Author Archive: askcarolynwarren

What is the Difference Between an Inspection and an Appraisal?

Don’t confuse the home inspection with the inspection done by an appraiser who provides the appraisal report. Here’s the difference, quick and easy:

The Home Inspection

You hire and pay for the home inspection outside of the loan. The inspector goes through the house from roof to crawl space. He or she will point out every flaw, take a photo, and write a detailed report. It’s best to be present at the inspection so you can speak with the appraiser directly and ask questions.

Your Purchase Agreement should have a clause that allows you to cancel the sale without penalty if the inspection does not pass your personal standards.

Every house has its flaws. You need to decide which items are major enough to ask the seller to fix or provide you with a credit to fix yourself. It doesn’t make sense to ask for inconsequential items to be repaired.

You do not share the inspection report with your lender.

The Appraisal

The appraisal determines the fair market value of the property. It protects you from paying too much and the lender from lending too much. The report is ordered and owned by the lender, but paid for by the borrower. The borrower receives a copy of the report, per federal lending law.

The lender may not collect money for the appraisal until after you have received the loan disclosures, a packet of information that includes the Loan Estimate. Then the lender will ask for payment of the appraisal by credit card.

The appraisal is paid for upfront, because if the value comes in too low or if you cancel the loan for any reason, the appraiser still must be paid. The lender does not cover that cost for you if you cancel the loan.

If the value comes in lower than the purchase price, you have three choices:

  1. You can have your Realtor renegotiate the price.
  2. You can pay the difference between the original sales price and the appraised value. (This will increase your cash to close.)
  3. You can cancel the sale.

You can also dispute the appraised value by providing different comparable properties with an explanation. This rarely works, but one time I saw the value raised in response to a customer dispute.

Neither you nor your loan officer chooses the appraiser. That is done by a neutral party who has no vested interest in the closing of the transaction. The idea behind this regulation is that neither the buyer nor the loan officer should have the ability to influence the value. That is why you cannot order your own appraisal report. No lender will give a report ordered by you one second of their time.

For more information about bogus appraised values, see my post here.

For 7 facts you should know about home appraisals, see my post here.

I welcome your comments and questions. (See Leave a Comment at the top of the post, under the title.)

 

 

 

Tax Liens and Judgment Removals: The Bombshell!

I received this excellent information from Credit Repair Resources, and I know many of you will be interested in this news:

So another bombshell hit the credit reporting and lending world this week. This time it is potentially big news for millions of Americans and thousands of lenders. In the ongoing effort to provide accurate credit reporting to consumers, the three major credit reporting agencies, Equifax, Experian and TransUnion have announced that in July, 2017 many tax liens and judgments will be removed from consumer credit files.

I thought I would add insight into why this move was made by the CRA’s. The key reason is, wait for it…. identifiers.

You see as part of the ongoing overhaul of the credit reporting system, entities that report information to our credit report, otherwise know as furnishers must provide specific information that accurately ties the account to the consumers credit file.

Public records like tax liens and judgments often do not contain the required identifiers that permit those accounts to be reported. After July of this year, any lien or judgment that does not contain the proper information will be purged from consumer files.

Now in the near term this is excellent news, but it is not all puppy dogs and ice cream. There is always a caveat. We must consider that government agencies and lien holders are not going to take lightly to this. I hate to make assumptions, but I will make the assumption that there will be pressure applied to court houses and Lexis Nexis to improve their record keeping.

It is also important to know that this will not affect all Americans with these items. If the lien or judgment does contain the proper identifiers, it can remain on the consumer’s credit file.

It will be interesting to see how this impacts the mortgage world, but at first glance, Summer 2017 is looking to a very busy one for the mortgage industry!

~ Written by Chad Kusner, President, Credit Repair Resources (Posted here with permission.)

Please help share this information via social media, because a lot of good folks need this intel.

 Repair Your Credit Like the Pros,
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96% of readers rated it 5 or 4 stars.

Four Ways to Buy a House with No Money Down

Can you afford a mortgage payment but are low on cash? Would you like to buy a house now before prices and rates go up even more?

Here are four ways to get into your own home with little or no money down.

1) USDA zero down loan. The property cannot be in a highly populated city, but it doesn’t have to be way out in the country either. To check out property eligibility, see here.

2) Use a state bond for the down payment. All states have various programs that either provide the down payment or lend you the down payment with zero interest and no payment, to be paid back at the end of the loan. To check out options for your state, contact your local mortgage broker or full service mortgage lender (not big bank).

3) Use gift money for the down payment. A conventional loan has 3% down, FHA loan 3.5% down. Both allow gift money from family for the down payment.

4) VA loan is zero down for U.S. Veterans. This is a nice thank you for serving our country. Most lenders offer the VA loan.

