How Short Sales and Foreclosures Impact Credit Scores
Today’s Guest Blog Courtesy of Kevin Kust with Veracity Credit Repair Service.
- Starting Score Rule: Better the score, bigger the hit with ALL delinquencies – As years pass, less effect (example: If the starting score is a 750 a foreclosure will hurt dramatically, probably from 200-250 pts. If the starting score is a 575 a foreclosure would only drop the score 75- 125. Make sense?)
- Credit Profile: The impact of any delinquency on a credit report will always depend on what remaining positive credit/trade lines are there to counter balance the recent derogatory. (Example: a late payment could hurt one consumer by 100 points, but another by only 20 based off of supporting credit)
Georgia Foreclosure – (150-250pt. average)
• Fannie Mae requires a Foreclosures 5 year “seasoning”
• High Outstanding Balance
• Reported as the most severe delinquency / Repo
• FHA – 3 years until you can buy again
Georgia Short Sale – (75-125pt. Average)
• Viewed as a charge off – late payments leading up to the short sales is what hurts not the “short sale” itself.
• Typically closed out with a $0 balance
• Fannie Mae requires a Short Sale 2 year “seasoning”
• If no lates, scoring models are not impacted by notes “settled for less” – only lenders acknowledge
• FHA treats a Short Sale like a foreclosure – 3 years
Biggest factor: Fannie Mae Guidelines – Lenders will qualify a consumer with a short sale (2yrs) & foreclosure (5yrs). FHA Guidelines – (3 yrs) for both.
In summary, no one can gauge the EXACT impact a short sale or foreclosure will impact one’s credit as it depends on the state regulations and the specifics of the consumer’s credit profile. More often than not, the short sale is always the best route to take if an option.
VERACITY CREDIT CONSULTANTS
1-866-518-2194
Refinance Your Georgia Mortgage and get a Tax Deduction
Today’s Guest Blog Courtesy of Jeff Rayman with Rayman Financial Solutions
Refinancing your Georgia home loan is a great idea if you can get a lower interest rate, ideally 1.5-2% lower and you plan to stay in the house for at least two or more years. If you plan to move or the interest rate is not a substantial decrease, the closing expense on the refinancing may be more than your benefit. Each situation is unique.
Most people don’t realize that the points on a refinance are tax deductible and others think the entire amount is deductible in the year refinanced. However, refinancing points charged at closing are tax deductible over the life of the loan. This means if you refinance and your points are $2,000 over a new 30 year loan, approximately $67 will be deductible on schedule A of your taxes each year. If you do not itemize, you will not receive any deduction for the points paid to refinance.
When purchasing a new home in Georgia the points are 100% deductible in the year the home was purchased. This will normally be reported on form 1098 from your mortgage company. As with all tax deductions, income limits and personal tax situations may result in a lower tax deduction.
Don’t forget if you sign a contract on a home by April 30, 2010 you may be eligible for the $8,000 or $6,500 tax credit on your 2009 tax return. If you close after you have filed your 2009 tax return, please contact me to file an amendment so you don’t have to wait for your credit. As of today, the closing on the home purchase must be completed by June 30, 2010.
Please contact me at jeff@raymanfinancial.com or 678-469-6931 with any tax questions related to a new home purchases, a recent refinance or to have your business or personal taxes completed by April 15, 2010. If you need to file an extension, I can file at no charge.
Submitted by Jeff Rayman, CFA, CTP at Rayman Financial Solutions, Inc.
USDA and Flood Insurance, Problems for GA Homeowners
The two most important issues facing Georgia home loans right now are USDA rural development and flood insurance. USDA loans have become wildly popular in the last two years due to the fact it is one of the only 100% loan programs left. In the middle of March USDA announced that they anticipate running out of funds by the end of April. This has happened in the past and funds were allocated quickly, but this time may be different. It does not appear that congress is going to reallocate funds this time. They will let funding run out and buyers that would like to get a USDA rural housing loan, may have to wait until October or November. This would be devastating to the rural housing market in Georgia.
Flood insurance is also a big issue right now. On March 28, 2010, congress let the National Flood Insurance Programs authority expire. This has not happened since 2002 and some speculate that the lapse was because Congress was focusing on getting the health care bill passed. When the NFIP’s authority expired, they now do not have the authority to issue new flood insurance policies or renew old ones. If this is not corrected soon, it could cause problems when trying to obtain a Georgia home loan. If the property you are trying to buy needs flood insurance and you cannot obtain it, you may not be able to close on your GA home loan.
What can we do? If you are a Realtor®, NAR has set up a call to action form that you can send to your congressmen. Follow this link to the form - NAR Call to Action
If you are concerned potential home buyer, write or call your congressmen. Let them know these issues are important to you.
What You Need to Know About Georgia Flood Insurance
Today’s Guest Blog Courtesy of Richard Wilson with Allstate
Did you know there is a 26% chance of having to experience flood damage to your home during the course of your 30year mortgage. If you are not in a high-risk flood zone, you still may experience flooding.
