Missed mortgage payments, short sales, and foreclosures will undoubtedly bring down your credit score.
Lenders use credit scores to see how credit worthy a person is. Credit scores range from 300 to 850. A mortgage makes up a big part of a person’s credit score and often is the most important part of a person’s credit profile.
And just missing a single mortgage payment by 30 days can affect a credit score. For borrowers, that can be nearly as destructive as a foreclosure to a credit score.
On the other hand, loan modifications, which is when lenders approve new loan terms, have a very, minimal” impact to credit scores, possibly dropping the borrower’s score by 10 or 15 points. So your first option should be to contact your lender/servicer and ask for a loan modification so your payment can be lower, more affordable.
A good credit score is important not just for financing home purchases, but employers increasingly check credit as well as landlords when seeking rentals. Also, poor credit scores can also mean higher costs on car loans and credit cards.
How a Credit Score Is Affected
FICO evaluated 3 various scenarios of mortgage holders, a borrower with a great credit score (780), a borrower with good credit (720), and a poor credit borrower (680) , in a study it conducted last month.
Here’s the impact FICO found:
▪ 30 days late on a mortgage payment: The 780 credit score borrower has her credit score fall to 670-690. The 720 credit score borrower has his fall to 630-650. The 680 credit score borrower falls to 600-620.
▪ Short sale, deed in lieu of foreclosure, or settlement, assuming the balance has been wiped out: The 780 credit score borrower falls to 655-675; the 720 credit score falls to 605-625; and the 680 credit score drops to 610-630.
▪ Foreclosure, or short sale with a deficiency balance owed: The 780 credit score drops to 620-640; the 720 credit score falls to 570-590; and the 680 credit score decreases to 575-595.
Monday, April 25, 2011
Sunday, April 24, 2011
Don't Just Walk Away From Mortgage
Some Americans who owe more than what their house is currently worth are opting to walk away from their mortgage. But a new survey finds Americans don’t agree with home owners who make that choice.
60% of Americans say it is “never OK” for home owners to stop making payments on their mortgage, according to a new survey of 1,000 American adults by FindLaw.com, a legal information Web site. However, 34 percent say it’s OK for home owners to walk away from their mortgage if they are no longer able to make their monthly payments.
Only 3% of those surveyed said home owners should be able to walk away from their mortgage anytime they want.
Many home owners are currently facing very difficult and complicated situations involving their home mortgage, in some cases even including the threat of foreclosure. But before making any major decisions, home owners should consult with financial and legal professionals, including accountants, real estate attorneys, financial advisers, short sale/distressed property experts and real estate advisors. Any major change to a mortgage situation could lead to serious and unanticipated consequences involving taxes owed, contract law, credit scores, ability to borrow in the future, potential for lawsuits, and much more.
60% of Americans say it is “never OK” for home owners to stop making payments on their mortgage, according to a new survey of 1,000 American adults by FindLaw.com, a legal information Web site. However, 34 percent say it’s OK for home owners to walk away from their mortgage if they are no longer able to make their monthly payments.
Only 3% of those surveyed said home owners should be able to walk away from their mortgage anytime they want.
Many home owners are currently facing very difficult and complicated situations involving their home mortgage, in some cases even including the threat of foreclosure. But before making any major decisions, home owners should consult with financial and legal professionals, including accountants, real estate attorneys, financial advisers, short sale/distressed property experts and real estate advisors. Any major change to a mortgage situation could lead to serious and unanticipated consequences involving taxes owed, contract law, credit scores, ability to borrow in the future, potential for lawsuits, and much more.
Landlord Investment Tips
Have you ever thought about investing in rental property? Apartment buildings, condominiums, rental housing... all of these properties can be lucrative investments. Or they can be disastrous money pits!!!
TIPS!
1.Have a property management firm screen your tenants
2.Require that your tenants have renter's insurance
3.Make sure your property is protected for vandalism due to the tenant not taking care of the rental
4.Make sure you have insurance that covers you for fair rental loss
5.Make sure you have adequate limits of liability
TIPS!
