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Play the credit score game

Play the Credit Score Game

Play the credit score game

Play the Credit Score Game

As a Senior Loan Officer, with Cason Home Loans in Michigan, I am asked frequently about credit scores and how they can improve.  Whether you have below average credit or very good credit you can benefit when you know how to Play the Credit Score Game.

How can I build my credit if I don’t currently have a score?


I have run across this home loan question many times through the years.  On occasion I speak with a potential home buyer that does not have bad credit they just don’t have any credit.  This might be the person who pays cash for everything.  The problem with paying cash for everything is that you don’t get credit for making the purchase.  You are essentially “off the grid” when it comes to credit.  So how can you get yourself “on the grid?”  Your first step might need to be to get a secured credit card.

Playing the Credit Game

You would do this by going to your bank or credit union and asking to sign up for a secured credit card.  What makes the card “secured” is that you will give them money, perhaps $300, and you would then be given a credit card with a $300 limit.  Now you would use the card just like a regular credit card, for example if you were to be stopping for gas you would put the cost of the gas on your new secured credit card.  Then when your payment is due you will make the payment (on time) and you will now receive “credit” for the purchase.  The reason the secured credit card is usually the first step to establishing credit is because it can be difficult to get someone to give you a credit card without a credit score.

You may want to get more than one secured card so that you can have several things reporting each month to the credit bureaus to make your score go up even faster.  It is a good idea to have at least 3 or 4 items that will will report to the credit bureaus each month.  Here are some examples of things that report to the credit bureaus; revolving credit account (credit cards), installment loans, student loans, car loans.  Sometimes people are surprised to hear but these are examples of things that do not report to the credit bureaus; car insurance, cell phone bill, cable bill, utilities, internet, netflix.  The only time these items will report is if you do not pay them and they become a collection (hint: this is not good).

What is my credit score based on?


Play the Credit Score Game

There are 3 credit bureaus Equifax, Transunion and Experian.  They report each month what your activity has been from the previous month and they score you according to how you have done.  If you think of your credit score as playing a game then we should know the rules of the game.  Your credit score is primarily based upon your propensity to pay or not pay for your debts.

So the #1 rule of the game is to make all of your payments ON TIME, no exceptions.  The penalty for not following rule #1 is that your score will go down and go down in a hurry.  I have personally seen peoples credit score go down by more than 100 points from 1 thirty day late payment.  The only way to recover from the mistake of breaking rule #1 is time…and not doing it again.

Another little tip when it comes to your credit score is to keep the balance on your credit cards below 30% of the available limit of the card.  For example if you have a credit card with a limit of $1,000 then you should keep the balance at the end of the month below $300.  So rule #2 of the game is, do not “max out” your credit cards.  Be responsible with your credit cards, do not spend money that you do not have.  You’re playing the game to get credit for a purchase not to go in debt that will cause you stress.  For example lets say you are at your favorite Best Buy Store…

(I have several)

One is on Miller Rd in Flint MI Flint Best Buy 

another is in Auburn Hills Auburn Hills Best Buy

and another is in Saginaw Saginaw Best Buy

…you see a TV that you would like to purchase.  In one hand you have the “cash” to buy the TV and in the other you have your Best Buy Credit card, what should you do??  Well if you want to “get credit” for the purchase you should buy the TV with the credit card in your one hand and pay the credit card payment with the cash in the other.  You just built your credit without spending money you did not have, and you can feel really good about that!!

Is there a website I can use to check my credit report, for free?


Don’t be fooled by look-alikes.

Lots of sites promise credit reports for free.  Annualcreditreport.com is the only official site explicitly directed by Federal law to provide them.  Under Federal law, you are entitled to receive one free copy of your credit report from each credit reporting company every 12 months.  Even if you have excellent credit it is a good idea to check what is reporting once a year (like checking the battery in your smoke detector) to make sure everything on your report is accurate.

What is a credit score?


Information contained below is credited to Annualcreditreport.com

A credit score is the result of a mathematical formula that uses the information in your credit file, such as how well you have paid your bills in the past, to calculate how likely you are to pay your bills in the future.

The credit scores you get from different companies may not be the same. There are a number of reasons for that:

  1. Each company uses its own formulas for calculating credit scores. The differences in the formulas may lead to differences in your credit scores.
  2. Companies may produce scores that give results on different scales.
  3. Creditors or lender reports don’t always report to every credit reporting company. This means that information that the credit reporting companies plug into their formulas may differ from credit reporting company to credit reporting company.

