Monahan Mortgage

Sorry friend's that it has been such a long time since my last entry.  I have had a lot of changes happen over the passed 6 months.  In case you have missed it, I have moved my business north to Carlsbad and am now working out of my new home.  As you know moving is never easy and always seems to take a lot longer than one thinks to get "settled" in.  Anyway while all this was going on a funny thing has happened.... The market is turning around!!!  Yes my friends what goes down does eventually have to come up, and coming up it is.  I have recently had an influx of applications from clients wishing to get pre qualified to buy a home.  I have checked in with my realtors to see if they noticed any changes and the overwhelming response was YES.  Believe it or not multiple offers on houses for sale is becoming commonplace again.  Furthermore Fannie Mae announced on Wednesday that they have lifted the "declining market" qualifier from their underwriting stipulations.  What does that mean you ask?  It means that Fannie Mae will no longer reduce the amount they will lend to the client based on the city or zip code they live in.  This means that Fannie Mae has recognized that the market has reached the proverbial " bottom" and is turning around.  So if you are thinking of buying a home and have been holding out to get a really good "deal" on a home by waiting for the prices to fall further; wait no more and get in the game.  One other good reason to get in now is because rates are on the RISE.  Yes folks they are going up.  One month ago we were at 5.75% for a 30 year fixed rate loan.  Today the 30 year fixed rate is 6.25%.  That is a full 1/2 a point higher in only one month.  There is no indication that they will go back down and if anything they probably will continue to rise as the banks try to recoup some of the money they have lost from foreclosures and short sales.  SO again I say to you now is the time to buy and if you need a good realtor to find you that perfect home, I have one for you.  I only work with the best and will only refer you the best agent to get you the perfect home AND the best deal.  No more waiting my friends, you have to GET IN THE GAME.  Dont be like my Lakers and watch the market pass you by and rough you up.  Take action and be the aggressor.  I am here to help you and as always I am never too busy for any of your referrals!

This is the time of year that makes me go inside and try to connect with what has been going on in my life and re-evaluate what is important to me.  I suspect that this may happen to others as well.  Over the years I have become more attuned to the shift that takes place in our society during the holiday season.  Have you ever noticed that people are more "thankful" more giving, freindlier, more understanding, and even smile more?  From Thanksgiving through the New Year mankind decides to treat each other the way we would like to be treated.  This reminds me of my favorite Christmas song by Elvis Presley, "Why cant every day be like Christmas?"  The songs message is very clear, why is it that during Christmas we do decide to be nicer, kinder etc?  Why cant we treat each other this way 365 days of the year?  I do not have the answer to this question and dont pretend to but it would seem to me that it should be easy to do this.  The next thought that pops into my mind is how can I make sure I do this every day.  The answer came to me in a movie I watched with my children.  It is called Evan Almighty.  I highly encourage you to see this.  It is a comedy and it has a great message that ties right into what I am talking about.  In the movie Evan runs for congress and his campaign promise was that he was going to "Change the World".  Well he wins and gets to congress and immediatlely forgets his promise and gets sucked into dirty politics.  God appears and lets him know that you change the world by one Act of Random Kindness.  He asks Evan to build an ARK but does not tell him why so Evan builds an ARK based on faith.  I will not tell you the ending or why but God points out to evan that the word ARK is an acronym for Act of Random Kindness.  What a great message this movie put forth.  So since then I have tried to do just that, put forth one act of random kindness daily  regardless of how small or great it might be and see what happens.  Sometimes our actions do not produce immediate results and in some cases we may not be around to see those results.  We just have to rely on faith and know that the only thing we can control in our lives are our thoughts and actions.  We have no control over the past, or the future, but we do have control over what we do TODAY.  So I ask you to ask yourself one simple question, What can I do today, what simple act of random kindness can I do today to make a difference in our world; to make every day be like Christmas?

