Home Buying

HARP Can Help

By | Home Buying, Homeowner, Real Estate

What would you do if you had an extra $200-$500 or more in your pocket every month? Would it make a difference in your life? Would it transform your financial future? We think most people would say “yes,” and then ask, “But where am I going to get that kind of money?”

Have you heard of the Home Affordable Refinance Program (HARP)? HARP is a government program that came into existence when the real estate market spiraled out of control, leaving many homeowners paying for homes that no longer held the value they once did. HARP is designed to help the “underwater” homeowner – homeowners who are not behind on their mortgage payments but are unable to obtain traditional refinancing, because the value of the home has dropped below what is owed.

But why would a credit blog primarily focused on helping consumers better manage credit cards be talking about HARP?

If you have a mortgage on your home and you are paying more than 3-4 percent APR, you may be throwing money away that you could be using to pay off high-interest credit cards and to get out of debt. Refinancing your home may be the best option, not just to save you money and keep you in your home, but to transform your overall financial condition.

Home mortgage rates have remained low. So if you obtained your loan before the real estate bubble burst, it’s likely that you are paying too much interest on your home loan. If you are current on your payments but have not been able to refinance, to take advantage of the lower interest rates, HARP may be the solution you need.

Recently, there have been changes made to HARP to make it more accessible and more streamlined. There is hope that even more people will now be able to take advantage of the opportunity to refinance at a lower rate, saving $200-$500 or more per month on their monthly house payment.

Even if you have already refinanced, you may want to consider refinancing again if the rates have dropped since that time. The money you save on your house payment by refinancing, whether through HARP or through a more traditional means of refinancing, can often be enough to help you redouble your efforts to pay off credit card debt and change your financial future.

A Perfect Credit Score Alone Won’t Get You a Mortgage, but without Good Credit, Homeownership Will Remain a Dream

By | Credit Scores, Home Buying, Homeowner

By the time you sign the papers to buy your new home, you’ll be frazzled, exhausted and wondering if it was all worth it…and you haven’t even moved the heavy boxes yet. Closing day, though, might be a long way off if your credit score isn’t up to par. While your credit score alone will not determine whether or not you can get the house of your dreams, without a healthy credit score, you’ll be handing money over to a landlord for a long, long time.

Your credit score affects almost every aspect of your finances. When you are applying for a loan, it is standard procedure for the lender to check your credit score. This will be a huge factor in determining if your application will be approved and how much interest will be charged. Credit scores vary from one person to another and are dependent on a number of things. If you want to purchase a property but don’t have enough to pay in cash, then it’s important that you start improving your credibility to lenders.

A credit score is used by lenders to determine how credible or risky you are as a borrower. Credit scores range between 300 and 850, and anything that falls under 620 is considered a low score. Each lender has their own standards, but essentially, any score above 700 is considered a good one. If you are hoping to get a housing loan, then you should at least have a score of 620.

Your credit score is calculated using your payment history, the type of accounts you have, the amount of money you owe, any new accounts, and the length of your credit history. The longer you keep your accounts, the more payments you make on time, and the lower you keep your balances, the better.

Although lenders will consider your income for the loan approval, your credit score does not rely on how much you make. A person making $25,000 a year who has a history of responsible credit use and makes every payment on time can have a higher credit score than someone making $80,000 who has a lot of late payments and high credit card balances. Conversely, having a high credit score won’t guarantee that you will be approved for a large home loan. Even if you have perfect credit, if you only make $25,000 a year, you won’t be able to get a loan for a $500,000 home. You need a strong credit score to get a mortgage, but the amount the lender will approve still depends on your income and your ability to pay the loan.

When you apply for a mortgage, lenders will look into your credit score, income, and debt-to-income ratio. Debt-to-income ratio is the proportion of how much debt you already have, compared to how much money you earn. It is used to gauge how much you can set aside for the mortgage payments. Lenders also compute for LTV or loan-to-value ratio, which is used for lending risk assessment. Ideally, you should have a low LTV to avoid any problems. If your LTV is more than 80 percent, lenders may require you to purchase mortgage insurance to protect them from buyer default.

If you are preparing to buy a new home in the near future, do what you can to improve your credit now. Remember, a good credit score can make the difference between a low interest rate and high interest rate loan. Ovation works with prospective homeowners to help reach their home ownership goals. Contact us if we can help you say goodbye to the landlord.

How Does a Short Sale Affect Your Credit?

By | Debt, Fannie Mae, Fraud Protection, Home Buying, Homeowner

In golf, the lower your score, the better. In bowling, a perfect score is a 300. When it comes to credit, the scores have to get much higher before you can win the game. Your credit score is the number that dictates your credit worthiness on a scale from 350 to 850, using a number of factors. Among them is your bill-paying promptness, your history of late payments and the credit card debt you’re carrying as compared to the card’s credit limit.

Your credit report contains additional information, such as the way your debts are handled. Some of the possibilities are: paid in full and on time or settled for less than the full amount. The report is important because it identifies areas where you’re financially vulnerable. In the case of a short sale, your vulnerability could be in a poorly-written settlement that leaves you liable for the difference between the mortgage balance and the settlement amount. That liability will appear in your credit report.

