Three things you might not know about credit

45024452_SNo matter how sincerely you promise to reimburse a lender, you probably won’t get a mortgage loan unless you have a good record of credit. But how familiar are you with the mechanism behind the credit-reporting industry? Here are three things you may not have realized.

There are more than three credit bureaus

Most people know about the major ones — Equifax, Experian and TransUnion — but there are other credit-reporting bureaus. Some of them deal with specialty areas, such as whether you’re a good or bad insurance risk, but the big three don’t control all credit decisions. And none are government agencies. They’re businesses that collect and sell information.

Credit reports don’t include every debt you owe.

Different credit bureaus create different credit reports on you. They get the data for these reports from lenders, who may or may not report the debt to all of them. While your car loan and credit-card debt will likely appear on the major bureau reports, utility bills and similar smaller debts may not make it. That’s why it’s wise to check more than one report.

You still owe debts that don’t appear on your credit report.

Related to the previous section, when a debt is missing or falls off your credit report, that doesn’t mean you can ignore it. Maybe the lender didn’t report it to that credit bureau, or maybe the statute of limitations for how long that item can stay on your credit report passed. Either way, you still owe the money.

Though it may seem like your creditworthiness is computed using a magic black box, there’s actually a rhyme and reason to your score. The information reported to the bureaus offers an objective prediction of your future behavior.

If you’re denied a loan because of your credit, ask your lender how you can improve your chances in the future.

You didn’t make any of these mistakes before closing — did you?

6463355_SYou’ve assembled your documentation, filled out the mortgage application and received approval to proceed with your purchase. It’s time to celebrate, right?

Not quite. Lenders recheck credit information right before closing, and certain behaviors might cause them to question your creditworthiness. Avoid these four mistakes to keep that from happening:

Getting a new job
Lenders like to see consistency. A new employer could mean delays due to employment and salary verifications. That said, if a huge career opportunity presents itself, talk to your lender.

Buying a car
You probably know that your debt-to-income ratio is important when you’re being considered for a loan. Adding to your debt could move that ratio to a level that your lender finds unacceptable.

Opening or closing credit accounts
Like taking on new debt, the mere act of opening a new credit account can affect your mortgage approval. The credit inquiry may impact your credit score by a few points, and your lender might wonder just how much you plan to spend with that new account. Even closing a credit account, which seems a positive step, could lower your credit score, because your overall available credit has been reduced.

Forgetting to pay the electric bill
If this seems unlikely, remember that instead of enjoying your normal household routine, you’re working out how to move your family and all your worldly goods. Now which box has the checkbook?

Part of the mortgage process is a last check to ensure you can afford the loan. Neither you nor your lender wants the payments to be a struggle, so don’t give your lender any reason to doubt your creditworthiness.

You may be a mortgage loan officer if …

12934537 - english green labyrinth with a cloudy skyYou may be a loan officer if:

You’ve walked into a corn or hedge maze, strolled straight to the center and out again — without realizing it was a maze.

You have to fight the urge to laugh uncontrollably when you hear the word “impossible.”

You wake in the middle of the night because you think the underwriting software might’ve missed something.

You were right when you thought the underwriting software missed something.

You arrive at work wearing a sombrero and poncho and announce, “Software? We don’t need no stinking software!”

You sometimes argue that loan-to-value is more important than debt-to-income, just to be a smart-aleck.

You would love to see ball games between teams named “Fees” and “Rates.”

When you read fairy tales as a kid, you identified with the character who granted the magic wishes.

You know the power of a positive attitude — and you’re not afraid use it.

Struggling to pay the mortgage? Here’s what to do

6771485_SMaybe you’re blindsided with an expensive medical procedure. Or your spouse loses his or her job, putting an incredible strain on your household finances. Hundreds of scenarios exist that could put you in a once-unthinkable position: in danger of missing a mortgage payment.

First, you’re not alone. Mortgage delinquency rates in the United States have declined from their 2009 peak, but the 2014 delinquency rate remained close to 6 percent. That’s not to say delinquency is your only move. Lenders are willing to discuss options — especially if you reach out to them before you miss a payment.

