This week, I saved some homeowners, a lovely couple in California, from making a financial mistake that would have cost them $115,720. Could you be making a similar mistake?
The wife asked my opinion on the Loan Estimate they received from a big national bank you would all recognize. It was a refinance to lower their interest rate and payment.
Her gut instinct said something was off; although, she wasn’t sure what. That’s when she reached out to me.
A close look revealed that the refinance was going to save them $47 per month. That adds up to $564 per year, and $16,920 over the life of the loan, 30 years. But wait!
They were already seven years into their loan. And most of the interest is paid in the first five years.
By going backward seven years, this “lower payment” was going to cost them $115,720 more!!!
And for what–to save a paltry $47 per month?
Mrs. Homeowner responded, “How can they do that to people?”
Good question. Her husband was a disabled U.S. Veteran, injured serving our country. How could they, indeed!
Before you jump into a refinance to lower your monthly payment, stop and consider what it will cost you to go backwards to the beginning of a 30-year term.
If you choose to go to a mortgage broker (rather than a bank or direct lender), you could get a customized loan term that won’t require you to go backward at all. That’s right! A mortgage broker can write a loan for 28 years, 27 years, 19 years, any term that makes the best financial sense for you.
If you are in CA or WA, I am licensed in those two states. If you are in AZ or OR, I have a colleague who is licensed there. Thank you.
Thank you, HGTV Magazine for publishing my credit tip in your October issue.
In case you can’t read the image from the magazine page, here is what it says:
How bad is it to have a credit card you don’t use?
“It could actually work in your favor. Credit bureaus calculate credit scores in part by comparing the total balance across a person’s credit cards with total available credit. So if you have two active cards with low balances and a dormant one with zero balance, that makes you look good because the ratio of total balance to total credit limit is lower than if you had only two active cards, says Carolyn Warren, author of Repair Your Credit Like the Pros. Just know that issuers can cancel inactive cards without warning. “When a card gets closed, your credit score might take a hit since your available credit will go down,” Warren says. That may be an issue if you plan to apply for a mortgage. If so, pull out the unused card on occasion for, say, birthday dinners, and pay it off on time. But if there’s an annual fee that’s higher than the cash back or travel rewards you’re recouping and a credit dip isn’t an issue, close the card — one less fraud risk.”
Are you considering a career in mortgage lending? Would you like to become a licensed mortgage broker?
If so, this is my suggested path to follow.
STEPS TO BECOMING A LICENSED MORTGAGE BROKER
There is not a college degree in mortgage lending, nor is a college degree required. However, to be a licensed mortgage broker, the National Mortgage Lending System requires that you take a 20-hour class by an approved provider. Depending on your state(s) for originating business in, there may be additional hours pertaining to that state. Then you must pass the NMLS exam with a score of 75% or higher.
The 20-hour class, however, will not train you to do your job. The exam is about ethics and lending law, so the classes are aimed toward people who already know how to originate and process loans.
How, then, does a person learn how to do the job of a mortgage loan officer?
This is the way most of us have done it, and the way most of us recommend.
1) Get hired at a bank, credit union, or other direct lender first.
Why? Because you don’t need to be licensed with that type of lender and because many provide on-the-job training. They will teach you how to read a mortgage credit report, how to complete an application, what documents are required, how to input into the system, and all the other basic steps.
Also, this type of lender requires much less knowledge on your part, because you only need to learn their loan programs. (As opposed to being a broker who works with 30+ wholesale lenders!)
2) Learn everything you can about the mortgage business and become a stellar employee so that you earn a top recommendation when you are ready to move up in your career.
3) In two years, you should be ready to move your career up. You don’t want to stay stagnant for too long. But believe me, literally every day in that first year, you will learn something new. Every loan is different and has its own unique challenges.
4) Take the NMLS 20-hour class and state class, and pass your exam.
5) Apply with a good mortgage broker so that you can get your clients the BEST loans at the BEST pricing. You will want this ability if you do loans for family and friends, and to grow your career.
Being a mortgage broker takes ambition, drive, determination, tenacity, knowledge, creative thinking, communication skills, intelligence, and persistence. It’s not for people who can’t handle stress. It’s not for people who are looking for an easy income.
But once you become a mortgage broker, it gets in your blood, and it is hard to think of ever doing anything else. The reward of helping people with their financing to achieve The American Dream of homeownership is truly a blessing in itself.
If you are a college graduate with student loans, but you are unemployed or cannot afford your student loan payments, you can request forbearance.
Forbearance is permission from the student loan provider to temporarily suspend your payments. That sounds good, and it can be; but did anyone tell you this comes at a price?
Your loan continues to accrue interest while it’s in forbearance, which means the balance continues to go up every month.
Navient, the largest student loan servicer, is currently being sued by the U.S. Consumer Finance Protection Bureau (CFPB) for pushing students to forbear when they could have received lower monthly payments instead — among other offenses. There is a public memo from the top brass at Navient that fairly shouts at employees to “FORBEAR THEM!”
Forbearance is better than non-payment or default, which severely hurts your credit score. But before you request it, ask if you can get a payment plan based on your income. That way, you might be able to get affordable payments and avoid extra interest charges.
The main take-away here is that forbearance can be expensive. So only use it when you have no other option.
You can read more about the Navient lawsuits here.
You may have seen the ad on TV or the Internet, the new credit score model called Ultra FICO. Supposedly, if you allow Experian to have access to your banking information, you can get a higher credit score. But wait! It’s not what you think.
