In a 180 degree turn from practices just a few short years ago, banks are making it extremely difficult to get a loan, especially if that loan is a refinance.
The Obama administration’s program to encourage the refinancing of loans owned or guaranteed by Fannie Mae and Freddie Mac was supposed to benefit up to 5 million homeowners whose loans exceeded their home’s current market value by as much as 5%.
Then, this summer, the program was modified to allow refinance of a mortgage as much as 25% over current value.
But the loans aren’t being made as planned.
The Home Affordable Refinance Program, known as HARP, had helped only 116,677 homeowners as of September 30.
The problem? Lender participation is voluntary, and they don’t want to make the loans.
Some homeowners, feeling the pinch because of job layoffs or salary reductions, are trying to refinance to take advantage of the lowest mortgage interest rates since the 1940’s. Dropping from a 7 or 8% interest rate down to 5% rate would save them hundreds of dollars per month and in many cases, allow them to hang on to their homes.
For others, the dark specter of an ARM about to reset is spurring the need for a refinance. For them, a refinance into a fixed rate will likely mean the different between keeping their homes and losing them.
But the banks, citing a need for tougher standards, don’t want to make the loans. There are, however, those who believe that isn’t the real reason. It simply isn’t in their financial best interest to give homeowners lower interest rates if they can manage to make the payments at their current rate.
And that’s probably the same reason that so few have been able to get loan modifications under the administration’s TARP program. They seem to have an attitude that if the person has been managing to make the payment at 7%, they might as well keep on paying at that rate.
The TARP program made it mandatory for banks who accepted bail-out funds to participate in making loan modifications, but as of Sept. 1, only 1,711 permanent loan modifications had been completed. Only 350,000 trial modifications had begun, and some homeowners report that the 3-month trial has stretched to almost a year, with the lender putting them off and repeatedly asking for the same documentation from month to month.
Sadly, the refusal to grant refinance loans or loan modifications is pushing many homeowners into short sales and foreclosures.
The wisdom of these programs will likely not be known for several years, but one thing is certain right now. The less money consumers give directly to the banks, the more money they will have to spend in the marketplace, or to pay other bills that may have piled up during this recession. If the banks held up their part of the bargain this economy just might begin to recover.
Job layoffs are a common occurrence these days, and employees are scrambling to find new jobs. But those who have traveled, entertained, or purchased office supplies on a company credit card have one more thing to be concerned about.
If your previous employer doesn’t pay that credit card bill, it just might end up on your personal credit report.
As you know if you’ve added a child to your own credit card account as an authorized user, your good credit can help them build their credit scores. But if you default on your credit card, you’ll be harming their credit rating as well.
Thus, the manner in which you were authorized by your employer to use a corporate card will play into whether your credit can be damaged by his or her failure to pay. One loophole that employers can use to shift the blame and the credit harm to an employee or former employee is to claim that the employee didn’t file expense reports on time.
As you might expect, filing expense reports might become difficult if an employee has been laid off – but if this has happened to you, you need to call and find out how to do it. Then document the fact that it has been done.
Another is to claim that the former employee used the corporate card for personal expenses. Thus, it is in your best interests to keep copies of every charge made on a corporate card – along with notations about the reason for the charge. If the card shows charges at a restaurant – document the reason why you were entertaining along with the names of the guests.
Any employee using a corporate credit card should check his or her own credit report to see if that card is shown. If not, then they probably don’t need to be concerned. However, since the economy is in a state of flux and confusion, and since not every company is operating within ethical standards, continuing to check after a layoff is important.
Should that former employer decide not to pay charges incurred by the employee, responsibility for those charges could transfer to the employee. The only safe route is to check your credit report monthly, and to read it carefully.
In the event that charges made on a corporate account do show up, it becomes the former employee’s responsibility to contact the credit bureaus and dispute the account. That’s when the employee’s careful record keeping will pay off.
I am retired veteran trying to purchase a house as a first time home buyer my credit scores are in the 590 and have had three garnishments that have been satisfied as of April 09, also had two lates with Bally’s total fitness in May and April of 09 which the membership has been cancelled but the lates are still reflecting on my credit report, I also have have a 2007 vechicle financed which have made on time payments, what can I do immediately to increase my scores have a deadline to meet by Jan/Feb 2010?
