Credit Tip – Charged Off Credit Cards

 

Today I want to thank Matt with Synergy Credit Pros for the great information! Give him a call for personal credit repair. They are the real deal! Matt “The Bureau Crusher” Johnson @ 281.971.9887.

As you have learned before in the past from our credit tips, paying off most collections will have a negative impact on the credit score.

Why is it that paying off a charged off credit card that is held by the original creditor, the only collection that will boost your credit score? The reason is because a charged off credit card is impacting two sections of the client’s credit score where all other collections are impacting only the payment history section of the credit score. When you pay off a collection, it will push forward the date of last activity and the reporting dates which will have a negative impact on the credit score.

However, when you pay off a charged off credit card held by the original creditor it will also clear up the amounts owed section of the credit score. So, when you pay off a credit card, it will push forward the reporting date and date of last activity which will drop the score about 10-20 points but will also see a gain of 40 points by clearing out revolving balances, which will net the client 20-30 points.

If the charged off credit card is transferred from the original creditor to a third-party collection company, it will not benefit the client because it is now an O-9 instead of an R-9 so it is not impacting the amounts owed section of the credit score anymore. If the charged off credit card is 4 years or older, we do advise you to call us first to look at the report and make sure it is an account that will benefit the client. If it is 4 years or younger, you can go ahead and have the client pay it off because it will be beneficial for the score.

Be sure to check out my website for more credit tips and tricks as well as other useful information about the homebuying process!

Appraisal Waivers Help You Get Into A Home Quickly!

Not every loan requires an appraisal!

Both Fannie Mae and Freddie Mac started collecting data on every appraisal they received a few years back (yes, big brother is always watching). They began storing every detail from the appraisals and created their own information database which pinpoints a specific property and looks at all of the recent information they have about properties around it in order to determine if they think the value or sales price is accurate. Since Fannie and Freddie are the primary sources of mortgage providers across the U.S., chances are they have all of the information for the home that just sold a few doors down. As long as they feel like the value is not inflated or they do not feel that you are in a declining market, they might offer you an appraisal waiver which means they are good to go with the value of the property offered.

Not every loan qualifies for an appraisal waiver, so let’s look at what is need to qualify.

Fannie Mae

Refinancing:

  • Must be a one-unit property (including for condos).
  • For a rate/term refinance on a primary residence or second home, you need at least 10% equity; 25% on investment properties.
  • Purchase:
    • Must be a one-unit property, (including condos).
    • You need at least a 20% down payment on a primary residence or second home. Investment properties aren’t eligible.

It is also worth a mention that if an appraisal has already been done (by the lender or recently by another potential buyer and lender where the deal may have fallen through), that value is used and the property would not be eligible for the waiver.

Freddie Mac

  • Must be a one-unit property, including condos.
  • The loan must be a new home loan or a rate/term refinance.
  • You must have a 20% down payment for buying a home, 20% equity for refinances.

The waiver is property and borrower specific so it can be hit or miss but always worth a shot. I should also mention that the waivers are only eligible on Conventional Conforming loans and that not every lender will offer the appraisal waiver option due to their own internal guidelines/requirements. If you meet the down payment requirements listed above, I will always run your loan through both the Fannie Mae and Freddie Mac automated underwriting engines to see if either one gives us the waiver to help ensure your loan process is as smooth as possible! As always I am here with any questions you might have! I am always here to help!

Grant funds available thru Capstar Lending in Texas

Todd Kurio is pleased to announce another Down Payment Assistance offering via Capstar Lending’s participation in the SETH GoldStar Program. This program provides assistance in the form of a forgivable 2nd lien. The maximum amount of Assistance to be provided is 7% and is based on the final loan amount. The Assistance is forgiven equally each month and is considered completely forgiven after 7 years. Funds can be used toward your down payment and closing costs. The program also provides a 30 year fixed rate mortgage. Mortgage options are FHA, VA, and Conventional. There is no pre-payment penalty or federal recapture tax for the mortgage loan. You can own other property if you are doing an FHA or VA loan but can’t own any other residential property for a conventional loan. Effective 4/1/18, the income limits for a conventional loan in Travis County was $137,600. Minimum FICO Score of 620 and maximum sales price of $453,100 on conventional. This program is available in Texas but outside of Travis County.

