a complete guide to credit and qualifying
DESCRIPTION
In this class we discuss what lenders are looking at when you apply for a home loan. Did you know that bad credit can result from not knowing how to build good credit? We talk about common myths about your credit report in this informative class as well. What is required by the lender when you apply for a home loan? It's covered in this class.TRANSCRIPT
Where homeownership education takes flight!
First Time Home Buyer’s Complete Guide to
Credit, Qualifying and Completing the Loan Application
Thank you for attending
We will begin in a momentClass Scheduled to begin at 6:00pm
Presented by
Scott SchangBranch Manager
Broadview Mortgage Corporation
1-866-667-6724
Where homeownership education takes flight!
Credit, Qualifying and Application
The Purpose and Goals of this Class
• To Create and Empower Home Owners
• Educate you about your credit, what lenders are looking at for qualifying & completing a loan application
• Empower you with the ability to make educated decisions in the home buying process
• Enable you to make sound financial decisions based on information, education and experience
Where homeownership education takes flight!
Credit, Qualifying and Application
Ask Questions throughout presentation
• You may type questions in at any time during the presentation – Questions box on your screen
• Home buying specialists are standing by to answer your questions during the presentation
• This is an interactive learning environment – you will get the most value by having your specific questions answered
• The only dumb question is the one you don’t ask
Write number down now in case you get disconnected
1-866-667-6724
Where homeownership education takes flight!
Credit, Qualifying and Application
Topics We Will Cover In This Class
• An Introduction to Your Credit Report
• The Loan Application Process
• The Loan Qualification Process
• Wrap Up and Take Aways
Where homeownership education takes flight!
Credit, Qualifying and Application
An Introduction to your Credit Report
• What you need to know about your Credit
• 3 Common Myths about ways to Increase Scores
• 3 Steps to Improving your credit scores
• Wrap up and Take Aways
Where homeownership education takes flight!
Credit, Qualifying and Application
What you need to know about your Credit
• Your Credit is a Current Snap Shot– Creditors report on different cycles
• Not knowing how to build good credit can result in bad credit
• How to get your truly FREE Credit Report– FTC Credit Report Site – www.AnnualCreditReport.com
• Free credit reports from TV are not FREE
• Consumer credit reports do not report the same as mortgage inquiries
Where homeownership education takes flight!
Credit, Qualifying and Application
What you need to know about your Credit
• Credit reports are not always right– Creditors are much quicker to report negative
items than they are to remove them
• How credit can affect your loan approval– Can trigger “risk based pricing” – increase cost– FHA does not penalize for credit scores
• 12 Month payment history– Most lenders are looking at past 12 months– 24 month history will give you the most benefit
• Credit Reports show past employers, past addresses, AKAs, social security number and birth date deviations
Where homeownership education takes flight!
Credit, Qualifying and Application
Installment Loans and Revolving Credit• What is an Installment Loan
– Fixed term– Fixed Payments– Auto, Education, Furniture, Cash Call
• What is a Revolving Credit Line– Credit Cards– High credit limit / Balance
• How they differ / How they are the same– On time payments the same– How Balances are treated are different– Number of months remaining
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Myths about Increasing your Credit ScoreProvided by: Informative Research, Inc.
• Myth #1 – Paying off credit card, collection accounts and tax liens/judgments will always increase the credit score
– Fact: The FICO model score reflects updates from “Date of Last Activity.” In some cases, paying off an old collection account can make current a negative factor, even though the action may be positive and in good faith!
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Myths about Increasing your Credit ScoreProvided by: Informative Research, Inc.
• Myth #2 – Closing accounts with zero balances will increase the credit score
– Fact: Closing accounts lowers the number of open accounts, which generally improves a score. But it also can raise the overall utilization of credit among the remaining accounts.
– Higher credit utilization (above 50%) negatively impacts the score—and increasingly the higher the utilization becomes.
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Myths about Increasing your Credit ScoreProvided by: Informative Research, Inc.