Peace and Blessings

Kevin

There are so many theories and urban myths in regards to credit scores and how they are computed that I thought it would be a great time to set the record straight.  Too many people think that your credit score is a reflection of how you pay your bills.  Nothing more, nothing less.  This could not be farther from the truth.  Every year I attend a credit seminar hosted by Info 1 credit services.  At this 2 hour seminar they breakdown all of the factors that determine your credit score also known as "Fico Score".  Imagine my surprise when I found out that only 33% of your score is how you pay your bills.  33%!!, that means 67% of your score is based on several other factors which I will breakdown for you in the following paragraphs.  But lets stop and think about that, only one-third of your score is reflective of whether or not you pay your bills on time.  Most people that I talk to, always tell me the same thing before I pull there credit, " My score should be very good because I am never late on my bills."  That is a fair assumption to make for anyone.  Heck I used to think the same thing too until I attended the seminar.  Imagine my surprise to find out there was more to my score than that.  My clients too are very surprised as well when there scores are not what they thought and thus the education begins.  So here is what really affects your credit scores.  This comes straight from the 3 credit bureaus so there is no guessing or hypothesizing here.  Just cold hard facts!

Payment history-33%

One of the misconcptions about payment history is that if you go past your due date it automatically shows up on your credit report.  The credit bureau only reports in increments of 30 days.  So if your payment is recieved 30 days AFTER the due date, then and only then will it show up on your credit report.  You could acutally go past your due date each month by 29 days and it will NEVER show up on your credit report. Of course you have to pay late charges but your credit score would not be affected.  So every time you are 30 days late it shows up on your credit and affects your credit score for the next 24 months from the date of that particular delinquency.  So for example you are 30 days late in January of 2007 on one of your accounts, it will affect your credit score until January of 2009.  After January of 2009 it will still show up on your credit report but no longer affect your FICO score.

33% Proportion of Credit Limit to Actual Balance

This is usually the number one reason a persons credit score is not higher than what is should be.  If your credit card balance is over 50% of its limit your score automatically goes down, regardless if you pay the bill on time.  So for example if you have a credit card that has a limit of $1,000, once the balance is $501.00 or more your score goes down.  The exact amount that your score goes down is not a set amount.  However the higher the limit and the higher the balance the more your score is hit.  The seminar speaker put it this way, " 50% of your limit hurts, 75% of your limit kills you, and 100% of your limit buries you!"

34% Inquiries, Judgements, Charge Offs, Bankruptcies, Foreclosures and credit depth

Not to be overlooked, but this section is can really hurt a consumer as well.  Anytime you fill out a credit application your and credit is pulled, your score goes down 7-10 points approximately.  So whenever you apply for a credit card to save 10% off your purchase your score is going to take a hit.  The biggest trap you will want to avoid when it comes to having your credit pulled is when purchasing a car.  Most people do not know that when they let the dealer pull their credit to purchase a car, there application is usually sent to 5-7 different banks and each one of them pull your credit.  That means yours score will drop anywhere from 35-70 points which could mean the difference between getting the car or getting a really good interst rate.  My advice make your sure you are ready to buy the car that day and from that dealer.  Too many people will visit multiple dealerships and have them pull their credit and that just makes matters worse.  When it comes to collections there is no such thing as a "good collection".  Meaning your score gets hit the same whether it is paid or not.  All the credit report recognizes is the word collection and the date it is reporting.  It does not give you any compensation for it being paid.  So if you remember earlier I mentioned that your credit score is reflective of your credit for the last 24 months.  If you are applying for credit and have a collection that has not been paid and it is over 24 months ago, YOU DO NOT WANT TO PAY IT UNTIL AFTER YOU GET WHATEVER IT IS YOU ARE APPLYING FOR!  The reason being is that if you go and pay it, the bureau will update your report to show it is paid and the computer will now think you have another new collection in the last 24 months and your score will plummit!  I am not saying to never pay your collections, you should pay them to avoid extra late charges and interest, just do not pay them if they are older than 24 months while you are in the middle of buying a home or car.  Judgements are the same as well.  In regards to Bankruptcies, many people are unclear as to how long it affects your fico and stays on your report.  Here is the deal, it affects your credit score for 2 years, and will stay on your report for the next 7 years.  IT does not matter what type of bankruptcy it was either.  Whether Chapter 7 or 13 it is the same hit.  Also do not be surprised if after 7 years it still shows up.  You might have to call the bureaus to remind them to take it and they will after the 7 year anniversary date.  Foreclosures are the one exception to the 24 month rule.  They will affect your fico score for 4 years.  Pure and simple.  So try to avoid this by keeping in touch with your bank.  Many would rather put you on payment plan than foreclose especially in the current market.  Lastly how many years you have had credit is a factor.  The funky thing is it is not simply calculated by the oldest tradeline minus the current calendar year.  Here is the formula, lets say for simple math purposes you have had credit since 1987.  That would be 20 years of credit right?  Wrong, they take that 20 years and divide it by the number of "open" tradelines you have on your report.  So lets say you have 5 open accounts, 20 divided by 5 = 4 years of credit history.  I know that does not make sense but that is the way it goes.  There is a loophole that can be exploited though by this formula that could help a person with limited credit.  Since the computer does not differentiate between the your acutal age and your oldest tradeline, you could have your mother or father add you to one of there credit cards and now you might have been born in 1969 but you have a Sears card that has been opened since 1973 and now you have a wider gap of credit.  The computer does not realize you would have been 4 years when you first got credit.  So your score goes up instantly!! Pretty nice eh?  I personally have benefited from this myself. 

Well thats the whole truth and nothing but the truth.  So now you are fully informed and an expert via osmosis on credit.  Pass this info on and as always if you know of anyone that needs a loan to buy or refinance a home, I am never too busy for any of there referrals!

Until next time!

Kevin

As the market continues to change and adjust, I remember a saying we have in my hometown of Chicago, "if you do not like the weather; wait a minute".  In other words this too shall pass.  Is the market changing? Yes!  Is it a bit more difficult and challenging to process loans?  Yes!  Are the banks closing at an alarming rate? Yes!  Is it still a good time to own or buy real estate?  ABSOLUTELY YES!!  The beauty of real estate is that it always fluctuates in an upward trend.  After every down period there is always an up period which usually lasts longer than a down period.  Right now the market is adjusting and "weeding" out those who have no business being in this industry.  From 2003-2006 we saw an unprecedented growth in real estate and because of that many "mom and pop" brokerage firms entered the market who really had no right being in it to begin with.  A lot of money was there to be made and at the same time the banks were very loose with their guidelines and quite frankly a lot of loans were given to people that really should not have been approved.  The majority of those loans were 2 or 3 year fixed rates and now that they are coming due a lot of people cannot afford the new payments and their homes have not gone up enough in value to refinance so they are letting the home  go into foreclosure.  This is what has caused banks to tighten up and be more cautious.  A lot of those mom and pop shops have left the industry, which is a very good thing, and there are still plenty of good banks out there that can help consumers.  The people that have been left out in the "cold" so to speak are those consumers with credit scores below 600.  There are not a lot of banks that want to underwrite these loans because they are the same borrowers that are now in foreclosure.  Consuemrs with FICOS below 600 can get loans but the rates are not very attractive and in most cases are worse than what the client already has.  At this point they should focus on getting their scores higher and waiting until this storm passes-which it WILL!  You may be asking yourself is this a good time to buy?  The answer is YES!  Just like stock you buy low and sell high.  Right now is the time to buy to get a very good deal on a home.  Many people are panicking and selling their homes at discount prices or in some cases they are falling behind and rather than go into foreclosure they are selling fast so they can avoid that process.  There are still plenty of good loans to buy homes for QUALIFIED applicants.  100% financing is still available however the banks are raising the bar in order to qualify for zero down financing.  For those clients who can prove their income the minimum fico score for 100% financing is 660, for those consumers who cannot prove their income or do not quite make enough and have to qualify under "stated" income-the minimum fico score has risen to 700.  Again the banks right now are trying to weather the storm and fix the broken wheel.  So my advice to you is to stop watching CNN or reading the newspaper.  Those two resources are painting a real dim picture of the market when it really is not the bad.  I would suggest you talk to someone actually in the industry like me!  Monahan Mortgage is still standing and will continue to help clients purchase or refinance their homes.  We are able to do this because of our loyal clients who continue to refer us to their freinds and family members, and in times like these now more than ever you will want to do business with someone you can trust.  We are never too busy for any of your referrals!  Until next time peace and blessings to you and your family! 

I am excited to have started this blog site.  I look forward to sharing with you updated information on what is happening in the mortgage industry as well as other topics.  I hope to get feedback and hear about things that are important to you and to get your comments and ideas.