Mortgage By Randy

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

Posted on February 1, 2011 by Randy Mitchelson

Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, February 2011
===================================================================================

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

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.
____________________________________________________________________________________
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.

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Is Your Mortgage Professional Licensed? – Mortgage By Randy Newsletter – Jan 2011

Posted on January 1, 2011 by Randy Mitchelson

Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, January 2011
===================================================================================

In Issue 34 We Touch On:
One Of My Favorite Moments Each Month
Is Your Mortgage Professional Licensed?
2011 = More Of The Same

I couldn’t believe I witnessed the Dow Jones Industrial Average break 12,000 this month amidst all the turmoil in our economy (record deficits, anemic job creation, ongoing housing slump, etc). This big bounce back from the 9000s goes to show how the stock market moves independently of what’s happening in the economy. In general, people who still have jobs are more confident that they will keep them and these folks are paying down debt and spending more freely these days. On the other hand, most of those people without jobs continue to despair which has resulted in our government extending unemployment benefits to unprecedented lengths. The good news for mortgage shoppers is that rates have trickled even lower as investors have triggered a flood of money migrating from bonds to stocks. If there was ever a time to purchase a home, now is it. We are experiencing a perfect storm of low housing prices and low interest rates. The party may go on for several more months, but when we least expect it, the party will be over – with no last call warning.

Mortgage Market: Press The Reset Button – How To Know If Your Mortgage Pro Is Licensed
Before selecting a mortgage professional to work with to purchase or refinance a home, you should check on the status of their national mortgage license. The entire mortgage industry had the reset button pressed by the Obama Administration and as of December 31, 2010, all mortgage professionals had their license expire, no matter if they have been in business for three years or thirty years. Licensing used to be solely managed by the states, but now there is a national Mortgage Licensing System and Registry (NMLS).

What is Involved in Registering and Earning a New Federal Mortgage License?
Loan originators must provide fingerprints and other identifying information in order to comply with a full background check with the FBI. Also, a 100 question federal mortgage test must be passed. For mortgage professionals in states where testing was not previously in place, a state level test may also have to be taken.

Upon creating an account with the NMLS, a unique identifier will be assigned to each loan origination officer. Most mortgage professionals will be paying $500 – $700 or more out of pocket to get their new federal and/or state licenses in good standing.

How to Determine if Your Mortgage Professional is Licensed
A lot of people want to take advantage of the extremely low interest rates available for mortgages. Before rushing into a relationship, simply ask your loan officer for their unique mortgage identification number. They are required by law to provide the number to you upon request. Once the full database is implemented the identification numbers will allow consumers to go online, pull up an individual and review prior rulings, violations and other issues.

For example, although I acquired a state mortgage license in 2005, the new laws require that I acquire a federal license, despite already having completed similar requirements for the State of Florida in 2005. My personal identification number for National Mortgage Licensing is 377413. Within the next 60 days once I complete the final testing phase of this new mortgage licensing process, my record in the NMLS will be active.

How Do I Access the Registry?
You can search for a mortgage license status at http://www.nmlsconsumeraccess.org. The registry does not yet show people (like yours truly) who are in process of acquiring their new license. However, the registry should be fully populated by March 31, 2011. If you can’t locate the mortgage person that you are working with in the National Registry, do not hesitate to ask them to provide you with their license number. Remember, it’s the law.

Personal Credit: One Of My Favorite Moments Each Month
If you have ever had a credit card lost or stolen then you know the emotions that run high until the matter is settled. This has happened to me twice in the past two years. Someone, a criminal, reported my credit card lost to Bank of America in an attempt to get a replacement card issued to their own (the criminal’s) mailing address. Did I receive an alert from Bank of America? Heck no and shame on them, but fortunately the wife and I have a back-up plan…

Checkout Line Walk Of Shame
Most people have to learn the hard way about identity theft crimes. Imagine you are shopping and swipe your credit card at checkout and it gets declined. The embarrassment of having this happen with the cashier looking at you suspiciously and the shoppers in line behind you annoyed that you are holding them up is memorable for the wrong reasons. Worse, if you do not have enough cash or a back-up card to use, then you get to do the walk of shame out of the store without your purchases.

A Faster Way To Learn About Credit/Debit Card Problems
I first learned about the two crimes against me via text message alerts. As a subscriber to a credit monitoring service, the instant anything important changes on my credit report, I receive both a text message and an email alert. If I am not near my computer, my mobile phone will display the text message. I’m covered wherever I go.

There are several different credit monitoring services. Shop around and compare pricing and features. Some major banks offer it or you can set it up through the credit bureaus. Shop around for the best price but expect to pay $5.00 to $25.00 per month depending upon what bells and whistles are included. Make sure to choose a service that monitors all three major credit bureaus and also can send text message alerts in addition to email alerts.

