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 When that happens, these “bottom-feeding” collectors purchase a bundle of outdated accounts for a penny or two on the dollar.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.
Last Thursday, a new Bill (H.R. 3622) was introduced to the Financial Services
Committee. This bill would shorten the time period that negative information can report on a person’s credit report.
Currently, late payments, collections, charge-offs, and other adverse credit can remain in your credit file for seven years. This bill, if passed, would reduce that to four years.
Is four years long enough for consumers to have their credit scores docked for a mistake or hardship of the past?
Is four years long enough for creditors to have leverage in collecting past due funds?
The bill was sponsored by House Representative Rashida Tlaib, Michigan on July 5, 2019.
Thank you to Credit Repair Services, LLC for bringing this to my attention.
“With your help and the ease of understanding your book, I was able to get a $2,500 deletion off my credit, among others. This book is a life saver, well, credit saver! (smile)
Susie asked me to write an update about junk fees imposed by settlement agents (title/escrow companies in the West). She has a good point. Fees have changed since I last posted on this topic in 2015.
Here is a snippet from an actual Closing Statement showing what I call “clean” fees, meaning no unnecessary bogus fees added to pad the profits of the settlement agent.
The Lender’s Title Insurance is $827.14
The Escrow/Settlement/Closing fee is a flat $1,186.80
Notice that the Owner’s Title Insurance is blank, because the Seller pays that.
No doc prep fee, no email fee, no FedEx fee, no courier fee, no archive fee.
Fair and customary fees for the purchase price in Washington state. I like it!
This same company, First American, adds two fees that they do not charge in Washington for California. In CA, First American has a “new loan fee,” previously called a “loan tie-in fee.” They also like to add a notary fee, which can be waived if you go into their office to sign loan documents rather than have a notary drive out to your location after business hours–if you ask. I’ve seen them charge a notary fee even when the buyer drove into their office but also waive it when asked.
Why does the same company charge a notary fee in CA but not in WA? Because competing escrow companies in WA don’t charge extra for a notary.
Here is another snippet, this time from a purchase in California:
You see that this unfortunate buyer paid:
Escrow Fee: $1,225
Lender’s Title Insurance: $1,004
Loan Service Fee: $340
Recording Service Fee: $14
Signing Fee: $225
Special Courier Fees: $75
Owner’s Title Insurance: $1,929
My Comments on these Fees
Notice that the Buyer is paying both the Owner’s Title (typically paid by the current owner, the seller) and the Lender’s Title Insurance. Poor buyer paid $1,929 extra!
Loan Service Fee: $340 Added junk fee. What service are they providing that is not included in the title insurance and escrow closing? They are not the loan servicing company.
Recording Service Fee: $14 This is not the recording fee charged by the county, which was $375. It is an added nonsense fee to the escrow company. It’s like buying a hamburger and paying extra for the pickle.
Signing Fee: $225 to sign, even if they didn’t need to hire a notary outside of business hours.
Special Courier Fee: $75 Isn’t that special of them to charge $75 when FedEx overnight is $17.50! And why isn’t their $1,225 escrow fee enough to cover that in the first place?
The $50 Environment Fee at the top of the list is a county requirement, so all escrow companies are required to charge it. It’s not junk and it can’t be waived.
There is a lot more to say about this topic, but I hope by seeing these two examples, you can shop for a good title/escrow company, and then ask your Buyer’s Real Estate Agent to request your preferred company on the purchase offer.
To shop fees, you can use the online fee calculators. Locate them through Google, like this:
First American Title fees + zip code
Chicago Title fees + zip code
Fidelity Title fees + zip code
Old Republic Title fees + zip code
WARNING: If you sign a Purchase Contract that stipulates using a high-priced, fee-laden escrow/settlement company, then you have agreed to their fees. Once signed, you will not be able to get it changed.
Thank you for reading this post. I work hard to help good folks get good pricing on their mortgage loans.
Warning! Closing credit cards you don’t use could lower your credit score.
