OK....it's officially under way!! 2012 is not just a number for realtors and lenders, but it's a huge opportunity for consumers. But there are so many consumers who are unprepared or who just don't know where to start.

BUYERS...here's what you need to know:

1. Before you do anything, meet with a licensed loan officer. Yes, that person needs to be licensed. Check out an earlier post Let's work with someone who doesn't have a license......NOT!!!!!!. Before you even meet with the individual, ask if they're licensed. Believe it or not the Fed has said that some folks can lend you hundreds of thousands of dollars at their terms without being licensed. Can you imagine any realtor being allowed to not have a license?
2. Meet with the loan officer - to determine what's right for your situation. Did you know that FHA has some monster changes for condominiums? Did you know that both Fannie and Freddie are making some very costly changes to the way they price a ton of there loans? How will your income and credit affect the rate that you may or may not be able to get? I just met with a guy and he's getting his credit scores up by the end of January so that he won't be penalized under the new rules. Right now.....TIME IS YOUR ALLY!
3. Get your income information together. If you're self-employed this is even more critical than for those who aren't. But if you get bonus income, commission income, or whatever, know how the Fed is going to look at your income and that of your spouse if you're buying with one.
4. Assets - Let's take a look at your asset situation. Cash is not king! If you have money we need to document it. If it's under your mattress or in a safety deposit box, then it's no good! But again, time is your ally! Meet with the licensed loan officer.
5. Get with a REAL realtor! What does that mean? It means get with someone who's doing this as a profession, not as a side job. Not as someone who's moonlighting to pick up a few extra bucks. After you meet with your licensed loan officer, have them refer you to someone who's known in your community for really working for their clients. They have to be knowledgeable. So many folks work with their neighbor who has a license. That's OK if the realtor is serious about this business and has demonstrated a history of success in this business. If not, run for the hills!

Recently I wrote a post about credit scoring entitled What You Need to Know About Credit Scoring. There were 5 variables that affect the credit score of the borrower. Needless to say, I really think that while credit inquiries have the lest amount of weight towards your credit, it also happens to be the most misunderstood category.

The 5 Categories that Specifically Impact your Credit are:

1. Payment History
2. Outstanding Credit Balances
3. Credit History
4. Type of Credit; and
5. Inquiries

Like I said, Credit Inquries are the least impactful, but probably the most frequently misunderstood. So... what's the 101 on credit inquries?

What's an inquiry?

Basically, it's when you specifically authorize lenders to look into your credit, specifically from a credit bureau. IF THE CREDIT INQUIRY WASN'T AUTHORIZED BY YOU, THEN IT'S NOT A HIT AGAINST YOUR SCORE!!! Know that so that you don't freak out!

Does applying for new credit affect my credit scores?

The short answer is probably. The reality is the more you apply for NEW CREDIT, the more likely it is that you need credit to live. In other words, you're having a hard time making ends meet and, therefore, are applying for new credit to shoulder some of they debts. If you need credit to live....in general, that ain't a good thing! Looking for credit too much means that your score is probably gonna drop!

How much will credit inquiries affect my score?

Bottom line...it depends. So abstract. So cliche. Really it will affect each person differently based upon their own credit history. For example, don't use credit often and have an inquiry....then don't worry about it. But if you need a briefcase to hold all of your credit cards together, then this inquiry is more apt to hurt a bit....at least a lot more than for the dude who has perfect or a stellar use of credit. Here's a good stat for you....Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. I don't know the science of credit scoring, but I do know that there's a reason for everything.

Are all Credit Inquiries treated Equally?

Nope, nada, fogettaboutit! Credit inquiries that go to rate shopping are treated with less scrutiny than those inquiries used to obtaining new credit. You have a 14 day shopping range to look into credit for a mortgage, or getting a better rate. CAPECHE? Bottom line is that for multiple inquries for rate shopping, the scoring ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring.

I see it all the time. The phone call begins. The people want to buy a home.

THERE ARE FOUR THINGS YOU NEED TO BUY A HOME!

1. Income

2. Assests

3. Credit

4. Appraisal

In 2010, the collapse always begins with issue number three....

Credit

CREDIT

CREDIT!!!!!

You got credit issues! So what? Join the rest of the world! Welcome to 2011! We're in the post luxorious living economy! Nothing's easy anymore. For the record....Lending isn't easy anymore! It just isn't. It's hard for me to lend money. It used to be a slam dunk. You have a pulse, then you have a loan. The only real issue was whether you were alive and whether or not you had a valid social security number. Now we need to verify everything, from top to bottom, over and over and over again.....or so it seems.

Again....you're credit isn't good, so what! What are you going to do? Walk away from it? Unfortunately, it will follow you around like your shadow. No matter how fast you run, it's following you! It's just not something that can be ignored. Ignoring it doesn't mean that next month or next year you can buy a home.

Bankruptcy? Sure, it's one way to work a tough situation. For those that are in way over their head and have no viable way out, it's the most extreme way to wash your debts away. The problem is that for most loan programs you're handcuffed anywhere from three to five years AFTER THE DATE OF DISCHARGE! That's a long time to say that you're not going to buy a home.

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The problem is that most people don't believe that their situation and their credit can be fixed well enough to be put in a situation to buy a home.

Frequently, I tell people "if you'll follow my directions, over the course of this year, we'll get you in a position to buy a home by the end of the year."

THE REAL PROBLEM IS INSTANT GRATIFICATION!

Invariably 8 out of 10 people think that the struggle to get back up is too great despite my words of encouragement. They fall off the wagon and are drinking the "gloom and doom Kool-Aid" and give up! Whaaaa, whaaa, whaaaaaaa.

For those who are coachable. For those who can follow advice, they are elated when they're back on track to buy their new home. It happens, all within a year. It thrills me, but they're ecstatic. Hard work & sweat with great results to show for!

INSTANT GRATIFICATION...

often times becomes long term pain. Why? Because the attorney's say "hey, pay me X $,000 dollars and we'll wipe away all your credit in short order. The took the bait, hook, line and sinker! It's really a shame.....Sure the debt is wiped out quickly, it's like walking into the bathroom after the 300 pound dude has been sitting there for about a half hour. It lingers and lingers and lingers. How long? Try 3 to 5 years! When I was in law school, I hated studying, but I'd tell myself "short term for the long term." Just work on it for a year for a long term gain!

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My advice

.....look both ways before you cross the street. You're probably closer to the top than you thought, but if you don't look before you cross, you could be spending a lot of time in the hospital wondering what just hit you!

OK...just met with new clients from a new realtor just yesterday. I've posted on this a number of times, but being the new year and all....let's revisit this issue. This sounds almost too good to be true. But it is true. You can't do it on a conventional loan. You can, however, do with an FHA mortgage with:

THREE CRITICAL CAVEATS!!!!!

1. The bank CANNOT be reporting the current loan as deficient;

2. The borrower can't have any 30 day lates reporting either.

3. If FHA puts a claim against the current loan, that'd be a deal breaker as well;

I HAD 5 LAST YEAR AND 4 QUALIFIED!

We've done a myriad of them at our company this year. There are reasons why some folks who sell a home short, should be allowed to buy immediately, but great discretion needs to be exercised.

My buyer was denied by two other mortgage companies over the last two months. The other mortgage banks didn't look at the 4155 (or the FHA guidelines). Realtors, this is critical. A buyer still needs to qualify, but if they sell their home in a short sale and meet both of the aforementioned criteria, then....you have another happy buyer!

Loan officers need to have the support. They need to know the guidelines. Buyers do have options.