1.Have a property management firm screen your tenants
2.Require that your tenants have renter's insurance
3.Make sure your property is protected for vandalism due to the tenant not taking care of the rental
4.Make sure you have insurance that covers you for fair rental loss
5.Make sure you have adequate limits of liability
Report Unveils Tactics of Loan Scammers
One in nine home owners are more than 90 days behind on their mortgage payments, which has prompted loan modification scams that promise to rescue home owners from foreclosure doom to skyrocket.
Four fair housing organizations released findings this week uncovering some of the most popular loan modification scam tactics after a yearlong investigation of about 80 companies.
According to the report, some of the common scam tactics used were:
Four fair housing organizations released findings this week uncovering some of the most popular loan modification scam tactics after a yearlong investigation of about 80 companies.
According to the report, some of the common scam tactics used were:
- 55% required an upfront fee to begin work or required a low initial fee to conduct minimal work — such as reviewing loan documents — on behalf of defaulting home owners.
- 43% guaranteed or promised they would be able to secure a loan modification even prior to learning about the home owner's financial limitations.
- 24% advised or encouraged home owners to stop making their mortgage payments or to stop contacting their lenders.
- 16% guaranteed a loan with a lower interest rate, between 2 and 6 percent.
- 12% discouraged home owners from getting free help from government-approved housing counseling agencies.
Don't trust anyone, BUT YOURSELF. Banks have been doing loan modifications for decades, and there has never been a need for loan modification companies. Just pick up the phone and your banks will be eager to listen to your circumstances, and guide you through the process to see if you can qualify. If successful you will see your monethly payment reduced. The bank will be better off to have you keep on making the mortgage payment as opposed to going through the headache and costly foreclosure process.
The only people who won't qualify are those who:
- Are not honest and thruthfiul
- Don't have a legitimate financial hardship
- Are too messy with their finances, not just the mortgage, but also have liens on their house, owe taxes to the IRS, and are obviously not serious about their finances.
- Loss of Job
- Mandatory Job Relocation
- Reduced Employment Income
- Reduced Self-Employment Income
- Military Service
- Business Failure
- Damage to Property
- Severe Illness/Incapacity
- Medical Bills
- Divorce or Separation
- Death of a Spouse
- Death of Family Members
- Inheritance Tax
- Payment Increase/Mortgage Adjustment
- Insurance or Tax Increase
- Too Much Debt
- Incarceration
If you want to use one of these causes to help make the case for either loan modification or a short sale, you need to be able to show to the lender's satisfaction both the cause and the degree of the hardship. Be serious and you will get what you want.
6 Do-It-Yourself Updates That Can Increase Home’s Value By More Than $10,000
Here are six do-it-yourself projects–all under $1,000–that made HomeGain’s list, as well as the estimated increase to the home’s price at resale for each project.
1. Cleaning and decluttering: Remove any personal items, unclutter countertops, organize closets and shelves, and make the home sparkling clean.
Cost: $290
Estimated return: $1,990
2. Light and bright: Clean all windows inside and out, replace old curtains, update lighting fixtures, and remove anything that blocks light from the windows.
Cost: $375 cost
Estimated return: $1,550
3. Staging: Rearrange furniture, bring in new accessories and furnishings to enhance rooms, including artwork and playing soft music in the background.
Cost: $550 cost
Estimated return: $2,194
4. Landscaping: Punch up the home’s curb appeal in the front and backyards by adding bark mulch, bushes and flowers, and ensuring current plants and grass are well-cared for and manicured.
Cost: $540
Estimated return: $1,932
5. Repair electrical or plumbing: Repair any leaks under the bathroom or kitchen sinks, remove any mildew stains, and ensure all plumbing is in good working condition. Update the home’s electrical with new wiring for modern appliances, fix any lights or outlets that don’t work, and replace old plug points with new safety fixtures.