One Of My Favorite Moments Each Month
If there are no important changes to my credit report, the credit monitoring service still sends a text message and email to confirm that everything is ok that month. When that message hits my inbox, it is definitely one of the best moments I have each month – knowing that I have my identity and my financial information under control. If you would like to enjoy that moment of peace each month, make a New Year’s Resolution right now to spend a few bucks per month for credit monitoring.

Economy & Financial Insights: 2011 = More Of The Same
A lot of experts have been looking into their crystal ball making predictions about our 2011 economy. Here is my two cents based upon research and commentary from my trusted sources…

Jobs: Although the official recession has ended and things are unlikely to get worse, job growth is still slow. Recent job gains hyped by the President are only a slight improvement, are not yet adjusted and maybe inflated by seasonal hiring for the holidays. We have a huge mountain to climb to get jobs growing.

Housing: The rate of new foreclosures is lessening, but there are huge backlogs for courts to work through. There were 1.8 million foreclosures in 2010 with close to that number expected in 2011. According to a report, there is a 1.6 million surplus of housing inventory. There are currently 4.1 million homes on the market, compared to the 2.5 million that is considered the normal working level. New home construction is at a trickle and prices of existing homes are falling. Buyers coming in after these sweet deals will gradually eat up inventory – one of the best home buying environments of our lifetime.

Spending: The last sixty days have seen bumps as those who have jobs feel more confident at retaining them (reinforcement of the worst is over). You may have noticed the lack of gloom and doom news reports during the holiday shopping season. Retailers in general, enjoyed a “green” Christmas.

Stocks: We are amidst a run-up in stock prices partly because there is less uncertainty in the marketplace. For example, major banks are settling lawsuits regarding their mortgage practices and lots of major firms are sitting on huge stockpiles of cash. We hear that buy and hold is a dead investing strategy in this volatile hi-tech trading age. We must learn to actively manage through volatility.

Question of the Month: How Can I Buy A Property Without Documenting All My Income?
It is a challenge to avoid documenting the income required to make monthly mortgage payments (incl. taxes, insurance, homeowners association fees, etc). For example, documenting $40,000 is not going to cut it if your price range you are looking at is $300k. Keep in mind that the lender will pull your tax returns directly from the IRS using Form 4506 so be prepared for full disclosure.

If the income thing is an absolute deal breaker for you, there is another loan option but it is very expensive. There are specialty lenders that will loan 50% – 70% of the value of a dwelling with virtually no documentation. Sounds great? The downside is that the loans are double digit interest rates and can cost as many as 8 points or more (a “point” equals one percent of the loan amount) up front, so like I said they aren’t cheap, but serve a purpose. Each specialty lender has their own lending guidelines so shopping around will pay benefits. These are meant to be short term loans (1-2 years) while you get your affairs in order to qualify for a conventional mortgage.

Giving Back: Michelle’s Angels 2nd Angel Artist’s Appreciation and Celebration Concert
As in July 2009, the Michelle’s Angels Foundation’s Board of Directors has approved its staging of an event to honor all of the Angel Artists who support the Foundation as it attempts to provide Love, Hope and Assistance among those who quietly suffer. The event is appropriately named the Michelle’s Angels Foundation’s 2nd Angel Artist’s Appreciation and Celebration Concert. This year’s event will be held on Thursday, February 10th at the famous Bluebird Cafe in Nashville between the hours of 6PM and 8PM. Angel Artists performing at this year’s event include Marcia Ramirez, Suzanne Hicks, A. J. Masters and MAF’s Music Director, Ken Harrell. You can listen to some of their music for free at through the Michelle’s Angels Jukebox. Limited concert tickets are available, but even if you are unable to be present, please consider a tax deductible donation in support of the event. Recurring or one-time online contributions can be safely made through the Foundation’s Facebook Causes Page.

I’m looking forward to the next Michelle’s Angels Concert at the famous Bluebird Café in Nashville on February 10. The end of the football season means that spring training is almost here and as usual I have my share of tickets. In my opinion there is no better time of year.

Randy

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Banks Lend On Illegal Structures – Mortgage By Randy Newsletter – Dec 2010

Posted on December 29, 2010 by Randy Mitchelson

Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, December 2010
===================================================================================

In Issue 33 We Touch On:
Banks Lending On Illegal Structures
Year End Donation Tips
Using Power Of Attorney

Happy holidays everyone! Enjoy the time you spend with friends and family during the holiday season – it is precious – and when you strip everything else away, it is these times that we spend together that bring the most meaning to our lives.

Mortgage Market: Banks Lend On Illegal Structures With A Lot Of “Buts”
It is hard to find good news for consumers regarding mortgage requirements. Lenders have tough standards that borrowers must meet. For example, take a look at this recent announcement by a lender that on the surface looks consumer friendly since it allows loans for properties with unpermitted living areas or illegal structures. However, there are a lot of “buts” in this language.

“Building permit requirements for unpermitted living areas are waived under the following circumstances:

-The addition does not cause the subject property to be in violation of zoning.
-The property may be rebuilt.
-The appraisal does not include comments that the addition was completed in less than a workmanlike manner or that there is any impairment to the soundness, structural integrity or livability of the property.
-Any applicable hazard insurance covers the addition.”

