Danell Merren

I've always prided myself on knowing what goes into a good credit score- see my previous blog on Credit Score Tips (http://activerain.com/blogsview/765125/credit-score-tips-). Well, sometimes we need to "do as we say" and not as we do!

I should have remembered that length of credit is 15% of your score! I knew it impacted your score, but I seriously forgot how much! I kept thinking it was like maybe 5%, 10%, etc. Well now that I come to think of it even 5% could easily drop you 40 points!

Well, I went from a 793 to a 738 in the course of a year. Several factors impacted this:

• My credit was run six times- this is too many! But I had to have it run twice as a Principal Officer at my mortgage company when we applied for our FHA license, once when I refinanced, once when I thought about refinancing my home equity, and seriously regarding a couple pulls, even I couldn't figure out why the banks ran my credit (I learned about these when I went to the free/non score hurting service at- www.annualcreditreport.com).
• I canceled all my credit cards but one. The magic number I've always been told to keep (per my credit bureau contacts) is two. I made an informed decision to cancel because like many other Americans this year, I was informed my rate was increasing astronomically. I was not willing to take my card with a 3.16% rate (tied to the LIBOR index) to a variable at 17+%, not when I was paying off a balance. To me, the risk of my score dropping from an increase in debt to credit ratio was worth it. I kept my long-term goal of having no credit card debt at the forefront- when this debt is totally gone in about another year, I'll have an excellent score again without having paid extra interest.

The downside though was that the credit card I did keep just sent a notice that they, too, are increasing my rate. They were blunt when I called that when they issued cards tied to the Prime index, they didn't expect it to hover around 3.25% for months. So, they sent a notice that the new rate would be Prime + a Margin of 3-11 percent. In the mortgage world- margin + index= rate. So, I knew that my rate would be 3.25% plus a minimum of 3% more, so it'd be at least 6.25%. This seems reasonable considering the hit banks, credit unions, and mortgage companies have taken. But my rate went up to 7.25%. I know this is still good, but I was curious, "why didn't I get the best rate?". Well because my score went to 738. So I asked the customer service person, "what's the magic number, 740?". And she replied, "No, it's actually 760 now." Whoa! I figured this was coming, but it sure came quick! A year ago anything over 700 would be considered excellent. Now 738 is just very good.

In the end, I'm really not too upset. Like I said, a 7.25% rate is still good in the world of credit cards. This card will be paid off in about five months, and then I'll be snowballing my payments and aggressively paying off that last elephant in the room. But borrowers beware, think twice before canceling a bunch of cards!

As we all know, the mortgage industry has had its ups and downs this past year. Each file seems to come with its own set of challenges, however, a positive outlook helps us to find solutions 99.9% of the time!

Recently I had an experience that just helped me stay in great spirits day after day! Suddenly within one week the following happened:

• A past customer was on vacation, so she had a minute to drop off a box of cookies from the local pastry shop (Van's)- yum yum! Thank you, Melissa and John!
• Another client, in the middle of her transaction, dropped off a homemade cake! She makes cakes and sells them out of her home for all occasions. Thank you, Josy! It was delicious! You can call her for special orders at 308-7819.
• Another client sent me an ecard thanking me for all the work we are putting in on her transaction! Thank you, Valarie! You made my day.
• And an ICCF donor that I've known for years began farming in Ada during retirement. He brought some peaches for her his farm. He asked me to call if they were good and to not if they weren't- ha ha. I called to let him know that they were so good that all our staff ate them, and I didn't even get a chance to try one. He dropped off an entire bushel the next week, and I got to try one, and they were wonderful. Thank you, Michael!

Folks like this make the challenges of the current mortgage market totally worth it! The successes outweigh the frustrations over and over!

We hear a lot these days and read a lot in sales books about "the customer is always right". While I believe that is true from a customer service standpoint, it certainly doesn't transcend to mortgage guidelines.

I lost a deal this week. This is very rare for me. I have been doing loans for over five years and I have never had a buyer walk away simply because they were upset about the mortgage guidelines or because they refused to cooperate with the rules. I've had buyers walk away for things totally out of our control. The deals I have lost included:

1. A buyer's grandpa recently decided to buy her a house with cash! Good for her! Can't compete with that one.
2. A deal fell apart a couple years ago because the house was in probate and sellers couldn't agree on price or who had rights to sell after a purchase agreement was already signed.
3. A buyer was buying a HUD home and had an epiphany while waiting for the lead abatement that the home was a money pit and that it wasn't a good decision. Good for him that he had this "a-ha" before he closed!