Most people’s different credit scores are very close, despite that the different credit reporting companies calculate your scores using different formulas, and sometimes from different information. If one of your three credit scores is very different from the others, you may want to research why.

Your credit score estimates how likely you are to pay back loans or services that a lender may give you during the next two to three years. People with higher credit scores may be more likely to pay back their debts. People with lower credit scores may be less likely to pay their debts. Lenders take bigger risks when they lend money or provide services to people with low credit scores.

Credit reporting companies can show your credit report and/or credit score to other companies who have a lawful reason to ask for it. These may include potential lenders. Lenders use credit scores to help decide how risky it will be to lend you money or provide you a service. Potential employers may use credit scores to help evaluate how dependable you are.

If this information has been beneficial to you feel free to contact me and don’t forget to download my free

mobile app

Play the Credit Score Game

What is your mortgage fit?

What is your mortgage fit?

So let me just put this out there…I love Will Ferrell!  When you combine Jimmy Fallon and Will Ferrell, HILARIOUS!!!  What does that have to do with finding the right mortgage fit for you??  Before we get into that do yourself a favor and watch this…you’re welcome.


Finding your mortgage fit.


Mortgage Fit

So everybody’s talkin’ about Will Ferrell’s tight pants, but does anyone talk about their mortgage?  I mean really, anyone??  Finding what mortgage fits your situation is essential to having success in one of the largest purchases you will make in your life.  Think about it, people will research what phone they will next choose to purchase or where they will have dinner on Friday night but they will spend very little time researching what mortgage program might best fit their needs.  Your home loan is something that will have an impact on your financial life for about the next 30 years so you owe it to yourself to take a moment to consider what your mortgage fit is.

What is the 1st step I should take in finding the right mortgage fit?


You should most definitely find a loan officer that specializes in various programs.  This will ensure that they are not going to be a “one trick pony.”  As a State of Michigan and Federally Licensed Mortgage Loan Originator I make it a priority to stay current on what programs are available for my clients.  There is not one mortgage program that will meet the needs of every buyer.

About 15 years ago, while on vacation in Tennessee, my wife and I decided to go white water rafting.  It was an incredible experience, one I would highly recommend you have on your “bucket list.”  With us in the raft was a white water rafting expert, they were our guide to make sure we had a fun experience and of course most importantly, that we did not die.  It was very clear that our guide knew what they were doing.  They knew exactly what to do in the moment, and they would give very clear instruction regarding exactly what they wanted us to do.  What was most impressive was not only their knowledge about what to do in the moment but that they knew what was coming around the next bend in the river.  Their knowledge of what was coming up ahead caused them to make certain decisions in the present to avoid problems later.

My job as a loan officer is analogous to the job done by my white water rafting guide.  I need to know what is around the next bend and guide you through the safest route for your home loan.  Knowing what is coming is one of the primary ways I will know what your mortgage fit is.

For information on whitewater rafting in Tennessee check out this blog http://www.smokymountainrafting.com/blog/whitewater-rafting-gatlinburg/why-smoky-mountain-outdoors-has-best-white-water-rafting-in-gatlinburg-tn/

Is it difficult to find my mortgage fit?


Finding your mortgage fit is typically not a difficult process.  In fact sometimes it becomes very clear what program will fit your needs in a matter of a few minutes.  For instance, if I am talking with a potential buyer and they mention that they are a veteran I might suggest they use their VA benefit by applying for a VA loan.   Or if the buyer is looking to put 20% down and has a credit score of over 800 they might want to consider a conventional loan.  Another buyer might not have as much money to put down or maybe has had some credit mishaps in the past, they might want to consider an FHA loan.  Or I might ask where a buyer is looking to purchase and if they mention an area like Davison Michigan I might suggest they consider a USDA Rural Development Loan.  Often times one program will just jump out as the obvious choice, other times a buyer might have multiple options and we must determine what your mortgage fit is based upon what is most important to you.

If you are looking to determine the perfect mortgage fit for you I would love to help.  Feel free to contact me to get the ball rolling.  To simplify the mortgage process download my free Mobile App

 

Frequently Asked Home Loan Questions

Frequently Asked Home Loan Questions????

Frequently Asked Home Loan Questions

As a Senior Loan Officer I speak with many individuals seeking to purchase a home.  I would like to take the opportunity to address some of the frequently asked home loan questions:

How can I build my credit if I don’t currently have a score?