The policy continues into illegal additions added to a property…

“A one- or two-unit property that includes an illegal additional unit or accessory apartment (often referred to as a mother-in-law, mother-daughter, or granny unit) is permitted when the following conditions are met:

-The illegal use conforms to the subject neighborhood and to the market.
-The property must be appraised based on its current use.
-The borrower must qualify for the mortgage without considering any rental income from the illegal unit.
-The appraiser must report that the improvements represent an illegal use.
-The appraisal must demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use.
-The loan file must contain evidence that the existence of the illegal additional unit will not jeopardize any future hazard insurance claim that might need to be filed for the property.”

Personal Credit: Try This Simple New Year’s Resolution
Many people set lofty goals for New Year Resolutions and forget to plan out how they will achieve their goal. This is a recipe for disappointment. Here is an easy resolution you can make with a clear and concise four-step process which will lead to greater peace of mind about your credit.

Resolve to check one of your three major credit reports every four months. This is free of cost and takes only a few minutes to do.

Step One: using your email calendar or other system you prefer, set a reminder for January 20, May 20 and September 20.

Step Two: on each of these dates, pick one of the three major credit bureau reports to check (Trans Union, Experian or Equifax)

Step Three: Go to annualcreditreport.com to access your credit report.

Step Four: Carefully review all the line items in your credit report for accuracy. Pay attention to whether an account is marked as open and active or closed. Are there any inaccurate late payments showing? Are there public records displayed that are not correct or do not belong to you? Hopefully, you don’t see anything out of the ordinary.

As always, if you ever need help reading your credit report, never hesitate to contact me for help.

Economy & Financial Insights: Variety Of Year End Updates

Rates: Although a bit higher than earlier in 2010, historically low rates still prevail. No one has a crystal ball to predict when interest rates will take off on a rising trend but one thing is for sure – when they do it will be too late to lock into a great low rate. What will make rates rise? Loss of confidence internationally in the U.S. dollar, inflation, positive trending in U.S. economic growth are all potential catalysts. Also, keep in mind that the Federal Reserve is helping keep interest rates artificially low buy purchasing tremendous amounts of U.S. Treasury debt. That program could end at any time as well.

VA Loans: The brave men and women that serve to protect our country have great news regarding their home purchasing power. The 2011 VA Zero Down Loan Limits were recently announced – in other words, how much can be borrowed with zero down payment. VA Jumbo Loans are also available up to $1,500,000 for higher priced neighborhoods. Did you know that a vet can purchase a $1.6 million home in Marin County, California with only $150,000 down (less than 10%) with zero private mortgage insurance (PMI) and a rate that is basically the same as someone getting a conventional $400k loan with 20% down? For good advice on VA loans, you can always reach out to our friends at Military Home Programs.

Tax Relief: Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude certain debt forgiven on their principal residence up to $2 million ($1 million for a married person filing a separate return). The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. Review IRS Form 982 Instructions for more details.

Question of the Month: How Do I Use A Power Of Attorney To Close A Mortgage?
Each lender has its own rules so there isn’t a single answer to this question. It is important to disclose your need for a POA early in the loan process so that the proper arrangements and documentation requirements can be met without delaying the closing. For example, here is information from one lender that recently announced some Power of Attorney Updates:

“Effective immediately for all loan programs: Power of Attorney (POA) policy has been updated to allow for general and military POA in addition to limited or specific POA.” Lenders will have their own policies related to eligible agents, using a POA, durability of the POA and notary acknowledgements. For example, one lender has this policy: “In order to be accepted, a non-durable transaction specific POA must clearly reference the subject property (property address and/or legal description).”

Giving Back: Tips On Making Charitable Donations Before January 1, 2011
This is a popular time of year when people clean out closets to make room for those new sweaters and other items received during the holidays. Items in good or better condition can be donated. The Internal Revenue Service has many guidelines for determining the value of your donation. Some publications which may be helpful are IRS Publication 561 (Determining the Fair Value of Property), IRS Publication 526 (Charitable Contributions), and IRS Form 8283 (Noncash Charitable Contributions).

If you itemize deductions on your federal tax return (using the long form), you are entitled to claim a charitable deduction for your donation to a qualified charitable organization such as the Salvation Army. You will be required to determine the value of these items. One valuation method acceptable to the IRS is to use Thrift Store Value. For example, here is list of thrift store values from Goodwill Industries in Florida.

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.

The New Year will first require a trip to Las Vegas for Affiliate Summit (shucks) and then we will look forward to the next Michelle’s Angels Hope Concert at the famous Bluebird Café in Nashville on February 10. Best wishes to all of you for a healthy and prosperous 2011.

Randy

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.
_______________________________________________________________________________________________
You have permission to publish this article electronically or in print as long as the following is included: