Considering buying a Short Sale?

Anyone watching the active listings of homes will see the abundance of  ”Short Sales” available.

So what are they?

• A short sale is where the seller owes more on their home than the current value and they are asking the bank to be ’shorted’ the funds due them.

And what’s the deal…

• Any offer must also be accepted by the Bank(s) holding the loan(s) on the property
  • Banks are slow to respond (could be months and months)
  • Bank must determine if it is in their best interest to do a short sale (is there mortgage insurance on the existing loan?)
  • Bank will determine at what price/value they will accept an offer (could be an amount greater than the asking price)
  • Bank may choose foreclosure over short sale
• It is an “as is” purchase - (no repairs will be done by the seller)
• The seller is not allowed by the bank to contribute any expenses regarding the closing (to pay for a home warranty for example)
• All parties must agree to the terms, buyer, seller, and bank(s)
  • If the seller does not agree with terms from bank - they can cancel
  • If the seller has excessive tax implications that they learn about - they can cancel
• And many more items to consider

And yet they could be a good deal for the person who…

• They sell for near foreclosure prices, and sometimes less
• is not in a hurry with no time frame requirements to meet
• Realizes the “list price” may not be the sales price and is prepared to raise their offer beyond the list price.
• has the patience of Job

My Credit Score isn’t the same? Why?

When your lender ‘pulls your credit’ they get a Tri-Merged credit report.  That translates to, the single credit report they receive is a compilation of all 3 of the main credit bureaus reports.   The lender will use your Mid-Score.  That is not the average of your 3 scores, but the middle of the 3 scores.

Why do I have 3 different scores?  Shouldn’t they all be the same?

It seems like all the scores should be the same, but each bureau does its own computations; coming up with their own numbers.  Also, some companies only report to one credit agency, not like your mortgage that reports to all 3; So some of the credit agencies have different information to base your credit score on.

The lender will only use your mid-score to determine what type of loan you will qualify for.  So if they do need to do any credit repair, they will just work with the one credit bureau reporting your mid score.

Correcting my Credit – what’s that all about?

There are many services out there that charge quite a bit to clean up your credit score.  If you are considering purchasing a home, I would suggest first contacting a good mortgage banker and see what could be done quickly, or will it be a process that takes time.

If you sit down with your mortgage person (ask me for a couple of very good ones) you can see what is on your credit.  Sometimes, there are a few things that just haven’t been updated.  If you can provide a statement (an online statement is perfect) that shows you have paid off the balance, or reduced the balance on an account.  That could be enough to bring your score up a few points.

If there are any accounts that are old and unpaid, it could hurt your credit to pay them off.  (I never said that determining credit made sense… )  In this case it may be possible to pay it off as part of your closing, and possibly even settle the debt for less money than owed.

Rescoring your credit can be costly; it runs $30 per account per credit bureau.  With several accounts to update quickly, the costs can add up fast.

Managing your credit repair can be tricky.  If you have the time, (you’re not looking to purchase a home or car right away) you can do it yourself.  Choose any of the services that you can get your credit report from, and check it out yourself.  If there are discrepancies;  get it corrected yourself.  Be sure to DOCUMENT, DOCUMENT, and DOCUMENT as you go with certified letters to confirm receipt, copies of everything and be diligent.

What goes into creating your FICO Score?

Most people (74%) believe your credit score is based on your income.  Not True!

• 35% is payment history
  • The most important factor in your credit score is your payment history. Making payments on time is key in keeping and getting your score as high as possible.
• 30% is the amount owed
  • Keep your credit card balances low, at the most have 30% owed and 70% available credit.
• 15% is the history of your credit
  • How long have you had credit established? If you have all new credit, this could hurt you.
• 10% is new credit (less than 6 months old)
  • Getting new credit can help someone with little or no credit, if all of your credit is established, not to worry
• 10% type of credit
  • Diversity is best, a car loan, home loan, and a couple of credit cards.

Great credit requires a delicate balance.  Not too much on credit cards, not only a home loan;  But a balance, on time payments and the time to prove you are credit worthy.

All credit reports are not created equaly

I discovered a few new things at a class on Credit recently.

I had always thought a credit report is a credit report. That is not true. A consumer credit report and a lender credit report are two different critters. If you go to any of the credit reporting services, the score you get today, and the score your loan officer will get on the same day will not likely be the same. The lenders score will be lower.

Why? Well it has to do with the purpose for getting your credit scoring in the first place. For your personal information, for qualifying for insurance, and other smaller concerns, your score will be higher. If you are applying for a loan, especially a loan to purchase or refinance a home, the factors they take into consideration are weighted differently.

If you have excellent credit a few points either way won’t make a difference. With mediocre credit, a few points either way could increase your payment, or keep you from purchasing a home all together.

New stuff on Scottsdale-Blog

I have been busy adding new info to Scottsdale-blog. I have added detail about each of the communities in McCormick Ranch, starting with the town home/patio home communities, then the apartment styled condos and the last section, still to come, will be the single family communities.

Check out the tables, making it easy to identify communities with features like golf views, heated community pool, gated and others. As the weeks go by I will be posting about each of these different communities. Making it easier for you to identify the right neighborhood for you.