Do You Have Unused Cards Like Jesse? Learn From His Mistake
How many credit cards do you own? Jesse had six credit cards: Alaska Air Visa, MasterCard, Sears, Home Depot, Paypal, and Target.
He read that only three credit accounts are needed to qualify for the best conventional loan. He also read that three credit cards are optimal for achieving a high credit score. So he took a look inside his wallet to see which cards he could get rid of without missing anything.
He quickly identified Sears, Home Depot, and Target as unnecessary. He almost always used his Visa for everything anyway, because he liked racking up the points for free flights.
So, he called customer service at the three store cards and instructed them to close the cards “at consumer’s request.”
Consequently, his credit score dropped by 15 points. Jesse was stunned and dismayed!
Length of Credit History Accounts for 15% of Your Score
Jesse’s Sears and Target cards were five years old. His Home Depot card was four-and-a-half years old.
His Visa and Paypal cards were both less than two years old.
By closing out three long-standing cards, Jesse had lost points for longevity.
What Should You Do With Old Credit Cards You “Never” Use?
If you have a major credit card with a bank or credit union, you should use that for a small random purchase (grocery item, gasoline) once every quarter to keep it active and prevent the bank or credit union for shutting it down.
On the other hand, individual store cards remain open indefinitely (most of the time). Even if you don’t shop at Sears for three years, Sears keeps your credit line open in hopes that you might stop in and shop a sale.
There is no harm to your score in keeping old, unused cards open.
If you don’t want to handle the cards, cut them up, shred them, or burn them; but whatever you do, don’t call and instruct the creditor to shut them down! Keep those “long history” cards working for your credit score.
For more vital information about building A+ credit in the shortest amount of time, see here.
Thank you for reading this post. My aim is to help good folks achieve A credit and gain respect in the community.
Which account will dock more points from your credit score and hurt you the most when applying for a home loan?
A) 30-day late payment on 5/2019 for $10 with Target
B) $249 unpaid collection on 9/2014 with Verizon Wireless
C) $5,000 tax lien on 1/2010 with the IRS
If you said (C) the tax lien because it’s the largest and most serious, I can’t blame you, but that is incorrect.
If you said (B) the collection, that is also incorrect.
It is the little $10 late payment that will dock the most points from your credit report, because it is the most recent derogatory account.
It is not the dollar amount but the “Date of Last Activity” that carries the most weight for credit scoring.
Also surprising to many, that little Target late payment will be your biggest hurdle to cross when applying for a home loan. Why?
Because it just happened! Underwriting wants to know why you aren’t able to make a small payment, why you aren’t managing your finances– especially if there are several late payments within the past 12 months. This little late payment will cause you to pay a higher monthly mortgage insurance fee for having a lower score, too.
As for (B) the $249 collection, that can be ignored. It’s five years old and it’s under $250. (FHA is even more generous and ignores under $2,000.) Mortgage underwriters will not regard it as long as your credit score qualifies.
As for (C) the tax lien, if you are in a repayment plan with the IRS and are making monthly payments, that payment will be included in your debt ratio just like a car payment or any other payment. It will not stop you from becoming a home owner.
It’s Not Fair!
If you “decide to do the right thing” and pay off the $249 collection, your score will suddenly drop.
This is because you have “updated the date of last activity” from five years ago to today.
It doesn’t make sense, and it’s not fair, but that is the way the FICO score has been set up. It is essential to know the “credit score rules” so that you can win at the game. When you know how credit scoring works, you are literally in control of your own score.
If you’ve got credit challenges, don’t wait to pick up a copy of Repair Your Credit Like the Pros here. So many good people have improved their credit and you can, too!
Jerrid wrote: “Not only did Bank of America remove this account from my credit reports, but the end result allowed for my credit score to go up 65 points.”
Daisy Bishop wrote: “As someone who has read over 100 purely informative books I can honestly say this book was hands down the most useful, valuable information I have ever read.”
Kara Sutherland wrote: ” I myself have seen a 100 point increase in THREE months.”