A:
Hello,
It sounds like the recent late payments caused your credit score to drop. It is really hard to determine what needs to be done without looking at your credit report. I will give some tips on what will increase your credit scores quickly. Here is an article I wrote a while back that will give these tips. Also remember late payments will be on your credit report for 7 years. Credit Repair tips here.
Job layoffs, reductions in work hours, and the real estate crisis have put many Americans into a financial bind in which bankruptcy has become unavoidable. It’s a scary situation, especially when you want and need to get on with your life and you know you may want or need to use credit again in the future.
You already know that a bankruptcy will remain on your credit report for ten long years. That’s not good, but there is a small “up side” to the situation.
One factor that many don’t consider is that after bankruptcy you may be seen as a better credit risk than before the bankruptcy. This is because you are no longer buried in debt, and because the law prevents you from filing again for 8 years.
This means probably won’t be entirely without credit for those ten years – especially not if you take steps to repair your credit as quickly as possible. You will, however, be subjected to higher interest rates and lower credit lines – especially during the first years.
So what can you do to rebuild your financial life and get back to some kind of normalcy?
The bankruptcy wiped the slate clean, so your task becomes one of building a new and better credit file – so get started right away.
Begin by controlling your spending and saving money in small ways that, taken together, can create a large impact. Doing so will enable you to stay current with your obligations going forward. This first step is all-important.
Next, begin rebuilding a good credit history. Search for a “bad credit credit card” or apply for a secured card – first making sure the one you choose reports to the credit bureaus. Then use the card sparingly. Charge no more than 30% of your limit and pay the balance in full each month.
If you have a parent or sibling with good credit, ask to be added as a user on a credit card that they use sparingly. Don’t actually use the card to get back into debt. That won’t do you or them any good.
Be sure that all utility payments are made on time – because while they may not report your account in good standing, they will report if it’s in default.
Begin building a reserve in your checking account, so you’re never in danger of an overdraft, and open a savings account.
Buying a home is the American Dream. Everyone would like to have there own piece of homeownership. With the real estate boom dead in the water, the market has become plagued with foreclosures. The chatter all over the U.S. is to “buy a foreclosed home; you will get a great deal.” This is partially true, but there are lots of issues when trying to buy a foreclosed home in this market. Below are some of the issues.
Financing on a foreclosed home
Most people will need a loan with a bank to buy a foreclosed home. Banks don’t particularly like financing a foreclosed home that has problems. While you are out looking for a foreclosed home you will find that these foreclosed homes typically are not in good condition and need some work. This is one of the issues with buying a foreclosed home.
Foreclosed homes purchased “as is”
When you are out looking for a foreclosed home you will discover that a bunch of these homes say “AS IS.” You might be wondering what this means….? Well that means the bank is selling the home in the condition it is in, and will not repair anything. So let’s assume your offer gets accepted, and the appraiser notes there are some issues with the home. A bank will require those issues to be repaired. At this point you are stuck. So make sure your realtor is seasoned and understands what banks are looking for.
FHA loans
F.H.A. loans are the most attractive currently because this loan only requires a 3.5% investment from the borrower. When it comes to guidelines, this loan has higher standards on appraisal requirements. The banks know this, and may not even accept FHA offers. So with this being said, you may be required to go Conventional on your loan which requires 5% down and much higher standards on credit requirements.
Closing Cost assistance from Bank
When negotiating on a home, it’s a common practice to have the seller pay 3 to 6% of your closing costs. This of course depends on the loan type, because some loans only allow 3% seller closing cost assistance. Some banks will not pay anything, and in other situations you might find yourself competing with multiple offers. The offer that is the best obviously wins.
These are some of the real life problems with buying a foreclosed home. Do your research before you buy a home that has been foreclosed. Also make sure your realtor and lender are experienced before using them.
Credit Repair is probably one of the most abused practices out there. You can find companies advertising credit repair all over the web. Being a lender for 8 years and knowing the facts, credit repair by credit companies typically will be a huge let down.
You cannot remove a debt you owe unless that debt has reached its expiration date. This is what most of these credit repair companies promise. In other articles I have discussed this expiration process; here is the way that works. In this article I wanted to discuss the how credit repair can be done fore FREE with your own efforts. Don’t waste your money and time with “credit repair companies” you can take that money and repair your own credit report.