Getting Closing Costs Paid For, Too

All loans have closing costs, which include the lender fees, cost of appraisal, title insurance, and attorney/settlement/escrow fee. In addition, there are property taxes and home owner’s insurance that must be paid for upfront. If you close in the middle of the month, there is a partial mortgage payment called prepaid interest.

The closing costs can be paid for by the seller if you have that written into your Purchase Agreement. (Ask your Realtor to negotiate this for you.) You can also receive a Lender credit toward closing costs. To receive a Lender credit, you take a higher interest rate. (There is no free money in mortgage.)

If you’re tired of paying rent, I encourage you to apply for a mortgage now, because interest rates are and will continue to rise, which means your monthly payment goes up. Don’t assume you cannot qualify for a home loan. Many people who feared that might be the case are now happily opening the door to their own home!

Please help pass on this encouraging news to others via social media. Thank you!

 

Tired of Renting But Can’t Afford a House? Expert Advice Here

According to a new study, 1 in 4 U.S. adults would like to buy

Dogs are a fan of home ownership too.

a house this year. Perhaps you or someone you know is among them, but having sufficient income is a concern. Here are some facts and tips that I hope will help.

Little Known Facts About Income Qualification for a Home Loan

1) With compensating factors, you can be approved for a higher debt-to-income ratio than what is posted.

Don’t get me wrong: I am not suggesting that anyone take on a mortgage payment they cannot afford. Nor am I suggesting that you become a slave to a mortgage. But you should know that the strict 41% or 43% debt ratio requirement is broken every day. With compensating factors, borrowers are getting approved for up to 49.9%. (This makes sense if there is a non-borrowing spouse who contributes income or if there is a secondary income that cannot be counted, because in reality, the debt ratio is much more reasonable.)

2) If you recently got a pay raise, you will qualify based on your new higher income, not last year’s W2.

Similarly, if you are offered a promotion, even if it is with another company, you are always free to take that (and switch companies if required) and still get pre-approved. That said, do not switch jobs in the middle of your loan process without first speaking with your loan officer.

3) You can have a co-signer to help qualify; just be aware that the co-signer must have credit equal to or better than yours and the co-signer will be on title as a co-owner.

4) If your auto loan has less than 10 months remaining, that payment will not be included. (Remind your loan officer in case he or she doesn’t notice this.)

Some Things to Be Aware Of

5) If you take a second, part-time job, you will need to be working at that part-time job for two years in order to include that income on your loan application.

6) If you pay off your credit cards in full each month (as you should), then the minimum payment required will be used for calculating your debt ratio.

7) If you are self-employed, do not take so many deductions that your Adjusted Gross Income does not qualify for the home loan you want. You cannot tell the IRS you make $40,000 and tell your mortgage lender you make $90,000. That is not how it works! You can’t have it both ways.

8) If your income has declined, the lender uses your new lower income, not the average income.

9) You cannot count the following as income: inheritance, gifts, winnings, gambling income, IRS refunds, or any other one-time, non-recurring income. However, you can use that money toward a down payment.

Don’t Give Up Your Dream!

If you want to become a home owner, don’t be like one person who said to me, “If I don’t get approved now, I’m going to spend all my money on a vacation.”

Instead, be like the person who said, “If I don’t get approved now, I’m going to do what it takes in order to get approved next time. Let me know what I need to do.”

Tips For Approval

10) Pay down your credit cards and then going forward, keep those balances low.

11) Go on a spending diet! Sacrifice now for a home, and you will build wealth in the long run. A good way to control spending is to stay off the buying websites and out of the stores. In other words, remove the temptation.

12) Fix the old car, don’t take on a new auto payment. Many people have been sad to learn that their auto payment prevents them from home ownership. Listen friend: a vehicle goes down in value while real estate goes up in value. Be smart and save your money for your piece of The American Dream and then you will increase your wealth through home ownership.

Thank you for reading my blog. Please feel free to share it on social media for others who could benefit from this information.

 

 

Capital One Charging 70.4% Penalty for a Late Payment?!

capital-one-late-paymentIf you think you know what your credit card company charges for a late payment, take another look. You might be shocked!

Capital One posts their interest rate as 27.24%. But look at this statement. Because this consumer was late, Capital One is charging over 70%!

Top line shows the balance was $41.17.
Sixth line (underlined) shows the fee charged is $29.00.

$29 = 70.4% of $41.17

I think that is outrageous, and I hope this goes viral.

It means the consumer is paying $70.17 for an item that cost $41.17. That is a terrible deal, no matter how you look at it!

I suggested that the consumer call Capital One and ask not to be posted 30 days late to the credit bureaus, because she has never been late before and has a perfect credit history. Getting docked 100+ points on her FICO score would hurt more than $29.