But never have I had someone who outright just wouldn't tolerate or cooperate with the mortgage guidelines.

This young woman was buying a "flip" FHA. She needed 3.5% into the transaction. The seller was paying all closing costs. When she came in for her application, she had the 3.5% saved in her checking account. She never indicated she would be using a gift or retirement funds for down payment.

I have buyers sign a "Do's and Don'ts" document (http://activerain.com/blogsview/917658/top-dos-and-don-ts-in-the-mortgage-process-). This spells out that the buyer should call prior to making unusual large deposits! After this experience, I have instructed my processors to add a line to that document that states "unusual deposit is any deposit over $50 that is not obvious from payroll".

All loan types that require a down payment require that we prove where the down payment came from and that the "giftor" had sufficient funds to gift. In this young woman's situation it appears she spent her down payment. So, she decided, without telling us, to use retirement funds. So, we needed proof that she got the money from retirement. She also got a gift for almost $500 from her brother. She said she had "lent" him the money and he paid her back. So, in her mind, it appears she felt it wasn't a gift. But that isn't how underwriters would see this- unless we could trace the money she originally gave him, then we'd have to have him fill out a gift letter and prove he could gift money to her.

The FHA guidelines say that the 3.5% down payment can come from:

• Buyer
• Gift of a relative, friend, or a grant program
• Employer

And the guide also says we must prove they could gift.

It's kind of that old adage, "don't shoot the messenger". I had an underwriter once say, "I don't write the mortgage guidelines, I just read the regs." Good point!

Sometimes people get frustrated, and it's our job to try to teach them the logic. What I learned in my loan officer classes was that ultimately, the reason we have to prove where down payment came from was that the government can seize a home if they believe it's a drug house. And then the buyer could get foreclosed. This might be extreme, but let's face it, an underwriter's job is to see the worst case scenario. If a person can't prove where the money came from then the underwriters will wonder what they are hiding. And with the collapse of the housing market, I say, who can blame them. The banks want to be sure that a buyer isn't obligated to repay gifts, so they want to be sure that the giftor was appropriate, i.e.- a relative and that they could gift the money.

It's unfortunate, but in an effort to prevent this in the future, I thought I'd write about it.

It's something about Thursdays lately! I leave my office at 920 Cherry St., get in the car, put the sun roof down, and notice the amazing thing happening! I have seen countless people walking, running, riding their bikes, pushing strollers, and shopping the cool shops in the East Hills Business District. East Hills is a truly "Walkable Community".

It's so great to see a city come to life again. I leave here feeling like Grand Rapids is truly becoming a Cool City.

My hubby and I are big fans of 1st Wok on Alpine.We go at least a couple of times per month. I guess you'd call us "regulars". We typically go on Sundays because they have a great special where you can get soup and an eggroll complimentary with your meal. Our little kids love the Won-ton soup and Fried Dumplings. They are quite rambunctious. I have a saying that kids are either wild or mild. Sometimes I feel embarrassed like the kiddos are being too wild.

So, a couple of weeks ago on a Friday night I ordered take out. I came in to pick up my order, and I could tell the owner thought I was missing some wee ones. I said to him, "I left the little ones at home tonight. You know they are so wild and everything." He smiled and told me they are fine. The owner made some small talk with me and said, "What you do for a living?" I told him I was a loan officer. He asked, "You like your job? You got a card?" And at the same time, he said to the hostess, "when you get ready to buy a house, you go see her." I gave them my card and told them that, yes, I like my job, but that this market sure has had its challenges.

A few days later, he sent me a gift certificate for two complimentary lunches!I was so moved by his kindness. My hubby and I snuck out for a rare lunch without the kiddos and our usual waitress noticed we were without the kids. She acknowledged it was nice for us to get away without them for a brief time, but she assured us that our kids are well behaved!

You can check out their great specials at:

http://www.firstwokgr.com/

Thank you 1st Wok for your outstanding customer service and the great food too!