New Bill Says Negative Credit Should Be Removed After Four Years

~ Carolyn Warren ~ 6 Comments

Last Thursday, a new Bill (H.R. 3622) was introduced to the Financial Services

House Representative Rashida Tlaib, Michigan

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) 
Thank you,
T.C.

 

How to Avoid Title and Escrow Junk Fees

~ Carolyn Warren ~ 4 Comments

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.

GOOD FEES!

 

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.

BAD FEES!

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.

 

 

Homebuyers Beware: Don’t Make One of These Fatal Mistakes

~ Carolyn Warren ~ 2 Comments

If you have a question about this information, feel free to post a comment or contact me here.

If you are in California or Washington, you can apply to get pre-approved here.

Thank you for reading my blog. I work hard to help people become home owners and achieve their part of the American Dream.

Don’t Close Your Credit Cards (Here’s Why)

~ Carolyn Warren ~ Leave a comment

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!

What happened?

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.

 

Buying a House? Don’t Quit Your Job (Even If You Signed Papers)

~ Carolyn Warren ~ 5 Comments

While signing loan documents in the company break room with the notary, the homebuyer got on the loud speaker and announced, “I now quit this job!”

A woman texted her employer and said, “I don’t wanna work here anymore.”

Both of these people suddenly lost their loans–and their dream of home ownership!

Yesterday, a group of mortgage brokers were talking about things that had gone wrong at the last minute. Both of these stories were part of the group conversation. More chimed in with similar stories.

Evidently, lots of homebuyers don’t like their jobs and  can’t wait to quit.

If you quit your job, your loan will be stopped.

Even if you have signed loan documents, the lender can still refuse to fund your mortgage. Signing the contract does not force the lender to go through with the loan.

The lender agreed to grant the loan based on your employment and income. When you change that, you have changed your agreement. The deal is off!

You can’t quit and start your own business.

If you’ve been a house painter for 20 years and now you want to start your own painting business, you will have to wait two full years before you can get a mortgage. The time requirement for being self-employment is 24 months, even if it is in the same line of business.

What happens if you get laid off or fired?

If you lose your job, then your loan goes on hold until you can regain employment and provide an offer letter and one paystub to show you’re back at work (and what your new income is). Likewise, if you quit and now regret it, scramble to get another job fast so you can save your loan.

The End of the Story

In the case of the woman who texted her boss that she quit, the loan officer tried calling the boss to persuade him to take her back. Unfortunately, the employee’s apology started off by calling her boss a dirty name, so that didn’t work out.

One would-be homebuyer asked his loan officer: “Don’t you have a loan program for people (who aren’t working) like me?”

“Yes,” she replied, “it’s called renting.”

As always, thanks for reading and passing on information to good folks who don’t know the rules of closing on a mortgage loan.

Many thanks to Dreamingfrees @ Pixabay for the free image I used above.

Which is worse: Late Payment, Collection, or Tax Lien?

~ Carolyn Warren ~ 1 Comment

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.”

Can You Use Bonus, Commission, and Tip Income to Qualify for a Home Loan?

~ Carolyn Warren ~ 2 Comments

Do you receive commissions, a bonus, or tips as part of your income? If so, here is important information.

With variable income, lenders are looking for stability. They want to see you consistently receive this extra income and that it hasn’t taken a nose-dive this year compared to last year (without a very good reason).

Here are specifics:

BONUS INCOME

You must receive bonus income for 24 months to include it on your loan application. The same applies to restricted stock (RSU) income. Future bonuses do not count; it’s based on the average over the past two years.

COMMISSION INCOME

If commissions make up 25 percent or more of your income, then you need to submit two years’ tax returns in addition to your W2s and paystubs. Why? To see if you deduct a lot of your income with required expenses.

A two-year history of receiving commissions is preferred, but one year can be accepted with make-sense circumstances. It’s an individual underwriter decision, so best to speak with your mortgage broker who knows all the underwriters (and who is most common sense oriented).

TIPS

Tip income can be included as long as it is verified. You’ll need to show the tip income on paystubs and W2s. The lender will most likely ask your employer to fill out a Verification of Employment form to confirm.

You cannot hide cash tips, pay no taxes on the income, and then suddenly declare it on your loan application. The income you state to the IRS needs to match the income you state to your loan officer.

Your experienced loan officer will help you calculate and determine your income for qualifying to buy a home. If you are in California or Washington, I am state-licensed and happy to help. (NMLS License # 1284134)

Beware of Incorrect Mortgage Information

~ Carolyn Warren ~ Leave a comment

This recent headline published by a mainstream and well-known media source is false.

There is NO loan that allows the seller to assist with the buyer’s down payment.

(Not allowed on conventional, FHA, VA, USDA, or non-prime loans.)

The down payment may come from the buyer, as gift money from a close family member, or from an acceptable down payment assistance program.

The seller is allowed to pay for closing costs only, never down payment on the loan.

When you are researching information on home buying and getting a mortgage, don’t believe everything you read online. There is a lot of incorrect information out there.

Article writers who have not worked in the mortgage industry are not good sources of information.

And to make a bad situation worse, articles like this get passed around, copied, and then when people see it multiple times, they believe it.

Be smart: get your information straight from your mortgage broker. That way, you will know it is true and accurate.

 

How to Shop for a Mortgage Without Getting Hit for Multiple Credit Inquiries

~ Carolyn Warren ~ 2 Comments

pexels-photo-1586525This is my best tip for shopping 30 or more mortgage lenders with only one inquiry and one phone call.

A big concern people have when they’re getting pre-approved for a home loan is, “How do I shop for the best rate without having multiple inquiries on my credit report?”

What the Big 3 Credit Reporting Agencies (Credit Bureaus) Say

Experian says consumers have 15 days to shop for a mortgage without having their credit score penalized.

Equifax and TransUnion say consumers have 45 days.

If this is true, why have some people seen their scores drop when their credit is pulled twice or more during that window?

According to National Credit Care, the window shopping idea is all nonsense. They say that they do see people’s scores go down, and that it is because lenders use the Classic 04 model, not NexGen that was created in 1997 and nobody uses.

Why Having Lots of Inquiries is Bad

  • If you have a borderline credit score, you don’t want to risk seeing your score drop.
  • If you have credit challenges and an underwriter sees that you have applied with six other lenders, the underwriter thinks, “None of my colleagues at other companies are approving this loan; why should I be the sucker who approves it?”

Best Tip for Rate Shopping Without Taking a Credit “Hit”WA First Awards 2018

A mortgage broker can shop 30 or more lenders (wholesale!) with only one credit pull. Not only do you avoid multiple inquiries, but you get to have a professional who knows all the underwriters do the shopping for you. It’s like having a free personal shopper!

Additionally, why walk into a retail bank or lender office when your mortgage broker can go to those same lenders on the wholesale side?!

There is no downside to using a state-licensed mortgage broker who has a legal fiduciary responsibility to get you the best loan at the best price they have available. (Banks and direct lenders don’t have that requirement.)

I am state licensed in CA and WA, NMLS #1284134. I’ve been doing loans for 20 years and have been on both the retail and whole side of the business. If you’d like me to help you get pre-approved, you are most welcome to apply here. Or, send me a message here.

 

 

When a Creditor Sends You a Summons

~ Carolyn Warren ~ 5 Comments

First off, always open a letter from a creditor. Never ignore it because you don’t want to face pexels-photo-534204 courtthe bad news.

If the letter is a summons to court, don’t make the biggest mistake of your life by not showing up! This is so important, and here’s why…

The vast majority of the time, if you show up and say the magic words, the entire case will be dropped and YOU WILL PAY NOTHING.

But if you don’t show up, then the creditor automatically wins, and then they have the right to claw money right out of your paycheck and/or claw money right out of your bank account. You won’t find out until pay day when you see that your check is not enough to live on. And it gets worse…

The creditor typically adds attorney fees and interest to the balance — plunging you even further into debt!

And to think that you could have paid $0 if only you’d shown up in court and said the magic words.

One study shows that 90% of people who receive a summons never show up. Maybe they didn’t open the letter. Maybe they were “busy.” Maybe they’d given up hope. Listen, my friends, don’t let that be YOU.

Show up. Wear your nicest business attire. A button down shirt, slacks, a skirt or dress, a business jacket if you’ve got one. Your best shoes. No tee shirts and flip flops. Present yourself like a financially responsible person.

When it’s your turn to speak, say these magic words: “Prove the case.” That’s right, it’s as simple as that.

I would phrase it like this: “Your Honor, I don’t believe I owe $3,495 (or whatever they’re alleging you owe). I would like for them to prove the case with the original documentation and a detailed explanation of how they got that balance.”

If you think you might be too nervous (or intimated) to remember that, write it down ahead of time and read it when you get there.

The overwhelming chances are that the representative showing up in court will not have proper documentation. Did you get that? Almost every time, at that point, the case against the debtor is dropped.

Just think, instead of owing $3,495 + $500 attorney fees + 24% interest, you could owe NOTHING.

I am sick and tired of hearing stories about good people who lost their jobs, had a medical emergency, are working for minimum wage while trying to take care of their children, and then got intimidated by a greedy creditor who doubled what they owe– supposedly — without ever showing the proper paperwork to prove it. And don’t get me started today about how they paid one penny on the dollar to buy the debt!

There is no reason why they can’t offer you a deep discount/settlement and still make a profit.

So again, don’t let that letter go unopened. And don’t fail to show up in court if you receive a summons.

Thank you for reading! If you’d like to pick up a copy of Repair Your Credit Like the Pros, Book cover Repair Your Credityou can find it here.