A Qualified Mortgage Consultant Can Outline Your Options
Renters Have Much to Gain by Pursuing Home Ownership
By Steve Hoogenakker, President ATM Financial - MrHomeLoan

Minneapolis, Minnesota – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.


Steve Hoogenakker is affiliated with ATM Financial, a Licensed Broker, Minnesota Department Commerce. Hoogenakker hosts Home Buyer’s Seminars which are open to the public on the 3rd Tuesday of the month at the Plymouth office. from 7:00 p.m. to 8:30 p.m. Seating is limited. To reserve your seat at the next event, call [763-213-2410 to RSVP and obtain a free copy of Steve Hoogenakker’s Home Buyer Handbook.


# # #


SUBMITTED BY:
Steve Hoogenakker
Phone 763-213.2410
Fax 763-479-0433
E-MAIL steve@MrHomeLoan.com
Website http://www.mrhomeloan.com/

Steer Clear of FHA Financing:
Dealing with Investors Who Seek Quick Profits
In a recent article, top mortgage originator and national trainer Greg Frost
noted that hyper−appreciation of property values in Albuquerque, NM had
drawn attention from many out−of−state investors in the last year. The
area saw an influx of savvy investors ready to bid on HUD Repos and
other affordably priced single−family dwellings.
Frost warned mortgage originators and Realtors® to be wary of investors
who try to represent themselves as owner occupants in this type of
situation. They may seek to obtain 97% FHA financing, even though their
real mission is to turn around and sell for a quick profit. Not only does the
lender lose their investment due to the rapid pre−pay in this type of
transaction −− The Government National Mortgage Association−backed
security loses value as well!
This practice is called "flipping," which the United States Department of Housing and Urban Development (HUD) defines
as "...a predatory lending practice whereby a property that was acquired is quickly resold for a considerable profit with an
artificially inflated value, often abetted by a mortgagee's collusion with the property appraiser and others involved in the
mortgage loan transaction."*
Flipping is not good for FHA, GINNIE MAE, or the affected lenders. Moreover, the negative effect dominoes to those
earnest purchasers who end up bearing a harsh increase in interest rates as lenders seek to recoup their losses.
HUD established time restriction guidelines in 2003 in an effort to crack down and prohibit the use of FHA loans to support
property flipping. The rule forbids a sale within 90 days of purchase, and requires increased documentation by the lender if
an FHA−financed home is flipped within 180 days. However, HUD's Prohibition of Property Flipping in HUD's Single
Family Mortgage Insurance Programs; Additional Exceptions to Time Restrictions on Sales; Interim Rule was published in
December 2004 to broaden and clarify certain exceptions to the existing regulation.
The interim rule, which became effective on January 24, 2005, now permits federal agencies that acquire properties [i.e.,
HUD's Real Estate−Owned (REO) properties] as a result of a function of their programs, to quickly market and sell those
acquired properties.
Additionally, the interim rule provides that time restrictions on sales do not apply to inherited property. The purpose of time
restrictions is to curb fraudulent property flips, whereby a property is deliberately acquired for the purposes of reselling
quickly and at an inflated value. While an Heir may turn a property quickly and at a profit, HUD now acknowledges that the
sale of an inherited property falls outside the intended scope of the regulation.
The interim rule also establishes that time restrictions do not apply to the sale of properties acquired by an employer or
relocation agency in connection with the relocation of an employee.
With the exception of an Heir selling a home or a person who is forced to relocate due to a job transfer, the HUD definition
of flipping applies to all transactions by individuals (non−agencies) who purchase or refinance using FHA funds. Greg
Frost advises that if you determine that a potential buyer is really an investor looking for a quick turnaround, steer away
from FHA financing entirely and seek to place the buyer in a conventional loan.
* See http://www.hudclips.org/sub_nonhud/cgi/pdf/28050.pdf
Professional Strategies to make Realtors more successful. Paid by Steve Hoogenakker for Realtor partners.
My way of saying Thank You for your business.

From the desk of:
Steve Hoogenakker
President
ATM Home Loan − MrHomeLoan
Tel: 763−213−2410
Fax: 763−546−1812
steve@MrHomeLoan.com

Publisher’s Directions: This article may be freely distributed so long as the copyright, author’s information, disclaimer, and an active link (where possible) are included.

