Doug Francis | Vienna Home Blog | Real Estate Agent in Vienna, McLean and Oakton VA | REALTOR | MLS Search, advice, tips, humor » FICO

Warning: If You Skip this Home Buyer Tip, You Pretty Much Want a Headache

Doug Francis — Sat, 18 Dec 2010 22:15:02 +0000

Did you think there wasn’t a top must do?

Credit Agency data isn't always clear.

This isn’t a tip exclusively for first-time home buyers, so please don’t think that you are too savvy to begin with a review of your credit report. The credit report and the resulting FICO Score hold the proverbial keys to your next castle, but can also be the stealthy iceberg that sinks the ship.

Why can’t it wait?

If you need to get something removed or identified as “closed” then it is essential to understand that changes need to “season” about thirty days to show up on the report. Some information may be old and you thought it had been taken care of, but know that it often does not get updated and now is your chance to set the record straight.

But my FICO Score is 720 which is considered excellent.

My point is that the specific mortgage interest rates offered to you depend 100% on your credit report and FICO Score. Gaining 25 points in your score may place you in the best pricing, knocking off .25 to .50 on the rates lenders offer you. That can mean real savings every year. (read as $$$$)

The other issue at hand which demands your attention right now (regarding taking a look at your report) is that assuming your report is “okay” is irresponsible. I have spoken with highly motivated home buyers who, once we say down to put together a plan, finally called a mortgage guy only find out that their credit report contained three or five errors that needed correcting.

Some current Vienna VA real estate buyer clients are having to wait out a reported billing error from their doctor’s office that was on the credit report and is causing an issue (and he is a CPA). It is a bummer, but they started early enough and can wait out the time-lag it takes to fix errors.

Any changes will need proper seasoning (about a month)

Many of the credit agencies can show you your report online (once you have paid) but start with the free Annual Credit Report that you are entitled to review.

So there is a top to the “must do” list for real estate advice, and reviewing your credit report and getting your FICO score is at the top of the heap.

Your Credit Score Matters More Than You Think (money.usnews.com)
Mortgage shoppers to get credit-score alerts automatically (seattletimes.nwsource.com)

Your FICO Score will take a hit from Damage Points

Doug Francis — Wed, 09 Dec 2009 19:26:25 +0000

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.

Clearing up confusion on credit scores (sfgate.com)
Where to Get Credit Report & Credit Scores [Credit] (consumerist.com)

Your FICO score matters!

Doug Francis — Tue, 15 Sep 2009 21:30:29 +0000

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…

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

Buying a short-sale in Northern Virginia

Doug Francis — Fri, 10 Apr 2009 18:25:29 +0000

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.

Fannie and Freddie loans are more expensive April 1

Doug Francis — Thu, 12 Mar 2009 03:10:23 +0000

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 haveÂ a $350,000 loanÂ then you will be charged a delivery fee ofÂ .75%,Â or more simplyÂ 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.