Here is the Conversation with Capital One

Cap One Rep: Sorry, we have to report it as late to the credit bureaus.

Consumer: I have a perfect credit history with you. Could I have this one grace?

Cap One Rep: No, we can’t do that.

Consumer: I would like to talk with a Supervisor (following the script in Repair Your Credit Like the Pros).

Cap One Rep: It won’t do you any good. She’ll just tell you the same thing.

Consumer: Nevertheless, I want to talk with a Supervisor.

Supervisor comes to the phone and Consumer asks again.

Cap One Supervisor: We won’t report you late to the credit bureaus. I apologize for what our customer service representative told you.

As a bonus, she waived the late fee. It seems the Supervisor was more interested in good customer service than the representative. It is a good thing she asked! Doing so saved her money and grief.

Scripts for how to negotiate with creditors are in the book. They are based on my own experience in negotiating for my mortgage clients in the past. I do not negotiate for consumers now, but there’s no reason why you cannot D.I.Y.

Setting up automatic payment to pay off your balance in full each month is a good practice. Don’t waste your hard-earned money on outrageous credit card interest. It’s not even tax deductible.

Don’t worry about the credit card companies making a profit. Even if you don’t pay them a single cent, they make money by charging the merchant or seller.

Please help get this education out to good folks: If you don’t pay your balance in full each month, you are paying too much! And if you accidentally go late one month, call immediately and get it resolved before it gets reported to the credit bureaus.

New Rules Will Stop Creditor Harassment and Limit Their Ability to Pursue Payment

Tired of being hounded by collectors? Fed up with being harassed for payment on an account that’s already been paid angry-collectoror is unverified? There is good news on the horizon!

The CFPB (Consumer Finance Protection Bureau) is proposing rule changes to the debt collection industry as follows:

  • Debt collectors will be required to disclose debt details so the consumer can easily verify accuracy right up front. Currently, consumers receive a bill demanding payment without ever proving whether or not the collector has the right to receive payment, whether or not the amount owed is correct, and other vital information. This will provide transparency and, hopefully, increase accuracy and fairness.
  • Debt collectors will be prohibited from pursuing a debt while it is in dispute. Fantastic!
  • Debt collectors will be limited in their communication with the consumer. The intent is to stop undue harassment.

In the meantime, know your rights and demand to be treated fairly and accurately. If you don’t want to be contacted by telephone, tell the collector to contact you by mail only. Current law states they must comply.

You also have the right to negotiate a settlement. And so you know, a settlement (as opposed to paying in full) will in no way harm your credit score or jeopardize your ability to get a home loan. Even if you have to pay taxes on the amount “forgiven,” you still come out financially ahead by taking a settlement.

However, if the collection is old, paying it off now will likely lower your credit score, so better to let it age off your report (or handle it like the pros do).

What I mean by that is, if you negotiate a settlement the way the professional credit repair specialists do, you can also have the negative account removed from your credit report–a very smart strategy!

Thank you for reading my post, and if you know anyone who is struggling with collections, please pass on this good and vital information to them.

Rates Rising! Don’t Procrastinate to Buy a Home or Repair Your Credit

Today, Janet Yellen, Chair of the Board of Governors of the Federal yellenReserve System, signaled that an interest rate increase in March is likely. The Feds expect the economy to continue to improve; and accordingly, for interest rates to continue upward on a gradual incline.

30-year fixed rates:

Last summer – 3.75%
Now –  4.375% to 4.5%.
How long will it take to get to 5%?

I think that is the appropriate question: how long until rates are at 5%?
Not “if” but “when”?

If you have been procrastinating in buying a home, waiting for flowers or sunshine, that is a mistake. Not only will rates be higher, but sellers price their homes higher when their yards are gorgeous. Statistically, bidding wars are at their fiercest in March when both sellers and buyers come out of hibernation. Be smart and beat the rush if you can.

Have you been procrastinating with getting your credit repaired? Maybe you don’t have the money to hire a professional service. STOP procrastinating and get busy now. All the instructions are available for you in my newly released expanded edition of Repair Your Credit Like the Pros.

Does credit repair work? Yes, it does!

TJ wrote me to say, “I read your book…I increased my score by 70 points!”

The time is now to reach your dream of home ownership. The chart on the left is from a professional service (EZ Credit). The book on the right teaches you how to do it yourself to get the same results.

Credit repair works.

Credit repair works.

 

Best Place For Getting a Mortgage Home Loan

Bank, credit union, broker, or direct lender? What is the difference, and where is the best place to get a home loan? Having worked for a national bank, a broker, direct lender, and having interviewed with a credit union, I can provide some insider information. Here are some facts most consumers don’t know.

