. Credit scoring was called unfair and unequal for everyone.
In 2018, Congress told them to get with it and choose a credit model update already! This launched their big multi-year investigation and testing project.
Now, FINALLY, they have agreed that there are two new credit models that are more accurate and more fair: FICO 10T and Vantage 4.0
FICO 10T is different than FICO 9 or FICO 10. The “T” stands for Trended Data. It uses Artificial Intelligence to look at how you are managing credit, not simply at what you’ve done. It is like a video of your credit activity rather than a snapshot.
For example, Trended Data sees more than if you paid on time. It also sees if you paid the minimum balance due or if you paid the balance in full. You get more points for paying the balance in full each month — something I have been advocating for a long time.
Another example is that if you consolidate a credit card with a personal loan in order to avoid the higher interest rate on the credit card, the Trended Data will see what you’re doing and dock your score a little. Why? Because it believes you over-charged on your credit card as evidenced by your need to consolidate the two.
HUGE NEW BENEFIT – INCLUSION
With FICO 10T and Vantage 4.0, your rent payments, utilities, and telecom payments can be included on your credit report and you will get credit score points for paying on time. Yay! This helps groups of people, including young adults and minorities, who have not had the advantage of buying a home and having a mortgage payment on their report. It helps people with “thin credit files” to beef up the data for earning a good score.
NEW! Two Scores Required, Not Three
The mortgage industry has used a tri-merge credit report with Equifax, Experian, and TransUnion all on one report, showing three credit scores. They then use the middle score of the three, throwing out the lowest score. If a person has only two scores showing, the bottom score is used. But that has changed.
Now, they are required to use only two scores: one from FICO 10T and one from Vantage 4.0. These new versions have proven to be more accurate, according to the vast amount testing done over the past few years.
When Does This Start?
Starting now, mortgage lenders and banks can use FICO 10T and Vantage 4.0 for their mortgage applications. However, not all banks and lenders are going to transition immediately.
You need to ask your loan officer these questions if the new scoring is important to your credit scenario: 1) Are you using the new FICO 10T? 2) Are you using Vantage 4.0? 3) Are you pulling a tri-merge or bi-merge credit report?
If your loan officer or real estate agent has not yet seen this news please pass on this blog post t them. Please share on social media so the word gets out. Here is the official announcement. Thank you!
I saw an ad by a bank that headlined “Borrow From Yourself.” It was an ad for a home equity line of credit.
If you truly borrow from yourself, you would take money from your own source — your own savings account or investment account.
You would pay back yourself.
You would choose to charge yourself interest or not. If so, the interest would go to yourself. LOL
When you take out a home equity line of credit (HELOC), you are securing the loan on your house. You are using some of your precious home equity to take a loan FROM THE BANK.
Who do you make the payments to? The bank.
Who collects the interest charged? The bank.
Dear Bank: Stop running deceptive ads that make homeowners think your loan is borrowing from themselves.
By the way, HELOCs are up 12% this year. Why? Because of advertising. It is not because more homeowners need more HELOCs. People are falling prey to ads like this.
Banks and credit unions are desperate for loans now that interest rates are up, and refinances are no longer happening. They can only get a limited amount of purchase loans, which are also becoming more scarce.
So in their desperation for business, they are advertising HELOCs like crazy. Don’t fall for the ads!
You don’t need to gobble up your precious home equity to get money for something you really cannot afford right now.
WARNING! What’s more, if you have an open HELOC — even if the balance is $0 — you cannot qualify for the lowest interest rate when you want to refinance. You must actually close the HELOC entirely first, if you want the lowest interest rate.
WARNING #2! Watch for prepayment penalties on the HELOC. In California, prepayment penalties are the norm, and some of them are horrible! Such as the California credit union that charged $2,000 prepay penalty to close a HELOC with a $0 balance.
In WA state, it is illegal to put a prepayment penalty on a HELOC. Find out the law for your state before signing for a HELOC.
Always ask, “Show me where it says there is no prepayment penalty.” Don’t take their word for it, because there have been plenty of liars who have deceived borrowers who didn’t read all the verbiage before signing.
Thanks for reading and being diligent for what you believe and what you sign!
I almost titled this, “The Dirty Little Secret,” because it’s something these mortgage lenders don’t want you to know.
Just today, I read about another big national mortgage company who has decided to outsource loan processing and low level underwriting overseas. This one is going to India.
India, the Philippines, Viet Nam, and other faraway places — is this where you want your bank statements, asset documents, credit report, and personal identification going?
These lenders have decided paying wages in the United States is cutting too deep into their profits. So they are laying off staff by the droves, and outsourcing the jobs halfway around the globe.
As a loan officer and mortgage broker, I always liked my ability to speak with my underwriter — either in person or on the phone — about any sticky conditions or needless paperwork requirements. How can anyone do that when they’re an ocean away in an opposite time zone with no available phone number?
If you don’t like the idea of your loan file being sent electronically out of the country, ask these questions upfront:
What city is your processing staff working in?
What city are your underwriters working in?
Does your company outsource some of the loan tasks outside the United States?
If outsourcing doesn’t concern you, that is fine. I’m just saying you have the right to know.
Have you picked up your copy of Credit Repair MINDSET? It’s available on Kindle and paperback from Amazon.
Getting blindsided on your loan application is not something anyone wants. Not the realtor, not the loan officer, and especially not you, the homebuyer.
Particularly NOW with the volatility in interest rates and changing market, you need to be aware of three things:
When the interest rate goes up, your loan approval can change. Keep in touch with your loan officer while you shop for a home, because your preapproval letter can turn void if rates jump up and you are buying at the top of your price range.
If your down payment is minimum, underwriting will be tougher on your debt-to-income ratio. Gone are the days when you could push your debt-to-income ratio to 49.9% on a 3% down payment loan and still get approved. With the volatility in interest rate now, most underwriters are saying keep the DTI below 43%.
43% DTI means all debts on your credit report plus the proposed new mortgage payment (including taxes, insurance, mortgage insurance) = 43% of your gross income. Your gross income is what the underwriter says it is, not what your personal spreadsheet says it is.
Any purchase made during the loan process can void your approval. Even if you have signed all mortgage disclosure documents, your loan can still be denied if you make a new purchase, such as: furniture, appliances, an automobile, or even open a new credit card. Underwriters monitor your credit activity every day until your loan closes and funds.
Yes, they can do that! Federal lending law gives them the right to turn your approval into a denial, even after you have signed the contract, if your financial or credit situation changes. Once you are preapproved, maintain the status quo until closing. And, please, keep in communication with your loan officer, who is your advocate, looking out for your best interests.