The News Dispatch is pleased to announce a new weekly feature. Michael Gowan of Hallmark Home Mortgage here in Michigan City will be here to answer your mortgage and real estate related questions.
Ask Mike
Mike,
I recently went through a nasty divorce and, as part of the property settlement, our joint debts were divided up between us. Afterward, I applied for a mortgage and was denied when they pulled my credit because my score was too low. I asked why this was; I always pay my bills on time. They informed me that I had many late payments on my report. They gave me a copy of the report and all of the late payments were on the debts that had been awarded to my ex-husband. When I informed them of this, they said that it didn't really help because the accounts were still affecting my credit score. How do I fix this?
J. in Trail Creek
Dear J.,
You are, unfortunately, in a not uncommon situation. The problem is, when a couple goes through a divorce, and the attorneys split up the marital debts, and then, eventually, a judge signed the property settlement agreement, everyone involved leaves the proceedings believing that the issues have been resolved.
However, no one throughout this process ever seems to remember to mention that not one of the creditors on any of the joint debts has been consulted, nor are they bound in any way by the decision rendered by the court.
What this boils down to is that, even though some of the debts were awarded to your ex-partner, you are still just as liable for the repayment of those debts as you were the day you signed for them. Also, the credit bureaus to which the creditors are reporting have no way of knowing that there has been any change unless the creditor supplies that information to them.
This is clearly a flaw in the system, both in practice and, primarily, in the disclosure requirements for the legal practitioners involved.
My recommendation is that you contact the creditors involved and either attempt to negotiate a settlement to retire (pay off) the debt, or re-negotiate the entire debt (or a determined portion of the debt) in your name only and begin to repay that portion in a timely manner. However, no matter which of these paths you choose, it is extremely important that you get all agreements in writing and that you follow up with the appropriate credit bureau(s) to ensure that the account is being reported correctly.
Please send your mortgage related questions directly to Mike at
mgowan@hallmarkhomemortgage.com.
Thursday, April 30, 2009
Monday, April 27, 2009
Anatomy of the FHA Purchase
In this, the last of these articles over-viewing the opportunities presented by FHA financing, I would like to address the various aspects of purchasing a new home (or at least new to you) through FHA.
As stated previously, purchase money mortgages are available with as little as 3.5% down, and as low as a 580 middle credit score. Also, non-traditional credit references are permitted for those with no credit scores.
In La Porte County, you can purchase up to a maximum base mortgage (after down-payment) of $271,050.00. This roughly equates to a purchase price of $280,000.00. This amount is adequate to cover over 90% of the homes sold in Michigan City and surrounding areas in any given year.
While FHA does have property standards to which we all must adhere, they are primarily based on health and safety concerns. The electrical system must be 100 amp service, there can be no peeling paint or broken windows, handrails must be installed for any staircase in excess of three steps, there must be GFI outlets installed near any sinks, and every home must have adequate smoke detectors to protect the residents.
My general rule is that everyone purchasing a home should invest in a home inspection and spend some time reviewing it and making sure they understand every section of it. FHA also highly recommends home inspections and it is important to understand that FHA and FHA approved lenders do not provide any form of warranty for the condition of the home.
Last, there is a little known program available through FHA for the purchase of insurable HUD repossessed homes. Under this program's guidelines, one of these homes can be purchased by anyone intending to use it as their primary residence with only $100.00 down payment and HUD will even pay up to $2,500.00 towards the buyer's closing costs.
So to wrap this series up, I just want everyone to keep FHA in mind when they are considering any form of mortgage financing. When the situation fits, it's unbeatable.
As stated previously, purchase money mortgages are available with as little as 3.5% down, and as low as a 580 middle credit score. Also, non-traditional credit references are permitted for those with no credit scores.
In La Porte County, you can purchase up to a maximum base mortgage (after down-payment) of $271,050.00. This roughly equates to a purchase price of $280,000.00. This amount is adequate to cover over 90% of the homes sold in Michigan City and surrounding areas in any given year.