The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
About the Author
Steve Hoogenakker provides a solid, common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer, including rate-watch, tips and articles, financial communication, news, and links to products and services. Visit: www.MrHomeLoan.com, or you can email Steve at Steve@MrHomeLoan.com
Steve Hoogenakker 5820 74th Avenue N. #100 Brooklyn Park, MN 55443 763-546-1414

Steer Clear of FHA Financing:
Dealing with Investors Who Seek Quick Profits
In a recent article, top mortgage originator and national trainer Greg Frost
noted that hyper−appreciation of property values in Albuquerque, NM had
drawn attention from many out−of−state investors in the last year. The
area saw an influx of savvy investors ready to bid on HUD Repos and
other affordably priced single−family dwellings.
Frost warned mortgage originators and Realtors® to be wary of investors
who try to represent themselves as owner occupants in this type of
situation. They may seek to obtain 97% FHA financing, even though their
real mission is to turn around and sell for a quick profit. Not only does the
lender lose their investment due to the rapid pre−pay in this type of
transaction −− The Government National Mortgage Association−backed
security loses value as well!
This practice is called "flipping," which the United States Department of Housing and Urban Development (HUD) defines
as "...a predatory lending practice whereby a property that was acquired is quickly resold for a considerable profit with an
artificially inflated value, often abetted by a mortgagee's collusion with the property appraiser and others involved in the
mortgage loan transaction."*
Flipping is not good for FHA, GINNIE MAE, or the affected lenders. Moreover, the negative effect dominoes to those
earnest purchasers who end up bearing a harsh increase in interest rates as lenders seek to recoup their losses.
HUD established time restriction guidelines in 2003 in an effort to crack down and prohibit the use of FHA loans to support
property flipping. The rule forbids a sale within 90 days of purchase, and requires increased documentation by the lender if
an FHA−financed home is flipped within 180 days. However, HUD's Prohibition of Property Flipping in HUD's Single
Family Mortgage Insurance Programs; Additional Exceptions to Time Restrictions on Sales; Interim Rule was published in
December 2004 to broaden and clarify certain exceptions to the existing regulation.
The interim rule, which became effective on January 24, 2005, now permits federal agencies that acquire properties [i.e.,
HUD's Real Estate−Owned (REO) properties] as a result of a function of their programs, to quickly market and sell those
acquired properties.
Additionally, the interim rule provides that time restrictions on sales do not apply to inherited property. The purpose of time
restrictions is to curb fraudulent property flips, whereby a property is deliberately acquired for the purposes of reselling
quickly and at an inflated value. While an Heir may turn a property quickly and at a profit, HUD now acknowledges that the
sale of an inherited property falls outside the intended scope of the regulation.
The interim rule also establishes that time restrictions do not apply to the sale of properties acquired by an employer or
relocation agency in connection with the relocation of an employee.
With the exception of an Heir selling a home or a person who is forced to relocate due to a job transfer, the HUD definition
of flipping applies to all transactions by individuals (non−agencies) who purchase or refinance using FHA funds. Greg
Frost advises that if you determine that a potential buyer is really an investor looking for a quick turnaround, steer away
from FHA financing entirely and seek to place the buyer in a conventional loan.
* See http://www.hudclips.org/sub_nonhud/cgi/pdf/28050.pdf
Professional Strategies to make Realtors more successful. Paid by Steve Hoogenakker for Realtor partners.
My way of saying Thank You for your business.

From the desk of:
Steve Hoogenakker
President
ATM Home Loan − MrHomeLoan
Tel: 763−213−2410
Fax: 763−546−1812
steve@MrHomeLoan.com

Publisher’s Directions: This article may be freely distributed so long as the copyright, author’s information, disclaimer, and an active link (where possible) are included.

The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
About the Author
Steve Hoogenakker provides a solid, common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer, including rate-watch, tips and articles, financial communication, news, and links to products and services. Visit: www.MrHomeLoan.com, or you can email Steve at Steve@MrHomeLoan.com
Steve Hoogenakker 5820 74th Avenue N. #100 Brooklyn Park, MN 55443 763-546-1414

Avoid Changes to Your Financial Profile
During the Loan Process
Once your loan package has been sent to the lender, there are a number of things you should avoid doing that will change your financial picture. Remember, the lender is looking for stability and consistency. If you want the best interest rate, keep that in mind. Here are a few things to consider:

The lender is looking to see what your source of down payment is.