A short sale is a situation in which a lender agrees to close an outstanding mortgage for less then the full amount owed. This usually comes about because the real estate’s value has dropped below the balance due on the mortgage, and the property owner(s) can’t make regular payments. One of its effects, beyond the settlement terms, is its impact on your credit score and your credit report.

A short sale reduces your credit score by 100 to 200 points and credit scores after a short sale hover around the range of 420 to 520. People with high credit scores are particularly hard-hit when they go through a short sale, probably because a high score carries expectations of financial stability and responsibility. Most of the drop comes from the history of late payments and the short sale itself. A rule of thumb regarding points lost on your credit report is that you’ll get:

  • An 85 to 160 point drop for a short sale.
  • A 40 to 110 point drop if your mortgage payment is 30 days late.
  • A 70 to 135 point drop if your mortgage payments are 90 days late.

Those who are forced into a short sale may worry about the impact on their credit, but the impact on your credit from a short sale versus a foreclosure makes the short sale a better choice. A buyer who is current (has no late payments) can qualify for a loan within two years after going through a short sale while it can take seven years or longer after a foreclosure. In the credit score game, a short sale is a better bet than a foreclosure every time.

Short Sale vs. Foreclosure

By | Credit Repair, Debt, Fannie Mae, Home Buying, Homeowner

In these harsh economic times, there are situations in which you simply have to bite the bullet and do what needs to be done. If you are sinking paycheck after paycheck into a mortgaged home that is not worth its value anymore, it’s time to cut your losses. Unfortunately, ridding yourself of a burdensome property is not as easy as Monopoly would lead you to believe. Do not be overly distraught just yet, though. There is an alternative to foreclosure that you should consider.

There are several reasons why an individual may be forced into either a short sale or a foreclosure. Unemployment, a nasty divorce, or lack of funds for whatever reason can lead you to such a point. Regrettably, it’s a difficult situation to stop once it has started; the lender tends to notice pretty quickly when payments have stopped coming in. Law requires that you get a warning of some sort, but by that point, your options are limited.

Foreclosure occurs when the bank takes back the property. This means that you have failed to make payments on your mortgage, and as collateral, the lender strips you of all property rights and takes the home from you. The long-term effects of foreclosure can be painful as well, affecting your credit and preventing you from purchasing another home for five to seven years. It is not uncommon for prospective employers to run credit checks as well, and a foreclosure on your record may cost you a much needed job opportunity.

A short sale, when possible, is a much better alternative. A short sale is when you sell the home for less than what you owe. The lender must approve the short sale, but because there are so many properties in foreclosure and programs supported by the government to help you through the short sale process, this can be a positive alternative.  You are still forced to sell your home, but at least this way, it is on your terms.

Keep in mind that the lender has to agree to it first, and you may owe any deficits, depending on the agreement. This a better option than foreclosure, in that as long as you were never behind on your payments, you can purchase another home immediately. Although your credit scores will still drop, the term “short sale” will never appear on your credit report the same way a foreclosure would.

It sounds like a catch-22 but when forced into such a situation, you have to choose the lesser of two evils. Although a short sale will still hurt your credit score, there are ways to recover. It might take a few years, but with the right strategies, you can rid yourself of debt, raise your credit score, ensure that you are in never in such a position again and buy a new home much sooner.

What’s Interesting about Down Payments?

By | Budgeting, Credit Repair, Home Buying, Personal Finance

One in every ten climbers dies trying to reach the top of Mount Everest. Even using every resource available to them, only 20% can reach the top. Getting into position for financial success or trying to improve your credit rating can feel like climbing a mountain, but it doesn’t have to. We can help you exercise wisdom while seeking creative ways to use your resources.

An improved or repaired credit rating means more options for you. How are you planning to spend your return? Approximately 84% of Americans are planning to invest their check from Uncle Sam this year in assets that add to their worth – cars and other major purchases.

Due to recent home market trends, more people are renting houses. A good credit score can put you in a position to buy a home – either for yourself or as a way to create extra income by renting it out to others. Great deals on homes can be found all across the country these days, and a healthy down payment can increase your monthly returns by making payments more manageable.

Using your tax return to purchase an automobile may be an option as well. Most car dealers salivate over the opportunities tax time presents, even offering to do your taxes right there at the showroom so that you can use the refund to make your down payment.

Using your tax refund to make down payments on large purchases provides you with two possible benefits: a lower and more manageable monthly payment, or the ability to buy more than you would have been able to afford otherwise.

A down payment will not, however, affect the interest rate you are able to get for the items you finance.

Your credit score is what determines the interest rate on the loans you obtain. That single number can have more to do with your overall purchasing power than any other number. The credit report will directly affect how much you will ultimately spend on interest. Can a down payment improve the amount that you pay in interest, too? Yes. While it will not lower your interest rate, it can significantly cut the total amount that you have to finance.

A down payment is basically discretionary funds used to pay on the principle of a loan up front. When coupled with a good credit score, it can put you in a position to make some seriously good choices for your life. If you’re credit is suffering or in need of repair, you’re often wise to wait on the purchase and use your tax refund to pay down your credit debt so that you can improve your score.

