Hammonton, NJ

Credit Scores: When Good is not Good Enough

In the past, a consumer with a FICO score of 620 was considered to be a low-risk borrower by Fannie Mae and Freddie Mac. Not anymore. After suffering major losses in the mortgage market last year, the nation's two largest mortgage finance lenders have redefined risk, announcing new Loan-Level Price Adjustments (LLPAs) for borrowers with FICO scores below 720.

LLPAs are automatic, cumulative fees based on credit scores and the loan-to-value, and they can significantly increase the cost of mortgage credit. These fees have nothing to do with your mortgage company or its various products and cannot be negotiated away.

Let's take a look at the impact that LLPA's have on conforming loans.






*Based on a loan amount of $300,000 and a loan-to-value over 70%. This chart is meant to be a guide. Interest rates and loan programs are subject to change. Adjustment to fees will be higher for cash-out refinance transactions.

As you can see, borrowers who have FICO scores below 720 will now be forced to pay more, either in points (as much as 3.000% more) or in interest rate. Borrowers with FICO scores below 620 will incur the maximum adjustment which, on a $300,000 loan, would amount to $9,000 in upfront costs.

For borrowers who can't or don't want to pay the cash up front, be aware that lenders have the option of converting these fees into higher rates. In the above example, a 2.75-point fee (2.75% of the loan amount ) is charged to the borrower. The charge could be waived, however, in exchange for increasing the interest rate by almost one full percentage point. The end result would be an increase of nearly $6,200 in mortgage payments over the course of the first three years of the loan, which translates into approximately $170 more per month.

According to Fannie Mae and Freddie Mac, the FICO credit score used to determine the fees for borrowers is the "middle" score of the three scores generated by the three national credit bureaus. For multiple borrowers, the middle score of the borrower with the lowest is used. In addition, requirements will vary based on the loan program and loan-to-value. For those borrowing more than 70% of the home's value, for example, credit scores must be 740 or more in order to avoid being subject to the adjustments.

If you are thinking about getting a mortgage in the next 12 months, your credit score is going to be more important than ever. Call your mortgage professional right away to find out where you stand. In some cases, professional credit repair may be required, which could take up to six months or more to achieve the most effective results.

Stay tuned for more great credit tips!

Karl Peidl
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037

kpeidl@linc-mort.com

www.facebook.com/newjerseymortgages

609-254-6687

Inflation and Interest Rates - What's Going On?

If you've seen the news lately, you know concerns about inflation are increasing. But what does it really mean to you?

The fact is, inflation is a very serious issue, and it will likely be on the rise as 2009 proceeds...and along with it, home loan rates will rise too.

To help you learn more about this important topic, I want to send you a link to a short video, featuring the nation's foremost mortgage industry expert. In this video, you'll learn how inflation impacts interest rates and what the outlook is for down the road.

Because home loan rates will be on the rise, if you or any of your family, friends, neighbors or co-workers have been considering a purchase or refinance, now's the time to act.

Please contact me today to discuss your specific situation, and feel free to forward this email and video link along to others that you think might benefit from it as well.

Watch the Video


Karl Peidl
Lincoln Mortgage Company
609-561-5050
609-254-6687

kpeidl@linc-mort.com

Have you ever had your day end and wonder where it went? Have you ever been frustrated by how reactive you have been to "emergency" situations that significantly reduced your productivity?

Many of us have experienced this to an excessive degree in our business practices. One of the greatest ways to eliminate the reactive state we find ourselves in is to practice the art of Time Blocking. Time Blocking is about scheduling your day with purpose, making sure the things you need to get done DO get done. This applies to work and personal activities. Remember, the more proactive you are with your day, the less reactive you will be.

Dedicate yourself to the following exercise for 2 weeks. Each morning, start off by blocking your entire day in ½ hour increments. The result might look something like this:

The key to this type of planning is to check your voice mail and email each hour and return messages promptly. The reason is simple: If you let too much time lapse before you respond to your client, it will tear you away from your time blocking schedule. The temptation to check the red light blinking on your phone, or respond to that electronic voice saying, "You've got mail," will be too great to resist. Remember, time blocking is about commitment. The more you live your days proactively, the more work you will get done.

