The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

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Improve Your FICO Score by 100 Points Quickly

How To Increase Your Credit Score Fast

You can raise your FICO and reduce what you pay for a mortgage, automobiles, and credit cards. And it’s not that hard to do.

Gina Pogol at The Mortgage Reports has put together a step-by-step guide to get your credit score up and start paying less for everything you finance. Below is a sampling from her article that you might find very useful….

How Much Can You Save?

Per Pogol and MyFICO.com, improving your score by 100 points can save you thousands per year – although that’s not enough to make you rich overnight, it certainly is enough to improve your life.

The average home purchase mortgage, according to the Mortgage Bankers Association (MBA), was $324,844 in May 2017.

MyFICO says that you’d pay 5.15 percent with a 620 credit score, and 3.78 percent with a 720 credit score.

The difference in payment for an average loan amount and a 30-year fixed mortgage is $264 a month. And that’s really just the start.

The First Step – Assessment

Your first task, when raising your FICO, is to see what you’re up against.

You can get a copy of your credit report from all three major bureaus for free at the government’s site, annualcreditreport.com. Pay the small charge to obtain your FICO scores as well.

Your “representative” score is the middle score of the three. So if your scores are 598, 602 and 623, your representative score is 602. Note that there are many variations on the FICO score, and not every lender uses the same one.

What’s The Reason For Your Low Scores?

Your plan of action depends on the reasons for your low FICO score.

If the cause is inaccurate information, you can clean up your report yourself by contacting all three credit bureaus, Trans Union, Experian, and Equifax, and the company reporting inaccurately, providing proof that you paid on time.

This can take weeks to fix. If you have a mortgage in process, your lender can bring in a rapid re-scoring company to expedite the process at a reasonable cost.

There is no guarantee that correcting information will raise your score by any specific amount.

Know The Codes

If your report is accurate, your scores have “reason codes” you can use to determine the biggest factors bringing your score down. The most common, according to Equifax, include:

  • Serious delinquency.
  • Public record or collection filed.
  • Time since delinquency is too recent or unknown.
  • Level of delinquency on accounts is too high.
  • Amount owed on accounts is too high.
  • Ratio of balances to credit limits on revolving accounts is too high.
  • Length of time accounts have been established is too short.
  • Too many accounts with balances.

Note that the most often-used word in those codes is “delinquency.” If your credit history looks like a rap sheet, littered with late payments, charge-offs and judgments, you’ll need to put some time between your mistakes and your next loan application.

You might even want to reach out to an expert for credit repair.

You won’t be able to start the process until you bring your accounts current. However, your creditors may be able to help you out.

Make Sure You Pay On Time

Next, get a system to ensure on-time payment. It takes about six months of on-time repayment to make a meaningful difference in your credit score, so start as soon as possible.

Set your accounts up on autopay from a checking account. Choose a payment date that follow your paydays and make sure money is there to cover your debts.

If you can’t afford your payments, enlist the help of a non-profit credit counseling service. They can possibly lower your monthly payments, bring accounts current, get penalties waived and help you toward debt-free status.

This may be called a debt-management plan, or DMP. A DMP is not a debt settlement plan, which you should probably avoid.

Some experts recommend that you consider bankruptcy if a DMP won’t pay off your unsecured debts within five years.

High Balances on Existing Debt

The other main category of reason codes concerns the amount of debt you’re carrying. FICO looks at the amount of credit you have with the amount used (utilization ratio), the balances and number of accounts with balances.

Credit bureaus look for spending patterns that are unsustainable. For instance, if every month you spend more than you earn, your payments increase each month, leaving even less disposable income.

Eventually, you have no more available credit and you can’t make your payments.

Fortunately, fixing this changes your score almost immediately. If you have savings to pay off your accounts, consider using it. It’s a safe bet that the interest you’re getting is a lot less than what your creditors are charging.

If you don’t have savings to cover this, you may be able to improve your score by paying off your credit card balances with a personal loan or home equity loan. Lowering your revolving (credit card) account balances drops the utilization ratio.

Don’t do this unless you are 100 percent confident that you will not use your credit cards until the new loan is repaid.

If you have more questions regarding your FICO score and getting into a home loan, please contact me, as it would be my privilege to help!

The Missing Ingredient In Many Athletes Today

When you think of the most successful players on the field or court, do you think of the “natural” athlete?  The biggest, strongest, fastest?

When you really analyze it, are they always the best players the team?

Funny thing, if you’ve been around sports long enough, you have probably heard this about a player – “he’s got a lot of talent, but he is just missing something.”

What is that “something”?

According to John O’Sullivan at Changing the Game Project, in all likelihood, that missing ingredient is the inner drive and will to succeed, a burning desire to push on despite obstacles, failure, and challenges.