I have run across this home loan question many times through the years.  On occasion I speak with a potential home buyer that does not have bad credit they just don’t have any credit.  This might be the person who pays cash for everything.  The problem with paying cash for everything is that you don’t get credit for making the purchase.  You are essentially “off the grid” when it comes to credit.  So how can you get yourself “on the grid?”  Your first step might need to be to get a secured credit card.  You would do this by going to your bank or credit union and asking to sign up for a secured credit card.  What makes the card “secured” is that you will give them money, perhaps $300, and you would then be given a credit card with a $300 limit.  Now you would use the card just like a regular credit card, for example if you were to be stopping for gas you would put the cost of the gas on your new secured credit card.  Then when your payment is due you will make the payment (on time) and you will now receive “credit” for the purchase.  The reason the secured credit card is usually the first step to establishing credit is because it can be difficult to get someone to give you a credit card without a credit score.  You may want to get more than one secured card so that you can have several things reporting each month to the credit bureaus to make your score go up even faster.  It is a good idea to have at least 3 or 4 items that will will report to the credit bureaus each month.  Here are some examples of things that report to the credit bureaus; revolving credit account (credit cards), installment loans, student loans, car loans.  Sometimes people are surprised to hear but these are examples of things that do not report to the credit bureaus; car insurance, cell phone bill, cable bill, utilities, internet, netflix.  The only time these items will report is if you do not pay them and they become a collection (hint: this is not good).

What is my credit score based on?


There are 3 credit bureaus Equifax, Transunion and Experian.  They report each month what your activity has been from the previous month and they score you according to how you have done.  If you think of your credit score as playing a game then we should know the rules of the game.  Your credit score is primarily based upon your propensity to pay or not pay for your debts.  So the #1 rule of the game is to make all of your payments ON TIME, no exceptions.  The penalty for not following rule #1 is that your score will go down and go down in a hurry.  I have personally seen peoples credit score go down by more than 100 points from 1 thirty day late payment.  The only way to recover from the mistake of breaking rule #1 is time…and not doing it again.

Another little tip when it comes to your credit score is to keep the balance on your credit cards below 30% of the available limit of the card.  For example if you have a credit card with a limit of $1,000 then you should keep the balance at the end of the month below $300.  So rule #2 of the game is, do not “max out” your credit cards.  Be responsible with your credit cards, do not spend money that you do not have.  You’re playing the game to get credit for a purchase not to go in debt that will cause you stress.  For example lets say you are at your favorite Best Buy Store (mine is on Miller Rd in Flint MI http://stores.bestbuy.com/mi/flint/g3660-miller-rd-411.html) and you see a TV that you would like to purchase.  In one hand you have the “cash” to buy the TV and in the other you have your Best Buy Credit card, what should you do??  Well if you want to “get credit” for the purchase you should buy the TV with the credit card in your one hand and pay the credit card payment with the cash in the other.  You just built your credit without spending money you did not have, and you can feel really good about that!!

What items should I be prepared to submit if I would like to be pre-approved for a home loan in Michigan?


The following would be a list of the most common items that would need to be submitted and reviewed:

  • W2’s for the most recent 2 years
  • Federal tax returns for the most recent 2 years (State of Michigan returns not necessary)
  • 2 months (most recent) bank statements (checking/savings)
  • 30 days (most recent) pay stubs
  • Copy of drivers license
  • Copy of divorce decree (if applicable)
  • Complete Bankruptcy Petition and Discharge (if applicable)
  • Benefit Award Letter(s) for Social Security, Disability or Retirement income (if applicable)

In order to make an informed decision regarding how much you can be pre-approved for these items listed above are essential.  As a loan officer I am building a case for you.  The more documentation I can provide to an underwriter the better opportunity you will have to successfully purchase a home.  Note: Additional items might also be required by an underwriter depending on credit history.

Forbes did a great article on this topic.  For further information, check it out here http://www.forbes.com/sites/markgreene/2016/04/03/why-your-mortgage-lender-needs-all-that-paperwork/#5c2e36585b1d

Once I have a signed purchase agreement is there anything I should avoid leading up to the closing on my new home?


YES!!!!!!