For more information please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, todd.kurio@capstarlending.com. Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

How To Protest Property Tax Values

Have you protested to lower your property taxes? I just filed to protest mine. There is a good chance you should. There are several services that will do this for you. Usually they charge a percentage of the tax savings, so if they wind up being unsuccessful you will not owe them anything. However, I prefer to protest my own taxes. It doesn’t cost anything and I feel I know my neighborhood best. Below is a very detailed step by step guide I put together several years ago.

  1. As quickly as you can, send in the form on the back of the county’s appraised value notice to protest the property taxes. There is a deadline, you don’t want to miss your opportunity. If you request a protest, you don’t have to follow through with it if for some reason you change your mind.
  2. If you purchased your home in 2017 and it appraised higher than the price you paid, make a note of this. With a copy of the settlement statement, they’ll usually simply lower it to the price you paid. You are not obligated to provide them with any information, so if the appraised value is lower than the sales price it is a good time to stay quiet. If you have owned your house a few years you may discover the county has it appraised for less than it is worth, so you may not want to protest at this time.
  3. When sending in the protest form, make sure to request the data the county appraisal district used to assess your home. They are required to provide it if you ask for it. This will be important in step 6.
  4. After a long time, the county will reply with a notice of a date for an informal protest and a formal protest. They will also include a packet with their details about your home as well as a spreadsheet of the comparison homes they used to arrive at their data.
  5. Make sure the data they have for your home is accurate. I’ve had properties where the square footage in the county records was larger than the actual square footage. Simply showing the square footage calculations from the appraisal lowered the appraised value not only for that year, but going forward. Other inaccuracies might include the condition of the property or structures that are no longer there. This also can go the other way, which you may not want to bring the assessor’s attention with a protest.
  6. Make sure the properties they are using for comparison are actually similar to your property. The comps should be of the same type and within the same neighborhood. I’ve had single family houses incorrectly compared to commercial property, much larger properties, duplexes and properties in other non-comparable neighborhoods. More commonly, houses that may look similar from the data on their spreadsheet are different in real life. For example, if you have a 20 year old kitchen and all the properties they are comparing your home to have been fully updated.
  7. Find properties that are more comparable and support a lower value. The best data is closed MLS listings from your immediate neighborhood. Most real estate agents are more than happy to help with locating these. Of course, these listings must support a lower value. It is very possible that the values in your neighborhood have gone up and the tax assessor is correct.
  8. Make notes of all items with your property that may negatively affect your home’s value compared to any higher valued properties, especially items that won’t show up on their spreadsheet. For example, do the comparable properties have similar-sized lots but your lot has a portion that is not buildable due to a flood plain, terrain or irregular shape? Is your lot on a busy road or adjacent to commercial buildings? Does it lack the view that other nearby properties might have? Have the comparable properties been updated and remodeled or expanded while your house has not? If your house needs foundation work or a new roof, bring in bids, photos or other documentation.
  9. By state law, the value the appraisal district is considering is as of January 1 of this year, so what is important is the condition of the property at that time. Comparable properties from the previous year can be used.
  10. Attend the informal hearing with your data. This hearing is a meeting with a county appraiser in his or her cubicle. Usually there will be an unhappy property owner with no data ranting at the appraiser in the adjacent cubicle. That approach will not be successful, and the appraiser will be happy to have someone in front of them not doing that. Show the appraiser everything to support your claims. He or she will want copies of anything that they use to update your file. Photographs are helpful, as are documentation of closed sales and maps. I have found the county appraisers very reasonable when they have data to review. However, they will never take your word for it that you think your house isn’t worth that much and they should just lower that value right now.
  11. If you are not successful and still feel you have a good case and good data, you can move on to the formal protest. This is a hearing with a county appraiser on one side and you on the other. Three paid, citizen appointees listen to documentation from both sides and vote on an outcome. I’ve had four formal hearings. Three were successful, with the appointees asking relevant questions of both sides and considering the documentation. The third was unsuccessful and featured one of the appointees who couldn’t do simple math and one who fell asleep during the hearing.

It doesn’t cost anything other than time to protest, and a successful protest may lower your taxes this year and in future years if there is incorrect information in the county records. If you do not want to spend the time to protest, there are services that will protest your taxes and their fee is a portion of the savings.

WHEN IS MORTGAGE INTEREST TAX DEDUCTIBLE?

