Credit Scoring-Don’t Confuse A Credit Score With A Credit Score Used for A Credit Decision

credit score

A question that I get asked all the time is, “Why is your credit score different from the one I received from Credit Karma?” The answer has to do with the type of scoring models that are preferred within our industry.

 

When it comes to their credit score, most consumers immediately think of the FICO rating, the most popular rating model that the Fair Isaac Corporation has been issuing since 1989.  But what you may not realize is that there are many different versions of this score, with the most recent one being FICO 8. Each lender within an industry is looking for a specific scoring model that is customized for the type of product that you’re applying for.

 

Auto lenders typically use a score that reflects the factors that determine the probability that borrowers would default on a car loan.  Mortgage lenders use a score that was created specifically for mortgage loans or perhaps one that is unique to the lending company.  When looking for a mortgage, even the score models themselves differ within the industry: Experian uses FICO Score 2, Equifax uses FICO Score 5, and TransUnion uses FICO Score 4.

 

Credit education websites such as Credit Karma or TrueCredit.com use a completely different scoring system from the FICO’s lenders use.  In fact, only lenders have direct consumer access to FICO scores they will be using.  You may be surprised to learn that although educational credit sites sell credit scores to consumers, a majority of them are never used by lenders nor do they translate to an exact FICO score.

 

I cannot use reports generated by those sites as for authenticity I must get them from my own credit reporting vendor using my scoring models.  I cannot even use a mortgage credit report from another lender, in addition to the different scoring models they use.

 

That said, it is still a good idea to use those services to monitor your credit and to get a general sense of where your credit scores are headed as well as review the body of your credit report.  Just know that when it comes time to apply for a mortgage, you’ll want to understand exactly what your FICO score is.

 

 

(Source: http://www.bluewatercredit.com/blog/is-this-my-real-score)

Here’s the Scoop on Florida Down Payment Assistance Programs

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Buying your first home may seem like a completely daunting experience, between qualifying for credit and trying to secure the down payment. But what you may not realize is that there are state assistance programs available for first-time buyers in Florida. In fact, some counties have their own specific type of program and they are only offered through approved lenders, like us at VanDyk Mortgage. Let’s take a closer look at the type of assistance that is available for Florida residents and how first-time buyers may qualify, as some of this has changed for 2016.

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  • First time home buyers or spouses who haven’t owned a property for at least three years can apply for up to $7,500 in interest-free down payment assistance. The down payment will be paid back upon any of the following conditions: the home is sold, refinanced, rented out or is no longer a primary residence.  The type of residence must be a single family residence, town home or condo and you must live in the property as your primary residence.
  • As a bonus, sellers are allowed to pay money towards the buyer’s closings costs, sometimes as much as up to 6% of the purchase price.
  • All funds must be used towards the purchase as there will be no cash back at closing. Any unused down payment assistance funds will be used to pay down the first mortgage at closing.
  • This program does not allow co-signors who do not live in the property.
  • The minimum credit score to qualify is 640.
  • There is a total household income limitation, meaning even if not all people living in the home will be on the loan, we must count their income towards the income limitation for the property, the amount depends upon the county, but can reach over $68,000 per year for a family over three living in Pinellas County.
  • Hillsborough County qualifies for special assistance program where buyers can get up to $15,000 and the assistance is forgiven at a rate of 20% per year so if a buyer stays in the home 5 years the entire amount is forgiven and not required to pay back.

 

I would be happy to answer any questions you may have about down payment assistance or any other lending topic. You can contact me at: bforrester@vandykmortgage.com. I am passionate about helping Tampa Bay-area residents realize their dreams of home ownership!

mortgage

What Is the New Closing Disclosure Form And What Does It Do?

mortgageLast October, a new five-page form called the Closing Disclosure was established to provide borrowers with a better understanding of the all of the details about their mortgage loan. This new Closing Disclosure form highlights the important terms of the loan, the projected monthly payments, and how much the borrower will pay in fees and closing costs to secure your mortgage. The mantra of the Consumer Financial Protection Bureau, the organization that oversees Federal financial legislation that protects consumers is “Know Before You Owe”. Their main objective in creating the new disclosure form was to ensure that borrowers would have a full understanding of their loan terms before they sign their paperwork.

Not only does the Closing Disclosure make it easy to review the vital aspects of a loan, the timing of the statement is another very important change as it must be sent to borrowers at least three days prior to their closing date.

Previously, borrowers would have to review all of the mortgage paperwork at closing, which can already be an overwhelming time. The new Disclosure statement will replace the existing HUD-1 Settlement Statement. Here are some other important points to know about the Closing Disclosure form.

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The new CFPB changes help you Know Before You Owe!

The changes in the disclosure form offer better clarity about the loan details which helps consumers avoid costly mistakes. Now, it is much easier to identify and review:

  1. How much is being borrowed
  2. What the interest rate is and
  3. What type of loan program is being offered

In addition, borrowers will know exactly what their month payments will be including the principal and interest, any mortgage insurance or estimated escrow. The intent is that borrowers will go into a closing with a much better comprehension of their loan terms.