Cost: $535
Estimated return: $1,505
6. Replace or shampoo dirty carpets: Steam-clean carpets, replace any worn carpets, and repair any floor creaks.
Cost: $647
Estimated return: $1,739
1. Cleaning and decluttering: Remove any personal items, unclutter countertops, organize closets and shelves, and make the home sparkling clean.
Cost: $290
Estimated return: $1,990
2. Light and bright: Clean all windows inside and out, replace old curtains, update lighting fixtures, and remove anything that blocks light from the windows.
Cost: $375 cost
Estimated return: $1,550
3. Staging: Rearrange furniture, bring in new accessories and furnishings to enhance rooms, including artwork and playing soft music in the background.
Cost: $550 cost
Estimated return: $2,194
4. Landscaping: Punch up the home’s curb appeal in the front and backyards by adding bark mulch, bushes and flowers, and ensuring current plants and grass are well-cared for and manicured.
Cost: $540
Estimated return: $1,932
5. Repair electrical or plumbing: Repair any leaks under the bathroom or kitchen sinks, remove any mildew stains, and ensure all plumbing is in good working condition. Update the home’s electrical with new wiring for modern appliances, fix any lights or outlets that don’t work, and replace old plug points with new safety fixtures.
Cost: $535
Estimated return: $1,505
6. Replace or shampoo dirty carpets: Steam-clean carpets, replace any worn carpets, and repair any floor creaks.
Cost: $647
Estimated return: $1,739
Loan Modification Inmportant Announcement
Under new rules that took effect Jan. 31, the FTC now bars for-profit companies that provide loan modification services from collecting advance fees.
Do You Have To Short Sale Your Home During a Divorce? Canceled Debt's Tax Impact
Bad news for investors, cash-out refinancers
I am in the process of preparing my income taxes, and heard that I may have to pay a tax on the moneys that my lender canceled when I sold my house via a short sale after I divorced my spouse. Is this truet?
It depends. Usually under the tax laws, if your debt is canceled or forgiven, that is taxable income to you.
However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million, if that debt was on your principal residence.
If the debt was on a second home or an investment property, then you are out of luck; the amount that was forgiven (or canceled) is taxable income to you.
What would you be taxed on? If you owe $500,000 on a home and it is sold for $400,000, then you would owe tax on $100,000. BIG TAX BILL!!!
If your canceled debt was on a refinanced loan, the law is tricky. If you used the refinance proceeds to substantially improve your house, then there is no tax to pay. But if you used those proceeds for other purposes (pay off credit cards, get a loan to buy a car, vacation etc.), regardless of how significant the investment may have been, the cancellation creates a taxable event for you.
The IRS has an excellent, free, publication on this topic, called "Canceled Debts, Foreclosures, Repossessions and Abandonments." It is Publication 4681, and will soon be published at the following link on the IRS website -- http://www.irs.gov/pub/irs-pdf/p4681.pdf -- or by calling (800) 829-3676, or (800) TAX-FORM.
I am in the process of preparing my income taxes, and heard that I may have to pay a tax on the moneys that my lender canceled when I sold my house via a short sale after I divorced my spouse. Is this truet?
It depends. Usually under the tax laws, if your debt is canceled or forgiven, that is taxable income to you.
However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million, if that debt was on your principal residence.
If the debt was on a second home or an investment property, then you are out of luck; the amount that was forgiven (or canceled) is taxable income to you.
What would you be taxed on? If you owe $500,000 on a home and it is sold for $400,000, then you would owe tax on $100,000. BIG TAX BILL!!!
If your canceled debt was on a refinanced loan, the law is tricky. If you used the refinance proceeds to substantially improve your house, then there is no tax to pay. But if you used those proceeds for other purposes (pay off credit cards, get a loan to buy a car, vacation etc.), regardless of how significant the investment may have been, the cancellation creates a taxable event for you.