Your lender will most likely ask you to provide proof of your liquid assets. This includes bank statements for checking and savings accounts, verification of investments, and any other liquid assets. Some of the things they ask for may seem trivial, but keep in mind, if you are planning a move to a new home, it's important to have all documentation readily available. If the lender asks for cancelled checks or deposit receipts to meet certain conditions, you want to be able to find these things quickly to avoid delaying the closing of your loan. Make sure your paper trail is easy to document, and don't move money from one account to another.

Major purchases tip the scales against your favor.

Avoid making any major purchases. You might be thinking about purchasing new appliances for the new home. This is not the time to do it. Avoid making any major purchases on jewelry, appliances, furniture, vacations, or anything with a significant price tag.

Buying or leasing a car can make a negative impact on the way the lender views your financial status. This is a big ticket item that dramatically affects your debt-to-income ratio. You may feel you have room in your budget to purchase a new car, and think this is a worthy investment if you are looking for a home that will mean a longer commute for you on a daily basis. But by tacking a car payment onto your existing debt, you reduce the amount that you will qualify for in a home loan. A $400 a month car payment can reduce your approved loan limit by as much as $50,000. Think about doing this after your loan is approved if you really need it.

If you have to change jobs, you may be asked to document why this change occurred.

If you are changing jobs to increase your income, that's a no-brainer for the lender. If you have an erratic work history to start with, another job change may make it look worse for you.

If you are an hourly wage employee, most likely a job change will have no effect on your ability to qualify for a loan. If you have a track record of a consistent amount of overtime or consistent bonuses over the last two years, the lender views this favorably. If you change jobs, there is no way of knowing if the new employer will pay overtime. Many do not! If you work on a salary + commission or straight commission basis, it has a dramatic effect on your stability. If you are considering starting your own business, again, this is something to consider after your loan is funded.


Publisher’s Directions: This article may be freely distributed so long as the copyright, author’s information, disclaimer, and an active link (where possible) are included.

Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
About the Author
Steve Hoogenakker provides a solid, common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer, including rate-watch, tips and articles, financial communication, news, and links to products and services.

Visit: www.MrHomeLoan.com, or you can email Steve at Steve@MrHomeLoan.com
Steve Hoogenakker 5820 74th Avenue N. #100 Brooklyn Park, MN 55443 763-546-1414

TIPS TO GET YOUR LOAN APPROVED

What is important to lenders?
MR HOME LOAN wants to help you understand what is important to lenders, and why. These tips will help you better manage some key aspects of your finances so that you can get your loan approved.

Not every applicant is approved for a home loan the first time he or she applies. For a variety of reasons, even after a lot of hard work, sometimes a loan just can’t be approved. It may have to do with the applicant’s credit or savings history, employment stability, debt structure, or the value of the home. The good news is that a denial is merely a detour, not a roadblock. Purchasing a home takes planning, discipline and hard work! Follow these tips and with our assistance, homeownership is not out of reach.

Establish a consistent record of paying bills on time.
Before making a loan the size of a home loan, most lenders will want to review how you have handled your credit in the past. This includes all credit accounts, including utilities, revolving debt (credit cards, etc.), and installment debt (car loans, student loans, etc.). It is critical for you to bring all overdue bills up to date immediately and begin paying them on time in a consistent manner.

Establish a consistent record of steady employment.
Lenders are more likely to look favorably on an applicant who has been in the same (or similar) line of work for generally two or more years. If you have been working steadily for less than two or more years, expect the lender to ask why. There are many acceptable reasons, including:

• You recently finished school, vocational training, or left the military;
• Your work is typically seasonal and gaps in employment are customary to the industry;
• You may have been laid off from your job; or
• Frequent employment changes are normal in your line of work (sales, contract work, etc.), but you have been consistently employed and maintained a consistent level of income over the past 2 years.

You may want to pay off some debt to lower your debt-to-income ratio.
This step will make it easier to qualify for a mortgage loan if your debt ratio is high. Chances are good that if you’re already paying rent, making a mortgage payment will be a smooth transition. Along with the mortgage payment, you’re also responsible for real estate taxes and insurance, and if required, mortgage insurance and homeowners dues. Work with us to determine the monthly payment you can afford based on your income and the standard debt-to-income ratio guidelines.

Establish a consistent savings pattern.
Saving money for a down payment, and still having enough reserves left over to cover two months of expenses in the event of an emergency, is typically the most challenging part of buying a home. While sometimes it is difficult, this is a necessary step to ensure you are financially ready to take the plunge into homeownership. Our goal is to help you meet your short-term and long-term financial objectives. We’ll help you evaluate exactly when the right time is for you to buy, in order to help you build a secure financial future.