While FHA does have property standards to which we all must adhere, they are primarily based on health and safety concerns. The electrical system must be 100 amp service, there can be no peeling paint or broken windows, handrails must be installed for any staircase in excess of three steps, there must be GFI outlets installed near any sinks, and every home must have adequate smoke detectors to protect the residents.
My general rule is that everyone purchasing a home should invest in a home inspection and spend some time reviewing it and making sure they understand every section of it. FHA also highly recommends home inspections and it is important to understand that FHA and FHA approved lenders do not provide any form of warranty for the condition of the home.
Last, there is a little known program available through FHA for the purchase of insurable HUD repossessed homes. Under this program's guidelines, one of these homes can be purchased by anyone intending to use it as their primary residence with only $100.00 down payment and HUD will even pay up to $2,500.00 towards the buyer's closing costs.
So to wrap this series up, I just want everyone to keep FHA in mind when they are considering any form of mortgage financing. When the situation fits, it's unbeatable.
Sunday, April 26, 2009
Refinancing Opportunities through FHA
In this, the second in a series of three of an overview of what FHA can provide, I will address the various ways that FHA financing can be used to your benefit in refinancing.
First, FHA interest rates are generally comparable with conventional/bank rates. In addition, you can qualify for an FHA refinance with as little as a 580 middle credit score.
On a refinance intended to reduce either the interest rate or the term on your current mortgage, i.e., no "cash back" at the settlement, you are permitted to finance up to 97.75% of the appraised value of your home. If you would like to consolidate your debt, or even take "cash-out" to fund some improvements on your home, or actually for any purpose, you can qualify for a refinance amount equal to a maximum of 85% of the appraised value. In both of these programs FHA is, far and above, the most aggressive loan program available.
FHA also offers a program called a "Streamline Refinance". This program is for customers who currently have an FHA mortgage who would like to improve the terms of their loan. Under the guidelines for this program a current FHA customer may refinance to a lower rate or shorter term with no credit qualifying, no income qualifying, and no appraisal.
This means that, if you have made your monthly mortgage payment in a timely manner, you can be approved to improve your terms regardless of your other credit. No income qualification is required, therefore the only necessity is that your lender verbally verify with your employer that you work there. Last, there is no requirement for a new appraisal; not only does this save the added expense of a new appraisal, it eliminates any worries regarding possible value decreases or property condition problems.
So any time you are considering refinancing your current mortgage, remember to keep FHA in your thinking; it can really come in handy.
Call any of your excellent local FHA lenders for assistance or to answer your questions.
In this, the second in a series of three of an overview of what FHA can provide, I will address the various ways that FHA financing can be used to your benefit in refinancing.
First, FHA interest rates are generally comparable with conventional/bank rates. In addition, you can qualify for an FHA refinance with as little as a 580 middle credit score.
On a refinance intended to reduce either the interest rate or the term on your current mortgage, i.e., no "cash back" at the settlement, you are permitted to finance up to 97.75% of the appraised value of your home. If you would like to consolidate your debt, or even take "cash-out" to fund some improvements on your home, or actually for any purpose, you can qualify for a refinance amount equal to a maximum of 85% of the appraised value. In both of these programs FHA is, far and above, the most aggressive loan program available.
FHA also offers a program called a "Streamline Refinance". This program is for customers who currently have an FHA mortgage who would like to improve the terms of their loan. Under the guidelines for this program a current FHA customer may refinance to a lower rate or shorter term with no credit qualifying, no income qualifying, and no appraisal.
This means that, if you have made your monthly mortgage payment in a timely manner, you can be approved to improve your terms regardless of your other credit. No income qualification is required, therefore the only necessity is that your lender verbally verify with your employer that you work there. Last, there is no requirement for a new appraisal; not only does this save the added expense of a new appraisal, it eliminates any worries regarding possible value decreases or property condition problems.