• Myth #3 – Public records, judgments, liens and collections negatively impact the credit score forever
– Fact: Most public record, collections, tax liens, and charge off derogatories are removed from a credit file at 7 years; (10 years for bankruptcies and CA tax liens). All are excluded from the scoring upon expiration
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Steps to Improving your credit scores
• Step 1 – Know your Do’s– Do Order your free annual credit report
• Or have a lender run your credit– Do Educate yourself about your credit– Do maintain at least 3 revolving accounts– Do keep balances on revolving credit lines under
50%– Do Treat your revolving credit cards like an
AMEX– Do pay your “Reported” debts on-time– Do ONLY use “referred” credit repair services
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Steps to Improving your credit scores
• Step 2 – Know your Don’ts– Don’t be afraid to speak to your creditors– Don’t take out “quick fix” loans with extremely
high interest rates– Don’t max out your credit cards– Don’t apply for every credit card application you
receive– Don’t transfer credit card balances to one card– Don’t Make payments more than 30 days late– Don’t use credit repair services without a
personal referral from someone
Where homeownership education takes flight!
Credit, Qualifying and Application
3 Steps to Improving your credit scores
• Step 3 – Take Action Now – Manage your existing credit lines
• Pay down balances on revolving lines• Increase high credit limits on revolving lines• Reduce installment to 10 months remaining
– Dispute derogatory items on Credit Report• Order free credit report to identify derogatory
reporting• Order online report for bureaus that are
showing derogatory accounts• Dispute all incorrect or inaccurate information
Where homeownership education takes flight!
Credit, Qualifying and Application
Wrap up and Take Aways
• There is no Mystery or Magic to credit reporting• It’s never too late to get on the right track and
improve your credit rating• Knowledge is Empowerment – Educate yourself
about good credit practices• 6 Month Plan – Starting from Scratch• Need it Now – Credit Repair Services
– Costs range from Hundreds to Thousands• Perfect credit not required for FHA loans
Where homeownership education takes flight!
Credit, Qualifying and Application
The Loan Application Process
• Complete a Residential Mortgage Loan Application– 2 years residence
• 12 months verification of rents/payment– 2 years employment
• Same trade / line of work• Last 2 years W2’s or • Last 2 years tax returns if self employed• 30 days pay stubs
– Gross monthly income• Before taxes• Use tax returns if receive “non-W2” income
– Assets Statements covering most recent 60 days
Where homeownership education takes flight!
Credit, Qualifying and Application
The Loan Qualifying Process• Automated Underwriting Engines
– Fannie Mae is standard– FHA DU
• Risk Assessment Underwriting Model– Income of household– Assets (reserves)– Credit profile– Equity (loan to value)
• Debt to Income Ratios determine maximum loan– Reducing liabilities improves DTI– MCC’s can improve DTI– Conventional loans now 45% maximum
Where homeownership education takes flight!
Credit, Qualifying and Application
The Loan Qualifying Process• Non government loans – Fannie Mae require
reserves
• FHA Loans do not require reserves
• Compensating Factors can help approval– Debt to income– Months of reserves– Credit Scores– Loan to Value
• Manual Underwriting – FHA Only– Actual FHA approved underwriter reviews all
documents – much more restrictive– DTI changes do not apply to FHA loans
Where homeownership education takes flight!
Credit, Qualifying and Application
Wrap up and Take Aways
• Getting approved for your loan is the first step
• You cannot get approved without completing the loan application and getting an underwriting approval
• Begin gathering your documents and putting together all information for loan approval
• If credit challenges prevent approval now, at least you know and you can work on it
• Complete a “Personal Home Budget” on Quicken Online website – “Yes, I can get a handle on my spending!” – Link on site
• Continue to educate and empower yourself!
Where homeownership education takes flight!
Credit, Qualifying and Application
Wrap up and Take Aways
• We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, USDA, FHA, VA and down payment assistance programs
• We would like the opportunity to earn your trust and your loan business.
• We are more than happy to be your “second opinion” if you are already working with someone
• We can refer you a qualified Real Estate Agent that shares values and passion for education
Where homeownership education takes flight!
Credit, Qualifying and Application
Wrap up and Take Aways
• You will receive a “Thank you” email with links to the information we’ve talked about here today
– Power point presentation – Workbook/Notes– Links to tools and resources we covered today
• Credit information resources form FTC• Loan calculators from Ginnie Mae – Gov.• Common Q&A about credit from Informative• Link to personal budget from Quicken
– Secure on-line loan application– Dream Home Finder request– A schedule of all upcoming classes
Where homeownership education takes flight!
Thank You for AttendingIf you enjoyed this class – Tell a friend
Please tell us how we’re doingFollow up email includes a link to “Praise” page
Your feedback is greatly appreciated
For more information
1-866-667-6724Homeownership Educator
Scott SchangBranch Manager
Broadview Mortgage Corporation