Coronavirus-FHA 680 FICO

Things are moving so quickly in the market with the coronavirus being at the forefront, everyone is feeling hardship across the board.

FHA Loans provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. It is one of the largest insurers of mortgages in the world, insuring more than 46 million mortgages since its inception in 1934 and it's the only government agency that operates from its self-generated income.

Self-generated income which means the Mortgage insurance premiums that is collected from borrowers via lenders are used to operate the program.

FICO scores tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk by utilizing a FICO formula.

The most commonalty used :

Equifax Beacon 5.0

Experian/Fair Isaac Risk Model v2

TransUnion FICO Risk Score 04

We’re seeing what’s “good” for rates can be bad for lenders, and what’s “good” for the market can be bad for home buyers. This tug of war has caused servicers to implement drastic measures to keep up; includes raising the minimum FICO. If you have questions or concerns please contact your lender right away.

Lifting a Credit Freeze

Un-Freezing Your Credit Report

Freezing your credit won't hurt your score, but it will keep an identity thief from opening new accounts in your name which is a good thing. Keep in mind when purchasing a home or refinancing you will need to "Un-Freeze" your reports with the credit bureaus.

When a mortgage lender pulls your credit they will be alerted that there's a freeze on your credit report and you will need to contact that particular company (Trans Union, Experian, Equifax), and each company has a process so ensure you check.

Below are the 3 different Credit Bureaus that you may have a Freeze on:

Transunion

You may request a lift of your freeze from Trans Union online, by mail, or by phone.

By phone: You will need to have your SSN, DOB, Security Freeze Pin, lift type, start date and end dates. It can take up to 15 minutes to process this request.

By mail: Complete the Lift Section of the Security Freeze Form that is sent to you after you've requested the freeze, mail it back to the address at the bottom of the form. It can take up to 3 business days from the date of receipt to process this request.

Note: If you're in the state of Colorado and are requesting a lift, you must ask for a "Global Lift." This does not require third parties to have a PIN to access your credit file.

Experian

You may request a lift of your freeze from Experian online or by phone

For either, you will need to provide your identification information and PIN. Experian will then provide you with a PIN to give to third parties that need to retrieve your report.

Equifax

You may request a lift of your freeze from Equifax online or by phone

For either, you will need to provide your 10-digit security freeze confirmation PIN provided in your confirmation letter, date range and the name of the specific credit grantor/report user you woul like to receive your report.

Your Purchasing Power

Who’s your favorite X-Men character? Wolverine? Storm? Professor X? What makes that character your favorite? For some people it’s the character’s courage, or perhaps their good looks, or their intelligence. My favorite mutant character is Mystique and what makes her my favorite is her superpower. Mystique is a shape shifter, meaning she can change her body and her voice to look like anyone she chooses. Did you know that outside of the comic book world there are real-life, everyday people with super powers? You are one of them. This article is going to walk you through tapping into and applying your purchasing power.

Though I’m sure you’re not a mutant like the characters of X-Men, your purchasing power is a great power to exercise when you’re looking to buy a home. Your “Purchasing Power” is the ability and the flexibility to get the home you want. Your purchasing power can be increased by applying the following practices:

Decrease Your Debt

Though the ultimate goal is to eliminate your household debt all together, depending on the amount of expenses you have, you may not be able to eliminate all of your debt all at once. In the meantime, decrease your debt by eliminating what you can. Pay off any outstanding medical bills. Return those overdue books to the library. Most importantly, stop using your credit cards. The minute you decide that you want to purchase a home, stop all usage of credit. Every time you swipe that card, you’re swiping yourself into debt.

Increase Your Credit Score

Similar to how eliminating all of your debt will take time, improving your credit score will take time too. It’s easy for credit scores to drop, it’s a little tougher to bring them back up. Every 30 days the credit bureaus update with any new financial information from the previous month. That means there’s only 12 opportunities within a year for your score to go up (once each month). So each month you’ll have to make a conscience effort to change something for the better on your credit report. Remember, when credit does increase, it’s usually only increasing by a factor of roughly 1-15 points. Big events (like a delinquency or having an account go to collections) can change your credit score drastically, negatively hitting your credit anywhere in the range of 100 to 150 points so be sure to pay everything on time if not early.

Check Your Credit Report

When you do your application to purchase a home, your credit report will be pulled and lenders will evaluate how much money you can be trusted to borrow. Do yourself a favor and check your score before the lenders do. I read once that at least 5% of Americans have a major error on their credit report. This could be caused by something as simple as someone having the same name and birthday as you. You’d be surprised how many John Smiths were born on the same day. Check your credit report to dispute any incorrect information that could be hurting your credit score.