Rates Are Low, But Can You Get a Mortgage?

By | Credit Repair, Credit Reports, Credit Scores, Debt, Fannie Mae, Home Buying, Homeowner, Loan, Mortgage, Real Estate, Your Credit

Mortgage rates are bouncing off of 40 year lows.  Seems like the best time to buy a house or refinance.  Not so fast – there is a catch.  You have to qualify first!

Before the recession, qualifying for a mortgage was not much of an issue.  The overall standards were pretty low.  If you had a low credit score, you could still qualify for financing.  Your credit score did not necessarily determine if you qualified more so than the rate that you qualified for.   People with higher credit scores received lower rates and people with lower credit scores received higher rates.  But just about everyone qualified for something. 

The lending environment today is vastly different.  Only those that meet the highest qualification standards can get financing.  According to the Federal Reserve, about seventy five percent of those that apply for financing are qualifying.  Of course, the number of those applying for loans has decreased significantly. 

According to Fannie Mae and Freddie Mac, the average credit score for loans that they finance has risen to 760.  It was 720 just a few years ago.  For FHA loans, the average score has increased to 700 from 660.

The subprime market has just about disappeared altogether.  Before the recession, subprime lenders routinely made loans to borrowers with credit scores below 620.  Today, it is very difficult to find lenders willing to make these loans. 

If you are thinking about financing, you should check your credit score.  If your score is below some of the qualifying averages, take proactive steps to improve your credit scores.  Remember, about eighty percent of the credit reports contain errors.  With a little bit of effort, you might find that you do qualify for a loan at the current rates after all.

When an Account on My Credit Report Changes to Say It Is In DISPUTE, Does That Hurt My Credit Score?

By | Ask a Credit Expert, Credit Repair, Debt, Fair Credit Reporting Act, Home Buying, Loan, Mortgage, Personal Finance, Your Credit

First, let’s talk about disputing. As a consumer you have every right to dispute any accounts and/or personal information on your credit reports that you feel has inaccurate, misleading, and/or incomplete information. Now, don’t be misled into thinking that means the entire credit account must be or has to be wrong in order to dispute the account. As consumers we need to review our credit reports at least once a year for errors. We need to look over every account and make sure the balance is reporting accurately.  If there are late payments reporting, look over them and make sure everything is accurate.  If something shows open when it should be closed then it needs to be updated, if the balance is wrong then it needs to be updated as well.  If something is reporting that does not belong to you then it needs to be disputed and removed.

Now that you know what needs to be disputed, let’s talk about the affect it will have on your credit score. When you dispute an account it will show on your credit report that the account is in dispute, but that should not be looked upon as negative. Now, if you pull your credit score while you are disputing accounts it will make your credit score fluctuate. When you pull your credit score it pulls that information at that exact moment and calculates the score. Any account in dispute will not be factored into your credit score at that time. That can have a positive affect or a negative affect on your credit score. Since it can have a negative affect it is usually best if you do not pull your credit score or apply for credit while you are disputing credit items on your credit reports. If you wait to apply for credit then you will allow time for the disputes to be finished and hopefully your credit score will increase from the work that was done. Another reason you want to wait for disputes to be complete, is that A LOT of mortgage brokers will not close a loan if your credit reports say an account in dispute. So, it is best to dispute everything you need to dispute and get your credit reports updated before you apply for a mortgage loan.

For all of your disputing needs, call the best in the industry – Ovation Credit Services. Our Credit Analysts are here for your FREE Credit Consultation and to answer any of your questions. Call us at 1-866-639-3426 option 2.

If you have a question for our Credit Expert Kristi Thornton, send an email to [email protected]

If I Am Married, Should We Work On Our Credit Together?

By | Ask a Credit Expert, Credit Cards, Credit Repair, Debt, Home Buying, Personal Finance, Save Money, Your Credit

Whether you have been married for 20 years or you just got married your credit is a joint venture.  Of course when you first get married your credit is still separate, but the longer you are married the more joined it will become.  This is why it is so important to take care of individual accounts you had before you were together and joint accounts you open while you are together.  Unless you plan to buy everything separately: house, cars, etc. each person’s credit will affect the other.  When you take care of both parties credit it will take care of you and make your finances easier.  You will have better lending opportunities, better interest rates, and now even better job opportunities.

When you have joint accounts and you are late it will report late for both of you.  Sometimes even when you are not joint account holders on an account the late payment will report late on each others reports.  That is why it is important to check your credit reports at least once a year.  If you find that there are inaccurate or incomplete items on either report or both reports, call the specialists who deal with couples and joint credit accounts every day, Ovation Credit Services.

At Ovation Credit we understand that it is best to work on both of your credit reports at the same time, which is why Ovation is proud to offer a couples’ discount for any two people that seek our services. So, sign up for the couple’s program and get our services at a discounted price. We will still set up two separate accounts, one for each of you to ensure the best service and results possible, however the billing will be together to get the discount. Visit to learn more about our credit repair programs and discounts. Or give us a call at 1-866-639-3426 Option 2 to speak with one of our Credit Analysts and get started on a better financial future for both of you today.

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