Consider modifying your loan, either by changing your interest rate or paying back the principal over a longer term — both changes can help your bottom line. For example, extending the term of your loan may increase your total cost, but it will reduce the amount you owe every month. You might also save money by refinancing to a lower interest rate. You’ll have to pay fees and other loan costs to make these changes, but the short-term gain might be worth the long-term costs.

The Federal Trade Commission’s Making Home Affordable Modification Program can help if you meet the following criteria:

  • You are struggling to make your mortgage payments due to financial hardship.
  • You are delinquent or in danger of falling behind on your mortgage.
  • You obtained your mortgage on or before Jan. 1, 2009.
  • You less than $729,750 on your primary residence.

However you decide to handle your mortgage shortfall, be on the lookout for scams. Companies claim that they can lower your payments by changing your loan terms, but nearly all their promises of relief are false. Unless they can prove a connection to your lender or the federal government, ignore the offers — no matter how attractive they are. Plenty of legitimate help exists for borrowers. Talk to your lender to figure out how you can stay current on your loan.

Why buyers don’t have to rush to get low rates

34452646_SInterest rates are on the rise, but that does not mean you must rush right now to purchase a home. Interest rates move slowly, and even with an increase, you’re still seeing historically low rates.

How low?

You can get a 30-year fixed-rate mortgage with an interest rate of less than 4 percent. Ten years ago, in 2006, that same loan carried a 6-percent rate. If you go back 10 more years, to 1996, the rate was over 8 percent — you don’t want to go back to the 1980s, when rates never dipped below 9 percent and climbed as high as 18 percent.

Yes, rising rates make it a little more expensive to borrow money, but those same rates also pay you more on your savings. So if you’re squirreling away funds for a down payment, the increased interest payoffs may almost negate the higher mortgage payments.

Plus, there are more important factors for you as a buyer than what the financial markets are doing. You need good credit, a strong income and savings beyond a down payment.

Also, know what’s going on in your housing market. Are properties languishing on the market, or are sellers fielding multiple offers above asking price? If things are slow, you should prepare to move forward with a mortgage loan, as you’ll have a chance to find a property that matches your criteria and budget. If houses are going under contract before they hit the multiple listing service, there isn’t as much urgency — your market is already extremely competitive and waiting to get your finances in order won’t mean a missed opportunity to get a great deal.

Rates haven’t moved too much, but they will eventually. Talk to your lender and figure out a strategy that gets you a competitive rate without rushing you into a decision.

Connecting with today’s consumer: The New Buyer Path

By John Seroka and Dave Zitting

36660765_SThe complexity of the sales and marketing process is at an all-time high. This heightened level of complexity has evolved to where it is today – beginning with the Internet going public back in 1995. Yet the skill and knowledge level of many marketing departments, especially in the mortgage industry, has not kept pace.

Many marketing professionals continue to try and force-fit their marketing strategies to align with an outdated buyer path known as the “sales funnel.” The theory behind the funnel is that a consumer, who could be investigating a mortgage lender begins with the many companies they are aware of, and as they move closer to making their final decision, companies are subtracted and narrowed down to the one that will win their business. Along the way, marketers communicate a variety of messages, customized to speak to wherever they might be in the funnel.

This funnel, developed in 1898 and still used today, articulates four stages: awareness, interest, desire and action.

Here’s how it works.

In the “awareness” stage, a potential borrower may be aware of many lenders that can provide home financing. This awareness was developed by companies leveraging “push” marketing tactics that include magazine ads, billboards, TV ads, direct mail and other items.

In the “interest” stage
, a borrower realizes they have a need to investigate certain mortgage companies they feel could meet their needs. So, they naturally subtract those that may be too far away, don’t resonate with them, and those that family or friends may have never used or didn’t come recommended to them by a trusted source.

In the “desire” stage, the borrower narrows down the options to one or two.

Next, they take “action” and choose a company to work with.
This progression seems logical, so what’s the problem? The problem is this: the Internet has ushered in a new dynamic that makes the funnel completely irrelevant – unless you live in the mountains or off the grid where you have refused access to any modern technology.

Let me explain …

The funnel does not take into account how people today interact with the Internet before they decide to work with you and fill out an application. It is focused on a push marketing methodology.

Studies show that 87 percent of consumers now travel a less linear, more complex pathway to a decision to do business with you. This is due to the availability of so much information on the Internet. Not adjusting your sails accordingly means you’re simply turning a blind eye to today’s reality.