In a word, grit.

From O’Sullivan’s blog…. “in 2005, Dr Angela Duckworth, a doctoral student at the University of Pennsylvania, began studying self-discipline. She measured 164 middle school students through both IQ and self discipline assessments, and then tracked their progress over a year of school.”

“She found that the students’ self-discipline scores were better predictors of GPA than IQ scores. This self-discipline, combined with a passionate commitment to a task and a burning desire to see it through, she termed GRIT.”

The Grit Scale

Dr. Duckworth developed a 12-question test, “The Grit Scale” (click here for link to the test), that takes only a few minutes to complete, and it has been shown to be an incredibly good predictor of success.

Sullivan continues, “In their most remarkable finding, Duckworth and her team administered their test to an incoming class at the United States Military Academy at West Point.”

“There, cadets already undergo a complex evaluation of academic grades, physical fitness measurements, and leadership testing, administered by the Army to predict which cadets will survive the rigors of West Point.”

In the end, Duckworth’s twelve-question Grit Test was a more accurate predictor of who would stay in school.

Guaranteed Success?

Do I think that grit is the single determinant of success or achievement?

Of course not – but it clearly is one of the key attributes that successful players have.

High level performance is made up of a variety of factors, such as talent, good coaching, deliberate practice, avoiding injury, and motivation….just to name a few. Yet when I think of all the talented players I’ve seen who didn’t achieve their potential, the missing ingredient was often very close to Dr. Duckworth’s description of Grit:

“the tendency to sustain interest in and effort toward very long-term goals.”

Many players have talent, they’ve worked hard in spots, but they did not maintain their interest and effort long enough to become superior competitors.

I’d highly recommend that you view Dr. Duckworth’s 6 minute exposition here.

Developing Grit

My advice is this: if your child is young and struggling to succeed in a sport, help them develop the grit to persevere, and the love of the sport to stick with it. Find them a team that allows them to play and have fun.

If your child is older, don’t make excuses for their failure. Let him or her own-up to their shortcomings. Encourage them to work harder and ask for help in getting better

Here’s a great video from John O’Sullivan that can teach us to help our kids develop grit.

Here’s what he says parents can do to instill grit, determination and self-control in your players:

  1. Allow them to FAIL: In fact, encourage them to fail! If you are always making excuses for failure, blaming other coaches, referees, players, etc., you have lost sight of the fact that failure is a MANDATORY component of both learning and becoming mentally tough. Children who are not allowed to fail never have any obstacles to overcome, and blame things outside of themselves for their failure. Every time they encounter an obstacle, they wait to be carried over it, they wait for the problem to be solved for them. They do not persevere, they do not persist; they only learn to give up. Let your kids fail, and teach them how to learn from failure.

  1. Praise Them for Effort and Tenacity: if you want an athlete with sports “affluenza,” then by all means praise him for his talent, intelligence, and ability. But if you want a determined, gritty athlete, then praise tenacity, point out the importance of perseverance and struggle, and highlight his achievements which came through sustained effort over the long haul. Children who are praised for being gritty will come to value, and even embrace the persistent pursuit of long term goals.

 

  1. Be a Model Grit for Your Athletes: This is a tough one, but remember that kids hear what we say, but remember what we do. Don’t complain about things out of your control that effected a sports outcome, or blame your boss or co-workers because you did not get the promotion. Instead, be honest about your disappointment with your kids, explain to them how while you are upset, you are going to work even harder, that this is a goal worth attaining, and soon achievement will come. You can even do something on your bucket list, such as sign up to run that marathon, do your first triathlon, or set out to lose some weight. Demonstrate for your kids that what you are doing is not easy, but it is worth the struggle, disappointment and perseverance required of achieving it.

Let’s agree that many of our kids’ today lack this quality – and let’s also agree that it is a key attribute to success. Don’t make excuses for your child – help him/her understand that setbacks are merely temporary.

It’s climbing over them that makes us better!

How Much Do Extra Mortgage Payments Save You?

Paying extra on your home loan can make good financial sense.

It really means a guaranteed return on investment, which isn’t the case for other investments like stocks or mutual funds.

If your current mortgage interest rate is, say, at five percent, you are guaranteed to “earn” five percent — by saving interest — on any amount of principal you pay off.

Borrower Options

Most conventional, FHA, and VA loans allow the borrower to make extra payments (known in the industry as prepayments), without any penalty or fee.

To be clear, making extra mortgage payments might not be the right strategy for everyone, however.

Homeowners often refinance instead, into a 15- or even ten-year mortgage. This drastically cuts their interest rate and slices years off their mortgage.

For shorter-term loans, sometime is the 3% range, make refinancing a very attractive proposition.

