Are you buying a new home? WAIT to buy new furniture!

iStock_000008143756_MediumI have been working with a couple of clients who are buying homes and who’ve recently asked if it’s okay for them to buy furniture before closing on their new home. It must be all the “Fourth of July blow-out” sales going on that’s causing this question to come up recently.

[Read more…]

I know my credit score

creditRecently my husband and I considered buying an investment home in West Seattle. We began the preapproval process so that we could present an offer with a bona fide preapproval letter. We gathered our W2s, tax returns, bank statements and paystubs…and had our credit report pulled.

[Read more…]

Tips on how to save up for a down payment

iStock_000009450603SmallGet Rich Slowly recently posted How to Save Up for a Down Payment Fast.  I’d like to respond to some of the ideas offered in GRS’s post from a Mortgage Professional’s viewpoint and offer my advice.

Here are some of the suggestions on How to Save Up for Down Payment Fast along with my 2 cents (in italics).

[Read more…]

Reader Question: Should I Wait to Refi?

One of my returning clients is considering a refinance, however, they’re not sure if they should wait or not.  Their Seattle area home is really close to that magically 80% loan to value – based on best estimates – which would allow them to avoid private mortgage insurance if their home’s value increases.

There are pros and cons to waiting to a refi, similar to those with having an extended closing when you’re buying a home.  Here are a few:

  • changes to home value. Your home’s value may increase as the Seattle markets seems to be doing well with purchase inventory… or a home in the neighborhood that’s a potentially a strong comparable for your appraisal might become a short sale or foreclosure, which may negatively impact your home’s appraised value.
  • changes to employment. If your or your spouse decides to change jobs and it’s not in the same line of work or the new job has a different pay structure, this may impact qualifying.
  • credit scores vary. Credit scores impact the pricing of your rate and underwriting decisions. Lately I’ve been encountering clients who have paid off credit cards and closed them which sounds great, however they now have “shallow credit” and lower credit scores. I’ve also seen late payments on a credit report caused by a parent co-signing for their child. Sometimes it may be worth deciding to delay a refi if you’re trying to improve your scores, or proceeding with the refi and rechecking scores prior to closing.
  • interest rates. Mortgage rates change daily. Sometimes rates change throughout the day. Although it’s anticipated that mortgage rates will remain low for the remainder of the year, members of the Fed have hinted that the Fed should consider no longer buying mortgage backed securities, which has kept rates at their manipulated lower levels. As the economy improves, mortgage rates tend to trend higher.
  • loan programs and guidelines may change. Currently, unless our elected officials take action, HARP 2.0 is set to expire at the end of this year. Banks and lenders currently adjust their underwriting guidelines (aka overlays). And we’re waiting for FHA to increase their mortgage insurance premiums which impacts FHA streamline and non-streamline refi’s. 

Refinancing now is gambling that your home will appraise high enough or you may be out the appraisal fee unless mortgage insurance or a piggy-back second mortgage makes sense to proceed with the refi.

Delaying the refinance adds other potential risk factors assuming you’re satisfied with the current low mortgage rates and you qualify.

I recommend reviewing possible refinance options that are available now and weigh out the pro’s and cons. Refinancing now, should you decide to, also means that you’re reducing your payment and higher interest sooner. 

If you are interested in a mortgage rate quote for your refinance or purchase of a home located anywhere in Washington, click here.  I’m happy to help you!

Is 714 a Good Credit Score for Buying a House?

This is a term someone entered into a search engine, like Google, who wound up on my blog.  “Is 714 a Good Credit Score for Buying a House?” is a fair question.  Just a couple years ago, having clients with credit scores 700 or higher was considered “excellent”.  In fact, previously credit scores of 680 or higher were considered good. Now with conventional loans, we have several brackets based on credit scores and loan to value.  Many lenders are adopting this with FHA loans too.

[Read more…]

How Returning an Overdue Library Book Declined a Mortgage Loan


Okay…it’s not just the overdue library book…we have a few other factors involved with this scenario.   In February I began working with buyer who was contemplating buying his first home, a condo to be exact.   We were able to offer a preapproval based on:

  • mid-credit score of 705
  • 100% LTV Fannie Mae My Community with LPMI (Lender Paid Mortgage Insurance)
  • 5 year fixed 10 year interest only payments (he qualified for fully amortized but opted to have flexibility with his payments)

The buyer, we’ll call him “Joe”, makes an offer on a condo that is in the process of going through a conversion.   The builder also has a “preferred lender” and will only provide a seller credit to the buyer if the buyer uses their lender.   Joe elects to stay with me because the builder’s lender cannot offer the same product and payment options, even though the seller credit was significant. 

Here’s all the scoop:

Joe had an old collection on his credit report from a library book that was overdue.  We had loan approval so I advised Joe to not pay it off until after closing.   Paying off collections lowers your credit score: the credit scoring system recognizes it as new activity on a collection.    Joe finds the book a few months into the transaction and returns it to the public library and paid his overdue collection.   It’s a noble action and would have been perfectly fine…had he done it after closing.

Joe also wanted to make sure he was getting the best deal and decided to continue shopping lenders even though we were locked and approved with his mortgage.  Shop, shop, shop…he did…and the lenders ran his credit report over and over again.   30 inquires over a couple of months HURTS your credit scores.

The condo conversion took months to complete (it was suppose to be done in early May and it won’t be finished until later this month)…so Joe’s credit report expired.   Typically, credit reports are valid for 120 days.   This is when we made the discovery that Joe’s credit score had dropped 40 points.   Forty points may not sound like a lot to you, however…zero down financing is very sensative to credit scores.  There is a tremendous difference between 660 and 700 with regards to your credit score…especially when you’re looking at 100% financing (zero down).   

Joe is a great candidate for FHA financing, however the condo (being a conversion) is not.   Zero down financing with a 660 mid score is not a pretty option.

Lessons (if you’re getting ready to buy or refinance a home…if you’re not, a different strategy may better suit you):

  1. Don’t pay off collections prior to closing UNLESS it is required by the underwriter.   (Pay them off after closing and be sure to get a documentation that they are paid).
  2. To have the best credit score, try to have 3 established accounts that you use at least every 30 days.  This could just be charging a tank of gas and then paying it off every month.   When revolving accounts go “unactive” for a couple months, they are considered “closed” by the scoring system which does not help your score. 
  3. Keep your credit balances below 30% of the available credit line.
  4. If you’re going to shop your Mortgage Professional, don’t let other LOs pull your credit.   You all ready have your scores and that is all the information a LO needs for a rate quote.
  5. Your documentation (such as credit reports, paystubs, etc.) are only valid for a certain time period.   With longer transactions,  be aware that your credit report may be re-pulled and/or employment may be re-verified.
  6. Return your library books before they become overdue.