Step 1: Getting your credit report
There are free trial credit report offers all over the web. You probably are asking which one is actually FREE. Well www.annualcreditreport.com is the only credit report site that does not ask for a credit card unless you want your credit scores with the report. We recommend getting your credit report with credit scores, that way you have an idea what your scores are. You can do that through our site if you want your scores. We also have provided a comparison site of all the top free trial credit report offers at our sister company www.freecreditscorequick.com. So check that out as well.
Step 2: Determine incorrect information on your report
Most credit reports have inaccurate information on that report. You need to determine what debts should be taken off and what debts are inaccurate. To determine collections or slow pays that need to be removed from your credit report, you can use this link to find out expiration dates.
Step 3: Dispute inaccurate information
Once you have determined what is inaccurate and expired, dispute that information on-line. In our professional opinion it’s much faster to dispute on-line than write letters. You can dispute online here.
Step 4: Determine budget to settle on collections
This is probably the most frustrating part of credit repair. It is also the quickest way to increase your credit scores as well. Take note of each collection and the collection company’s number. Add up t he total amount of money you owe to each creditor. One you have that total determine how much you can pay to either settle or pay in full the collection that is owed.
Step 5: Call collection companies to settle on debt
You will find that these collection companies can be difficult to work with, but they will usually settle pennies on the dollar to get payment.
Example:
Collection amount: $500.00
Offer Amount: $250.00
Remember you have already determined what you can afford to offer each collection company. Also make sure you meet the agreement that has been arranged. Don’t tell the collection company you are gong to pay and blow them off. This may take some time, but will be the quickest way to repair your credit.
Step 6: Collect letters from collection companies
This is very important, once you have released money to a collection company make sure they get a letter stating you have either settle or paid in full on the collection. Keep these letters in a folder. You may find that the Collection Company or bureau did not update the collection properly. This letter is proof you took care of collection.
Step 7: Reestablish credit
I am going to assume you have no good credit reporting on your credit report. All the good credit you had went to collection. You will need to re-establish good credit. You are going to find that most banks will only allow secured lines of credit to establish good credit. The quickest way to do this is with secured credit cards. You can get the top secured credit cards through our site. You will need a minimum of 2 cards. Most of these credit card companies require you to send them $200 to $300 dollars of your own money to secure that line of credit. The reason I recommend this is because this line of credit will report to all 3 credit bureaus as good credit. Make sure once you have received a couple of cards you keep the balanced owed extremely low. Credit Cards are not credit lines to go out and charge up above and beyond what you can pay off that particular month. Also make sure you are not late on any payments. If you charge up your cards or are late on payments, you credit scores will plummet. With your new secured cards you will establish higher credit scores and this process will take about 6 to 12 months.
Step 8: Pull your credit report
Once you have done all the above and it has been around 6 to 12 months re-pull your 3-in-1 credit report. You want to make sure that the collection companies have reported everything properly like they should. Remember you have letters to show you paid or settled on your collections. If you find that these collection companies have not updated the credit bureaus like they are suppose to, remember you can dispute online to get update or call the collection company to ask what is going on.
Conclusion:
Remember credit repair is not a quick and easy process. If you follow the steps given, you will be like the individuals we have helped get a mortgage over the years that had credit issues. Don’t fall prey to credit repair companies, most of them will disappoint you.
I am recently divorced. In the divorce settlement, my ex husband is responsible for paying the 1st mortgage and 2nd mortgage on the home we own together. The house has been on the market for almost a year and has not sold. He is currently living in the home, and is not making full payments, and/or regularly pays late. This, of course, has affected my credit score drastically. Other than those two items and prior to 2009, my credit score was in the high 700’s.
Is there any way I can dispute this based on the fact that legally these payments are not my responsibility?
Cindy
A:
Hi Cindy,
This divorce decree issue is a huge problem after divorce takes place. This is one issue attorneys don’t explain properly. The proper way of drawing up a divorce decree when a house or debt is involved is to get that debt out of the individuals name that is no longer responsible for that debt per the decree. Unforetunatley most attornies don’t do this. So in your situation the creditor will still say you are liable for the debt regardless of what the decree says. Disputing will not do any good for your situation. The ideal situation is to have him sell it or refinance the obligation out of your name. I would consult with your attorney why he did not explain the repercussions of this. In my opinion attornies should be responsible for a mess like this, because they are suppose to represent you.