So any time you are considering refinancing your current mortgage, remember to keep FHA in your thinking; it can really come in handy.
Call any of your excellent local FHA lenders for assistance or to answer your questions.
Friday, April 24, 2009
FHA – What is it?
The national media is still announcing that, if you want to finance a home, you need a 20% down payment (or 20% equity) and a 700 credit score. Everyone must understand that this is not true.
Through FHA (Federal Housing Administration) financing, a borrower can qualify with as little as a 580 middle credit score and only 3.5% down-payment.
FHA exists to provide mortgage insurance on loans made by approved lenders. Simply put, mortgage insurance insures the lender in case of a loss due to default by the borrower, which results in a claim being paid by FHA to the lender. It is the only government agency that operates solely from self generated income and is the largest provider of mortgage insurance in the world, having insured over 34 million loans since 1934 when created by an act of Congress.
Before FHA was created a home buyer was typically required to put 50% down and the loan was required to be repaid over a 3-5 year period. This resulted in very few home owners and many renters; only 4 of 10 citizens owned their own home.
FHA loans can be used to purchase or refinance 1 to 4 unit owner-occupied homes and are not limited only to first-time home buyers as is widely believed.
As stated above, the minimum credit score to qualify for an FHA loan is only 580, so it is by far the most aggressive program in this regard. In addition, if a borrower has NO score, they can still qualify by providing non-traditional credit in the form of a good 12-month rent rating and two other satisfactory references from utility companies, insurers, telephone providers, etc.
FHA does have debt to income ratio limits (the ratio of your total monthly debt divided by your gross monthly income is typically limited to 43%), but these guidelines can be exceeded when accompanied by compensating factors such as higher than required credit score, assets in reserve after closing, etc.
So FHA does have guidelines that must be followed but they are by far the most lenient of the loan programs and exceptions to these rules are granted on a daily basis. Contact any local FHA lender for help you with the specifics of your transaction.
The national media is still announcing that, if you want to finance a home, you need a 20% down payment (or 20% equity) and a 700 credit score. Everyone must understand that this is not true.
Through FHA (Federal Housing Administration) financing, a borrower can qualify with as little as a 580 middle credit score and only 3.5% down-payment.
FHA exists to provide mortgage insurance on loans made by approved lenders. Simply put, mortgage insurance insures the lender in case of a loss due to default by the borrower, which results in a claim being paid by FHA to the lender. It is the only government agency that operates solely from self generated income and is the largest provider of mortgage insurance in the world, having insured over 34 million loans since 1934 when created by an act of Congress.
Before FHA was created a home buyer was typically required to put 50% down and the loan was required to be repaid over a 3-5 year period. This resulted in very few home owners and many renters; only 4 of 10 citizens owned their own home.
FHA loans can be used to purchase or refinance 1 to 4 unit owner-occupied homes and are not limited only to first-time home buyers as is widely believed.
As stated above, the minimum credit score to qualify for an FHA loan is only 580, so it is by far the most aggressive program in this regard. In addition, if a borrower has NO score, they can still qualify by providing non-traditional credit in the form of a good 12-month rent rating and two other satisfactory references from utility companies, insurers, telephone providers, etc.
FHA does have debt to income ratio limits (the ratio of your total monthly debt divided by your gross monthly income is typically limited to 43%), but these guidelines can be exceeded when accompanied by compensating factors such as higher than required credit score, assets in reserve after closing, etc.
So FHA does have guidelines that must be followed but they are by far the most lenient of the loan programs and exceptions to these rules are granted on a daily basis. Contact any local FHA lender for help you with the specifics of your transaction.
Wednesday, April 22, 2009
All is Not Lost for Troubled Homeowners
Many of our fellow citizens are finding themselves recently in this unenviable position: some financial trouble surfaced, the bills started falling behind, and the mortgage, typically the largest of the monthly bills, ended up being the hardest one to meet in a timely manner. Once this snowball begins its downhill run it can be extremely difficult to stop or even slow its prgressively increasing momentum.
