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Having a good credit score is a lifetime process and it is impossible to achieve overnight. Here are 5 tips you should incorporate in your habit today: 

1. Pay your bills on time. It accounts for 35% of your credit score. One late payment can negatively affect your credit score. 96% of consumers with an 800 credit score pay credit accounts on time; 68% of those with a score of 650 have past due accounts. Even paid past due accounts will remain in your record for 7 years. Tips: Set-up your account with auto-pay so you do not miss a payment. 

2. Minimize credit usage. Credit utilization accounts for 30% of your credit score. This factor is the ratio of used credit divided by available credit. The higher the ratio, the lower the credit score. 800 credit score ratings are obtained by those who use about 7% of their available credit while those with a score of 650 have typically maxed out their available credit. Tips: Paying your balance to below 50% of available credit line will increase your score sooner. Please inquire about our Rapid Rescore. 

3. Try to avoid credit checks. Getting hard inquiries from a mortgage company, bank, auto loan or even an additional credit card will cause your credit score to drop. Tips: Shop within 30 day span from multiple lenders and banks. This will count as 1 hit. Please inquire about our soft inquiry. 

4. Keep a long credit history. This accounts for 15% of your credit score. The longer the credit history, the more trustworthy your borrowing status. Tips: Do not close your older, inactive accounts since this will reduce your credit utilization ratio. 

5. Maintain low balances on credit cards. Most people who have 800 credit score never pay the interest due to the fact that they pay their balances in full every month. Tips: If you can't pay in full - paying down to 50% of available credit line will help. See item 2 above.  

Each credit score bureau (Experian, Equifax and Transunion) has its own method of credit scoring with each assigning a different credit score.  You can check your own credit report for free annually and if you suspect any foul play - you can freeze it for free. Should you find an error in your credit report - please follow this instructions from Consumer Financial Protection Bureau (CFPB) on how to address it legally. You can fix most credit error yourself for free without involving a costly credit repair company (I can guide you along the way).  

If you have a collection account - DO NOT pay it. Here's why.  If you have no credit profile - please start here. It will take at least a few months but it's progress. Tips: Please inquire about our non-traditional credit lines to help you qualify for a home loan.  

Posted by Sam Kader on August 16th, 2019 9:10 AM
The Federal Reserve reduced benchmark interest rate Wednesday (7/31/19) for the first
time in more than a decade lowering the Fed funds rate by a quarter-point (25 basis points) to just below 2.25% in an effort to bolster the U.S. economy amid early signs of a global slowdown in China and Europe and uncertainty from President Donald Trump's trade war. The Federal Reserve  Chairman, Jeremy Powell said that there is really nothing in the U.S. economy that presents a prominent near-term threat.  Downside risks are really coming from abroad.  

In addition to the rate reduction, the Fed said it would stop selling off its $3.8 trillion assets in August in another easing move. The Fed bought a large amount of Treasury bonds and mortgage-backed securities in the aftermath of the 2008 financial crisis through it's Quantitative Easing policy to keep interest rates low. The Central bank started to sell some of its holdings in recent months because it did not think that extra stimulus was necessary anymore. Now the Fed is putting this on hold.  

How does it affect me? 

Many consumers are wondering why home loan rates haven't declined by 0.25% in tandem with the Fed action. The Fed Funds Rate (FFR) affects short-term rates on things like Home Equity Like of Credit (HELOCs), credit cards, auto loans and savings deposit.  The FFR has no affect whatsoever on home loan rates. The rate that the Fed reduces is the federal funds rate which is what banks and other financial institutions charge one another for short-term borrowing.

Mortgage rates are driven by pricing and trading action in Mortgage Backed Securities (MBS). Mortgages are actually "turned into or securitized" and are traded just like stocks and bonds. Unlike Fed Funds which only changes every 6 weeks (if at all), MBS can change every minute of every business day. MBS tend to correlate with the direction of U.S. 10-Year Note. The main driver for long-term rates is inflation and inflation expectations. If inflation is forecasted to move higher, rates move higher and the opposite is also true. Another driver for of long-term rates is uncertainty - domestically or overseas. 