The IRS has an excellent, free, publication on this topic, called "Canceled Debts, Foreclosures, Repossessions and Abandonments." It is Publication 4681, and will soon be published at the following link on the IRS website -- http://www.irs.gov/pub/irs-pdf/p4681.pdf -- or by calling (800) 829-3676, or (800) TAX-FORM.
Andre Luc Plessis
REALTOR®, RCS-DTM REALTOR® & Financial Educator
Keller Williams® Realty
The Wealth Creation Team
Empowering People to Buy & Sell Real Estate Correctly!
CA DRE License # 01856185
Tel: (818) 341-2972
Cell: (310) 266-9463
Wednesday, April 13, 2011
How To Avoid Refinancing After a Divorce
DIVORCED homeowners dealing with the task of removing a former spouse’s name from the mortgage after buying out his or her equity stake in the marital house may think that refinancing is the only choice.
There is another, little-known option that can avoid refinancing and the high cost associated with refinancing a home, which generally runs 3 to 5% of the outstanding loan amount. You simply ask your lender to remove the former spouse’s name, leaving the mortgage in your name only.
The only problem is that not all lenders or mortgage servicers offer this option, known as "Release of Liability" OR Qualifying Name Delete Assumption.” A "Name Delete Assumption" is done when one party or the other on a mortgage loan wants to be removed, but the remaining party really does not want to refinance, perhaps because of fees, rate or in your case property value. If the remaining party can be proven to qualify on their own, the other party can be "deleted" from obligation, but the loan stays exactly as is and the costs are minimal.
This process will leave the existing loan in place, but would relieve the non-occupying spouse from their obligation on the loan.
The lenders and servicers that do will most likely run a separate credit check on you, requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring that you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal.
And if you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.
In regards to being "under water" OR when you are going through a divorce you may also wants to ask the lender or servicer to do a loan modification. Banks have been modifying loans for decades when there is a hardship in a family. Hardhsips may be any of the following:
•Reduced / lost income
•Medical or disability
•Unexpected expenses
•Divorce
•Business failure
•Caring for a family member
•Credit card debt
•Escalating ARM
•Loss of rental income
•Etc.
A loan modification will allow the spouse that keeps the home to get the loan terms modified. That could be a reduction of the interest rate, the loan term to be extended (15 to 30-year) that will help the spouse get a lower monthly mortgage payment.
That is also a great tip because if both spouses are on the loan, that will give the spouse that leaves the house some peace of mind as the other spouse will be able to meet the monthly financial obligation more easily and maybe will help avoid default on mortgage payment, credit card accounts that both spouse have in common.
In regards to Name Delete Assumption keep in mind that lenders seldom have a reason to take a co-borrower’s name off the note. But, if a homeowner can prove that he or she can afford the payments and meet the required credit criteria, typically those of the investor in the loan , then release of liability may work. The lender will require the borrower to prove that the borrower is able to support the monthly payments without the co-borrower spouse,” typically through monthly bank statements, annual tax returns and investment statements.
Having the name removed from the loan obligation protects the credit of both parties. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, both spouse’s credit could be hurt.
Most divorce settlements stipulate one of two outcomes for marital property. Either (1) the house must be sold, or (2) the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage, either through refinancing or a Name Delete Assumption typically within a year.
Under the option (2), the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage note. It is very important to get your name off the mortgage if you are going to be off the title.
Lenders or servicers typically charge $300 to $1,000 to execute a Release of Lliability or Name Delete Assumption and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days.
Still, a lender or servicer generally has no obligation to release one of the borrowers. But homeowners may have one point of leverage. Qualified borrowers not granted the release or delete assumption can tell their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage at another lender. In such cases,the servicer/lender might agree to do it.
In any case in case you are going through a divorce, I highly suggest that the spouse staying in the home should seek a loan modification and the spouse leaving the home should seek a Name Delete Assumption. Those two solutions will help divorcing spouse avoid tremendous financial stress cause by a divorce.