Fact: 25% of all flood claims are from people who live outside of a flood zone.
What would it cost you to rebuild your home or replace all of your personal possessions. Losses due to flooding will have an effect on your financial well-being and that is where your current home insurance company and the National Flood Insurance Program can help give you peace of mind.
Where do I start?
Always check your home insurance policy. Most homeowners’ insurance policies do not cover flood damage. You may need a separate flood insurance to protect against flooding. Flood policies, administered by your insurance company and provided by the federal government, are available in communities that have joined the National Flood Insurance Program. Purchased separately from your home insurance policy, a flood insurance policy can complete insurance protection for your property.
The National Flood Insurance Program has set up a Preferred Risk Policy which is designed for homeowners with low to moderate flood risk and for those who acknowledge the need for flood coverage, and want to protect their home and personal belongings in the event of a flood.
There are certain conditions to qualify for this type if policy:
- You own a one to four family dwelling.
- You are located in a low to moderate flood hazard area.
- There has been no more than one paid flood claim over $1000 since the date of construction.
If you do not qualify for a Preferred Risk Policy, you may still be eligible under the Standard Flood Insurance Policy. To purchase or for more information about Georgia flood insurance, give me a call.
Richard Wilson
rwinsurance@gmail.com or 404.388.1471
April’s GA Realtor® of the Month
Helen Minor - RE/MAX Suburban Atlanta
My name is Helen Minor. I am a Buyer’s Agent for The Nancy Minor Team of RE/MAX Suburban Atlanta. As a member of the team I work with home buyers in Metro Atlanta and I have a vast knowledge of Gwinnett, South Forsyth and North Fulton areas.
This is my 5th year with the team and everyday is exciting for me, working with Atlanta home buyers and helping to make the process a little easier.
I often work with First Time Home buyers and what a thrill to see their expressions as they receive the keys to their first home.
Once you give me the criteria that you are looking for, I can put you on a customized website that shows updates of homes that will meet your needs. This will be a great resource for keeping you informed with the latest listings, price changes and updates to the status of homes.
I have worked with Toby Lane of Academy Mortgage on numerous occasions. He helps my buyer’s obtain Atlanta home loans and his level of knowledge, communication and promptness in his field has been great for my buyers and for me as their realtor.
Talk to you soon!!
Helen Minor
Buyer’s Agent
The Nancy Minor Team
RE/MAX Suburban Atlanta
cell# 770-352-4483
Fax # 678-302-9387
helen@minor.net
www.helenminor.com
www.OACHOMES.com
USDA Rural Development is Running out of Money
On March 9, 2010 we received a letter from USDA Rural Development stating that they anticipate running out of funds by the end of April 2010. If your USDA loan is in processing or you are looking for a home and plan on using USDA, this can be frightening news. It is actually quite common for USDA for run out of funds. It seems like this happens once or twice a year. Since USDA is one of the few 100% financing loans still available, it has become quite popular in recent years. When they run out of funds, Congress has to appropriate more funds to them, which usually takes a week or two. This is not guaranteed to happen, but has in the past.
If they do run out of money, you should be prepared to react if necessary. Your choices would include waiting until funds are appropriated or maybe switching your loan to an FHA or VA loan. The negative to an FHA loan would be the fact that you will now have mortgage insurance and have to come up with the 3.5% down payment. Keep in mind, this is all happening as everyone is trying to take advantage of the $8,000 first-time homebuyer tax credit, that expires April 30th. You don’t have to close by April 30th, but you do have to be under contract. The end of April is likely to be a chaotic time for most lenders, so plan appropriately.
FHA Upfront Mortgage Insurance Going Up
When someone applies for a Georgia FHA home loan, they will find out that there are two types of mortgage insurance associated with an FHA loan. The first type is monthly mortgage insurance which is calculated at .55% of the base loan amount. The second type of mortgage insurance is upfront mortgage insurance, which is currently 1.75% of the base loan amount. FHA’s upfront mortgage insurance is typically financed into the loan or basically added to your base loan amount. It was just announced that FHA’s upfront mortgage insurance is going up effective April 5, 2010. It will be going up to 2.25%. With the .5% increase on a $200,000 loan, this will cost you an additional $1,000 that will be added to your loan. In the same $200,000 loan scenario, this will cost you over $5 additional on your payment per month. With the current economy, every dollar counts, so if you are buying soon keep this in mind and get a contract before the end of March.
A few other possible changes to the FHA home loan may be coming as well. Currently a seller can pay up to 6% of a buyers closing cost. It is very likely that this will be reduced to 3%. For smaller loan amounts this will mean more out of pocket expense for buyers. The other change that is being talked about right now is changing the FHA requirement for down-payment. It is currently 3.5% and soon may go to 5%. This could eliminate a lot of potential buyers.
All this being said, lending guidelines are still getting tighter, so now is the time to buy before a new change effects your ability to get a loan.