Once your mortgage payment is past thirty days overdue, then most mortgage servicers will refuse to accept any payment less than the full amount due including any late fees. Here is where the miscommunication usually begins.
The mortgage company does NOT want to foreclose on your home! Though every piece of correspondence you receive from them may seem like further proof that they are “after your property”, it is actually the furthest thing from the truth. It is in everyones’ best interest, and most especially the mortgage servicer’s, that you get back on track and continue sending them their monthly payment. This payment is how they make their money.
Foreclosing on any property is an absolute loss for any mortgage company and the last action they want to take.
However, our laws are written in such a way that, once a mortgage note is past thirty days overdue, it is only at that point that the mortgage servicer can legally begin "pre-foreclosure" proceedings. It is very important to a mortgage servicer that, should a foreclosure become unavoidable, they have every option to expedite the long, drawn out process.
Again though, in accordance with the law of the land, should they accept less than a payment of less than the full amount due, then the “clock” stops and this can seriously delay the proceedings in the future which will result in even more cost to the investors.
So any discussion of the the nerve wracking situation of being behind on one’s mortgage must begin from this understanding.
So now what? The first, and most important thing to keep in mind is communication. The mortgage company does not want to take your home and you want to keep your home; you are on the same side.
However, if the payments are not being made, and the mortage company is not hearing from you, (sometimes peoples make the mistake of not even taking the mortgage company’s calls) then they have to assume that you no longer intend to make the payments or keep the home.
It is of the utmost importance that you speak with your servicer to let them know that this is not the case. Once they are aware that you have run into some problems but are making an effort to get back on track, then they will, in all likelihood, do their best to assist you.
One last note for this column and that is that you will probably be speaking with the collection or foreclosure department of the mortgage company. The employees that work in these departments are harrangued and screamed at for, let’s say, seven out of the eight hours of their work day.
You have to approach these individuals from this standpoint. They are not your enemy. Keep in mind that the person on the other end of the line could have just ended a telephonically communicated drubbing that would give many of us nightmares immediately prior to picking up your call.
So make sure that they understand right up front that you are not going to add to their stress, but maybe even give them a bright note in their day and try to work with them. You will be amazed at how just this little amount of effort to empathize with the person on the other end of the phone line can change the entire tone of your dealings with your mortgage servicer.
However, should you end up with one of those people who seem to come to work to take out their aggressions on the world, (we all know they’re out there) remain calm and politely ask to speak to their supervisor. You’ll get much farther by approaching it in this manner.
In my next column, I’ll start outlining the list of options that are available once you find yourself in this position. There are more than you may think.
Many of our fellow citizens are finding themselves recently in this unenviable position: some financial trouble surfaced, the bills started falling behind, and the mortgage, typically the largest of the monthly bills, ended up being the hardest one to meet in a timely manner. Once this snowball begins its downhill run it can be extremely difficult to stop or even slow its prgressively increasing momentum.
Once your mortgage payment is past thirty days overdue, then most mortgage servicers will refuse to accept any payment less than the full amount due including any late fees. Here is where the miscommunication usually begins.
The mortgage company does NOT want to foreclose on your home! Though every piece of correspondence you receive from them may seem like further proof that they are “after your property”, it is actually the furthest thing from the truth. It is in everyones’ best interest, and most especially the mortgage servicer’s, that you get back on track and continue sending them their monthly payment. This payment is how they make their money.
Foreclosing on any property is an absolute loss for any mortgage company and the last action they want to take.
However, our laws are written in such a way that, once a mortgage note is past thirty days overdue, it is only at that point that the mortgage servicer can legally begin "pre-foreclosure" proceedings. It is very important to a mortgage servicer that, should a foreclosure become unavoidable, they have every option to expedite the long, drawn out process.
