I had a great question yesterday from a potential client who asked how come my Good Faith Estimate was showing more reserves being required than the other lenders he was comparing me to. [Read more…]
Credit Scores for the Ages
January 2, 2009 by Leave a Comment
I’m taking a few days off from “blogging” to enjoy a little break…this article was orignally posted at Rain City Guide. You can read the original, along with comments, by clicking here.
It’s funny how sometimes a post will take on a life of it’s own within the comments…such is the case with my recent interview of Jillayne Schlicke. My intentions were to call out to Washington State LOs to make sure they’re up to speed with the new year approaching…the comments have turned into a discussion of credit scores. Most likely because of Jillayne’s prediction:
“I expect that underwriting guidelines will continue to go up as banks and conforming paper sold to Fannie and Freddie will raise minimum credit score requirements to 800 and require 20% down. Everyone else will be pushed to FHA.”
Ardell offered stats from 2005 on credit scores and age so I thought I’d share credit score information from credit reports I’ve provided since the start of 2008. Not all of the subjects obtained a mortgage loan.
- Age 18 – 29: average credit score = 697. Don’t let age fool ya, this group had a high score of 807 and a low of 513. (This group = 12% of the demographic).
- Age 30 – 39: average credit score = 735. High score of 811 and the low at 614. (36% of demographic).
- Age 40 – 49: average credit score = 739. High score of 819 and a low of 592. (31% of demographic).
- Age 50 – 59: average credit score = 759. High score of 820 and the low at 680. (15% of the demographic).
- Age 60 – 69: average credit score = 714. High score of 813 and a low at 589. (4% of the demographic).
- Age 70 plus: average credit score = 805. High and low score: 805. (1% of the demographic).
The average mid scores, year to date credit reports I’ve ran is 732 for the borrower and 720 for the co-borrower. This means that if they are considering locking, the rate would be based on the lower of the two mid scores. I’m also pleased to see that the credit score criteria that I use (credit scores from 720-739) seems to be appropriate for when I’m post.
From the same interview with Jillayne post, Ardell asks:
“What good is it to say interest rates are at 5.875%, if only people 70 plus can get that rate? False advertising…no? If the average person buying a home can only get a rate of 6.5%, then we have to stop encouraging people to think their rate is going to be something that is unlikely”
Using the credit score data above, it’s very likely that the younger group would be FHA candidates. Not just because of having an average credit score of 697, most are still working on building their savings and do not have 20% down payment. Combine a 697 mid score with a 90% loan to value and (now costly) private mortgage insurance and FHA may be the better option. The key is to investigate all available options if someone decides they should buy a home at this stage of their life.
The next two groups, 30-49 year olds, would fit the rates that I quote at RCG since the credit score criteria I use is based on 720-739. Based on Friday’s rates, their rate would be 5.875% at 1 point (total shown in lines 801, 802 and 808 of the Good Faith Estimate or HUD). This combined group is 67% of the applications with credit reports that I have worked with year to date.
Credit scores 740 and above qualify for a slightly better rate. Based on Friday’s scenario, they would have 0.25% improvement to fee–so 5.875% would be at 0.75% points (using the above example). Or depending on how rates were, they could possibly obtain an 0.125% better rate.
The slight dip in average credit score to 714 for ages 60-69 I think just reflects that “life happens”. Maybe something medical has taken place or you were on vacation and thought you paid that credit card or you’re helping your kids with college or you have an unknown parking ticket or an overdue library book turned into a collection. I’ve seen many surprised people over the years where they had no idea their credit score dropped. This is in no way a reflection on this age group, it’s just how the stats came in for this report based on my data.
FHA credit scores (where the credit report was ran and FHA was the identified loan program, the loan may be closed or just prequalified) averaged 680. FHA is not as credit score sensitive as Fannie/Freddie. FHA is looking for clean credit (no lates) in the past 12 months.
This data is hardly scientific and is really just a reflection of the people I work with which is really pretty diverse. I don’t advertise or do cold calling or try to “specialize” in a niche market…so I’d like to think that this group is a good “norm”.
Happy New Year!
January 1, 2009 by Leave a Comment
Thank you to all who have made 2008 quite memorable! It will be facinating to see what the New Year brings the mortgage industry.
Mortgage Master is closed today and will reopen for business as usual on January 2, 2009.
Lease Purchase or Lease Option – Are You Wondering About These?
December 30, 2008 by 3 Comments
Recently a Mortgage Porter reader, Lisa, sent a question via my Suggestion Box (located on the right side of this web site):
"Rhonda, Can you address lease options and lease purchases? Have you seen these going on around King County? Thanks!"
Leases are not a part of what I do as a Mortgage Originator…so I enlisted a local real estate professional, Diane Kawell of Windermere West Campus. The article below is actually reposted (with permission) from her blog, Di Kawell Real Estate Blog.
The easiest way to keep these straight is to remember that a 'lease purchase' is a purchase agreement – remember the word 'purchase.' In this strategy, the buyer agrees to buy and the seller agrees to sell, and the buyer will lease the property from the seller pending closing. There is often a delayed closing, but the buyer is obligated to close the transaction on a specified closing date. There would be a written purchase and sale agreement plus a lease agreement, and default on the lease would be default on the purchase and sale as well.
A 'lease option' is a situation where a tenant is obligated only to lease the property, but also has the right, or option, to purchase the property at a future date. There would be a written lease, as well as a written option agreement that should outline the terms of what the buyer's purchase would include, and a deadline for the buyer to decide to purchase or not. There would also be a negotiated cost between the parties for the option itself, which could be handled in several different ways (part of each rent payment, an upfront lump sum, etc). And the option cost may not be refundable if the tenant chooses not to exercise the option.
