Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, September 2009
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In Issue 18 We Touch On:
New Truth In Lending Law
Credit Score Simulators
Home Purchase Timeline Tips
Summer fun is over and with school in full swing and the hectic holiday season just around the corner, these next few weeks are ideal for taking advantage of weekends. In these uncertain economic times, people are embracing the day-tripper mentality. Affordable, closer to home outings (to state and national parks for example) have replaced the extravagant beachfront resort rentals. Lay away plans and Christmas Club accounts are making a comeback at the stores as people keep their credit cards in their wallet. We are being smarter with our money but unless we teach the youth these valuable money and credit lessons, history is bound to be repeated. On to the news….
The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…
Mortgage Market: $8,000 Tax Credit Expiration Fast Approaching / Revised TILA Law
The first-time homebuyer tax credit program that provides up to $8,000 for new home purchases is expiring November 30, 2009. This leaves about eleven weeks for homebuyers to find, contract and close on a new home. An estimated 1.4 million buyers have already filed for the credit, with that number expected to grow by the time tax returns are due next April. For more information about this program check out the July 2009 Mortgage by Randy newsletter.
In other news, revisions to the Federal Truth in lending Act (TILA) went into effect July 30, 2009. Two significant consumer protections have been put in place:
1) Mortgage lenders must provide loan applicants a good faith estimate of loan costs within three business days of receiving a loan application
2) Mortgage lenders must provide a revised good faith estimate of loan costs if the Annual Percentage Rate (APR) changes outside a small tolerance range and wait an additional three business days before closing the loan to allow the customer time to review and digest the changes.
Although the intent of these rules is to help protect consumers the rules can also have the opposite effect of causing great amounts of stress. For example, if a sales contract has a closing date of September 29, but September 25 a fee for the required title insurance comes in higher than originally estimated thereby causing the loan APR to rise, the revised law mandates that the customer be issued new disclosures of costs and a three business day freeze is place on the loan transaction. Guess what? You’re not closing September 29. Be aware of these rules and be prepared to work with them for better, for worse.
Personal Credit: Online Credit Score Simulators Help Consumers Make Good Decisions
There are several myths that continue to perpetuate among consumers about their credit scores. For example, some people refrain from pulling their own credit report thinking that it may cause their score to decline. Not true. Another myth that many people believe is that when they make good on a derogatory account that their credit score is automatically fixed. Not true.
Derogatory Accounts
Just because a negative account is paid or satisfied, it does not get removed from the credit file. It will be shown as paid, zero balance, but will remain in the history for 7 years from delinquency. A credit score is calculated using all of the information in a history, however, the most recent 2 years of activity has the heaviest weighting in the score formula. If you have collection accounts or late payments that are several years old, they have less of an impact on your score as time passes AS LONG AS the history after the date of those late payments has been clean.
Credit Score Simulator
Since the mathematical formulas for calculating credit scores are a secret, Equifax offers an interactive score simulator that predicts your FICO® score based on certain actions you could take. Mortgage by Randy readers can contact me for a Free 30 Day Trial which includes the score simulator as well as:
-Unlimited Equifax Credit Reports
-FREE 3-Bureau Credit Report
-FREE FICO® Score
-FREE Score Power Report – an explanation of what your score means and how it compares to national averages.
-Up to $1,000,000 identity theft insurance
Do not arbitrarily close out accounts without advice. This is not a credit rebuilding strategy. Regardless of any negative history, credit scores can improve over time as long as on-time payments are always made. Get a detailed credit analysis, including all three credit scores, and personalized action plan and consultation for only $99 by contacting me.
Economy & Financial Insights: Unsustainable Age Of Extravagance Fades Away
Recent economic studies confirm that Americans continue to be conservative with their spending. Purchase of non-essential items continues to drop. In addition, credit card balances are trickling downward. The age of extravagance we once knew that included regular trips to the day spa, purchases of fancy new appliances and electronics, and weekend outings to professional sports events, is behind us. Our new state of mind is that of basics only. With less credit available, pressure on wages and jobs, and the threat of higher taxes to pay for health care, Americans are slowly lowering their debt levels, but there is a long way to go. To compound things, the economic situations in other parts of the world, especially Europe, are much more bleak than in the U.S. Our collective economies are interlinked and so we must prepare for more repercussions down the road. Lesson: do not get comfortable
Question of the Month: How Long Does It Take To Close On A Home Purchase & What Happens?
There are several things to be aware in terms of timing BEFORE you sign a sales contract to purchase a home. Contracts stipulate the number of days that a buyer has to act upon various steps in the process. For example, one of the first things a buyer must do is arrange for a thorough home inspection. This will give the buyer peace of mind that there are no major issues with the home that would require repair and/or reduction in the sales price. Second, the sales contract will define the number of days the buyer has to provide proof of a loan commitment from a lender. Finally, the sales contract provides a closing date. Lenders have laid off a lot of staff and as a result are moving loan applications through their pipelines slowly. In addition, lenders are being super thorough with checking and double checking all aspects of a mortgage application like income and employment verification and appraisals. Give yourself 10-12 weeks between contract date to closing to have enough cushion in case some challenges pop up.
Giving Back: Supporting Our Communities – How To Protect Yourself: Charitable Solicitations
Everyone receives countless solicitations by mail and telephone asking for donations to what seem like worthy causes. The problem is how to distinguish between the legitimate charitable cause and the scam. You may want to contact the National Charities Information Bureau at (212) 929-6300, as well as other state and local consumer agencies, to determine if the charity you are donating to has any outstanding complaint. Copycat organizations may use names similar to a well-known charity in order to confuse you. Before you donate, make sure the charity to which you are giving is the charity you think it is.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
Fall is here and we are ready for baseball playoffs and the Food and Wine Festival at Disney.
Randy
Mortgage by Randy newsletter, Copyright 2009 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other loan products. Through its network of partners, National Web Leads delivers innovative Web 2.0 software solutions such as lead generation platforms and real time desktop widget and mobile reporting tools for lenders and internet marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.
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