Home Equity Loans and Your Credit

By | Credit Repair, Credit Reports, Credit Scores, Home Buying, Homeowner, Mortgage, Personal Finance, Uncategorized

Home equity loans, as the name suggests, are a way for homeowners to borrow against the equity that they built up in their home. For a number of years following the 2008 financial crisis, lenders were reluctant to offer home equity loans because the value of so many homes had decreased. This lowered the equity that people had built, so it was difficult for many Americans to take advantage of them.

The good news is that as the housing market has stabilized, fewer people are at risk of defaulting on their mortgage, and home values are on the rise. In fact, the home equity market has improved for its third straight year, and, according to USA Today, the number of loans increased by about 20 percent in 2015. Consequently, lenders are more willing to extend home equity loans to customers who qualify.

The key word is “qualify.”Owning a home and having some equity doesn’t mean you automatically qualify for a home equity loan. Lenders want to be sure that you’ll be able to repay your loan. Your credit score and credit history are key indicators. So lenders won’t just look at the amount of equity that you have in your home, they’ll review your credit score and your payment history on other lines of credit, such as credit cards and your existing mortgage.

Credit Scores

While a potential home equity borrower may be current on all of his loans, he may still have a credit score that is too low for him to qualify for a home equity loan. Enlisting the help of a credit repair service such as Ovation Credit Service is a great way to improve your credit score. Our services work with credit bureaus and creditors to resolve issues that may be hurting your credit score.

A key service of credit repair services is educating you about factors that are impacting your credit score and keeping it lower than it could be. Not everyone understands how things like credit utilization and the number of open lines of credit can affect credit scores. Having an expert on your side to help navigate your credit report can help improve your score and show you which behaviors are likely to have the greatest impact on your score.

Types of Home Equity Loans

There are a lot of home equity lenders. You can go to your local bank, where you already have a relationship, or shop online for the most competitive rates. There are two main types of home equity loans:

  • Traditional Home Equity Loans are a lump sum amount paid to you when you’re approved. These are best for repaying credit card debt, consolidating other loans, paying for your kids’ college tuition, or splurging on a big-ticket purchase such as a car. The funds are given to you, and you make payments based on how much you borrowed.
  • Home Equity Lines of Credit (HELOC) are a great way to borrow against the equity in your home and keep some funds in reserve. If you’re renovating a room in your house or want to take a nice vacation, you can tap into some of the equity available to you. You only pay back the amount of equity from the line that you used, but you have other funds available if you decide to expand the scope of your renovation project or extend your vacation.

Things to Consider

A traditional home equity loan is a great tool for borrowers who want to improve their credit score. Having some cash available to consolidate high-interest credit cards—or pay them off entirely—is a good way to manage your credit. A credit repair service can recommend which lines of credit you should pay off first to have the greatest impact on improving your credit score.

How Home Buyers Can Use Their Credit Score (and More) to Reduce Their Monthly Mortgage Payment

By | Credit Repair, Home Buying, Homeowner

lower-mortgage-with-credit-scoreSo you’re looking to purchase a home, but cash flow is an issue, and you want to make sure that your monthly mortgage payment is as low as possible. Here are eight great strategies for shrinking your prospective monthly mortgage payment as you prepare to purchase your home.

Make a large down payment. The more cash you can put down at closing time, the less you will have to borrow. This decreases not only your mortgage principal, but also the amount of interest you’ll be paying. Higher down payments can also get you better interest rates.

Make a large enough down payment to avoid private mortgage insurance, or PMI. PMI is third-party insurance that most lenders will insist you get if you put down less than a 20 percent down payment. It’s their way of making sure they’ll get enough money back if you default on the loan. If you can’t put down at least 20 percent, then shop around for a loan at one of those few banks or credit unions that doesn’t require PMI. If you have no choice but to pay for it, remember to cancel your PMI (or refinance your entire loan) once the equity in your home reaches 20 percent.