  • Don’t make any deposits into your bank account other than payroll checks.
  • Don’t apply for any new credit (credit cards, auto loans, revolving or installment loans)

No matter how much you love the dining room set at your local furniture store (my favorite is Ikea in Canton Michigan http://www.ikea.com/us/en/store/canton).  Don’t buy it until you close on your home.  Adding new debt could cause your pre-approval to be voided and you could find yourself missing out on the home you were so excited to purchase.  Avoid this at all costs and you will have success in the home buying process.  No stress, no mess!!

What is an Earnest Money Deposit or (EMD)?


When you sign a purchase agreement with your realtor you will place a deposit on the house called your earnest money deposit or EMD.  This deposit guarantees that no other offers from other buyers can be considered and locks in a purchase price.  This money of course, goes towards your cost in acquiring the home.  This means that the money you are required to bring to the closing table (cash to close) is equal to the total cash to close minus your EMD.

For further defenition of an EMD check out https://en.wikipedia.org/wiki/Earnest_payment

What is Cash to Close?


With any mortgage transaction the borrower is required to contribute a certain amount of money to cover the cost of the transaction.  Cost like your down payment and other miscellaneous costs combine to form what is called your “cash to close.”  This is the amount of money you are required to bring to the closing table when you close your loan.  The money on deposit with the realtor (EMD) counts towards your required investment.

first time home buyers

Top 5 Tips for First Time Home Buyers

Top 5 Tips for First Time Home Buyers

As a Senior Loan Officer in Michigan I get asked if I would have any advice for first time home buyers.  Below are my top 5 tips for first time home buyers:

5.  Think in terms of a payment you are comfortable with vs a specific amount you want to spend.


As a lender I typically ask a potential borrower what they would be comfortable paying for a house payment including taxes, insurance & any home owners association fees etc.  This is very important because I don’t know the things you might value.  For instance, you may save hundreds of dollars every month for a vacation you take once a year, or you may frequent casino’s more than you like to admit.  At any rate no one will understand your budget better than you.

For a Mortgage Calculator that works really well download my free mobile app

4.  Get yourself into pre-approval shape.


There is a lot of advice I could give a first time home buyer as it relates to being “ready” to purchase.  Make sure that you are making all of your payments on time.  This is an essential component to having a credit score that is worthy of being pre-approved for a home loan.  Even if the main reason you are wanting to purchase a home is because you really don’t like your landlord, make sure to pay your rent on time, every time.

If you currently live with family and do not have a rent payment do your best to “pay” yourself the equivalent of your new house payment each month into your savings account.  This is important because that new 70″ 4K Ultra High Definition TV in your parents basement/your apartment is not proof that you can make your new house payment.  What I am helping you to avoid is something called “payment shock.”  An example of payment shock would be that you currently do not pay rent while simultaneously not having a savings pattern.  To determine how to calculate payment shock visit http://wiki.fool.com/How_to_Calculate_Payment_Shock

If you have cash that is stashed under your mattress it will not be able to be used as a down payment for your new home.  This comes as a surprise to many first-time home buyers.  If you know that you will be purchasing a home a few months down the road get that money into your bank account so that it can “season.”  You should have the cash deposited at least 60 days prior to making an offer on a home.

3.  Make a plan and stick to it.


The goal of home ownership is something that you share with countless numbers of other people.  Know what you want to accomplish.  Write it out.  Make a vision board with pictures of homes you can see yourself living in.  Nothing will make you work harder to accomplish your dream than keeping your dream before you.

Here is a phenomenal article on “The reason vision boards work and how to make one.” http://www.huffingtonpost.com/elizabeth-rider/the-scientific-reason-why_b_6392274.html

2.  Understand the value of having a professional realtor on your side.


First time home buyers

I can not overestimate the value of a great realtor.  They will meet with you to determine the type of home that will meet your needs and set up appointments to view homes that you are interested in.  I have talked with many potential home buyers that have lost out on homes because they were searching the internet only to find the home they loved and thought was available had already been sold.  Your realtor has the most up to date access to any home coming on the market giving you the advantage when it comes time to making your offer.  Once you find a home your realtor will be your biggest advocate when it comes to negotiating the terms of the contract.  It really pays to have a professional realtor representing you and your interests when you make such a large purchase.  As a professional in the Michigan real estate and finance industry I would be more than happy to recommend a realtor to you.  Not all realtors are created equal and I can say that I work with some of the best in Michigan!