Contrary to popular belief, mortgage interest is NOT always tax deductible. Here’s some basic information to help guide you to determining if your mortgage interest could be deducted:

1. DO YOU ITEMIZE YOUR TAX DEDUCTIONS?

First thing first, you cannot take the mortgage interest deduction if you are taking the standard deduction. In 2018, the standard deduction is $12,000 for single taxpayers, $18,000 for heads of household, and $24,000 for married taxpayers filing a joint return. In 2013, 30% of households itemized their deductions and experts are expecting the number of people that itemize to decrease with the increase in the standard deduction. Please see a CPA for details.

2. IS YOUR HOME A “QUALIFIED RESIDENCE”?

Mortgage interest is only deductible if the mortgage is attached to a “qualified residence”. Taxpayers can generally deduct the mortgage interest on two qualified homes:

  • One Primary Residence; and,
  • One Vacation Home

3. IS YOUR MORTGAGE CLASSIFIED AS “ACQUISITION INDEBTEDNESS”?

Your mortgage or home equity line of credit is considered “acquisition indebtedness” if it was used to buy, build or improve a qualified residence. Generally, you can deduct the interest on mortgage balances up to $750,000 of Acquisition Indebtedness. Here are two examples:

  • Jane buys her $500,000 primary residence using a $400,000 mortgage. Jane would be able to deduct the interest on the $400,000 mortgage as acquisition indebtedness because (1) the mortgage was to buy a qualified residence; and, (2) the mortgage falls within the $750,000 limit.
  • Janice buys her $500,000 primary residence with cash.  A year later, Janice does a cash-out refinance and puts a $400,000 mortgage on the home.  The funds are not used for home improvements. Janice would NOT be able to deduct the interest on the new $400,000 mortgage because the funds were not used to buy, build or improve the house.

THREE PITFALLS TO AVOID

As you can see, it’s very important to structure your mortgage in a way where it can be classified as “acquisition indebtedness”! Here are three common mistakes that many people make when choosing a mortgage strategy and deducting their mortgage interest:

  • Pulling cash out of a primary residence to buy a vacation home, and then illegally deducting the interest on that cash-out mortgage (in these cases, it’s often better to place a mortgage on the vacation home itself so that it can be classified as “acquisition indebtedness”)
  • Paying cash for a home, taking out a mortgage later on, and then illegally deducting the interest on that cash-out mortgage
  • Illegally deducting the interest on mortgage balances that do not qualify as acquisition indebtedness

DISTINCTION BETWEEN A QUALIFIED RESIDENCE AND AN INVESTMENT PROPERTYEverything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.

Stephanie Donnell

Residential Mortgage Loan Originator

NMLS Number: 1031976

stephanie.donnell@capstarlending.com

 

Capstar Lending, LLC NMLS 214411 (www.nmlsconsumeraccess.org) 6836 Austin Center Blvd #110; Austin TX 78731 512-459-2400. Capstar Lending, LLC is an Equal Housing Lender. This is not an offer to enter into an agreement. Information, rates and fees are subject to change without prior notice. Loan approval is subject to applicant’s qualification for a loan program. All products are subject to credit and property approval. Capstar Lending, LLC is not affiliated with any government agency. Intended for Texas consumers only, Texas- SML Mortgage Banker Registration. Residential Mortgage Loan Originator.

$1500 in Extra Down Payment Assistance Available

 

Capstar Lending through the State Affordable Housing Corporation is offering $1500 in Extra Assistance to borrowers with incomes at or below 80% AMI who use our Preferred Conventional Product.

For more information please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, todd.kurio@capstarlending.com. Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

Help is on the Way with Your Credit Report

Read about the National Consumer Assistance Plan and how it will make credit reports more accurate.

Highlights:

Medical debts won’t be reported until after a 180-day waiting period to allow insurance payments to be applied. The credit reporting agencies will also remove from credit reports previously listed medical collections that have been or are being paid by insurance.

The credit reporting agencies will provide special attention to consumers who are victims of fraud or who have credit information belonging to another consumer on their file.

http://nationalconsumerassistanceplan.com/about/

For more information on credit reports, please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, todd.kurio@capstarlending.com. Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

Tips for Success: Your Mortgage Application

For months, maybe even years, you’ve dreamed of owning your own home. As you move forward towards that direction your first step should be to determine how much of a home you can comfortably afford.  Even if you’ve taken steps to ensure you have a respectable credit score and saved for your initial investment, it’s completely normal to feel anxious about your mortgage application being approved. Use the following as a guide to ensure a smooth loan approval.