Gives borrowers time to review the loan details before the settlement.
The closing settlement on a property can be a very overwhelming experience. Many people are hesitant to speak up and ask for clarifications about any details that aren’t clear. Receiving the Disclosure papers three days prior to a closing will now give home buyers extra time to review and ask questions that they need to before signing off on a mortgage.

Clearly states how much money is needed at closing.

This can be one of the most frustrating aspects of a closing-not knowing exactly how much you need to bring to the settlement. There is a “Calculating Cash to Close” tab on page three of the Disclosure form that details that correct amount needed. It will also explain any amounts that have changed since receiving the Loan Estimate.

Should you have any questions about the new Closing Disclosure statement or any other aspect of mortgage lending, I would be happy to answer them by email at: bforrester@vandykmortgage.com. I have over 12 years of experience in loan origination and am passionate about helping Tampa Bay-area residents realize their dreams of home ownership.

Thinking of Applying A Down Payment Gift Towards A Home Loan? Here’s What’s Allowed and How To Do It.

house gift

Using gift money for a mortgage down payment is more common than you may think, especially for first-time home buyers. This is an idea situation for someone who can afford the monthly payment but who may not yet have the required money for the down payment or closing costs. However, when it comes to details of using a down payment gift, buyers really need to pay attention. Regardless of the type of home loan that you have, there are three steps that you must take to ensure that your gift will be correctly applied to your loan. Failure to comply with any step may result in your loan being denied by your lender, a harsh price to pay for mistakes. So focus on your paper trail and follow these specific steps as directed.

Step One. Do not run down to the bank and deposit your check in your bank account. Officially “accept” your down payment gift by detailing the following information in a letter that your lender provides.

  • The total gift amount
  • The property address that is the subject of the loan
  • The relationship of the gifter to the giftee
  • State clearly that the money is actually a gift and not a loan that needs to be repaid

Remember, every step of this process needs to be properly documented both from the gift giver to the recipient. So there’s no need to include any additional information in the letter that is outside the scope of the list above. In fact, doing so will complicate things for your lender unnecessarily.

Down payment gifts require proper documentation.
If you are using a down payment gift, pay attention to the details!

Step 2: Documentation is very important for both sides of the transaction.
For the person who is giving this gift, it is important that you keep a well-documented paper trail of each step in this transaction, including where your gift funds are coming from. If you are selling stock to yield proceeds that will be used as a down payment gift to another, take care to document the sale of your stock and the transfer of the funds from your brokerage account. If you are taking the funds from your personal account, the bank will be interested in receiving a copy of the full bank statement prior to the gift transfer, a copy of the check and then an updated statement after the transfer has been made.

Now you’re ready to write the gift check to the home buyer, making sure that it’s exactly the amount you specified in your letter. Make several copies of the check itself, one for yourself and one for the buyer, which the lender will need in the process.

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Step 3: Document Receipt Of The Down Payment Gift
On the recipient’s side, it’s recommended that the buyer walk the check into the bank in person and not to deposit via ATM or online app. Keep in mind that the easier you make things for your lender in terms of paperwork, the faster things can move along with regards to your loan. This may seem simplistic, but don’t forget to collect a receipt for your deposit.

You want to keep this transaction all about the gift check, so that the amount on the deposit receipt is an exact match to that of your check. You will also need a copy of the cleared check from the gifter, which will show the money coming from the bank, in addition to an updated bank statement from the recipient that reflects the new deposit amount.

It may seem like a lot of paperwork, but ultimately it is worth every step when your mortgage application gets approved!

Escrow

More Than Your Everyday Escrow

Like attorneys and IRS agents, sometimes we mortgage bankers get a bad rap. We can of course lay claim to our share of bad apples, but I am particularly proud of the opportunities we at Van Dyk Mortgage provide borrowers.

One opportunity in particular (that you won’t find with every lending institution!) is the opportunity for an escrow holdback. This devise can go a long way in supporting a buyer looking for the proverbial real estate deal.

While there’s no denying there are still chances to score a higher end property at a fraction of its value, anyone who has shopped the foreclosure market knows they will often find homes that were not consistently maintained; especially if the owner was underwater and did not have the funds to allocate to home maintenance. And, once in the bank’s hands, measures to keep the home up to snuff are not necessarily being handled.

Even worse, a good percentage of homes on the foreclosure market can be missing things like bathroom fixtures such as a sink or a toilet, or have roofs or flooring that will not pass lender inspection for conventional, FHA, or VA.

For these circumstances we offer both the buyer and the seller the opportunity to drop money into an escrow holdback fund at closing whose proceeds can be applied toward items that would make the home compliant and therefore able to be financed for purchase. The clock starts when the ink dries on the closing documents and we have ten calendar days to complete the repairs/replacement of whatever is missing. Then a re-inspection is scheduled for no later than the 10th day after which the funds in escrow are released once the re-inspection report comes back noting the repairs are complete.

Nine times out of ten it is the buyer who will pony up the cash to fuel the fund, but every real estate transaction has its nuances; no two are ever the same.

At the end of the day, in certain circumstances, leveraging an escrow holdback can really save the day. Again, these are considered on a case by case basis and all recognized lending rules apply as far as qualifications and risk factors. We just like “thinking outside of the transaction” if it will help our clients get what they need!