March’s GA Realtor® of the Month
MaryAnn McReynolds – Prudential Georgia Realty
MaryAnn has been a successful real estate investor for over 15 years. She became a licensed Realtor® in 2003. She focuses a lot of her efforts in the West Georgia market including Douglasville, Villa Rica, Carrolton and other surrounding cities. Her passion is helping people. She works with everyone from first-time homebuyers to experienced investors. She has also been very successful working with residential builders in this tough environment. MaryAnn’s team is now ranking in the top ten for all agents in West Georgia.
Years ago Maryann realized a shift was taking place in how buyers and sellers participate in real estate transactions. She understood that people now go the internet first to educate themselves and search for Georgia real estate. She hired a full time assistant to boost her presence on the web. She is now ranks among the top for Douglasville Real Estate and other cities in West Georgia. This has given her a distinct advantage when listing someone’s home. Sellers know that buyers are visiting her website first to learn about West Georgia homes.
Whether buying or selling a home, contact MaryAnn for your Georgia real estate needs.
MaryAnn McReynolds
Prudential Georgia
www.dallasgahomesales.com
770-891-3314
Proper Disposal of Confidential Information
Guest Post Courtesy of Leigh Clack with Neel & Robinson, Attorneys at Law
Georgia’s law called the Record Disposal Act (OCGA 10-15-1) requires businesses to properly dispose of confidential customer information, including social security numbers and account numbers, in order to prevent identify theft.
Realtors, lenders, and closing attorneys need to be sure to comply with this law. The fines for violations of the law can go up to $10,000.
Proper disposal is by shredding paperwork or by deleting (remove or mark out completely) all confidential information from any documents or computers that can be accessed by anyone else.
Listing Agents: safeguard the payoff information and social security numbers for your sellers, plus any other financial data provided as part of a short sale.
Selling Agents: protect any financial data provided by your buyers to be used for loan approval or information given to provide proof of funds for a cash purchase.
Lenders: almost all information provided by your borrowers must be kept secure, including income tax returns.
Closing Attorneys: pre-closing work and closing documents, especially those containing account numbers and social security numbers, must be kept confidential.
*Reminders to Your Clients:
Remove social security numbers from identification cards, driver’s licenses, and checks.
Social security numbers should not be reflected on any recorded documents from a closing.
IRS liens now include just the last four digits.
Unfortunately, older recorded documents show some social security numbers.
Be aware that death certificates are public records, and show the full social security number (and cause of death) of the deceased. Make sure that this confidential information is deleted if a death certificate is being placed in the real estate records.
Neel & Robinson, Attorneys at Law, LLC
Leigh Clack
404-705-3690
Understanding the Components of Your Credit Score
Guest Post Courtesy of Veracity Credit Consultants
What do consumers know about their credit scores? We have all heard a thing or two about credit, but do the good habits of our day to day financial decisions benefit our credit score? The bottom line is the Credit Scoring world is complex and secretive place. Little of what the average consumer understands or thinks they know about credit is in fact important or relative to benefiting their credit score.
Today, credit scores can be a consumer’s biggest asset to build or protect. Understanding the Credit Scoring Models and being on top of the game could save individuals thousands a year and make them a very powerful consumers. A consumer’s credit profile is considered for insurance, mortgages, employment, auto loans, utilities, cell phones and the list goes on and on. Creditors seek current or past account histories to determine personal risk. Here is a basic overview of the 5 components of our credit score:
1. Payment History (35% of credit score / 297.5 points) – This is where positive & perhaps negative payment history is reviewed. To optimize this component of the credit score one must have open accounts and make on time payments to their creditors. The longer that positive payment history is reviewed the more points will be accumulated in this section. Negative payment history (public records, collections, charge offs, late payments) are also assessed in this section. The more derogatory marks that report to the credit bureaus the bigger negative impact on the credit score. This is essentially where most of any type of “credit repair” can help the scores.
2. Debt Ratios (30% of credit score is Revolving Debt / 255 points) – The majority of debt that impacts your credit score are credit cards and HELOCS. By utilizing over 30% of a line of credit’s balance to limit ratio one will lose points for that specific account. Hence, a maxed out credit card will certainly hurt a credit score. There are several ideas how to maximize these ratios and spread debt around to help scores without available cash – consult with a Veracity representative to review your specific profile. Additionally, do not pay collections without consulting with a Veracity representative. In cases, if a collection is paid credit scores can actually go down. If paying or settling on a collection is the best option, there are strategic ways and documentation needed when doing so.
3. Length of Credit History (15% of credit score / 127.5 points) – A consumer’s credit history is an average of only open accounts. In most cases do not close older accounts or open new accounts if not absolutely necessary.
4. New Credit (10% of credit score / 85 points) – This section relates to the amount of times a consumer has their credit pulled (credit inquires) to apply to open a specific account. Understand that every time a creditor pulls your credit it will negatively impact your scores – no matter what you have heard. However, by pulling a credit report from an internet source a consumer will not hurt their scores.
5. Types of Credit (10% of credit score / 85 points) – A consumer can only have revolving, installment, or real estate types of accounts. A good mix of these types of credit is recommended to achieve high credit scores.
Veracity Credit Consultants
1-866-518-2194