The Elements of a Credit Score

A credit score is an extremely important financial tool. It provides access to the financing you need in order to buy a car, a home, or pay for college tuition, among other things. Since higher scores equate to lower costs and vice versa, it's vital to understand the factors involved in calculating your score. Here are the five elements that make up a credit score, in order of importance:

Payment History: 35% impact. Paying debt on time has a positive impact. Late payments, judgments, and charge-offs have a negative impact. Delinquencies that have occurred in the last two years carry more weight than older items.

When applying for a mortgage, every point in your credit score can make a big difference. So don't make any major financial or credit decisions - even paying off an old debt or delinquency - without first discussing it with your mortgage professional.

Outstanding Credit Balances: 30% impact. This factor marks the ratio between the outstanding balance and available credit. Ideally, consumers should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when planning to enter into a loan transaction within 3-6 months.

Credit History: 15% impact. This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area.

Type of Credit: 10% impact. A mix of auto loans, credit cards, and mortgages is more positive than a concentration of debt from credit cards alone.

Inquiries: 10% impact. This quantifies the number of inquiries (or requests for credit) that have been made on a consumer's credit history within a 6-12 month period. Each individual inquiry - up to 10 - can hurt your credit score by as much as 5 to 30 points. Any additional inquiries thereafter will not affect your credit score.

In other words, don't start the loan process until you're ready to act. Otherwise each individual credit inquiry could cost you. However, scoring models have now been adjusted to count multiple "hard" inquiries within a 45-day period as a single request. So, when you're ready, your credit will be too.

If you or anyone you know has any questions about credit scores or what can be done to repair them, please don't hesitate to call.

Recent Federal legislation can impact your closing date. When completing your Purchase Agreement, even if you are prepared to move forward and close quickly, a more conservative timeframe of at least 30-45 days from the time of the contract acceptance would be a more realistic expectation at this time.

Listed below is information on two pieces of legislation that stand to impact your closing date, and a few bullet points that explain the reasoning behind and effects of each measure.

HVCC: Home Valuation Code of Conduct
HVCC was designed to ensure that appraisals are conducted objectively and without pressure from parties with an interest in the transaction. Under HVCC:

• The appraisal and selection of the appraiser will be ordered by someone not directly involved in the origination of the mortgage. This could be either someone else within the mortgage company or a third-party appraisal management company.
• A copy of the appraisal must be provided to the homebuyer/borrower no less than three days before closing.
• The minimum time expectations for receipt of the appraisal should be a few weeks and not days. (While receipt of the appraisal may be received in shorter timeframes, conservative expectations are warranted.)
• Communication between the appraiser and the originating mortgage professional is prohibited. It is imperative that the agents involved in the transaction be prepared at the time of inspection to offer supporting value information if warranted.

HERA: Housing and Economic Recovery Act
HERA was designed to ensure that the borrower(s) involved in the transaction are given accurate disclosure information (Truth in Lending Statement pertaining to Annual Percentage Rate or APR) regarding the loan they are applying for and adequate time to re-evaluate their decision to proceed in the event of any changes that would impact their costs to finance. Under HERA:

• No fees may be collected for the transaction other than those for running a credit report at the initial time of application. Additional fees may be collected only after four business days.
• Should the APR change by more than .125% on a fixed rate loan or .250% on an adjustable rate loan, the lender must disclose the new APR and the borrower must have a minimum of three business days to review the information before the transaction may proceed.
• Items that can trigger re-disclosure requirements include a change(s) in the loan amount, closing date, loan program, any fees that impact the APR or interest rate from the rate indicated on the original loan application.
• In cases where documents are sent by mail to the borrower related to re-disclosure of APR and/or providing a copy of the appraisal, anticipate six business days (three to allow for mailing and three to allow adequate time to review them) before a closing can occur.

Karl Peidl
Superior Mortgage Corp
(800)706-6671 x4349
kpeidl@supmort.com

www.facebook.com/newjerseymortgages