Archive for the ‘Mortgage Searches’ Category

Q: My two sons and ex-wife are in the market for a mortgage. My sons’ FICO scores are in the high 700’s but my ex-wife’s score is in the low 700’s (3-4 years ago, she declared bankruptcy). Can your software handle three FICO scores on a single inquiry ?

A: Great question!

First, let me explain how lenders view credit scores. You’ll typically have one “primary borrower” on an application. That person is usually the one who is makes the most income. It’s the middle score of that primary borrower that usually determines the rate and program for the loan. Any “co-borrower” will also be on the application, but their credit scores are often considered a “compensating factor” which means they can help, but don’t carry the same weight. A very small number of lenders will average credit scores of both borrowers.

Our system is set up like that of the lenders whose programs we search, allowing for two borrowers (one primary borrower and one co-borrower).

I don’t know what your son and ex-wife’s incomes are, but if your sons make enough money to support the loan, your wife doesn’t even have to be on the loan. She can still be on the title to the property without being included on the loan. If her income is essential to qualifying, however, then the good news is that her bankruptcy may be old enough that it doesn’t have a major impact on the loan. (Though as you point out, it would likely be best if one of your sons is the primary borrower because of their high credit scores.)

I would recommend they run their rate search using the information of the two borrowers with the highest documented income. If those two are your sons, then great. If your ex-wife is the primary wage earner, she should be listed first. After they compare mortgage rates using our mortgage search engine, a single loan officer will contact them to discuss their loan needs, and can help them decide if there is a better way to handle the application.

It was no surprise to us when a study last week revealed that minorities and people without college degrees pay more in mortgage fees than do white applicants and those with a higher education.

According to the study, “..Those living in neighborhoods where all adults have a college education typically paid $1,100 less in fees than those where no residents had a college education.”

Think about this for a second. Online mortgage shopping — loan officers “competing” for your business — was supposed to make loans cheaper for borrowers, right? So how were so many people overcharged over the past several years? One reason has been the lack of transparency in the mortgage loan industry. Sure, a lender may tell you they have a great loan for you…but how do you know if they do or not?

The only way to effectively shop for a loan is to have access to the same information loan officers do. Then it’s no longer a matter of who can do the best job selling you on a loan, but who can actually deliver the loan.

That’s what we’ve been trying to do for the past year with our mortgage rate search engine: level the playing field between consumers and borrowers with information lenders use when finding loans for their clients.

And if we can save you $1100, we’re thrilled!

“Dani” asks:

My score is right around 620 and I’m looking to get my first home. My question is, should I wait until I improve my score to buy and risk rates going up, or buy a home while rates are lower now? Together my husband and I make about $56,000 a year and want to buy between $120,000 and $130,000. But we want a 30 yr fixed rate and don’t have a lot for a down payment. We’re also wondering if that is possible to get one loan with private insurance instead an 80/20 loan with our credit score?

1. You indicate your credit score is around 620. I want to make sure you have checked your three bureau credit scores through MyFICO.com. The middle of those three scores is the one most likely to be used to qualify you for a rate and program. If you are using credit scores from another source, they are not the same scores that mortgage lenders use and will not be as useful. And since scores can vary widely between the three credit agencies, you’ll need all three to make sure you have the correct number. Make sure your husband has checked his too. Typically the lender will use the score of the person with the higher income, which may be you or your husband. (Our system will search mortgage programs using all three scores, and take into account each lender’s criteria for evaluating those scores.)

2. The price range in which you wish to buy sounds reasonable for your income, but the fact that you have little saved and lower scores does worry me. If you get too strapped with the purchase, you’ll have nothing to fall back on when the normal expenses of homeownership crop up. You may want to look for a real bargain (depending on prices in your area), even if it’s not your dream home, to keep your expenses low. Don’t worry so much about where rates are headed as whether you are ready to buy a home or not. If you feel pressured or rushed, you are more likely to make a poor decision.

3. You may well qualify for a low-downpayment loan with Private Mortgage Insurance (PMI) but don’t rule out a piggyback loan (80% first, 10/15 or 20% second). Compare both. The only way to know for sure what your options are is to find out what loans are available to you. In addition to using our mortgage search engine to compare mortgage loans at LenderRateMatch, I would also recommend you talk with a lender who offers FHA loans. These government insured loans are offered by private lenders, and can be more lenient on credit factors as well as offering a low downpayment. They had fallen in popularity in the past few years, but there is a resurgence in them now that other options have dried up.

We wish you the best with your first home purchase!

Q: I am interested in purchasing a FSBO (For Sale By Owner) home in my area. What steps must I absolutely not neglect in securing the best possible mortgage?

A: What a great question! The smartest homebuyers always think about the financing before they start home shopping. After all, while buying a home is expensive, by the time you pay off the home loan you may have paid twice that!

We have a number of articles on our site that should be helpful to you as you prepare to get a mortgage, but here are the most essential tips I can offer:

1. Get your three-bureau FICO credit scores from MyFICO.com. Lenders are becoming much stricter in their credit score requirements, and as a result, you want to make sure yours is as strong as possible. If you find any mistakes or incomplete information, give yourself plenty of time to straighten it out.

2. When you compare mortgage rates and fees, make sure you are comparing apples to apples. You always want to ask a lender to quote you the “par rate.” This is similar to the dealer invoice pricing, and allows you to accurately compare a rate against another. (Our mortgage rate search engine automatically does this for you so you.)

3. Get pre-approved from a lender in writing. This will give you negotiating leverage with the home seller, as they know you are good to go if all other details of the purchase work out.

And although these aren’t home mortgage tips, I’d also recommend you get a real estate attorney to write up or review your purchase contract, and that you get an independent home inspection from an ASHI certified inspector.

Good luck – I hope you find your dream home!

A frustrated homebuyer-to-be asks:

Q: My credit score is not good. Most of it is because I have two accounts that are the same on my credit report, and two that are paid off but still on my credit report. How can I get someone to help me finance a home? I pay bills on time but at that time in my life I had a sick fiancée to care for.

A: Negative information does not haunt you forever. Under the federal Fair Credit Reporting Act, late payments can be reported for seven years and collection accounts may be reported for up to seven and a half years, whether they are paid or unpaid, Bankruptcies can remain for ten. But the good news is, the older that information becomes, the less important it is to your credit. Accounts in the past two years typically carry the most weight.

I don’t know how recent your problems were, but I suspect part of the trouble you are having is that you don’t have current positive references on your file. I would recommend you check your credit reports and scores.

With your three bureau credit reports and scores in hand, you can use FreeRateSearch.com to find out what home loans may be available. After you complete your initial mortgage rate search, you can also try “what if” scenarios by changing the information you submit — what if you increase your income, for example, or reduce your proposed loan amount? This may help you find a loan that works for you.

Most mortgage lenders like to see at least four current credit references paid on time. If not, you may need to start with a secured credit card.

I would also recommend you dispute the account that is being reported twice. If there is a duplicate account for the same item, one should be removed.

If you really focus on your credit, and make sure your other qualifications are strong (down payment, steady income, etc.) you should be on your way to becoming a homeowner.