Credit-How Important is my Credit Score?

With all of the media outlets bombarding consumers with the subprime mortgage market and short sales steadily increasing, it's no wonder credit is a valuable commodity. Many lenders conservative and aggressive have increased their requirements for credit scores especially with products the banks and investors view as "risky". Some of these "risky" parameters may include: Stated Income, Stated Income and Stated Assets, No Income/No Employment, and a credit history that may include collections, judgements, tax liens, rolling 30-60-90 day late payments. Many of us have been there where we did not pay a phone bill on time or missed a credit card payment by a few days. These may not have had quite the impact in a "hot" market where there is less housing inventory and a greater amount of demand from buyers. Nowadays lenders have time to reconcile and review their books and you better believe they have begun tightening their belts among the rash of fall-out in the market.

Some important tips to maintaining the high credit scores banks, lenders and investors reward with both loan products and interest rates are as follows:

1) Check Your Credit Report-When you are applying for a credit card, loan or extension of credit most lenders will pull a credit from one or all three of the major credit bureaus: Experian, Equifax and Transunion. One of the scores or the middle score of all three will be used in the extension amount and corresponding interest rate. Your best bet is to check the report yourself through http://www.annualcreditreport.com/. The site will allow you to view your credit history and current items that may affect your credit score. Keep in mind the credit scores you view on any credit site may not correspond with the lenders scores. Factors such as last payment made, balances at the time of the credit pull, new credit established, new credit reflected and inquiries on the report will impact the score.

2) Correcting Errors on the Credit Report-If you believe there is an error on the credit report, dispute it! You are protected by Federal law to request correction of an item and update your credit report. Items to prepare for the credit bureau: copy of current driver's license, letter with detailed information on the dispute, letter from the credit agency reflecting the item stating they made an error. The credit bureau will review the information and send a response within 30 days. You may expedite the process online if you have pulled the credit report yourself.

3) Eliminating Fraud- More consumers have become victims of fraud and identity theft. Here are a few tips to protecting your credit:

* Follow-Up with agencies asking for your personal information via mail or email. There are secure ways to send your social security number and much more. Ask your lender or credit agency if these use these resources to protect you.
* Place a security alert on your social security number through the credit bureaus. They will alert you of any activity.
* Review your credit report regularly. If you have used up your Free Credit Report, join one of the memberships through individual bureaus that offer the service with an annual fee. This may save you lot of money if you find issues immediately rather than waiting and being declined an extension of credit when it really matters!
* Document your contact if you find you are a victim of fraud or identity theft. Names, dates and a conversation log can prove extremely helpful.

The credit score is a key component in analyzing your financial future for lenders and investors alike. In a tightening market, the score really does matter!

Until next time, "Obstacles are those frightful things you see when you take your eyes off your goal". - Henry Ford

Mortgage Loan Options

When I first began working with mortgage loans, I was perplexed as to how many components there are to a mortgage loan. My grandparents conveyed a 30 yr. fixed was a solid loan and they assumed adjustable loans were not suitable and had no merit. Being the conservative financial consultant I was at the time, I sold 30 yr. fixed loans night and day.

As I began to peel away the layers of mortgage lending during the recent historically low period for the Prime Rate from late 2001 to present, I started to understand Adjustable Rate Mortgages and Interest-Only Loans and how they contributed to assisting borrowers accomplish the dream of home ownership. Let's break three different types of mortgage loans down and analyze the differences:

1) 30 yr. Fixed Mortgage-This mortgage loan if fully amortized for 30 years. From the monthly payment, a portion is applied to the principal balance and the remainder to interest. This is a common loan for FHA, HUD and many First Time Home buyer Programs. If the loan is 100% financed, Private Mortgage Insurance may be added in addition to the payment or factored in to the interest rate. A solid loan with a rate that does not change. Typically, without making any additional payments to principal it will take several years before more of your monthly payment is applied to principal to assist in paying down the balance. If you do not plan on living in the property 30 years or retaining the property as an investment, an alternative mortgage option may be applicable.

2) 5/1 Fixed-Adjustable Rate Mortgage-This mortgage loan interest rate is fixed for 5 years and may adjust annually thereafter. There is usually a margin and a life time cap associated with this loan. The margin measures how much the rate with change annually and the lifetime cap provides a ceiling or a maximum to the interest rate change. The interest rates for this loan may be lower than a 30 yr. Fixed. If your purchase of real estate is short term this may be a suitable loan. Historically speaking, real estate has continued to generate favorable returns over the long haul.

3) 30 yr. Fixed with 10 year Interest Only Option-This mortgage loan interest rate is fixed for 30 years with the first ten years of optional Interest Only. If a Second Mortgage Loan is in place and the payments are fully amortized, by taking the amount you would have paid on a traditional 30 yr. Fixed and applying that difference to the second mortgage, the second will be paid off significantly faster. Once the second mortgage is paid in full, you can take those payments and apply them to principal on your primary mortgage, this will in turn assist at paying down your mortgage loan in less time. Most mortgage lenders have access to calculating this information based on your scenario. I provide this mortgage calculation to my clients and show them how to save money over the life of their loan.

These three mortgage loan options are offered by several lenders and are not always available to all borrowers. There are specific criteria in place to qualify which may include; credit scores, income documentation, asset documentation, and amount financed to name a few.

I am available for a free consultation and can be reached via my blog, email: tiana.uribe@trufinancialservices.com or 1 (877) TRU-3855 Ext. 401. Thanks for reading and until next time, "Let no feeling of discouragement prey upon you, and in the end you are sure to succeed."-Abraham Lincoln.