Broward Directory Blog

Part I: Good Credit Translates into Lower Rates for the Consumer

Credit Score

In the 1960s, Fair Isaac Corporation started working on a system lenders could use to evaluate the likelihood of receiving repayment on loans. Prior to that, it was really a matter of trusting an individual to be a “man of his word,” so to speak. Fair Isaac sought to take human error out of the equation with a reliable system that could determine whether or not consumers were truly worthy of credit, and thus FICO was born. This evolved to become the standard for lenders by the 1980s.

Credit scoring has an enormous impact on a borrower’s ability to purchase a home. It can mean the difference between getting a good interest rate and the home of their dreams, or whether they even qualify at all. For this reason, it is important for borrowers to understand the credit scoring process, and to know what their credit score is when they look to obtain mortgage financing.

What the credit scoring model seeks to quantify is how likely the consumer is to pay off their debt without being more than 90 days late on a payment at any time in the future. Credit scores can range between a low score of 350 and a high of 850. The higher the client’s score is, the less likely they are to default on their loan. Only a rare one out of approximately 1300 people in the United States have a credit score above 800. These are the slam-dunk clients that walk away with the best interest rates. On the other hand, one out of eight prospective home buyers are faced with the possibility that they may not qualify for the loan they want because they have a score between 500 and 600.

Stay tuned for Credit Scoring, Part II: The Five Factors of Credit Scoring

Part II: Dealing with Challenges

Dealing with Challenges

Typically, a person with a low credit score is in this position because they lack structure in his or her life. There are, of course, cases where unplanned health or employment complications are to blame, but for the most part, these are individuals who lack the discipline to pay their bills on time or curb their spending. This is your opportunity to be the “knight in shining armor” that provides them with a simple roadmap to get back on track.

Let’s take a look at some examples that can help to quickly improve less-than-perfect credit scores for the potential homebuyer:

Let’s say we have a borrower with a credit score of 664. She has a concentration of credit card debt on one card; let’s say $17,000 on a card with a $20,000 limit. At the same time, she has four or five additional credit cards, all with a zero balance. I would advise the borrower to distribute the debt over a number of her cards. Remember, a borrower’s credit to debt ratio represents 30% of his or her overall score. By simply changing the ratio of available credit to debt, the borrower in this example could possibly increase her credit score to something closer to 700, saving thousands of dollars on her mortgage.

Another thing to take into consideration in a case like this is what percentage each of the five factors measure in the resulting credit score. Let’s say we have a borrower with a “credit high” (the maximum debt allowance on all cards, combined) of $20,000. He has one card that is used for business purposes that is pushing the limit. I would advise the client to get two new cards and, once again, spread the debt out over all of his cards, leaving at least 30% available credit on each card. This will positively affect his overall score, based on the five elements of the FICO scoring model.

Conversely, the borrower should be advised not to close any existing credit card accounts, even if they are at a zero balance. Some people think they are doing themselves a favor by having fewer cards, but they lose out on the credit history factor. Even if the borrower does not have a good rate on an old credit card, they are rewarded for having the long-term credit history, and from time to time they should make a small purchase to keep the account in an active status.

These are just a few examples of what borrowers can do to improve their credit scores when they consider buying a home. If they are disappointed by the fact that they cannot get the most desirable loan up front, I would continue to monitor rates and their specific loan scenarios on an ongoing basis and advise them when they will have a chance to turn this situation around. The new mortgage debt will temporarily drop the score, but once the first payment registers as “paid,” the score will begin to go up again and eventually present the opportunity to refinance at a lower rate.
Part III: Credit Remediation

Credit Remediation

If you have clients in need of credit remediation, and especially if you live in an area where this is an overall problem within the population, you should seek to align yourself with a credible referral source for credit repair. While government web sites will suggest that self-help may be the best option, keep in mind that for the most part these people lack discipline when it comes to spending and making payments. They are not likely to have the diligence to research and remedy their own credit problems.

The Federal Trade Commission regulates credit repair services, and they provide free information to help consumers spot, stop, and avoid businesses with fraudulent, deceptive, or unfair practices.

Be familiar with the Credit Repair Organizations Act http://www.ftc.gov/os/statutes/croa/croa.htm as you seek out a genuine ally in this area. Research their background and make sure this company will cast a good reflection on you when you refer your clients to them.

I have a company that I use for this purpose, and they have a proven track record of keeping in touch with my clients and me on a regular basis, while my clients are going through the remediation process. Their work is 100% guaranteed, which means that if they are not able to meet the commitments outlined at the commencement of the process, then there is no charge to the consumer.

I have also developed marketing literature on the topic of credit repair, which I pass out to my clients to help them understand credit scoring. This provides them with information about what they can do to immediately help improve their credit score. Subsequently, in many cases, they are able to obtain the financing for the home they wish to purchase.

