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
Subscribe to:
Posts (Atom)