So, if the funnel is outdated, what is the new buyer path to purchase?
It’s called the “purchase loop.” It’s defined as a “loop” because it is non-linear and allows for consumers to enter into the path at different points and even bounce around between various points depending on how they think and make decisions on an individual level. Where the funnel was designed for the masses, the loop is designed for individuals. This is a critical distinction to understand so you can make sure you create content on the web that’s necessary to elevate your brand according to individual mindsets.

Within the purchase loop, there are several states of mind the buyer can experience. These include openness, realized want/need, learning, seeking of ideas/inspiration, research/vetting and finally the post-purchase mindset.

Let’s take a look at each of these states of mind and how to accommodate them.

When a consumer is in this state, they may not even know they need to take a look at home-financing options. But they are open if they come across information that strikes their curiosity.

For example, a consumer comes across an article that informs them that there’s a lot of home inventory on the market and now could be a great time to negotiate a great deal on a new home. That might inspire the consumer to look at whether they could qualify for a home loan and how much they could borrow.

How would they come to this conclusion? By coming across a piece of content that strikes their curiosity, like an infographic, video or a blog post.

Realized want/need: In this mindset, a consumer starts checking out the housing inventory online and then realizes that they will need to look at financing options. So, they run off to Google and type in “mortgage loan options for first time home buyers.” If your company is to appear in the first page of the results, make sure you have a competent SEO strategy in place.

Our consumer probably hasn’t come to the conclusion they need a low down payment loan yet. So they will seek more information by entering other keywords or phrases and may then come across some piece of content entitled “5 Mortgages That Require No Down Payment or A Small One.” Maybe you even give the option of filling out a form to download information that might be helpful to your prospect.

Learning: Our consumer begins to understand that there are a number of options available to them depending on their specific circumstances, so they are receptive to learning more from you because they filled out that form earlier. So, you might follow up with them by emailing information that further explains the different options available and how you may be able to help.

Seeking of ideas/inspiration: Now our consumer is in the mindset of looking for ideas and inspiration because they are seeking content that will motivate them to continue down the path. Helpful content at this stage may include case studies or testimonials from clients who, because they worked with you, had a positive outcome.

Research/vetting: In the Research and Vetting phase our consumer realizes they will be purchasing a home. So, it would be good if you could offer them information on rates, fees or a mortgage calculator to help them make the decision to work with you.

Post-purchase mindset: In the post-purchase mindset, the new borrower will decide whether or not to recommend your company to others or decide whether they will do business with you again. They may provide you with a rating on Facebook, Yelp, or any number of venues.

This model takes into consideration a person’s EMOTIONS (very important) and understands the process isn’t linear – that a person can bounce from one stage to another.

As I mentioned before, the purchase loop really came into being because of how we, as a society, use the internet today. If you think about each one of these purchase states, great brands provide some type of content, be it blogs, videos, infographics and more to help the process along. And this is the key to connecting with today’s consumer!
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This post was co-authored by Dave Zitting, CEO, Primary Residential Mortgage and John Seroka, Brand Consultant and Principal in the Los Angeles office of Seroka, a full-service brand development and strategic communications firm specializing in the mortgage industry. and was originally published in California Mortgage Finance News, a California Mortgage Bankers Association publication.

The first step you should take toward your new home

3486735_SVisiting open houses in your dream neighborhood is a fun way to spend your weekends, but it won’t get you closer to your goal of buying property. When you’re serious about purchasing your first home, you need to know how much money you’ll have to spend. That’s why you should talk to a lender and get prequalified or preapproved for a mortgage loan.

What’s prequalification?

The lender will perform an initial evaluation of your creditworthiness. You provide your income, debt and other relevant financial details, and the lender will crunch the numbers to figure out how much money you might be able to borrow. Of course, the lender hasn’t confirmed any details of your financial situation, so the prequalification number is just a rough estimate.

What’s preapproval?

A step closer toward a mortgage application, loan preapproval means you go through the full mortgage-application process. Fill out the paperwork, and the lender verifies your income, employment history, credit report and other details. Then the lender will decide what interest rate you’re eligible for and how much you could borrow.

Does that mean I have a loan?