Also, there is another strategy which is simply an 'option to buy.' And this option is unrelated to any lease between the parties. Again, there would be a written option agreement outlining all basic details. And most often there would be some sort of cost for the option itself.
***All of this said, none of what I've written above, or will say below, is to be relied upon or construed as legal advice. I am a licensed real estate associate broker, not an attorney. I am licensed to fill in standardized forms, but not to give legal advice.*** Also, at this time in Washington state, there are big legal issues if a property owner is in a distressed situation and a buyer wants to offer to buy and lease back to them with a purchase option – you don't, and I don't, want to go there.
Three issues to consider:
- In a declining market, a sale price set today, may not be market value by the time a sale would close, and that could mean financing problems due to any required appraisal.
- Although a buyer might qualify based on today's rates and programs, they may not qualify when it comes time to close – we know the current volatility in the financial markets!
- The parties will have to decide whether or not is acceptable or desireable to keep the property on the market during the pending, lease or option period – there is no law addressing this issue. In my opinion as an agent, successful transactions are always about win-win between the parties, so with the right set of circumstances, using these options might just be the best answer. Another example: Seller is working out of area for the next couple years, might or might not want to sell, and buyer needs time to get their lives or finances straightened up.
Still Have Questions? Please contact me.
To try to find out if Lease Options or Lease Purchases are becoming more common in King County, I've posted the question at Trulia. You can check out the answers by clicking here.
Magnificent Larry Cragun
December 27, 2008 by Leave a Comment
Larry Cragun has announced that this month marks the end of his Magnificent 7 Nominees. For three years, Larry has read thousands (tens of thousands?) of articles and has hand picked those he felt were most consumer focused each month; spotlighting them on his blog, Real Estate Undressed. In January of the following year, he posts “the Super bowl” of consumer posts and whittles down his top selections from the top 7 of each month for the Magnificent 7 for that year. It’s quite a task and I thank him for it. Not only have I been lucky enough to have a few of my articles nominated by Larry, I’ve been introduced to many other real estate bloggers who care just as much about shedding light to consumers as I do.
The final set of nominees for the Magnificent 7 are:
- Dan Melson with “Getting Rich Quick in Real Estate”
- ARDELL with “A buyer’s right to do “an additional inspection”
- Noah Rosenblatt with “Deflation Buyer Strategy: Buy to Renovate”
- Mark Clawson with “Should I Refinance”
- James Lapori with “Re-adjusting Priorities: What’s a House For”
- Luke Mullins with “Sheila Bair: We Need Foreclosure Mitigation Now”
- Rhonda Porter (my article) with “Can I Buy a $620,000 Home with a 620 Credit Score”
Thanks, Larry–YOU ARE MAGNIFICENT!
Christmas Cheer with Jingle Bell Rock
December 25, 2008 by Leave a Comment
Jingle Bell Rock as sung by The Talon Group’s Choir (aka King County Sales Department).
EDITORS NOTE: Sadly, when First American Title rolled up The Talon Group, they took down all of their videos… information and funny alike.
Merry Christmas and Happy Holidays
December 24, 2008 by Leave a Comment
From my home to yours, I hope you are surrounded by those you love most during this holiday season.
Mortgage Master will be closing early today at 1:00 p.m. in honor of Christmas and will be reopening for business as usual at 9:00 a.m. Friday, December 26, 2008.
Merry Christmas to you and yours!
Photo: Orson taking a Christmas break.
Social Media and Seattle’s Snowpocalypse
December 22, 2008 by Leave a Comment
Are you feeling like you've been trapped in snow globe and you can't get out? Do 
you have images from The Shining playing in your head? I'm a Puget Sound native and for life of me, I cannot recall so much prolonged snow! It's beautiful and I've enjoyed taking pictures (check out my snow album) but I'm ready for some rain!
On a side note, it's been fascinating to see the level of communication that has taken place about our weather via blogs and other forms of social media, like Twitter, from the public to our local government.
I've received emails from the City of Seattle and King County over the past few days with request to post safety tips for my "community" of readers. They are utilizing bloggers to help spread their message. In my neighborhood, West Seattle Bloghas done a phenomenal job (as they always do) keeping everyone up to date and sharing stories about our local weather (and more). I believe it was our big winter storm of 2006 that really catapulted WSB's readership. If you have an neighborhood blog, this is one reason alone to subscribe. Just this morning, I became aware of the Seattle Transit Blog.
If you're a long time reader of Mortgage Porter, you may be aware of the interest rate updates I quote. Twitter allows you to post live updates of whatever you're doing in 140 characters or less. Just like a blog, you can subscribe (or "follow") what the author has to say. Local folks I'm following on Twitter who have helped with information on the storm are:
West Seattle Blog (@westseattleblog)
Washington State DOT (@wsdot)
King County News (@kingcountynews)
Seattle Department of Transportation – Snow (@sdotsnow)
Seattle Times @seattletimes
Seattle PI @seattlepi
and don't forget Mortgage Porter (@mortgageporter)
Last, but not least, you can search terms on Twitter using "Twitter Search". Twitter-er's will use the # sign to create a short code/phrase that can be used to follow a specific event or thing. For this storm, the code is "#seatst". Whenever someone posts a comment (aka tweet) on Twitter about this storm, if they include #seatst. When you enter #seatst in the search field on the Twitter search page, you'll see a list of what EVERYONE is saying right now about the storm.
Do you have a Twitter profile?
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