From there, I continually keep an eye out for new options as their credit standing improves, and seek to place them in a lower interest loan as time progresses. I feel it is my responsibility to do more than simply quote rates and provide a loan, but rather to help them manage their debt on an ongoing basis to meet their long-term goals.

Let me know when you would like to set an appointment and talk about what I can do to assist your clients who are in need of credit remediation services. I look forward to assisting you in this area.

Allen Robinson
Certified Mortgage Planning Specialist
First Trust Mortgage
Phone: 800-529-9758 x229
Local: 954-771-1828 x229
http://www.broward-directory.com/BrowardMortgages/
www.iborrowsmart.com/arobinson

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Large and small companies across the globe rely on access to money markets to finance their daily operations, including inventories, and payrolls. Lenders routinely make loans to these companies, and to each other, to make it all happen. When lenders have confidence in these markets, and investors have confidence in this system, we have a functional marketplace that, for the most part, is sustained by competition. When confidence in this system is shattered, however, like it has been recently, credit becomes expensive and scarce to all parties, and small and large companies alike can choke to death waiting for the short-term capital it needs to fund its long-term success. This directly affects you and your family. It means a slower economy. It means more lay-offs and less new job creation, which often means lower home values. It also fuels volatility in the financial markets that, as we’ve seen, can wreak havoc on your savings, retirement, and other investment accounts.

It is estimated that some $70 trillion in total global investment capital is available, which would be great news if our financial systems were functioning with confidence – and that’s what the Rescue Bill is basically about. Like it or not, the US Government has been given unprecedented power to invest $700 billion in our financial systems in two main ways. First, as much as $250 billion to purchase stock in US banks, providing the banks with badly needed money. Second, through the purchase of certain assets to help stimulate more liquidity in the credit market. Another initiative will provide government guarantees for the short-term loans banks make to each other to run their daily operations. More importantly, these actions are in concert with similar practices by other governments and central banks.

None of these actions will solve our problems completely or save us from recession, but here’s the good news. It is a positive step in the direction of stabilizing the markets. The other good news is that several other measures were tacked on to the bill to help build your confidence in the markets. Unfortunately, there just isn’t enough space in this short newsletter to cover them all. We will briefly highlight a couple of them, but our best, most practical financial advice is to create your own plan for the future with your financial professionals. Don’t make any rash decisions without speaking to the experts you trust to handle your investments. If you need help finding a financial professional you can trust, we’ll gladly provide a referral. Just give us a call. We’ll review your mortgage and create a plan that fits your individual financial goals and needs.

Allen Robinson - CMPS,CMA,TEAM,CLA
Certified Mortgage Planning Specialist
South Florida Mortgage Planner
First Trust Mortgage
2933 W Cypress Creek Rd, #201
Ft Lauderdale, FL 33309
954-771-1828 ext 229

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

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As part of the Rescue Bill, Congress also increased FDIC deposit insurance from $100,000 to $250,000 for all of an individual’s accounts at a single institution. For one year, joint accounts, retirement accounts, and trust accounts are insured separately. This means a married couple can insure up to $1 million at a single bank, by making a few simple adjustments. Changes also affect revocable trusts, allowing the same amount of insurance for beneficiaries, such as your children. That means, a married couple with three kids could create enough qualifying individual and joint accounts to protect up to $1.5 million. It’s important to note that the FDIC has never failed to pay a single dime of insured money when banks have failed, so you won’t have to make a run on the bank or hide your money in your mattress anymore. Small businesses will also benefit from new increases, as well as the confidence that comes with this kind of insurance.

Allen Robinson - CMPS,CMA,TEAM,CLA
Certified Mortgage Planning Specialist
South Florida Mortgage Planner
First Trust Mortgage
2933 W Cypress Creek Rd, #201
Ft Lauderdale, FL 33309
954-771-1828 ext 229

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

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Within the 451 page Rescue Bill are nearly 100 tax code changes that directly affect individuals and business owners, including education deductions, sales tax, energy credits, and even new disaster aid. Other tax breaks, which were due to expire, were extended, including property tax deductions, the Mortgage Debt Forgiveness Act, and the shield for the Alternative Minimum Tax (AMT). The property tax provision, set to expire in 2008, has been extended to 2009, and allows up to $500 ($1000 for joint filers) in deductions in addition to the standard property tax deduction – even if you don’t itemize! The Mortgage Debt Forgiveness Act, extended to 2012, was designed to protect those who already lost their homes due to foreclosures from facing an additional tax penalty for qualifying cancelled or “forgiven” debt of up to $2 million. And, finally, the Rescue Bill also saves about 23 million Americans from the dreaded AMT, a kind of extra tax that some people have to pay on top of their regular income tax created by the Tax Reform Act of 1969.

These are just a few of the potential tax benefits created or extended by the Rescue Bill. As always, there are specific qualifying standards, and so it is essential to speak with a qualified tax professional about these and other tax benefits that could help you lower your tax bill and increase your confidence in today’s tumultuous financial markets.