Shop for a good deal on mortgage lenders and insurance the same way you would for any other item. Every lender and insurance company works differently, which means that each company will likely come up with a different package for you. Taking the time to shop your loan to at least three or four lenders and insurance companies will make sure that you’re getting the best packages possible — and don’t forget to bundle your auto and home insurance to get a further discount.

Check each town’s real estate tax rates. Most likely you’ll be looking for a home in an area with a few different towns or suburbs. The same way that you want to shop for towns with good schools, check out their real estate tax rates as well. A home bought in an area with lower real estate taxes can save you significantly on your payments—for every year that you own the home, not just while you have a mortgage.

Consider points. Points are the fees that you have to pay when buying a house, and it’s possible to purchase points that will lower your interest rates. Take the time to do the math and figure out how long it would take you to break even—simply divide the cost of the points by the amount you save per month ($5,000 / $50, for example, would require 100 payments, or roughly 8.3 years, to break even)—and whether that aligns with how long you plan to own the home.

Talk terms. Long-term mortgages divide the payments over a longer period of time, so the monthly cost is less, but it will take you longer to pay off the mortgage. Short-term mortgages pay off the debt more quickly and accrue less interest, but the monthly bills are higher. Figure out which method works best for you.

Think smaller. When shopping for a new home, ask yourself whether you really need all that space, inside and out. If you can find a smaller home on a smaller plot of land, you’ll pay less.

Don’t forget to bump up your credit score.Credit scores are a major factor lenders look at when determining interest rates, with the better scores resulting in rates that are much more favorable. In fact, a good credit score can reduce one’s mortgage rate by as much as 1.5%, which would translate to a savings of roughly $190 per month for a $200,000 loan. Anything you can do to fix errors in your credit score or improve your payment performance will help improve your mortgage interest rate and lower your payments.

So when you start looking for a home, keep these handy tools in mind. They will help you find the lowest mortgage payments possible. And along the way, should you need any assistance with credit repair, Ovation is here to help.

Mortgage Post-Foreclosure: 3 Steps to New Ownership

By | Home Buying, Homeowner, Mortgage

It’s Saturday morning, and you’re watching your child playing on the playground next to your apartment building. Sure, it’s not the backyard you used to have behind the home you used to own, but there’s plenty now to feel upbeat about — because there’s money in the bank for the first time in a long while. It’s only a matter of time until you’re watching your child play in a yard from your own porch again.

One thing worries you though. Is your foreclosure going to keep that yard and porch out of your grasp?

Yes! You can get a mortgage after a foreclosure

It is possible to get a mortgage after a foreclosure, but it will take hard work on your part to repair your credit and establish yourself as a sterling example of financial responsibility. Depending on your circumstances, there may also be a mandated waiting period of one to seven years. However, there are several concrete steps to get you on your way and possibly lessen your wait.

First of all, get a handle on your financial reputation. Get your hands on every official record you can find, including your credit report, and make sure all the information about you—and the details of your foreclosure—is 100% accurate. Be vigilant. Sometimes debts that you thought had fallen off your credit report can be sold to new collection agencies and reopened. Contact anyone presenting inaccurate credit information, and have it corrected.

Yes, there are concrete methods to responsible credit repair

Here is where some hard, day-to-day work comes in. Your credit needs to be squeaky clean from here on out, but if that makes you want to hide and avoid using credit at all, think again. A mortgage broker will want to see that you’ve learned financial responsibility. So, it’s time to start building new credit. For regular use, apply for a secure credit card—and pay it on time! And while this may seem counter-intuitive, consider applying for a high-interest credit card—store cards are a good choice—and carry a balance no more than 30% of its limit. Of course, you’ll need to pay it on time and preferably in full every month.

Next is a big purchase. No, not the house yet. A car, a large appliance, something you could reasonably take out a loan for. Make sure it’s a loan you can manage, and here’s where you will really impress a mortgage broker: Be better than the terms of the loan. Overpayment, extra payments, early payments — be so good that Ebenezer Scrooge couldn’t find fault with you.