BROKER

A mortgage broker shops wholesale lenders to find the best option for your loan. Think of a travel agent shopping airlines for you. Some people assume that using a broker costs more–a middleman fee–but that is not true. Because brokers go to wholesale lenders, they can often find you cheaper financing than if you go directly to your retail bank.

Brokers are required by federal law to obtain a loan officer license from the National Mortgage Licensing System. This means they must attend classes in lending law and requirements, then pass a rigorous test that about 30 percent of applicants fail. They must also be fingerprinted and pass a background investigation and credit investigation.

DIRECT LENDER

A direct lender uses their own money to lend rather than broker out to wholesale. Using in-house underwriting is sometimes an advantage for closing faster and for getting a more streamlined approval.

Loan officers working for a direct lender must obtain their NMLS license, passing all tests and background checks, the same as for a broker.

BANK

A bank also uses their own money, but typically, they do not close faster or easier. In fact, the large banks are usually slower and have tougher underwriting requirements to pass. It is not unusual to be asked for more documentation in the 11th hour, requiring getting an extension on the loan.

Loan officers at a bank do not have to get a NMLS license. They do not have to pass an NMLS test. They do not get fingerprinted or have a background investigation. I personally know of a case where a woman who was under investigation for loan fraud waltzed into a big bank and was promptly hired.

CREDIT UNION

Everything above that applies to a bank also applies to a credit union. Some credit unions have excellent pricing and service, but others have horrific service. One popular West Coast credit union that I interviewed with has a bad business model. They have application takers in their branches, then those applications get passed on to a regional loan officer who handles dozens of branches. So the person you met with in the branch is not your actual loan officer, nor does that person have any training in mortgage loans. I’m sorry, but that is not my standard of service when it comes to something as monumental as buying a house.

FULL SERVICE MORTGAGE LENDER

I’ve saved the best for last. A full service mortgage lender has their own money to lend (like a direct lender) but can also broker out when needed. This gives the most options and the most flexibility.

Loan officers must meet all NMLS licensing requirements and pass all investigations and checks.

Personally, I work for a full service mortgage lender, and I like having more choices for my clients. I am state licensed in WA and CA, so I have taken state courses for both states, and have passed state tests as well as the big national test. I was fingerprinted twice and have passed all background tests, including an annual credit investigation.

I welcome your questions and comments. Thank you for stopping by my blog today. By the way, my new expanded 2017 version of Repair Your Credit Like the Pros has been released and is available here.

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Equifax, TransUnion Busted for Credit Score Scam! Are You Owed a Refund?

I’ve been warning people not to buy their credit scores from the credit bureaus, because those scores are not their real scores; that is, they are not the scores used by mortgage lenders. Now the Consumer Finance Protection Bureau (CFPB) has levied a big fine against Equifax and TransUnion for deceiving consumers by selling those scores.

People purchased them in good faith, wanting to know if they qualified to buy a home. But the scores they got were calculated with a different, more generous algorithm, often 20 to 80 points higher than their actual mortgage scores.

Their little scam will cost those two credit bureaus more than $17,600,000. Of that, approximately $13.9 million is to go as restitution to affected consumers. The companies are required to send notification letters to the folks who were taken advantage of. I hope people don’t mistake the letters for junk mail and toss them in the recycle bin.

Going forward, Equifax and TransUnion must make it clear that the scores are good for entertainment purposes only–just kidding. Those scores are good for qualifying for a little plastic credit card, which is not that hard to do. Personally, I would not pay money for that when there are sites that offer free scores for people who want to get an “approximate score.” (Beware that the free scores are not offered as a charity. Those sites will then try their darndest to get you to buy a service or product from them, and they will send you solicitation emails until you get so sick of them that you unsubscribe.)

The third major credit bureau, Experian, was not a part of this action.

Source and verification here. As always, thank you for reading and subscribing to my blog.

 

New Scam Hits the Mortgage-Real Estate Industry

A brand new fraud scheme has hit home buyers, and it’s taking victims from all Businessman running along sidewalk with oversized chequeacross America. Here’s what happens.

The borrower receives an email from their title company with instructions on how to wire their funds to close. The home buyers — or home owners refinancing — have been expecting this information, so when it comes in, they readily respond and wire their down payment and cash to close. BAM!

Unbeknownst to them, they have just sent their money to scamsters sitting in their evil darkness in God-knows-what-country. So far, these criminals have not been caught. And so far, these victims have not received their money back. How now are they going to be able to close on their home?

ALERT: Do not wire any money until you first pick up the phone and verify with your closing agent and loan officer that the instructions you have received are true and correct. Do not take chances — double check!

Please help get this information out via social media, because this is happening all across the nation. Thank you and be safe.

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