Add to Your Income

Another thing that lenders look for when processing your mortgage application is your debt to income ratio. This ratio compares how much debt you have to how much income you earn. It is calculated by dividing the total amount of your monthly expenses by your gross monthly income before taxes. The lower your DTI is, the more money lenders are likely to let you borrow. Increasing your income can also lower your DTI by adding to the income portion of your ratio. For example, if your monthly debt totals at $1500 and your gross monthly income is $3000, your DTI ratio would be .5 or 50%. On average lenders look for a DTI ratio of no more than 43%. If you were to pick up a second job that brings in an additional $2000 per month and you could raise your total income to $5000, your DTI would drop to 30%, a much more ideal percentage.

You have powers nestled deep within the financial center of your brain. It’s easy to tap into those powers by doing things like paying off debt and clearing up your credit. Your purchasing power gives you the flexibility to make broader decisions when it comes to purchasing. Purchasing power also means better borrowing opportunities and access to different types of loan programs. Increase your power today!

When doing your research always be sure to consult great sources. See the sources for this article below!

http://www.thetruthaboutmortgage.com/pay-down-your-debts-before-you-apply-for-a-mortgage-to-increase-purchasing-power/

http://budgeting.thenest.com/increase-purchasing-power-21057.html

http://www.investopedia.com/terms/p/purchasingpower.asp

WHITNEY RUSH, VALLEY WEST MORTGAGE

Vital Aspects Of Your Credit Health

Lenders look at potential borrowers from many angles before extending credit:

How much of its income will a household need to put into debt repayment?
How large is the down payment?
Does the borrower have a job with stable income?
What is the borrower's credit score?

It's important to understand what affects your score and how you can boost it.

One major factor in your credit score is how much revolving credit** you have versus how much you're actually using. The smaller percentage it is the better it is for your credit rating. The optimum percentage would be 30% or lower. By paying down your balances, and keeping those balances low you can boost your score.

Multiple credit card balances can be consolidated with a balance transfer credit card or personal loan could help with your score.*

What You May Not Know:

Even if you pay balances in full every month, you still could have a higher utilization ratio than you'd expect. Some issuers use the balance on your statement as the one reported to the bureau.

You may want to ask your credit card issuer if they will accept multiple payments throughout the month.

Nuisance Balances

These are small balances you have have on a number of credit cards. Gathering up all of your credit cards with small balances and paying them off can help increase your score. Selecting, one or two go-to cards for everything will keep your credit report clutter free.

The Old Debt

Negative items are bad for your credit score, and most of them will be removed after 7 years but, removing old debt that you've paid off is a bad idea. The longer your history of good debt is, the better it is for your score.

Small Dips

When making purchase inquiries when applying for credit, each time it can cause dips in your credit score that lasts a year. Scoring formulas for a mortgage, auto and student loans- allow that you'll make multiple applications but take out only one loan.

The credit score commonly used by lenders, ignores such inquiries made in the 30 days prior to scoring. If there are any older than 30 days, they will count those as one inquiry.

If lenders are using the newest forms of scoring software, then you have 45 days. Older forms, you need to keep it up to 14 days and won't count multiple student loan inquiries as one one.

Paying On Time

When making a big purchase you don't want to default on any bills. Your score could drop and you won't be able to make that purchase.

That can even extend to items that aren’t normally associated with credit reporting, such as library books, she says. That’s because even if the original “creditor,” such as the library, doesn’t report to the bureaus, they may eventually call in a collections agency for an unpaid bill. That agency could very well list the item on your credit report.

Putting cash into a savings account for a major purchase is smart. Just don’t slight the regular bills to do it.

Sinking Ship

Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do. Taking cash advances or even using your cards at businesses that could indicate current or future money stress. You don't want to do anything that would indicate risk.

Monitoring

If you are denied credit (or don’t qualify for the lender’s best rate), the lender has to show you the credit score it used, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Another smart move is to regularly check your credit reports. You’re entitled to one of each of your three credit bureau reports (Equifax, Experian and TransUnion) for free every 12 months through AnnualCreditReport.com. It’s smart to stagger them. Send for one every four months, and you can monitor your credit for free.

You can also use apps like:

Credit Karma that monitors your Equifax and TransUnion but it only shows the Vantage 3.0 Credit Score**
Check with your bank, USAA offers members a free subscription to check your Experian Report
Credit Sesame: Offers you a peek into your Experian National Equivalency Score (ENES) While the FICO credit score ranges from 300 to 850, the ENES ranges from 360 to 840.

FICO maintains a total of 28 different FICO scores, which are widely used by issuers of home, auto, and credit card loans. Remember that each one of these apps offers a free snapshot of a credit score based on a separate model and that snapshot is only for educational purposes. If you want to get the actual FICO credit score, you'll have to pay at least $19.95 per month.