Don’t just take my word for it http://home.howstuffworks.com/real-estate/buying-home/10-benefits-of-using-a-real-estate-agent.htm

1.  Know what you can afford and get your pre-approval from a professional loan officer.


I have spoken with many borrowers that had a “pre-approval” from a lender only to find out later it was not worth the paper it was written on.  There is a process to being pre-approved.  A lender should be looking over your credit report in detail to see if there is anything that could potentially derail your purchase.  I personally use a method I call D.I.G., which stands for Discover Investigate and Gather.  I want to know what your financial history has been and how things look moving forward.  Within a few minutes a professional loan officer can get the pulse of your financial life by asking the right questions.  This is essential to you accomplishing your dream of home ownership.  I would rather slow a borrower down if there is something we need to work on or “fix”rather than send you out looking knowing that your search will end in disappointment.  I can not tell you how many real estate deals I have had to “save” because a lender did not do their due diligence on the front end.  Don’t put one of the largest purchases you will ever make into the hands of a novice.

For information regarding your upcoming home purchase and to get your pre-approval contact me today!  Download my free mobile app

 

Rural Development Loan

What is a USDA Rural Development Loan?

What is a USDA Rural Development Loan?

When you hear USDA do you think Steak or Home Loans?  The USDA Rural Development Home Loan is better than your favorite cut of premium steak.

What is a USDA Rural Development Loan?


Rural Development loans  are offered in rural areas as determined by the United States Department of Agriculture (USDA).  Their mission is to help lower income households obtain home loans at reasonable mortgage rates.  You might be surprised by some of the areas that qualify.  When you think rural you might get a picture in your mind of a winding dirt road far from “civilization.”  In reality there are many areas across the state of Michigan that would be classified as Rural Development territory.

What areas qualify for an RD loan?


Feel free to follow this link and input any address to see if it qualifies:

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp

Why would a buyer consider an RD loan?


Some benefits of a USDA Rural Development Loan:

  • 100% Financing (That means this is a 0% Down loan program)
  • No maximum purchase price
  • Competitive 30 year fixed interest rates
  • Flexible credit guidlines
  • Allows for purchase and no cash out refinances of primary residences
  • If the home appraises at a higher amount than your purchase price RD will allow you to “roll” the difference into your loan to lower the amount of money you will bring to closing.  For example if your purchase price was $100,000 but the home appraises for $102,000 you could “roll” the additional $2,000 into the loan and lower the amount you bring to closing by that much.  Pretty cool!

Are there people that would not qualify for an RD loan?


There are restrictions to the amount of money an individual or household can make per year.  Those restrictions are based on the county you are purchasing in and the number of people that will be living in your home.  If you happen to make too much money to qualify for a Rural Development Loan, congratulations 🙂  I say that because I have actually had clients that were disappointed they did not qualify.  This is one of those times you just have to say, “I’m gonna look at the glass half full instead of as half empty.”


 

HAVE QUESTIONS ABOUT USDA RURAL DEVELOPMENT LOANS OR WANT TO GET THE PROCESS OF HOME OWNERSHIP STARTED? CONTACT ME OR FOLLOW THIS LINK TO DOWNLOAD MY free mobile app

 

 

 

FHA Home Loan

What is an FHA Home Loan?

What is an FHA Home Loan?

As a Senior Loan Officer with Cason Home Loans in Michigan I have the opportunity to discuss the benefits of an FHA Home Loan with many home buyers.

What is an FHA Home Loan?


 

FHA stands for FEDERAL HOUSING ADMINISTRATION.  An FHA Loan is a fixed or adjustable rate loan insured by the U.S. Department of Housing and Urban Development.  FHA loans are designed to make housing more affordable, particularly for first-time home buyers.  While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes throughout Michigan.

Wikipedia on FHA Loans https://en.wikipedia.org/wiki/FHA_insured_loan

Why should a buyer consider an FHA loan?


One of the main reasons a buyer would consider an FHA loan is that it is a low down payment program (minimum down payment is 3.5% of the total purchase price)

FHA loan guidelines are flexible.   Bad things can happen to a good person’s credit.  Borrowers who lack an established credit history or have experienced credit challenges in the past will welcome the flexibility of an FHA loan.

Gift funds are allowed from a family member.  This is a very attractive benefit of the FHA loan program that may make your dream of home ownership a reality far sooner than you ever imagined.

When purchasing a home your offer can include up to 6% in seller concessions.  That means that the seller can contribute to pay for a portion of if not all of your closing costs.  This of course is dependent on the seller agreeing to these terms as part of the purchase agreement.


Have questions about FHA Loans or want to get the process of home ownership started? Contact me or download my free mobile app

 

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