Allen Robinson - CMPS,CMA,TEAM,CLA
Certified Mortgage Planning Specialist
South Florida Mortgage Planner
First Trust Mortgage
2933 W Cypress Creek Rd, #201
Ft Lauderdale, FL 33309
954-771-1828 ext 229

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

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For immediate release December 3, 2008

Allen Robinson, Certified Mortgage Planning Specialist
First Trust Mortgage

Ft Lauderdale, FL – Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

Allen Robinson - CMPS,CMA,TEAM,CLA
Certified Mortgage Planning Specialist
South Florida Mortgage Planner
First Trust Mortgage
2933 W Cypress Creek Rd, #201
Ft Lauderdale, FL 33309
954-771-1828 ext 229

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

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Productivity Will Follow

How many times have you experienced a brilliant revelation while in the middle of something else? Ten minutes later, you go to retrieve it, and it’s gone. Or you have a task that you know you must complete, perhaps a phone call at work, but other items keep popping up. The day ends, you pull into your driveway, and realize that you never made that call.

Years ago, George A. Miller wrote an article for The Psychological Review in which he suggested that the number of items a person can keep in their short-term memory is approximately seven, plus or minus two. With everything going on in the world around us, it’s no wonder that we forget so many things.

What’s the solution? Write it down! Productivity expert David Allen* believes that you should avoid having the same thought more than once, unless you enjoy that particular thought. Our minds are prone to remember items that happened recently or which contain emotional content. Given the choice, we would probably prefer more selective criteria, especially considering the space constraints of our short-term memory. By writing notes, you free your mind to do more productive things such as coming up with innovative new ideas or analyzing existing data.

Allen has also observed that as adults, we often experience ideas somewhere other than where they’re to be implemented. Perhaps you’ve been discussing something with a client, and you have an additional thought while standing in line at the grocery. The reverse can also happen, where you remember that you are out of milk while you’re in the middle of a meeting. By writing these thoughts down when you have them, you’ll ensure that they’ll be acted upon when the opportunity arises.

How should you begin this process? Stock up on working pens, pads of paper, and a location to place these notes at work, at home, and when you’re traveling in between the two. The only thing worse than forgetting an idea is writing it down and losing the note, which doubles your anxiety. You’re wondering where the note went, prompting fears that other notes have been lost, and you’re trying to retrieve an idea which you’ve already placed in your mental recycle bin. (This bin is emptied regularly, unlike the one on your PC’s desktop!)

By documenting your ideas, you will achieve a clear mind and be ready to face even larger challenges!

Allen Robinson
Certified Mortgage Planning Specialist
First Trust Mortgage
Phone: 800-529-9758 x229
Local: 954-771-1828 x229
http://www.broward-directory.com/BrowardMortgages/
www.iborrowsmart.com/arobinson

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Reducing the Risks

Don’t wait for a discerning buyer to find faults in a listed property. The EPA website (www.epa.gov) has tons of useful information on possible hazards in a home, and you should at least check the following conditions as part of the listing process.

Radon Gas - In January of 2004, the HUD home inspection form for FHA loans (HUD 92564-CN) was modified to include information on radon content in indoor air. This form (updated again in June of 2006) is mandatory for all FHA-insured mortgages, which means a good portion of buyers may request a radon inspection as part of the home inspection process. To find a radon service professional, visit www.epa.gov/iaq/whereyoulive.html.

Asbestos - Asbestos may not be easily identified, so consult with a professional if you are unsure about a material in a home. The Environmental Protection Agency says that “Usually the best thing is to LEAVE asbestos material that is in good condition ALONE.” If buyers have concerns, refer them to www.epa.gov/asbestos for current information on asbestos risks.

Lead-Based Paint - If a home was built before 1978, there’s a chance that lead-based paint was used. If the paint is peeling, that is not the only danger to be concerned about. Lead-contaminated dust and soil can also pose serious health risks to children and pregnant women if inhaled or ingested. Make certain the buyer knows if there is lead-based paint in the home, and remind them that removal of lead-based paint, if done incorrectly, can result in lead-contaminated dust being released into the air. Visit www.epa.gov/lead for more information.

Smoke Alarms - Know your state’s smoke alarm laws by heart! Some states require one smoke alarm in each bedroom, plus a detector on each floor. Make sure your sellers’ home complies - the last thing you want is a delay in a purchase for something as simple as smoke alarms!

Be sure to do your homework as there may be risks specific to the region where you live, such as California’s earthquakes or Florida’s hurricanes, that mean regional laws to follow.

Allen Robinson
Certified Mortgage Planning Specialist
First Trust Mortgage
Phone: 800-529-9758 x229
Local: 954-771-1828 x229
http://www.broward-directory.com/BrowardMortgages/
www.iborrowsmart.com/arobinson

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