Deciding to refinance or make additional payments takes some examination, but the right choice could help you save thousands in interest and get you closer to a mortgage-free life.

Find out more here, from The Mortgage Reports

Big Savings

By making extra principal only payments, the savings could be huge.

For example, a 30-year fixed-rate mortgage at 4% and $200,000 borrowed would require about $140,000 in interest over the life of the loan.

But if you were to prepay just an additional $100 a month toward principal, you would save about $30,000 in interest, and pay off that loan five years quicker.

Here’s another prepayment benefit: unlike the capital gains and dividends earned on other types of investments like stocks and bonds, the savings earned from prepayments are not taxable.

In many cases, taking a longer-term loan at 30-years might be a great option – especially if you pay off the principal faster. You get the flexibility of a smaller monthly payment, but can pay the mortgage down quicker, if you choose.

I’d be more than happy to sit down and talk with you about mortgage term related options. Contact me here for more!

True Communication in the Real Estate World

Whether you are the buyer’s agent or the seller’s agent, the communication with a loan officer can occasionally get tense.

As the seller’s agent you want to ensure that your client gets the best deal possible and you want the loan to close on time. As the buyer’s agent you want to ensure your client gets into the home of their dreams without a hitch.

At the same time, the single biggest issue I hear from agents regarding their lenders has to do with communication….or lack thereof.

“My biggest complaint has always been communication with the consumer and me through the entire process” – Mike K, Realtor

The most important thing to always keep in mind is that whether you are the buyer’s agent or the seller’s agent, I believe it’s best consider the loan officer a part of the team. Remember, we want this loan to close as badly as you and your client.

Key Questions to Consider

Are you receiving weekly and timely Loan Status Updates from your lender?

Are you the first to hear both good news and bad regarding the progress of your client’s loan?

Do you find out about the need for escrow extension only a day or two before the expected close?

If you can’t answer these in the affirmative, you might need to find a new “go-to” lender!

“If the client can’t qualifyy, then don’t waste my client’s time and MINE by trying to fix a square peg in a round hole. However, if they client can be brought along, developed, consulted into becoming a viable buyer then you are a hero to me! I want you calling me and not ME chasing you down.” Kyle C, Realtor

The Importance of The On-Time Close

As a loan officer, my worst nightmare is a loan that doesn’t close. We are paid strictly on commission, so we don’t get paid unless the loan closes (just like you), so there’s extra motivation to come up with any possible solutions to a problem. We don’t want to spend weeks and weeks on a file and then not have it close – and we are no different than the agents in this regard.

The Lending Coach as Your Teammate

So, think of me as your teammate throughout this process.

The referral agents I work with have my word that they will hear the good, bad, and the ugly immediately from me.

They know that we will work together to solve those problems and issues that inevitably arise quickly and professionally.

Please do contact me for more information and how we might be able to work together!

Fannie Mae Eases Qualification Requirements

The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, opening the door to home-purchase mortgages for large numbers of new buyers.

This move by the mortgage giant will dramatically increase the number of people who will now be able to qualify for a home loan.

Per The Washington Post, “Studies by the Federal Reserve and FICO, the credit scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor.”

Using data over the last 15 years, Fannie Mae’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

Simple Definition : Debt-To-Income (DTI)

Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income.

Mortgage lenders use debt-to-Income to determine whether a mortgage applicant can maintain payments a given property.

DTI is used for all purchase mortgages and for most refinance transactions.

It can be used to answer the question “How Much Home Can I Afford?

Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.

Most mortgage guidelines enforce a maximum debt-to-Income limit – and Fannie Mae has essentially “upped” that ratio to help more borrowers qualify!

Housing Ratio or “Front-End Ratio”

Lenders add up your anticipated monthly mortgage payment plus other monthly costs of homeownership. These other costs of homeownership could include homeowner association (HOA) fees, property taxes, mortgage insurance, and homeowner’s insurance.

Normally, some of these expenses are included in your monthly mortgage payment. To calculate your housing ratio or front-end ratio, your lender will divide your anticipated mortgage payment and homeownership expenses by the amount of gross monthly income.

Total Debt Ratio or “Back-End Ratio”

In addition to calculating your housing ratio, lenders will also analyze your total debt ratio. At this time your other installment and revolving debts will be analyzed and added together. Installment and revolving debts will appear on your credit report.

These payments are expenses like minimum monthly credit card payments, student loan payments, alimony, child support, car payments, etc.

Your monthly installment and revolving debts are then added in addition to your estimated monthly mortgage payment and housing expenses and divide that number by your monthly gross income.

Because of these changes by Fannie Mae, many individuals that did not qualify for a home loan might now be eligible under these new regulations.

Please contact me to find out more!

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