Being preapproved or prequalified for a mortgage loan doesn’t guarantee anything. You still could fail to secure a mortgage loan for your desired amount or terms. However, both processes let an expert give you a sense for how much money you could have to work with. And a buyer with a prequalification or preapproval letter from a lender may be more appealing to sellers.

Before deciding where to put the couch in your dream home, talk with a lender. He or she will help you make sure your home-buying aspirations line up with your financial situation.

The mortgage that could double your down payment

3871040_SMost lenders require a down payment equal to at least 20 percent of the purchase price for a conventional loan. Anything less and you’ll have to pay private mortgage insurance (PMI).

But what if you don’t have the funds to put down 20 percent? One option is a piggyback mortgage.

Three parts, one mortgage

Also called an 80-10-10, the piggyback mortgage is made up of three things. There’s the first or main mortgage loan, which is usually for 80 percent of the sales price. The next piece is a second mortgage for 10 percent of the sales price. It’s also referred to as a second mortgage, home equity line of credit or home equity loan. The final part is your 10 percent down payment.

The good and the bad

You already know that a piggyback mortgage can help you avoid PMI on your loan. So, what’s the disadvantage of this type of loan?

You’ll pay closing costs on both loans. Also, the second loan will have an adjustable rate that’s likely to be higher than the first loan’s rate, so climbing rates will hit your checkbook. Piggyback mortgages usually require a high credit score than other low-down payment options, such as a Federal Housing Administration loan. But these disadvantages can be overcome with some careful planning and the counsel of your lender.

A piggyback mortgage isn’t right for everyone — each borrower’s situation is unique. However, it’s a great option to consider if you’re a strong mortgage candidate who’s a short on the down payment.

Take advantage of mortgage related tax deductions

2830656_SIf you’re looking at taking out a mortgage to buy a home, refinance an existing loan, or remodel your property, you will want to analyze all the relevant monthly costs. When you’re calculating the loan costs and other expected expenses, remember to consider the potential tax benefits.

The National Association of Realtors estimates that home owners save an average of $3,000 annually in taxes due to deductions related to mortgages and property tax. Make sure you factor potential savings from the many available deductions into your buying decision.

Mortgage interest
You may know that interest paid on a mortgage is tax deductible. But did you realize that mortgage interest on a refinance, a home­ equity loan, or a home­ equity line of credit may be deducted as an expense?

Discount points
If you paid points to lower your interest rate, those may be deducted for the year in which they were paid. Discount points on a refinance are also eligible for tax benefits but must be amortized over the life of the loan.

You can deduct private mortgage insurance for a primary residence and a vacation home, as long as you don’t rent out the second home.

Property taxes
Taxes you pay on the real estate you own can be deducted from your federal income taxes.

These items are just some of the ways you can reduce your tax burden when you take out a mortgage loan. The statement you receive at your loan’s closing will show you what is allowed to be used on your tax return. Some items will be tax-deductible while others will count as personal expenses.

While your lender can certainly help you understand the financial implications of your borrowing decision, it’s always a good idea to visit with a tax professional who can analyze your situation.

Keep an eye on your credit report

9182720_SImagine that you’ve scrimped and saved for a down payment, worked hard to pay your bills on time, and found the perfect home that’s in your budget. It sounds like the perfect set up for a happy ending.

But then you submit your mortgage application, and the mortgage lender says that you don’t qualify for a mortgage loan with your poor credit. You get a copy of your credit report and realize that someone stole your identity and ruined your credit score with unpaid debts.

Do you think that scenario is far-fetched? Well, the IRS reports 2.7 million people in 2014 had their identities stolen. But if you stay on top of your credit report, you’ll know when something is amiss—before it gets out of hand. The best part is that you can check your credit report for free.

Each of the three national credit-reporting companies—Equifax, Experian and TransUnion—is required by law to provide you with a free copy of your credit report once a year at your request.

How many reports you request and when you make those requests is up to you. If you’re just checking your credit periodically, spacing them out can help you monitor any changes. If you know you’ll be applying for a mortgage loan soon, you might choose to get all three at the same time. Comparing all three can help you look for errors or address problems.

Go to This is the only website authorized by the federal government to provide the reports you’re entitled to receive. You’ll be required to provide some personal information to confirm your identity.

Monitor your credit report to ensure that there aren’t any surprises when you apply for a mortgage loan. It’s a free process that only takes a few minutes.