Calculate Your Mortgage Budget

Before you start shopping and fall in love with a house you can’t afford, you need to do some math. You know your financial situation and your spending habits better than anyone.  What monthly mortgage can you reasonably afford given your current income and debt obligations? After you’ve done your homework, consult with a reputable loan officer and get their opinion on what a lender is likely to loan you.  It will generally take about 15-20 minutes over the phone to find out.  Having a good understanding of your finances will ensure your success as you shop for your home and apply for your mortgage.  As a general rule, your total monthly house payment (PITI and HOA dues if any) should be between 30% – 33% of your gross monthly income.  Your house payment plus all of your other debts should not exceed 36% – 42% of your gross monthly income.

Ascertain Your Available Funds for Down Payment and Closing Costs

As you consider homes to purchase, determine if the potential house payment will be within your budget and check to make sure you have cash on-hand that is necessary for the down payment and closing costs. The larger your down payment, the lower your monthly house payment will be.  Most loan programs will require a minimum down payment of 5 percent of the sales price of the home.  In addition, you’ll have to plan to pay closing costs and “pre-paid expenses” which usually run between 3% – 4% of the sales price.  (There are loan programs available that have a minimum down payment of 3% if you can qualify.)

Avoid These Actions

Lenders examine every aspect of your financial history. From your credit to your income, no stone is left unturned. As you prepare to submit your mortgage application, talk to your loan officer before you do any of the following:

  • Buy or lease a new car
  • Change Jobs
  • Get Married
  • Transfer large quantities of money between bank accounts
  • Close credit accounts
  • Open new credit cards (Don’t let anyone pull your credit – it can make the difference between qualifying and not.)
  • Make any unusual deposits in your bank accounts

Basically, any unusual financial activity could hinder your chances for mortgage approval.

Get Your Documentation Together

There are some documents your lender will need to collect from you to submit your mortgage application.

  • Complete copies of bank statements for the most recent 2 months from checking, savings, investment, and retirement accounts.
  • Complete Personal Tax Returns including all schedules and W-2s for the most recent 2 year period.
  • Paystubs for each borrower for each employer the most recent 30 day pay period.
  • Driver’s licenses for each borrower.
  • Complete tax returns, W-2s, and 1099s for most recent 2 years

Depending on your particular circumstances the necessary documentation you must provide will vary. Your loan officer will give you a customized list of everything required.

Get Expert Advice

After you’ve done your homework, consult with a reputable loan officer and let her help you put all the pieces together. It will generally take about 20-30 minutes over the phone to give you a good idea of what you can expect to be approved for.  (Face-to-face meetings are always a good idea when possible.) She will probably want to check your credit to make sure there aren’t any unforeseen surprises.  She’ll review different loan programs which might be a good fit for you and explain the pros and cons of each.  She will give you estimates for different loan scenarios so you can see what your monthly payment will be and how much of an initial investment each scenario will require. When you feel comfortable with the loan officer it helps to provide her with the supporting documentation listed above and ask to be formally “pre-qualified”.  She will review everything for any potential issues and advise you how to correct them. She will be able to give you a rock solid Pre-Qualification letter so that a seller will consider your offer when you find a home.  (If you’re in need of a good Realtor, she’ll be able to refer you to a tried and true professional.)

For over three decades, Dorothy Erminger has been helping Texans buy homes. When you’re ready to get in the game give her a call.  She will give you professional, reliable guidance so you can set yourself up for a smooth loan approval. Contact Dorothy today.

9 Tips for Improving your Credit Score

Congratulations on beginning the home buying process. You’ve started in the right place by researching how to best prepare yourself for submitting a mortgage application. A major part of that application is the home buyer’s credit score which examines many years of your financial history.

About Credit Scores

Known as FICO scores, credit scores were developed in the late 1990s to serve as an objective method for assessing an individual’s credit management habits. As a portion of the mortgage application process, your credit score allows lenders to determine which type of loan you are eligible for and the pricing tier you qualify for when searching for a new home. Credit scores range from 300 to a high of 850, with most lenders looking for a median score of at least 640.