The higher credit score FICO will give you for having a good banking history is nothing more than a vanity score. I call it a fake score, because no lenders will ever see it, use it, or accept it.
You might feel better by seeing your score go up, but you will be the only one.
It’s a useless score.
So what’s the point? Hmmm, why does Experian want access to your banking information? They already have a list of all your credit accounts and payment history. What little privacy you have left, they want you to give that up as well.
Don’t be seduced by the hope of an instant higher score via the Ultra FICO score. It won’t help you get a better home loan.
The shocking results of a customer service survey showed that people with low credit scores receive more disrespect and bad service than people with high scores.
It’s not enough that people pay higher rates and higher premiums for having bad credit! Now they get treated like second class citizens, too.
I’m not making this up.
Cable One, an Internet company that services almost a million customers, fully admitted that they spend less time and resources helping their customers who have low credit scores. Here’s what CEO Thomas Might said:
We don’t turn people away,” Might said, but he added that the cable company’s support staff isn’t going to “spend 15 minutes setting up an iPhone app” for a lower-value customer.
Did you get that? If you have a poor FICO score, you are considered a “lower-value” customer.
They flag a person’s file so that the customer service reps know not to spend too much time on you.
This is just one example. Who knows how many other companies provide inferior service to people with subpar credit?
Listen, friends: You don’t have to take this garbage! Take control of your credit, starting today.
Request your free annual credit report so you can check for errors and unverifiable derogatory information. Check your balance-to-limit ratios and pay down those high balances that are docking your score. Pay all your accounts on time. Don’t ignore those statements that come in the mail, because there might be something important inside the envelope. Keep your good credit open, even if you don’t use the credit card (assuming you’re not wasting money on an annual fee).
If you’re not sure where to start, pick up a copy of Repair Your Credit Like the Pros here. Make sure you get the Expanded Edition, not a used copy of an old version of the book. That way, you’ll get all the newest info and all the letters that accompany it.
Refuse to be a victim of a low credit score! Take charge of your life and earn the respect from the financial community that you deserve.
If you’d like to read more about Cable One’s credit discrimination, see here.
Be smart! Pay attention to the roadblocks and avoid them. That way, you will have a smooth and stress-free closing. I am state-licensed in California and Washington. I shop wholesale lenders for you. I am your mortgage advocate. ApplyHere
Tired of throwing away money on rent? Would you like to own your own home?
Use this short list to get ready:
TO DO LIST FOR HOMEBUYERS
- Review your free annual credit report for errors that negatively impact your score.
- Keep all credit accounts open — do not close any accounts.
- Pay down all credit card balances to below 50%. (Below 30% is even better.)
A low balance-to-limit ratio on credit cards = a higher credit score
- If you have cash at home, deposit it into a bank immediately. Cash is not allowed when getting a mortgage loan. The money must be seasoned and sourced in a bank.
- Save for a down payment. You will need 3% to 3.5% of the purchase price, depending on loan type. Exceptions: The zero down VA loan for U.S. Veterans and the zero down USDA loan for properties in rural and semi-rural areas/non-metropolitan areas.
- If you do not have sufficient funds for a down payment, explore the possibility of gift money from family.
- Do not, under any circumstances, purchase a vehicle!
Buy the house first; get the car afterward.
- Do not quit your job; but if you are offered a better job or promotion opportunity, that is totally acceptable, because you are not cutting off your income source.
- Seek out a mortgage broker for your financing. A mortgage broker can shop 30 wholesale lenders with only one credit pull.
A mortgage broker has more loan options to choose from.
- Get your pre-approval letter that shows what price you can purchase.
Get pre-approved first; then go house shopping.
Home ownership represents security and stability. With some work and planning, the American Dream can be yours!
ApplyHere for a home loan in California or Washington state.
Carolyn Warren, Sr. Loan Officer/Mortgage Broker NMLS #1284134
Today, I show you how a gentleman got a $1,290.63 collection deleted. But first, to explain…
An unpaid bill might be charged-off by the original creditor and then sold to a collection company. If enough time passes without collecting money, the account might be sold again and again. There is no limit to how many times it may be sold.
A collection can even be sold after the legal date for reporting to the credit bureaus. When that happens, these “bottom-feeding” collectors purchase a bundle of outdated accounts for a penny or two on the dollar. They know they won’t get money on the vast majority, but on the few they do, it makes their effort profitable.
When you have a collector requesting money, how do you know if they have the legal right to collect?
How do you know if the amount they purport you owe is accurate?
Come to think of it, how do you even know it’s really yours? Do a Google search and see how many people have your same name.
The Law Gives You the Right to Receive Validation of the Debt
You have the legal right to request documentation showing the debt is yours, that the collector has the legal right to collect on it, a payment history, documentation that the balance is accurate, original documentation with a signature, and more.
If they can’t provide proper validation, they don’t get to report it to the credit bureaus and they can’t force you to pay.
As you can see from the letter below, a collection agency completely cancelled a $1,290.63 account, because the gentleman who purchased and read this book took proper steps according to his legal rights.
This is proof that Repair Your Credit Like the Pros works. Thank you for reading my post. I work hard to provide good information to folks who need to improve their credit.
Remember the scandalous data breach with Equifax in 2017 where millions of consumers’ personal data was stolen? Equifax has now settled for $700,000,000.