While the advice provided by any of these services can be valuable to improve your credit score, your potential lender may be working with a very different score than the one gleaned from an app. If you're working toward meeting the requirements for a mortgage, ask your lender what credit score their using. That way, you'll choose the app that can provide a more accurate estimate.

*We're not a credit consultant nor do we claim any of these methods will guarantee your credit score to change. This is for information purposes only. We advise to contact a professional credit company for any questions or legal assistance.

**Revolving Credit: Credit that is automatically renewed as debts are paid off.

**Vantage 3.0 Credit Score: Can score millions more people than other models by incorporating up to 24 months of past credit activity – including utility and rent payments where available – which could open up more credit options to you.

Resources:

https://www.wisebread.com/7-apps-that-monitor-your-credit-for-you

https://www.creditkarma.com/credit-scores

https://www.bankrate.com/finance/

A Rise in Your Credit Score

Some changes took effect at the top of this month that could have amazing results on your credit score!

We’ve talked about the importance of your credit score in some of our recent posts. Your credit score—more importantly your FICO credit score (which is a combination of your credit scores and credit history)—is assessed to determine your eligibility for lines of credit, personal loans, auto loans, and more importantly, home loans. The higher your FICO score is when you apply for a mortgage, the better your chances are at negotiating mortgage loan terms with your bank or broker.

In a recent review of the three main credit bureaus, Equifax, Experian, and TransUnion, the Consumer Financial Protection Bureau found a number of concerns within the credit reporting processes of the agencies. The main issues that were called to attention included improper quality control procedures as well as incomplete and inadequate investigations when handling disputed accounts from consumers.

Your Credit Score

Raising your credit score can be challenging. Collections, debts, and student loans often tend to sneak up on us when we least expect it. One late credit card payment could drop your score down 90 or more points, and once your score is down (or damaged) it takes time to repair it again. Because of the difficulty of maintaining good credit, it’s important that the information on your credit report is accurate. Otherwise you could be receiving penalties and dropped points on someone else’s behalf. For far too long consumer credit reports have been erroneous due to insufficient identity information. As a part of the new standards set for the credit bureaus, the government has outlined a list of ways for the credit bureaus to improve on accuracy of information before applying a collection to someone’s credit report. Beginning July 1, 2017 a new and improved list of standards was set for credit bureaus.

The Bureaus

Equifax, Experian, and Transunion are due to pay more than $17 million in restitution back to consumers who’ve been victims of false reports. They are also due to pay at least $5 million in fines and penalties to the Federal Government. 12 to 20 million Americans are expected to benefit from the new standards put in place by the Consumer Financial Protection Bureau. Those who will the see the change are most likely consumers who had civil debts and tax liens on their credit report.

Checking Your Credit Report

Your credit score updates every month. Be sure to be on the lookout for a rise in your score!

When doing your research, always be sure to consult reliable sources. Check out the sources for this article below!

http://www.cnbc.com/2017/06/30/your-credit-score-may-jump-starting-this-month.html

http://www.cnbc.com/2017/03/14/consumer-agency-leans-on-companies-to-improve-credit-reporting.html

http://talktown.blog.myajc.com/2017/06/30/will-your-credit-score-go-up-this-weekend/

WHITNEY RUSH, VALLEY WEST MORTGAGE

Social media credit approval is on the way

Social Media plays a huge part in our day to day activities. From staying connected with friends to finding an activity on a Saturday night. With the popularity of Facebook growing every single day, it's no surprise that the Social Media giant is finding new ways to monetize their site in order to generate an annual revenue. Filing a patent is one of the ways the company has to earn additional capital. Social media credit approval

According to an article on The Next Web, On August 4th, 2015 Facebook filed a social media patent that could help filter spam emails and offensive content, improve searches and allow lenders to use your social habits to determine a credit approval. We are already use to the idea of making social media tool more adaptive to daily use, but allowing lenders to use your social media accounts to determine a social media credit approval is absolutely terrifying.

Social media credit approval

The patent filed by Facebook is fairly simple to understand. Lenders would have direct access to your friends list and they would factor in all of your friends credit scores to determine an average credit rating that could factor into your social media credit approval. There are already a huge number of determining factors that play into the credit approval process. Now Facebook wants to make their way into this process. This has the potential to deny millions of Americans the chance to purchase their dream home.

We mentioned in a previous blog post that less than 50% of the American population is saving less than 5% of their monthly income. What would a social media credit approval process do to that statistic? Probably cause that number to drop down to 2.5%.

Facebook hasn’t made it clear how this patent will be used and there are laws in place that determine the criteria lenders can use when deciding your creditworthiness. However, if this social media credit approval process is added into the loan process, it could ruin the way we use social media every day. SO we have to ask, is Facebook trying to make the world a better place, as they have claimed in the past, or are they just trying to make a quick profit for the next quarterly report?