There is another, little-known option that can avoid refinancing and the high cost associated with refinancing a home, which generally runs 3 to 5% of the outstanding loan amount. You simply ask your lender to remove the former spouse’s name, leaving the mortgage in your name only.
The only problem is that not all lenders or mortgage servicers offer this option, known as "Release of Liability" OR Qualifying Name Delete Assumption.” A "Name Delete Assumption" is done when one party or the other on a mortgage loan wants to be removed, but the remaining party really does not want to refinance, perhaps because of fees, rate or in your case property value. If the remaining party can be proven to qualify on their own, the other party can be "deleted" from obligation, but the loan stays exactly as is and the costs are minimal.
This process will leave the existing loan in place, but would relieve the non-occupying spouse from their obligation on the loan.
The lenders and servicers that do will most likely run a separate credit check on you, requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring that you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal.
And if you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.
In regards to being "under water" OR when you are going through a divorce you may also wants to ask the lender or servicer to do a loan modification. Banks have been modifying loans for decades when there is a hardship in a family. Hardhsips may be any of the following:
•Reduced / lost income
•Medical or disability
•Unexpected expenses
•Divorce
•Business failure
•Caring for a family member
•Credit card debt
•Escalating ARM
•Loss of rental income
•Etc.
A loan modification will allow the spouse that keeps the home to get the loan terms modified. That could be a reduction of the interest rate, the loan term to be extended (15 to 30-year) that will help the spouse get a lower monthly mortgage payment.
That is also a great tip because if both spouses are on the loan, that will give the spouse that leaves the house some peace of mind as the other spouse will be able to meet the monthly financial obligation more easily and maybe will help avoid default on mortgage payment, credit card accounts that both spouse have in common.
In regards to Name Delete Assumption keep in mind that lenders seldom have a reason to take a co-borrower’s name off the note. But, if a homeowner can prove that he or she can afford the payments and meet the required credit criteria, typically those of the investor in the loan , then release of liability may work. The lender will require the borrower to prove that the borrower is able to support the monthly payments without the co-borrower spouse,” typically through monthly bank statements, annual tax returns and investment statements.
Having the name removed from the loan obligation protects the credit of both parties. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, both spouse’s credit could be hurt.
Most divorce settlements stipulate one of two outcomes for marital property. Either (1) the house must be sold, or (2) the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage, either through refinancing or a Name Delete Assumption typically within a year.
Under the option (2), the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage note. It is very important to get your name off the mortgage if you are going to be off the title.
Lenders or servicers typically charge $300 to $1,000 to execute a Release of Lliability or Name Delete Assumption and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days.
Still, a lender or servicer generally has no obligation to release one of the borrowers. But homeowners may have one point of leverage. Qualified borrowers not granted the release or delete assumption can tell their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage at another lender. In such cases,the servicer/lender might agree to do it.
In any case in case you are going through a divorce, I highly suggest that the spouse staying in the home should seek a loan modification and the spouse leaving the home should seek a Name Delete Assumption. Those two solutions will help divorcing spouse avoid tremendous financial stress cause by a divorce.
Andre Luc Plessis
REALTOR®, RCS-DTM REALTOR® & Financial Educator
Keller Williams® Realty
The Wealth Creation Team
Empowering People to Buy & Sell Real Estate Correctly!
CA DRE License # 01856185
Tel: (818) 341-2972
Cell: (310) 266-9463
www.RealEstate-LosAngeles.net - Use our Latest Map Search to Find Real Estate Deals
www.WealthCreationTeam.net - Build Wealth with Real Estate
www.DivorceRealEstate.org - Divorce Real Estate
www.DivorceRealEstate.Blogspot.com - Divorce Real Estate Blog
www.TheWealthCreationTeam.Blogspot.com - Get Connected With Our New Blog
www.YouTube.com/AndrePlessis - Follow The Latest Real Estate News From The Experts
Monday, April 11, 2011
10 Ways to Improve Your Credit Score Instantly
10 Corrections Can Save You Money When You Apply for Credit
Look for Credit Report Errors
So here's what you do. Go to the government-mandated website http://www.annualcreditreport.com/ to get your three free credit reports from the major bureaus. If there are inaccurate, unflattering entries on your report, simply fill out the form provided to dispute them. Pay particular attention to the following kinds of errors, which can drag your score down most of all:
Old Bankruptcies
Bankruptcies remain on your report for 10 tough years. If a bankruptcy entry is still there after that, complain.