Yes, someone can help you

Of course, the best way to get started on repairing your credit and getting a new mortgage after a foreclosure is to speak to a credit repair professional like Ovation. Each of our knowledgeable representatives work with you personally to build a credit repair and credit re-establishment plan that is tailored just for you. Call us today for a free consultation.

Improve Your Credit for Cheaper Mortgage Rates

By | Credit Repair, Home Buying, Homeowner, Mortgage

According to Freddie Mac, long-term mortgage rates are significantly higher – more than a percentage point – than they were only three months ago.  A percentage point may not sound like a lot, but in the lending industry they are a big deal and make a marked difference in your ability to achieve less expensive loans.

Mortgage industry leaders are advising their customers to lock in current rates as soon as possible. This is a positive sign that the American economy is becoming stronger daily, and signals to consumers that now is a great time to re-finance their mortgages. But, consumers first need to ensure that they have secure credit.

A weak credit score should be repaired and strengthened to be eligible for these improved interest rates. You want to pay the least expensive mortgage rate possible—that’s obvious. But, is your credit score preventing you from taking advantage of this market uptick?

Actions That Improve Credit

Here’s what we would recommend:

  • Pay as much as you can toward your current credit card(s) debt
  • Pay down the card with the most debt first
  • Decrease the charge limits of your cards
  • Check for inaccuracies (incorrect late payments, outdated personal information)

Every credit situation is different; however, taking control and working to improve your overall financial health can help you obtain the best rates possible.

Get Help Securing a Better Mortgage

Unsure of how to fix your credit? Ovation Credit can help you repair your credit score so that you can take advantage of better mortgage rates.  To learn how, browse our website or call 1-866-639-3426 for a free consultation and you’ll soon be on your way to paying less for your home!


Consider Credit Repair Before a Home Purchase

By | Credit Repair, Homeowner

Buying your first home is a huge milestone in your life. You’ve looked around at neighborhoods and homes, and finally have a few in mind. However, before you think seriously about buying, there is a lot to consider.

We’ve created this checklist to keep in mind as you think about your first home purchase.

Consider your credit

How’s your credit looking? You want to make sure you have the best credit possible when financing your first home. This will help you negotiate a favorable interest rate on a mortgage. Ideally, a credit score of 740 or above is favorable. A lower credit score doesn’t mean you won’t be able to get a mortage, but it can mean a higher rate.

If your credit isn’t where you want it to be, consider Ovation for your credit repair needs. We have various program choices that can help you work on your credit now so that you may save money over the years of your mortgage.

Deciding on a Downpayment

Assess your finances and your current credit load and think carefully about how much you can put down towards a payment on your house. That amount will depend on your financial situation, but consider somewhere between 10% and 20%. If you can afford to put 20% down, you can avoid paying private mortgage insurance.

Be Realistic

This should be a lesson that doesn’t need too much reiterating, since our economy is still reeling from the collapse of the housing market in 2008, but here it is: Be realistic about your finances. Take a long look at what you’ll be able to afford and stay within your means. When you’re looking at your future finances, think about what may happen if unexpected expenses come up or if you are without a job for a period of time.

Beware of “Bait Rates”

A “bait rate” is a mortgage rate that is misleadingly formulated to attract buyers. A bait rate is typically a low rate with no contingencies for people with extraordinary credit. The rate will be affected by factors like your credit, the size of the loan, and your debt-to-income ratio. Your rate won’t be locked in until you accept the loan, so you may find that the rate is higher than you thought it would be.

Comparison shop

Take a look at websites that let you find and get loans in real time. You can get access to mortgage quotes and information, along with tips on how to get your finances in order. This is not a decision to rush into, so take some time to do research.

Plan Ahead

If you go through this list and decide that now isn’t the right time to buy a house, start planning and setting goals so you will be able to buy a house sooner rather than later. Work on improving your credit and paying down debt. After you do that, calculate how much you can afford. While you’re working on getting your finances in order, try to avoid making large purchases or applying for new credit.

If you need help improving your credit score to purchase your dream home, we’re here to help.  Contact us at Ovation for a free consultation today!


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.

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.

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