There are 40 factor codes divided into five main categories that are used to calculate a credit score:

  1. Past Payment Performance (35%) – This indicator shows how often you pay your bills on time. If you let bills and debts slide, thus incurring late fees, this will negatively affect your credit score.
  2. Credit Utilization (30%) – This factor examines how you use credit. In regards to applying for a mortgage, lenders like to see 3-5 credit cards in use for a period of no less than two years to know that you understand credit and utilize it properly.
  3. Credit History (15%) – A look at of the financial accounts in your name and the length of time they have been open.
  4. Type of Credit in Use (10%) – Accounts such as mortgages, auto loans, revolving or installment accounts show the type of credit you’ve used.
  5. Inquiries (10%) – This refers to any formal inquiries made about your credit. Any time a company makes an inquiry about credit score, it impacts said score. Too many inquiries can be the difference between getting a mortgage and not. If you’re planning to buy a home you need to be very judicious about who you give your Social Security Number to.

Improve Credit Score Before Applying for a Mortgage

It might seem like your credit score is chiseled in stone but that’s not true.  A credit report (and a credit score) is a snapshot in time. If you are planning on buying a home soon and are concerned with your credit scores, there are steps you can take to ensure they will be better before submitting a mortgage application.

  1. Speak with a financial professional. Before, you close any accounts or make any changes to your credit profile, speak with a knowledgeable loan officer about the best course of action to take so you can be strategic about your overall mortgage plan. A professional, experienced loan officer will be your guide throughout the home buying process and is there to help you successfully submit your mortgage application.
  2. Pay all of your bills on time. Always. Past Payment Performance accounts for 35 percent of your credit score, so it’s imperative that all bills are paid in a timely manner. A great method for making sure your bills are paid on time is to set up reminders on your cell phone’s calendar. Also, many companies allow users to set up recurring payments to automatically pay bills to eliminate the monthly hassle.
  3. Under-use existing credit cards. While it is important to have credit cards in use, you want to under use them. Try to keep a balance that is no more than 35 percent of your credit limit. Maxed out credit cards reflect poorly on your score.
  4. Don’t pay off your credit cards unless you normally pay them off at the end of every month.  A zero balance has a negative impact on your credit score – leave a small balance.
  5. Review your credit report for any errors. You should not be penalized for errors made by creditors and you are entitled to have these mistakes removed from your credit report. Unfortunately, any mistakes might negatively impact your overall score and thus change the outcome of your mortgage application. Your loan officer will tell you exactly what you need to do to clean up any incorrect information from your report.  It’s not a good idea to formally dispute any charges until you’ve spoken with your loan officer.
  6. Do not apply for unnecessary credit. You want to limit any applications you might make for additional credit, whether you are considering buying a new car or you want to acquire another credit card. Your top priority is your mortgage application. Extra credit lines can absolutely be considered once everything has been settled with your mortgage.
  7. Increase credit limits. Speak with the banks and companies that hold your credit cards, and see if they will extend your credit limits. The increased credit limits reflect well on you but the unnecessary spending of that credit works against you. A word to the wise: be careful not to increase your spending habits if you get additional credit.
  8. Begin the process sooner rather than later. If you think you’ll be buying a home within the next year or so, the time is now to take steps to improve your credit score. Work with a loan officer, organize your bills, and follow the other tips mentioned here so when the time comes to apply for a mortgage, there are no unwanted surprises awaiting you. Believe it or not, you’re probably in much better shape than you realize.
  9. You may get a free credit report once a year from www.AnnualCreditReport.com.  This will not be reflected as an inquiry on your report.  You will be asked if you would like to pay for an upgrade but that’s not necessary.  You will need to follow the prompts to request your report from each credit reporting repository – Equifax, TransUnion, and Experian.  You should request your free report from all three bureaus – they don’t always report the same information.

Buying a home is an exciting yet nuanced process, with many moving parts. To make sure you move into the home of your dreams, you want to work with a trusted and tested expert who will walk you through the process and answer each and every one of your questions. With 24 years of experience as a loan officer and 10 years of experience as a realtor, Dorothy Erminger has the expertise every homebuyer needs to successfully submit a mortgage application. Contact Dorothy today to start taking steps to improve your credit score.