Debts Disposed of in Bankruptcy
If you declared bankruptcy in the past, debts covered by that bankruptcy settlement should not appear on your report as past due or still payable because bankruptcy wipes the slate clean.
Outdated Lawsuits and Judgments
If you paid a legal judgment, it should not be in your records anymore. If you didn't pay, it's still supposed to disappear after seven years.
Inaccurate Tax Liens
Tax liens you have paid remain on your report for seven years. Unpaid ones last 15 years, longer than anything else. (Guess who makes the laws.) If there's a lien on there longer than those two parameters, dispute it.
Outdated Demerits
Late payments and charge-offs, where creditors write your bill off because they have given up on you, are not allowed to remain on your report after seven years.
Duplicate Debts
The same debt should not be listed more than once, particularly by more than one debt collector.
Your Spouse's Bad Debts
If your spouse failed to pay bills before your marriage or after your official divorce, as long as your divorce filing was handled properly, these should not be on your credit report.
Other People's Accounts
Other people's account information -- good or bad -- should never appear on your credit statement. A cynic might say to keep the stranger's entries if they are positive, but who's to know when that person will face a financial crisis that will ruin their credit, and yours.
Old Credit Applications
"Hard" inquiries where you apply for credit count against you. They shouldn't remain on your report for more than two years.
Credit For Which You Didn't Apply
If you spot hard inquiries that you didn't authorize, dispute them. "Soft" inquiries, where banks check your credit report in order to offer you a preapproved card, are harmless. Checking your own report is harmless.
Look for Credit Report Errors
So here's what you do. Go to the government-mandated website http://www.annualcreditreport.com/ to get your three free credit reports from the major bureaus. If there are inaccurate, unflattering entries on your report, simply fill out the form provided to dispute them. Pay particular attention to the following kinds of errors, which can drag your score down most of all:
Old Bankruptcies
Bankruptcies remain on your report for 10 tough years. If a bankruptcy entry is still there after that, complain.
Debts Disposed of in Bankruptcy
If you declared bankruptcy in the past, debts covered by that bankruptcy settlement should not appear on your report as past due or still payable because bankruptcy wipes the slate clean.
Outdated Lawsuits and Judgments
If you paid a legal judgment, it should not be in your records anymore. If you didn't pay, it's still supposed to disappear after seven years.
Inaccurate Tax Liens
Tax liens you have paid remain on your report for seven years. Unpaid ones last 15 years, longer than anything else. (Guess who makes the laws.) If there's a lien on there longer than those two parameters, dispute it.
Outdated Demerits
Late payments and charge-offs, where creditors write your bill off because they have given up on you, are not allowed to remain on your report after seven years.
Duplicate Debts
The same debt should not be listed more than once, particularly by more than one debt collector.
Your Spouse's Bad Debts
If your spouse failed to pay bills before your marriage or after your official divorce, as long as your divorce filing was handled properly, these should not be on your credit report.
Other People's Accounts
Other people's account information -- good or bad -- should never appear on your credit statement. A cynic might say to keep the stranger's entries if they are positive, but who's to know when that person will face a financial crisis that will ruin their credit, and yours.
Old Credit Applications
"Hard" inquiries where you apply for credit count against you. They shouldn't remain on your report for more than two years.
Credit For Which You Didn't Apply
If you spot hard inquiries that you didn't authorize, dispute them. "Soft" inquiries, where banks check your credit report in order to offer you a preapproved card, are harmless. Checking your own report is harmless.
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