YOUR GOALS, YOUR DREAMS, YOUR FUTURE.

I'll help you get there.

Welcome 1st Time Homebuyers! 

Stop renting and stop paying for the college education of the landlord's kids.  Invest in YOUR future by owning your own home. 

Now that you made the decision, the first thing you want to do is get approved for a mortgage.  This way you can take your approval letter to your favorite realtor, find your dream home, and have the keys to the front door within thirty days.  Choosing the right realtor is a very important part of having a successful home buying experience. Our team works with a select network of ethical and experienced realtors, who have a proven track record of satisfied clients. Please let me know what your needs are, and I would be happy to recommend a realtor.  Hopefully you will find the following information useful.

It is important that you know what is on your credit report, what your credit score means, what is causing your low score, and how to raise your score.  Fixing your credit may not be easy but it can be done.  You may have to call creditors and credit bureaus and supply them with documentation.  Ignoring collections, judgments, or errors on your report will not make them go away.  I will work with you until I can get you a home loan.  Hopefully you will find the following information useful.

Home Buying and Your Credit Report

    How to Get Started – Getting All Your Ducks in a Row

    What Information is in a Credit Report?

    What does the Credit Score Do?

    How to Get Started – Credit Report Repair

Steps to Boost Your Credit Score

Establishing Credit for the 1^st Time - How to Get a Credit Score

    Understand What Creditors Are Looking For

    Start With Your Bank

    Consider a Department Store Card

    When All Else Fails

    Establishing Credit is Only the First Step

Qualifying for a Mortgage

Check List of Items You Will Need to Have

Reducing Debt

How to Make a Budget

Home Buying and Your Credit Report

Owning a home is the American dream, but for many of us, it remains a figment of our imagination because of one thing – a poor credit report history.  Many first-time home buyers do not realize that their credit report can make the difference between the Underwriter granting or rejecting their mortgage loan application.  The information on a credit report portrays an image of us; it is a financial report card of sorts.  So, what is a would-be home buyer to do?  The first step to improving and repairing a credit report is to ask for help.  A reputable consumer credit counseling service can provide professional guidance on how to retrieve, review and interpret credit reports and analyze your credit score to determine strategies to improve it.  Improving your credit report and credit score can be the “key” to owning your new home.

How to Get Started – Getting All Your Ducks in a Row

Because purchasing a home is probably the single biggest investment of your life, you should take every action to ensure you are doing it right.  You can start by getting organized and following the suggestions below.

Make an exhaustive list of every credit card or loan that you currently have or have had in the past (even closed ones).  Then, order a copy of your credit report.  You are entitled to one free credit report per year from each of the three nationwide credit reporting agencies – Equifax, Experian, and TransUnion.  You can obtain the credit report by website (www.annualcreditreport.com), phone (1-877-322-8228), or by mail (form is located at www.ftc.gov/credit).  Once you receive your credit report information, you will need to carefully dissect it to ensure that the information is accurate.  Because understanding and interpreting credit reports is such a daunting task, a professional credit report specialist can help you take the guess work out of it and learn the proper way to dispute any inaccuracies.

What Information is in a Credit Report?

A credit report details many aspects of your credit history that you may not have even considered.  Some of the types of information that are collected by credit reporting agencies are:

• Information on Employment and Identity – This includes such pieces of information as your name, social security number, date of birth, addresses (current and past) and spouse's name.  Your employment information includes jobs you have held in the past and income.
• Your Payment History – Includes every credit account that you have ever held detailing whether or not you have made timely payments and what your credit line was.
• Any Past Inquires Made on Your Credit – If any creditors have requested information on you for either credit purposes (within 1 year) or employment purposes (within 2 years).
• Any Information on Public Record – This includes such items as bankruptcies, liens, or foreclosures.

What does the Credit Score Do?

Another extremely important aspect of your credit report is the credit score.  Also referred to as a risk score or FICO score, the credit score is a 3-digit number developed by the Fair Isaac Company (FICO) used to determine your creditworthiness to potential lenders or creditors.  The number can range anywhere from 300-850 (with 850 being a perfect score), and is calculated by a complicated mathematical algorithm.  The breakdown of how a credit score is weighed is as follows:

• Payment History – 35%
• Outstanding Debt – 30%
• Credit History Length – 15%
• New Credit Applications – 10%
• Your Credit Mix – 10%

If your credit score falls below 650, it is important to improve it by focusing your efforts on reducing your debt, paying your bills on time, and making sure that your credit report information does not contain any inaccuracies.  It can take some time to increase your credit score, but it is vitally important to show creditors that you are a responsible and creditworthy candidate.

How to Get Started – Credit Report Repair

No one is perfect.  We have all had times when we have paid a bill late for one reason or another, and some of us have had serious credit problems in the past, but it is never too late to start repairing your credit.

