FICO

Your FICO Score will take a hit from Damage Points

Real Estate Agents have all wondered how FICO Scores are impacted when events happen to consumers, and FICO has released an informative chart that you need to see. It seems that if you have a high score and are 30 days late on your minimum payment then your penalty will actually be greater than someone who already has a lower score.

This great chart came to my attention from a post Justin McHood wrote at “The Phoenix Real Estate Guy.com” and I felt it was important to share. Consumers have a resposibility to manage their credit and can get a copy of their report either through a service like Equifax or free through AnnualCreditReport.com. Requesting a report to review will not negatively impact your score, but if you apply for a new BuyMore-Card then it can be a ding. Get it?

In a recent post of mine, I mentioned how important having a 720 or better score is when trying to get a mortgage, and how a real estate client had one error repeated three times impacting his FICO Score. Once cleared his score jumped 40 points!

So let’s be careful out there during the Holiday Season in Northern Virginia and not run our cards up to the max because that will damage your score 20+ points… even if you did it by accident. There are plenty of stories out there to keep you up at night. Keep it real because you need to keep your credit reputation as good as possible in today’s world. And remember that is important to examine your ratio of available credit to used credit… an important FICO Score variable.

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FICO

Your FICO score matters!

Okay, driving through Fairfax County I share my thoughts on the essentials of knowing your FICO Score and the importance of getting a credit report  early on in the home buying process. If the FICO Score isn’t 700 720 then there may be ways to improve it… since 720+ is the magic number for availability and good pricing.

So after you have surfed through umpteen home-search web sites late one night, contacting a reputable lender and completing a basic loan application will get the ball rolling! I know some.

Have you been paying you bills on time?

It’s a hard-and-fast rule…

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• Your FICO Score will take a hit from Damage Points (dougfrancis.com)

FICO

Buying a short-sale in Northern Virginia

So you pulled up a listing in the neighborhood that you would kill to live in and it is priced $100,000 below the last sale. “Honey, get the keys cause we are gonna buy that house”, you say wildly.

What you did not see written into the comments section is this home is a short-sale that needs the lender’s approval. Someone in the sale is coming up short, and that, my friends, is where the current mortgage lender (the bank) gets involved. And I mean really involved because the seller is asking the bank for permission to sell at a loss.

Basically, the seller is on his knees, praying that the bank will agree to solve his problem.

A lot of people now owe more on their homes than the homes are currently worth, especially after the market made a giant 180º turn starting in 2006. The situation was aggravated in 2008 as many people began to lose their jobs. Combine that with some exotic mortgage programs based on increasing value models and you can see why the house of cards collapsed into a smoldering heap of despair and destruction. Too vivid?

A short-sale is a pre-foreclosure attempt to sell, and to preserve the seller’s credit (FICO) standing since foreclosures kill a reputation. And unlike stock sales that are short, you cannot itemize a loss on a home on your tax return.

Short-sale properties are often too good to be true because banks hate to take a loss of any kind. Offers on short-sales are low priority taking a month or four to get a response. Some banks never respond.

Personally, I have only had one of 7 short-sale contracts work out. In baseball that would be a batting average of .142. Most agents are still batting 0, and tell their clients not to waste their time. Actually, that may be excellent advice.

If you are considering buying a short-sale to be your next home, understand the uncertainty going in, make your offer as flexible as possible so you can back out if you find another home, and keep looking. Banks are trying to sell these homes before they have to foreclose (which costs banks 10k’s+), so there are bargains out there for those of you with the patience and understanding that this is anything but an easy transaction.

FICO

Fannie and Freddie loans are more expensive April 1

The L.A. Times recently published a piece discussing how Fannie Mae and Freddie Mac were raising fees, and toughening credit rules depending on FICO credit scores. So start watching for “delivery fees” if you are putting down less than 30%.

That’s not a typo!

• below 700, add 1.5%
• 700-720, add .75%
• 721-739, add .25%

Meaning, if you have a $350,000 loan then you will be charged a delivery fee of .75%, or more simply pay $2,625 more.

This add-on probably won’t stop anyone from buying, and with rates so low with few discount points if any, why make a big deal of it? Because, when someone buys a home, they pump money right back into the economy buying everything from furniture to paint. And if they have $2,625 less to pump back because of the “delivery fee” then the economy will enjoy less of the economic stimulus of the process.

The two companies are promoting this fee to loan officers as adding extra protection. Oh, that is protection for themselves.