Credit: Know the Score

A good credit history is more important than ever. Solid credit keeps down the cost of consumer financing, and it can be the deciding factor in whether an auto or home loan application is approved.

In today’s fast-paced, high-tech age, your credit history will be reviewed more often by artificial intelligence than human intelligence. This computerization has made the loan process much more efficient. That’s a good thing. But computers take all the subjectivity out of credit evaluation, and that means you have to take ownership of your own credit standing to make sure you’re not blindsided by any stain on your record.

It is important that everyone know his or her credit score. Everyone is entitled to one free credit report a year. Various companies, including Experian Consumer Relations (888-397-3742), can show you your credit profile. Fairly frequently, erroneous information appears on a credit report. This can take a few months to correct, which might mean the difference between being able to purchase your dream home or not.

Credit scores usually range between 400 on the low side to 800 on the high side. On rare occasions these ranges can be exceeded. Sometimes a score cannot be obtained for factors like lack of credit history or too few lines of credit.

If you know your score, then you can see what the creditors see and have the ability to get a jump-start. Here is a quick breakdown of what a score means to a creditor:

720 and over Wonderful, you are at the top. Best rates and terms.
700 – 719 Excellent score. You are a very desirable borrower.
680 – 699 Good credit. You should be in strong shape to buy.
660 – 679 Okay credit. Don’t look for other exceptions.
640 – 659 Borderline. Okay if everything else is strong.
620 – 639 Weak. The rest or your file must be perfect.
600 – 619 Difficult. Needs some work or a special program.
Below 600 Trouble. Try to fix up your credit.

Short-Term Interest Rates on the Rise
Adjustable Rate Mortgage Holders Prepare for Increase in Interest Rates
By Steve Hoogenakker
ATM Financial - MrHomeLoan

Minneapolis, Minnesota – Interest rates are on the rise and many home owners who have adjustable rate mortgages may see increases in their forthcoming annual adjustments.

Federal Reserve Chairman Alan Greenspan made it clear in 2004 that the Federal Reserve would be increasing short-term interest rates at a “measured pace.” With the US Dollar at its weakest point in seven years, oil prices unstable and the evaluation of other economic indicators, the Fed Funds Rate was hiked seven times from 1.0% to 2.75% since June 2004 in an effort to curb inflation. Some economists believe it won’t stop until the Fed Fund Rate hits 4.0%.

Consumers with revolving debt accounts tied to the prime rate have seen the effect through rising interest rate charges, as the prime rate always rides 3% above the current Fed Funds Rate.

Mortgage interest rates are affected indirectly by these changes. An increase in the Fed Funds Rate has an impact on financial markets as a whole, but mortgage rates may go up or down based on the perception investors have of current economic statistics and their reaction to the Federal Reserve’s after-meeting statements.

In general, when economic data indicates we have a slow-down occurring in our economy, investors tend to sell off stocks and reallocate that money to the safe haven of bonds and mortgage-backed securities. The purchase of mortgage-backed securities drives interest rates down. When economic data says there is growth in the economy, the stock market typically rallies and mortgage-backed securities sell off to fuel that stock market rally. This drives mortgage interest rates up.

Our current market reflects the reaction of investors reading between the lines on comments made by the Fed, and mortgage interest rates are going up. This will have an affect on home owners with adjustable rate mortgages (ARMs) tied to indexes that are based on short-term interest rates. This includes the 11th District Cost of Funds, 12-Month Treasury Average (MTA), London Inter Bank Offering Rates (LIBOR) and others.

This doesn’t mean that everyone with an adjustable mortgage is in trouble right away. Some indexes are more volatile than others. COFI moves much slower than other adjustable rate indexes, while the LIBOR fluctuates with more volatility. But remember, when an ARM adjusts, the new interest rate is a sum of the borrower’s fixed margin plus the current rate of the index the mortgage is tied to.

Consumers who foresee paying an interest rate that is significantly higher may want to consider refinancing to take advantage of the stability of a fixed rate mortgage.

This is also a good time for borrowers who started out in an adjustable rate loan due to a poor credit score to transition into a fixed rate loan if they can. Once a track record of making mortgage payments on time and in full has been established, this should have a positive effect on the credit score and there’s a good chance the borrower may now qualify for a loan with a lower interest rate.