If you are ready to purchase a home, but your credit history is still haunting you, prove your credit worthiness by maintaining your monthly payments and paying down your outstanding debt.  

1.) Order your credit reports
Find out what the top three credit bureaus Equifax, TransUnion and Experian are saying about you.  It's likely that they're all slightly different because creditors don't have to report to all three credit bureaus.

2.) Examine your reports carefully
It is not uncommon to have an error on at least one credit report from one of the major credit bureaus.  Credit bureaus don't verify information they receive from your creditors when they generate your report.

Carefully look for everything from typing errors, outdated and incomplete information to inaccurate account histories.  You'll want to make a thorough list of items you dispute and why.

If the negative information in your report is true, only time and improved habits can change that.  Late payments, such as credit cards, and charged-off accounts remain on your report for seven years after they have been paid.  Bankruptcies stay for 10 years.  Underwriters look for a pattern of payment rather than focusing on one-time or rare occurrences; so consistent on-time bill payments will improve those blemishes.

3.) Dispute and Document
Identify each mistake and state why it's wrong.  A recommendation is to send a photocopy of your credit report with the mistakes circled to the reporting credit bureau. Include copies of supporting documents.

Document, document, document.  Keep copies and records of all the forms, letters and documentation that you send the credit bureaus, plus dates sent.  The credit bureau must investigate any relevant dispute within 30 days of receiving your letter.  Any item that is not verified as accurate by a creditor is removed.

4.) Solve and dissolve debt
Now's the time to devise a spending plan that reduces your debt and sets you up to pay on time, every time.

If you're having difficulty making payments, be proactive.  Call your creditors and negotiate to keep your accounts current and from being reported as delinquent or "bad debt."  You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.

The same strategy can be used for fixed-loan payments.  Remember, though, that this is a short-term strategy.  You'll pay more interest to extend the repayment schedule, but it allows you to stay current and save your credit rating.  Use the extra money to pay off debts one at a time, gradually increasing payments to other debts.

Deal with any collection accounts.  Unpaid collections are worse than paid collections.  You can negotiate a pay-off settlement that reduces your bill, plus demand that all derogatory remarks are removed from your credit report or at least reported as paid in full.  Be sure to get verbal agreements in writing before sending off your payment.

If you have really bad credit, perhaps even filed bankruptcy, don't let your credit status go dormant.

5.) Pay your bills on time.  Delinquent payments can have a major negative impact on your score and the longer you pay your bills on time, the better your score.

6.) Keep balances low on credit cards.  High outstanding debt can affect your score.  Maxing out your credit cards could lower your average score by as much as 70 points.

7.) Don't open a number of new credit cards that you don't need.  New accounts will lower your average account age, which could actually lower your score by up to 10 points.

8.) Have credit cards - but manage them responsibly.  In general, having credit cards and installment loans (and making timely payments) will raise your score.  Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

Establishing Credit for the 1^st Time

How to Get a Credit Score

When you have no credit history you will have no credit score.  Without a credit score a Mortgage company has no way of evaluating your ability to pay back the loan and you will need a cosigner to get a mortgage.  When getting an approval for a mortgage without a cosigner, we will look to see that you have three creditors, such as credit cards or auto loans, all in good standing for one year.  

However, when you don’t have any credit history, it can be difficult and frustrating when trying to obtain that credit card, or auto loan, or other type of loan.  Establishing your initial credit history can be a Catch-22.  If you don’t have credit, not many places are willing to give you credit, yet how can you ever establish credit if nobody is willing to give you any?

Understand What Creditors Are Looking For

Since you are looking to establish credit for the first time, lenders can’t look to your credit score to determine whether or not to lend you money.  In these situations they have to examine other factors that can help them decide if you are a credit risk or not.

Bank accounts. You don’t need a credit score in order to open a checking or savings account at your local branch.  Since it doesn’t require credit to open, it also doesn’t get reported to the credit bureaus to establish any credit.  Even so, your account history can be a vital component when lenders consider giving you a credit card or loan for the first time.  A savings account with a pattern of savings also goes a long way to proving your ability to pay a mortgage. 

EXAMPLE: If you pay rent each month of $600 and show a deposit into your savings account each month for $400, this shows the Underwriter that you can afford a monthly mortgage payment of $1000.  Plus, after a year of making the $400 deposits, you have saved enough for a down payment.

Employment history. Another important factor lenders look at is your employment history.  They want to see if you are able to hold a job or if there are periods of unemployment.  Your ability to hold a steady job can improve the likelihood of getting approved.

Residence history. Lenders will also look to see how often you move and whether you rent or own.  As with employment history, it pays to have a stable residence.

Utilities in your name. Even without a credit history, it is possible to sign up for many utilities in your own name.  Having an electric or gas bill, telephone, cable, or water service in your name also helps.  Just having your name on these accounts won’t establish a credit score, but it can be helpful for first-time borrowers.

Start With Your Bank

There are a few things you can do that can help in your quest for establishing credit.  The first thing you should do is open and maintain a checking and savings account at a local bank.  This is helpful in two ways:

When you have active bank accounts in good standing, you are proving that you can manage money.  While bank accounts aren’t typically a part of your credit score, lenders can use this information to determine whether or not you are a credit risk.

Establishing a relationship with a bank will improve your chances in obtaining a credit card through them.  If you already do business with a bank, they should be the first place to look.  They know you and they value your business.  This existing relationship should carry some weight when seeking credit.

Consider a Department Store Card

You’ve probably been shopping at the mall and been asked if you’d like to sign up for their store credit card to save 10% on your purchase, but politely declined.  Generally, store cards are a bad idea because they lure you in with that up-front discount, and then the ongoing interest rate is very high.

Avoiding these cards is typically a good idea, but the ease in obtaining one may actually be a good thing if you’re having trouble establishing credit.  If you have struck out at the local bank, you may want to consider checking with one of the local department stores and see what type of cards they offer.  Whatever you do, make sure you find out whether or not they report to the credit bureaus.  If they don’t, it will do you no good.

If you are approved for their card, you need to be disciplined and use it properly.  Don’t treat this new purchasing tool as free money, but only as a means to establish good credit.  The limit will probably be low anyway, but you should make an initial purchase with it and subsequently pay the balance off in full.  Once the card is active, it should begin to be reported to the credit bureaus.  It is now important to maintain a good payment history on this card so your credit history can build upon it.

When All Else Fails

If you’ve tried the bank, department store, or even credit card companies directly and failed, not all is lost.  Secured credit is a last resort, but it is much easier to obtain than unsecured credit.

When a credit card or loan is secured, it means that there is an asset linked to the account that the lender can take if you fail to make payments.  When you have a mortgage or auto loan, these are secured loans.  If you fail to make payments, the lender will take your house or car in order to satisfy the debt.

You can establish the same thing at most banks with a secured credit card.  You can pledge money you deposit in an account to secure the credit card.  For example, you could obtain a secured credit card with a $500 limit if you put a $500 deposit in the bank that is linked to the card.  If you fail to make your credit card payments, the bank takes your deposit.

Again, you want to check and be sure that this secured credit is reported to the credit bureaus, but if so, this can be a useful tool to establish that first piece of credit history.  After you maintain that account in good standing for a while, you may be able to obtain a regular credit card or loan.

Establishing Credit is Only the First Step

Qualifying for a Mortgage

You will need a few things to qualify for a mortgage

1. Money for a down payment
   1. FHA loans require 3.5% down
   2. VA loan require 0 down
   3. Conventional loans require 5-20% depending on your credit
2. You must be currently employed and have been working in the same line of work continuously for 2 years.
   1. If you have been in college and are now employed in the same line of work as your degree, 2 years is not required.
3. Good credit (620)
4. Good Debt-to-Income Ratio’s

   1. Income

                                       i.      Employment

                                       ii.      SSI

                                       iii.      Alimony

                                       iv.      Child support

                                       v.      Any documented income

2. Debt

                                        i.      Recurring credit cards

                                       ii.      Automobile payments

                                       iii.      Any monthly debt that appears on a credit report

3. Front End Ratio

                                        i.      The front-end ratio is your new mortgage payment divided by your monthly income.  The maximum front-end ratio for a FHA loan is 29%.  

                                        ii.      This means if your monthly gross income is $4,000, to qualify for the maximum FHA loan, your monthly principal, interest, taxes and insurance payment can not exceed $1,160.   

                                            $1,160 / $4,000 = 29%

4. Back End Ratio

                                         i.      The back-end ratio reflects your new mortgage payment, plus all current bill payments.  Therefore, the back-end is higher than the front-end.

                                         ii.      For FHA the maximum back-end ratio is 43%.  This means if your car payment is $350, and you pay $150 a month in credit cards, your total monthly recurring debt is $500.  On the FHA loan payment above of $1,160, plus the $500 recurring debt, your total debt is $1,660. The back-end ratio number is $1,720 ($4,000 x 43% = $1,720). Your total debt is less than $1,720, so you qualify.

                                             $350 + $150 + $1,160 = $1,660

                                             $1,660 / $4,000 = 42%

Check List of Items You Will Need to Have

Income Information

1. Paystubs for the past month
2. W-2’s for all jobs worked for the past 2 years
3. If there are any gaps in jobs or changes in pay you will need to write a letter of explanation.
4. If commissioned work you will need 1040’s for the past 2 years
5. If self-employed you need to show:
   1. Corporate or S-Corp federal returns (signed)
   2. Year-to-Date Profit & Loss Statement (signed)
   3. Financial Statement of Assets & Liabilities (signed)
6. If you receive a Pension, Social Security, Alimony, or Child Support you will need:
   1. Copies of most recent checks received.
   2. Copy of official document such as Divorce Decree or SSI Awards letter
   3. If you receive child support you will need to show 12 months checks

Assets

1. You need to show enough money in the bank for down payment and closing costs.  If the loan is conventional you may also need to show enough in the bank to cover all bills and the new mortgage for a few months.
2. If your bank statement shows any large deposits or bounced checks you will need to write a letter of explanation.
3. If you have any Stocks, Bonds, IRA, or 401K, and you are using it for closing costs, you will need to show documentation.
4. If you are using Gift Funds
   1. Get a signed Gift Letter
   2. Make a copy of the check
   3. Make a copy of the deposit slip

Credit and Debts

1. All credit problems in the past 2 years must be explained and documented in detail
2. Copy of past 12 months Rent checks.
   1. If renting from an apartment complex, give company name and number.
   2. If living at home with family and not paying rent, you will need to have very good credit and show significant savings.
3. If you have any judgments, collections, or late payments, you will need to provide a letter of explanation.
4. If credit report shows any unpaid debts, you will need to show proof that they are paid off.
5. If you have had a Bankruptcy or Divorce you will need to provide all the official documents.

Money

1. Money for credit reports and appraisal must be paid upfront

Photo I.D.

1. Copy of drivers license or other photo ID.

Reducing Debt

If you've made the decision to rid yourself of debt, it's time to take action.  Some types of debt such as a home mortgage, may improve your credit rating over time.  But carrying high-interest loans and credit card debt could negatively impact your credit report.  Here are five steps you can take today to focus on successful debt management:

• Create a budget. Focus on those credit card payments.  Adjust expenses to pay whatever extra amount you can put toward the credit card balances.  If you have trouble finding extra funds, consider consulting with a professional credit counselor at Consumer Credit Counseling Services agency.
• Focus on one payoff. After a full examination of your overall financial situation, debt management experts will advise you regarding whether to pay off your higher interest loans first or focus on smaller balances.  This recommendation is usually dependent upon the rates of interest and fees that are being applied to your accounts.
• Make extra payments. Pay more than the minimum required on monthly credit card payments.  Once you have paid off a credit card, continue making the same payment amount toward another credit card, in addition to the required minimum monthly payment for that card.
• Ask for cuts. Call and ask your credit card companies for lower interest rates.  They will consider your request, particularly if you know of lower offers elsewhere.
• Stay focused. Balance-free cards are tempting to use, as is the extra cash.  But spending either will only put your debt management goal further away.  Stay focused on being debt-free!

Take action today toward your personal debt management goals.  These steps, and staying focused on your goals, will ensure that you have a debt-free future!

How to Make a Budget

Do you find yourself thinking at the end of each month, "I earn a decent salary, where does it all go?"  A personalized budget can provide a clear picture of the money you earn and spend.  It will also help you target effective ways to save money, and help secure your financial future.

Six Money Saving Steps

To make and maintain your individualized budget, Consumer Credit Counseling Services (CCCS) experts recommend these six simple steps:

• Record income. List everything you expect to earn in the coming year.  This should include salary, raises and any tax refunds.
• Identify expenses. Don't minimize or exaggerate your monthly household costs.  Make sure to include hobbies, dining out and salon services.
• Pay yourself first. Every budget should include monthly savings, no matter how small.  Credit counseling specialists say that the habit is more important than the amount.  Small savings grow quickly.
• Adjust As you go. Fitting expenses into your income usually requires some tweaking.  If you need help fine-tuning those expenses, consider consulting with a nonprofit credit counseling agency.  After a confidential consultation, your credit counselor will create an individualized and thorough budget to help you reach your long-term financial goals.
• Banish debt. If the bulk of your monthly income currently pays off debt, work on getting rid of that debt!  A solid financial future depends on it.  A credit counseling agency can talk with you about a debt management plan.  The debt management plan will help consolidate your debts, and can structure more reasonable monthly payments, enabling you to pay down debt as quickly as possible.
• Track results. Check in regularly with your budget, at least monthly.  When you see how quickly you are moving toward your long-term goals, you will realize how helpful a budget can be.

A budget is essential for successful debt management, credit counselors say.  Checking the numbers regularly helps keep you focused on paying off bills.  It is rewarding to see debt drop each month, knowing that a realistic budget is helping you reach your financial goals.

NMLS #171848