Again though, in accordance with the law of the land, should they accept less than a payment of less than the full amount due, then the “clock” stops and this can seriously delay the proceedings in the future which will result in even more cost to the investors.
So any discussion of the the nerve wracking situation of being behind on one’s mortgage must begin from this understanding.
So now what? The first, and most important thing to keep in mind is communication. The mortgage company does not want to take your home and you want to keep your home; you are on the same side.
However, if the payments are not being made, and the mortage company is not hearing from you, (sometimes peoples make the mistake of not even taking the mortgage company’s calls) then they have to assume that you no longer intend to make the payments or keep the home.
It is of the utmost importance that you speak with your servicer to let them know that this is not the case. Once they are aware that you have run into some problems but are making an effort to get back on track, then they will, in all likelihood, do their best to assist you.
One last note for this column and that is that you will probably be speaking with the collection or foreclosure department of the mortgage company. The employees that work in these departments are harrangued and screamed at for, let’s say, seven out of the eight hours of their work day.
You have to approach these individuals from this standpoint. They are not your enemy. Keep in mind that the person on the other end of the line could have just ended a telephonically communicated drubbing that would give many of us nightmares immediately prior to picking up your call.
So make sure that they understand right up front that you are not going to add to their stress, but maybe even give them a bright note in their day and try to work with them. You will be amazed at how just this little amount of effort to empathize with the person on the other end of the phone line can change the entire tone of your dealings with your mortgage servicer.
However, should you end up with one of those people who seem to come to work to take out their aggressions on the world, (we all know they’re out there) remain calm and politely ask to speak to their supervisor. You’ll get much farther by approaching it in this manner.
In my next column, I’ll start outlining the list of options that are available once you find yourself in this position. There are more than you may think.
Tuesday, April 21, 2009
This is an article I wrote a while back for the News Dispatch.....
A Bold Step Towards the Future For Our School System
On May 19th we will be voting on a referendum on whether to allow the Michigan City Areas Schools to finance the proposed Career Center adjacent to the Michigan City High School.
This presents an opportunity to make the clear statement that we will no longer accept a school system that is sub-standard; that we understand that our most precious resource is our children and we fully intend to make their success our top priority.
Model Career Centers across the nation have resulted in decreased dropout rates and behavior problems, increased graduation rates and have given students a clear view of their possibilities by working with them hand in hand to prepare them for their chosen path.
Through partnerships with Purdue North Central, Ivy Tech, Michigan City Chamber of Commerce, and local businesses, we can show these students that there is a reason to continue their education; that there is a good future awaiting them after graduation, and that they have support in the schools and the business community to help them achieve their goals.
Last, as anyone in the real estate and business communities knows, the reputation of our school system is the primary reason for families choosing not to re-locate to our community. By making a bold statement that we are addressing the failings of our schools we can make progress toward changing that perception, and the clearest way to demonstrate that is to overwhelmingly support this referendum.
A Bold Step Towards the Future For Our School System
On May 19th we will be voting on a referendum on whether to allow the Michigan City Areas Schools to finance the proposed Career Center adjacent to the Michigan City High School.
This presents an opportunity to make the clear statement that we will no longer accept a school system that is sub-standard; that we understand that our most precious resource is our children and we fully intend to make their success our top priority.
Model Career Centers across the nation have resulted in decreased dropout rates and behavior problems, increased graduation rates and have given students a clear view of their possibilities by working with them hand in hand to prepare them for their chosen path.
Through partnerships with Purdue North Central, Ivy Tech, Michigan City Chamber of Commerce, and local businesses, we can show these students that there is a reason to continue their education; that there is a good future awaiting them after graduation, and that they have support in the schools and the business community to help them achieve their goals.
Last, as anyone in the real estate and business communities knows, the reputation of our school system is the primary reason for families choosing not to re-locate to our community. By making a bold statement that we are addressing the failings of our schools we can make progress toward changing that perception, and the clearest way to demonstrate that is to overwhelmingly support this referendum.
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