Before deciding to plunge ahead with a first home purchase, renters should consider several factors, the first of which is how long they plan to stay in the community.
Under the regulations for the First Time Buyer Tax Credit, a buyer must remain in the home for 3 years. If they move before that time has passed, they will be required to return the $8,000. This alone could create a hardship. And as we all know, owing the IRS is not something we want to do.
In addition, because during the first few years of a home mortgage most of the payment goes to interest, they’ll have little equity in the home if they sell. And selling takes time. Depending upon the market at the time, they could be looking at several months on the market.
Thus, if they need to move because of a job transfer, until the house sells, they’ll be stuck with a mortgage payment as well as rent on a home or apartment in their new location.
Next, renters need to decide if they’re ready to take on the responsibility and expense of home maintenance and repair. As a renter, if the plumbing starts having problems or the furnace goes out, they simply call the landlord to have the problem fixed. As a homeowner, the responsibility belongs to them. Not everyone has the resources or the desire to deal with those expenses.
Many landlords set aside 10% of the rental income for repairs. New homeowners would do well to set aside 10% in addition to their mortgage payment as a fund to tap into when repairs are needed. Will that fit the budget?
Homebuyers might do well to stash that $8,000 in a savings account as a cushion to fall back on when maintenance and repairs are necessary.
The next thing to look at is monthly cost. Right now census bureau figures indicate that over 11% of all rental properties are vacant. That means that in several areas of the country, renters can find bargains on good properties. While they aren’t earning any equity as renters, it does afford an opportunity to set aside funds for a respectable down payment when the time is right to buy.
No one should rush out to buy a home simply to get the $8,000 First Time Homebuyer Tax Credit. First, decide if the time is right and if it makes financial sense. If the answer is yes, then the credit is a nice gift.
Instead of expiring at the end of November, the First Time Homebuyer Credit has been extended to the purchase of homes that are under contract by April 30 and closed by June 30, 2010.
This is an extension of the $8,000 credit offered to home buyers who have not owned a home within the previous 3 years. This definition of “First Time Homebuyer” has confused some who don’t realize that they do qualify, even though they have owned a home in the past.
The difference between the current credit and the 2009 credit is the income limit. Last year’s limit was $75,000 for a single person and $150,000 for a married couple. The new limits are $125,000 and $225,000. Buyers with additional income of up to $20,000 more are eligible at a decreasing percentage based on income.
Congress also passed an expansion to this bill – now including homebuyers who have lived in their present home for at least 5 of the past 8 years. This $6,500 credit is the subject of debate among real estate professionals. Some believe it will spur the market while others see it as having no effect.
As with the original $8,000 First Time Buyer Credit, some real estate professionals believe it will cause sellers to remain firm on pricing. Some feel they don’t need to negotiate because the buyers are going to get the credit. That belief, however, can come back to haunt them as buyers move on to homes with more favorable pricing.
For homebuyers who want to “move up,” the $6,500 tax credit may ease the sting of taking a loss on the home they are selling. This adds to the fact that the savings on their new home can outweigh the loss on their previous home.
In a market where prices are down 20%, their loss on a $100,000 home is $20,000 while their savings on a $200,000 home is $40,000.
Agents working in high-end markets, with homes in the $500,000 and up range, are those who saw little effect from the previous credits – and who don’t expect to see an impact from these. For many of those agents, the biggest motivating factor is “bargain pricing.”
In some markets, homes that had been offered at over $1 million can now be purchased for as little as $750,000. For consumers wishing to own a second home on the beach or a chalet at a ski lodge, that savings can be a powerful motivator to act now.
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.
In a 180 degree turn from practices just a few short years ago, banks are making it extremely difficult to get a loan, especially if that loan is a refinance.
Job layoffs are a common occurrence these days, and employees are scrambling to find new jobs. But those who have traveled, entertained, or purchased office supplies on a company credit card have one more thing to be concerned about.
Instead of expiring at the end of November, the First Time Homebuyer Credit has been extended to the purchase of homes that are under contract by April 30 and closed by June 30, 2010.
