Why Different Credit Scores Exist – Mortgage By Randy Newsletter – Feb 2011

Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, February 2011
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In Issue 35 We Touch On:
100% Financing Still Exists!
Win A Bid On A Foreclosure
Why Different Credit Scores Exist

I am surprised that I witnessed the Dow Jones Industrial Average break 12,000 this month amidst all the signs of a jobless recovery. Even “Mr. Fed”, Ben Bernanke himself, has little optimism about our so-called economic recovery (see his quote below). You would think that unrest in the oil rich Middle East and North Africa would cause investor confidence to falter – uncertainty is the enemy of stock market investors – but the Dow keeps pushing forward and is well over 12,000 at month end. I am the last person you want stock advice from, but I will say this: I believe that the stock market is like a living, breathing body. It represents the collective emotions of the millions of investors that participate in it. Just like any other living thing, it inhales and exhales. To me, the rise to 12,000+ represents a huge intake of air and it is only a matter of time before it exhales. Don’t be greedy and take some profits.

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: 100% Financing Still Available For Certain Situations
No, it’s not a typo, misprint or mirage. There are 100% financing, zero down payment mortgage loan programs still out there for certain situations and here are a couple of them:

USDA Loans For Rural Property Purchases – 100% Financing
-No down payment is required !!!!
-Occupy the property as your primary residence.
-Flexible credit score guidelines.
-No maximum purchase price limit.
-Closing costs can come from any source including gifts.
-Repairs and improvements can be included in the loan.
-Competitive fixed 30-year rates.
-Household income must meet certain guidelines.
-Home to be purchased must be located in an eligible rural area as defined by USDA
-Apply with a local participating lender of your choice.

For more information about USDA Guaranteed loans, email Randy.

VA Loans For Home Purchase – 100% Financing
-No down payment is required !!!!
-Provide proof of acceptable military service
-Unmarried surviving spouse of a veteran who died on active duty or as the result of a
service-connected disability is eligible
-Credit scores as low as 620
-Prior bankruptcy, foreclosure or short sale more than two years old ok
-No mortgage insurance even with zero down
-Very competitive interest rates

For more information about VA loans, email Randy.

Personal Credit: Why Your Credit Score Differs When You Pull It Vs. When A Lender Pulls It
You can purchase your credit score from any of the credit bureaus. However, the number you see will likely differ from the number a lender sees when they purchase it. Remember that your credit score can change from day to day based on new information. Your creditors report payment history on various schedules; some monthly (but not same day each month), some quarterly, etc. Even on the same day your score can differ depending on who is pulling it. This is because lenders (banks, car dealers, etc.) have different credit score models to choose from.

Some lenders use industry-weighted scores (a score specifically weighted for the insurance industry for example), and others use blended scores from all three CRAs. The lender picks which score model it prefers. For example, a mortgage company may use a different model than a department store. Some lenders use a blended average of all three scores. Others use your score from a single credit bureau. Banks can complicate matters more by feeding your credit report scores into their own proprietary model and coming up with a number that is only meaningful to the bank.

As long as your scores are within a handful of points between the different sources, you have little to be concerned about. You are not likely to be concerned unless you are declined for credit or on the border of attaining a critical score threshold which dictates qualifying for a better interest rate (e.g., 735 vs 740). Feel free to submit your personal credit score questions anytime.

Economy & Financial Insights: Jobless Recovery And The Dilemma Our Country Faces
The U.S. economy continues to show signs of improvement. Fewer companies are laying people off, production is ticking up and consumer confidence is the highest since 2008. However, there are traps set that could easily undo this progress. First, inflation is increasing as you can tell from gas and food prices. Also, creation of new jobs remains anemic. Small businesses, the driver of jobs, remain cautious to take on risk faced with higher taxes and fees, rising health care mandates and tougher access to capital.

We will not get our economy going until true job growth takes hold. Next time you hear a positive jobs report, keep in mind that it takes 125,000 – 150,000 new jobs per month just to keep up with our population growth! Another thing to keep in mind regarding the unemployment figures you hear on the news: Our government considers an unemployed person that has not looked for a job in four weeks to magically not be unemployed anymore. More and more frustrated job seekers have been falling into this category each week which artificially make U.S. unemployment stats better than they really are.

“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”

The recent quote above is from Ben Bernanke and is a signal that those of us borrowing money can rely upon low interest rates for the foreseeable future. Couple this with the aforementioned signs of inflation and it does not take an economist to see that Mr. Bernanke and friends face a difficult dilemma. Whether to raise rates now to curb inflation or keep them low for businesses in hopes of a faster jobs recovery is a “damned if you do and damned if you don’t” predicament.

Question of the Month: How Do I Win A Low-Ball Bid On Bank Owned House?
Shopping for bank-owned properties (also known as REOs which stands for “real estate owned” on a bank’s balance sheet) has become en vogue as prospective homebuyers try to get a “steal”. It’s not as easy as it looks. Banks are wise to market values and not usually willing to unload a seized property without a fair offer. Here are some tips to help you prepare for submitting a bid:

1) Be organized and use facts to your advantage. With a realtor’s help, put together a compelling proposal to the bank for the price you think is fair.
2) Do your own pricing homework. A comparative market analysis (CMA) may reveal other similar sales within 1-2 miles of the subject property to justify your offer price.
3) An itemized budget of required expenses associated with renovating the property can be included in the proposal to justify how much out of pocket investment you will be making. If you can get your mortgage from the same bank this budget will look good to them since you will be improving the property and lowering their credit risk.
4) Another trick is to conduct an online search for nearby sexual predators/child molesters. If you get one or more hits, you can add that to your proposal to show that neighborhood values are further depressed due to this.
5) Be patient. In many cases you could be competing with other buyers for the same property, so do not despair if your bid is rejected. Cash buyers will usually win out over those purchasing via mortgage. Just keep trying and know that each rejection puts you one step closer to winning.

Giving Back: 3rd Annual Gentlemen Hug Your Brides Day – Facebook Photo Campaign
Wednesday, March 2, 2011 the Michelle’s Angels Foundation is sponsoring the third annual Gentlemen Hug Your Brides Day. Cancer and other deadly illnesses can take away our spouse much too soon. Husbands all over the world will take a few minutes to honor their bride on March 2 with a hug. Take a photo of your hug and show the world how you feel about your bride in four easy steps!

1. Sign on to Facebook and go to Michelle’s Angels Foundation
2. Click the Like button
3. Post a photo of you hugging your bride to the MAF Facebook Wall
4. Email your photo to info@michellesangels.com

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.

By the time you read this I should have passed the new federal mortgage exam required to retain a mortgage license. Will let you know all about it in the next newsletter. Counting the days to the start of spring training – my favorite time of year. For the first time since I was a child I bought a new baseball bat and no it’s not for autographs. Next January I will be playing baseball at New York Yankees Fantasy Camp at Steinbrenner Field in Tampa. This is a dream come true in honor of my significant birthday (I just learned that term today) this year. I will be doing a little spring training of my own…

Randy

Mortgage by Randy newsletter, Copyright 2008-2011 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 financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate 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.