As with any decision to refinance, it is important to take the terms of the existing loan, the cost of the new loan, and the borrower’s long-term needs into consideration. A qualified mortgage professional should help weigh out the options by providing a clear assessment of available loan programs for the consumer.



Steve Hoogenakker is affiliated with ATM Financial, a Licensed Broker, Minnesota Department Commerce. Hoogenakker hosts Home Buyer’s Seminars which are open to the public on the 3rd Tuesday of the month at the Plymouth office. from 7:00 p.m. to 8:30 p.m. Seating is limited. To reserve your seat at the next event, call [763-213-2410 to RSVP and obtain a free copy of Steve Hoogenakker’s Home Buyer Handbook.


# # #


SUBMITTED BY:
Steve Hoogenakker
Phone 763-213.2410
Fax 763-479-0433
E-MAIL steve@MrHomeLoan.com
Website www.MrHomeLoan.com

Getting the Best Interest Rate on Your Home Loan?
A Qualified Mortgage Consultant Can Help Boost Credit Scores
By Steve Hoogenakker, President
ATM Financial - MrHomeLoan

Minneapolis, Minnesota – Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back the loan. The borrower’s income and debt ratios are taken into consideration by the lender, as well as the predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get the best interest rate possible.

Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as the consumer’s credit score goes down, interest rates will go up.

A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time.

Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans.

If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate the value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though the B-paper loan is still considered sub-prime.

A qualified mortgage consultant will guide you through the nuances of the process of improving your credit score to refinance and save money. First and foremost, he or she will want to review the terms of the existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell the home or try to refinance before the pre-payment penalty expires and you have not already paid off 20 percent of the original loan amount, you will most likely have to pay a 3 percent fee back to the lender to compensate for the high risk and high costs incurred to provide that financing.

Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving the credit score six months prior to the expiration date on your existing pre-payment penalty.

There are five factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.

Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure the best interest rate available.

This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at the time of purchase. The important thing is to work with a mortgage consultant who can give you a roadmap to follow and a strategy for success in building personal wealth.



Steve Hoogenakker is affiliated with ATM Home Mortgage + MrHomeLoan, a Licensed Broker, Minnesota Department Commerce. Hoogenakker hosts Home Buyer’s Seminars which are open to the public on the 3rd Tuesday of the month at the Plymouth office. from 7:00 p.m. to 8:30 p.m. Seating is limited. To reserve your seat at the next event, call [763-213-2410 to RSVP and obtain a free copy of Steve Hoogenakker’s Home Buyer Handbook.


# # #


SUBMITTED BY:
Steve Hoogenakker
Phone 763-213.2410
Fax 763-479-0433
E-MAIL steve@MrHomeLoan.com
Website www.MrHomeLoan.com

Getting the Best Interest Rate on Your Home Loan?
A Qualified Mortgage Consultant Can Help Boost Credit Scores
By Steve Hoogenakker, President
ATM Financial - MrHomeLoan

Minneapolis, Minnesota – Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back the loan. The borrower’s income and debt ratios are taken into consideration by the lender, as well as the predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get the best interest rate possible.

Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as the consumer’s credit score goes down, interest rates will go up.

A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time.

Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans.

If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate the value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though the B-paper loan is still considered sub-prime.

A qualified mortgage consultant will guide you through the nuances of the process of improving your credit score to refinance and save money. First and foremost, he or she will want to review the terms of the existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell the home or try to refinance before the pre-payment penalty expires and you have not already paid off 20 percent of the original loan amount, you will most likely have to pay a 3 percent fee back to the lender to compensate for the high risk and high costs incurred to provide that financing.

Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving the credit score six months prior to the expiration date on your existing pre-payment penalty.

There are five factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.

Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure the best interest rate available.

This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at the time of purchase. The important thing is to work with a mortgage consultant who can give you a roadmap to follow and a strategy for success in building personal wealth.



Steve Hoogenakker is affiliated with ATM Financial, a Licensed Broker, Minnesota Department Commerce. Hoogenakker hosts Home Buyer’s Seminars which are open to the public on the 3rd Tuesday of the month at the Plymouth office. from 7:00 p.m. to 8:30 p.m. Seating is limited. To reserve your seat at the next event, call [763-213-2410 to RSVP and obtain a free copy of Steve Hoogenakker’s Home Buyer Handbook.


# # #


SUBMITTED BY:
Steve Hoogenakker
Phone 763-213.2410
Fax 763-479-0433
E-MAIL steve@MrHomeLoan.com
Website www.MrHomeLoan.com