Archive for May, 2008

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Credit Score Requirements for FHA mortgage

Wednesday, May 7th, 2008

If your credit score is low these days it might be pretty difficult to get financing for a mortgage. There are loans out there that don’t have credit score requirements, but the banks that provide the financing have their own internal requirements. For example, FHA loans which are government insured loans don’t have a credit score requirement to insure the loan, but the bank that underwrites the loan will have their own internal credit score requirement to even approve the loan.

What is FHA ?
Federal Housing Administration is what FHA stands for. This is a department of Housing and Urban Development (HUD) that insures loans underwritten by banks. Banks are more anxious to provide FHA financing due it being less risk to the bank. If a borrower forecloses on the FHA loan HUD buys a portion of the loan back. So in all reality this loan is a lot more attractive for banks to lend with.

Credit Scores for FHA mortgage
With all the banking rules changing currently, FHA is still the strongest and most aggressive loan out there. The caveat is the banks have gone to credit score requirement for FHA loans. The current standard is a middle credit score of 580. I know HUD is really concerned about this but they don’t underwrite the loan, the banks do. The reason for this credit score requirement is because there has been a pattern with borrowers below a 580 credit score. These types of borrowers are foreclosing on their homes. Typically when banks portfolio their own loans they monitor certain foreclosure types. If there are too many foreclosures of one particular type of borrower, they raise the bar on underwriting requirements. So with this being said you need at least a 580 middle credit score to get FHA financing these days.

So if you are wondering what your credit score really is, you might consider pulling a copy of your free credit score report. That is the most proactive way to determine your buying power. It also is a great way to see if there are any incorrect information that could be dragging down your credit score report.


About the Author: Mike Clover is the owner of http://www.creditscorequick.com/. CreditScoreQuick.com is the one of the most unique on-line resources for free credit score report, fico score, free credit check, identity theft protection, secured credit cards, student credit cards , credit cards, mortgage loans, auto loans, insurance and a BlOG with a wealth of personal credit information. The information within this website is written by professionals that know about credit, and what determines ones credit worthiness

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When should I refinance my Home ?

Tuesday, May 6th, 2008

Low interest rates and liberal underwriting guidelines caused a surge of home ownership in the US over the last 7 years. Interest rates have stayed relatively low as well. In 2004 interest rates hit a all time low around 4%. This made it very possible for lots of families to afford home ownership. As the years passed lots of families were put into adjustable rate arms (ARMs). Some families were just simply taken advantage of and were put into high rate loans when the market in fact allowed lower interest rates. Here is what to look for in order for a refinance to make financial sense.

Reasons for a home refinance & FACTS

1. To lower rate at least a minimum of 1.5%
2. Must stay in home for at least 10yrs to recoup refinance costs
3. ARM about to expire
4. Got a escrow shortage
5. Need to take out equity for cash to pay down debt

As you can see there are some steps to determine whether a refinance will make sense for you. Despite the commercials you see about no closing cost loans, believe me you are paying for it some how. There are closing costs involved in a refinance, so you want to make sure you stay in your home for a minimum of 10 years before selling or moving. The reason for this is it takes about 10 years to recoup the cost of a refinance on a home. You definitely don’t want to refinance your home unless you can lower the interest rate at least 1.5%, otherwise it’s not worth it. Families are loosing their homes all over the U.S. because they don’t have the value or the credit to refinance their home out of a costly ARM. My advice would be not to tap into any retirement to save the home, just let it go. It’s not worth touching your 401k, IRA, or any kind of retirement savings. Another problem is having escrow shortages, or the lender sold you on a no escrow loan. These two situations can get you in trouble real quick. Escrows in case you did not know are the taxes and insurance typically collected into an account and paid by the bank. If you find yourself behind on this stuff make sure you pay it as soon as possible.

Watch out for too good to be true advertisements
On TV and in the mail you probably see this really low interest rate, and typically it’s got a catch to it. Normally the low interest rates are going to cost you to get that rate, and in some cases it’s some creative loan that is very complicated. There is no miracle out there when it comes to low interest rates; most lenders have the same interest rates across the board. If a particular lender sticks out like a soar thumb because their rates are extremely low, it’s probably because it’s a gimmick to get you to call.

Author: Mike Clover
CreditScoreQuick.com

Posted in ARM, free credit check | Comments Off

Proposed Credit Card and Banking Regulations

Sunday, May 4th, 2008

It looks like the government will be getting serious about credit card regulations. The Federal Reserve Board proposed rules to prohibit unfair practices regarding credit cards and overdraft services that would among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.

Regulation AA (Unfair Acts or Practices)
The proposal would amend Regulation AA to prohibit unfair or deceptive acts or practices by banks in connection with credit card accounts and overdraft services for deposit accounts.


Blue from American Express

Credit Cards

• More Time To make Payments. The proposal would stop banks from treating a payment as late unless the consumer has been provided with reasonable amount of time to make that payment. There would be a new safe net for banks that send periodic statements at least 21 days prior to the payment due date.

• Allocation of Payments. When you have a credit card with different balances (for example, purchases, and cash advances), typically the annual percentage rate (APR) is higher on the cash advance. When you make a payment on a scenario like this the bank will apply your payment to the lower of the two. With the new regulation the payment will be split equally amongst the two balances. In addition, to enable consumers to receive the full benefit of discounted promotional rates (for example, on balance transfers), during the promotional period payments in excess of the minimum would have to be applied first to the balances on which the rate is not discounted.

• Two-Cycle Billing. The proposal would stop banks from imposing finance charges based on balances on days in billing cycles preceding the most recent billing cycle. Credit card issuers will not be allowed to use previous billing cycles to calculate interest on your current bill. Current double cycle billing uses the average balance from the previous two months to calculate interest charges, even if you paid part of the previous balance.

• Rate increases to existing balances. Credit Card companies will not be able to increase you APR on existing balances, unless you had a promotional offer and/or was late on a payment

• Less bait and switch credit card offers. The proposal would require banks making firm offers of credit advertising multiple APRs or credit limits to disclose exactly what the qualifications would be for those terms.

• Finance of Security Deposits and Fees. The proposal would address concerns regarding subprime credit cards by prohibiting banks from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if charges assessed during the first twelve months would exceed 50 percent of the initial credit limit. The proposal would also require financed security deposits and fees exceeding 25 percent of the initial credit limit to be spread over the first year.

• Credit Card Holds The proposal would prohibit banks from imposing a fee when the credit limit is exceeded solely because a hold was placed on available credit. This can occur where the final dollar amount of a transaction was not known in advance (for example, when a consumer checks into a hotel, a hold is placed for the expected cost of the stay).

Overdraft Services

• Debit Holds This proposal would stop banks from charging a fee when an overdraft takes place to due to a hold placed on available funds in an account.

• Right to opt out The proposal would stop banks from imposing a fee for paying overdraft unless the bank gave the consumer an opportunity to opt out of the payment of overdrafts and the consumer has not done so. This would apply to all transaction types. This would also be applied to overdrafts resulting from ATM and point of sale transactions.

Author: Mike Clover
CreditScoreQuick.com

Posted in credit cards | Comments Off

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Disclaimer: This information has been compiled and provided by CreditScoreQuick.com as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.