Here are some affects that you might see from Fed Funds Rate cut: 

1. Your savings account. Fed funds rate has a direct correlation with average yield on a Certificate of Deposit. 

2. Your mortgage. In November of 2018 as the Fed "appears" to have ended its slow-march of interest-rate increases, rate on a 30-Year mortgage was sightly under 5%. It has since fallen to 3.75%. Since mortgage rates are tied to long-term rates, this rate cuts is probably already fully priced in well in advance.  Historically speaking, mortgage rates do not have much further to fall. In the past half-century, the average 30-year rate has never dipped below 3.3%. 

3. Your spending and borrowing. The impact on the household budget of the rate cut is inconsequential. It's not likely to unleash a flurry of consumer activity. 

4. Your job. The Fed reduced rates now and possibly again this fall as policymakers are trying to reduce the risk that millions of Americans could be thrown out of work due to the prospect of a job-killing recession (not that we haven't  faced a looming lay-off from Boeing already).  

Posted by Sam Kader on August 2nd, 2019 8:34 AM
Do you know that not all Private Mortgage Insurance are alike? Check out our latest offerings below and let me save you on a lower monthly mortgage insurance (MI). 

Posted by Sam Kader on July 10th, 2019 6:55 PM
While most of the information collected on consumers by three credit bureaus is similar, there are differences. One credit bureau may have unique information captured on a consumer that is not being captured by the other two credit bureaus or the same data element may be stored or displaced differently by the credit bureaus. 

The FICO scoring system design is similar across the credit bureaus such that consumers with high FICO score on bureau "A" data will likely see a similar high FICO score at the other two bureaus.  When comparing scores across 3 different credit bureaus - there are differences due to the following: 

  1. Not all credit scores are "FICO" scores. Make sure that the credit scores you are comparing are actual FICO scores provided from legitimate sources. 
  2. The FICO scores should be compared at the same time. The passage of time can result in score differences due to model characteristics that have a time based component. Comparing a FICO score pulled on bureau "A" last week to a score pulled on bureau "B" today can be problematic as the "week-old-score" may already be dated. 
  3. All of your credit information may not be posted to all three credit bureaus. The information on your credit report is supplied by lenders, collection agencies and court records.  Don't assume that each credit bureau has the same information pertaining to your credit history. 
  4. You may have applied for credit under different names which may cause fragmented or incomplete files at the credit reporting agencies. There may be instances where incomplete files or inaccurate data such as Social Security numbers, addresses, etc cause one's credit information to appear on someone else' credit report. 
  5. Lenders report credit information to the credit bureaus at different times often resulting in one agency having more up-to-date information than another. 
  6. The credit bureaus may record, display or store the same information in different ways. 

Posted by Sam Kader on July 10th, 2019 6:38 PM
You should consult with one or more lenders (not all lenders are alike and here's why you
should work with your local mortgage broker).  Lenders are to educate your home financing options and to help you navigate the loan process (thus their availability when you need them is at utmost important).  

a) What type of loans do you offer?  You may qualify for either a VA, USDA, Conventional,  or FHA loan. It all depends on your circumstances such as your FICO score, down payment and subject property. 

b) What is the interest rate and Annual Percentage Rate (APR)? As a general rule - you want the difference between the rate and APR to be as little as possible - indicating minimum junk fees and closing costs. 

c) How large does my down payment need to be for each loan?  Down payment can be as little as 3% with FNMA HomePath or 0% with VA and USDA loan. 

d) What is earnest money? An earnest-money deposit is a guarantee that you the buyer will fulfill the contract. If the transaction cannot be closed because the buyers fail to fulfill their part of the contract, the sellers retain the earnest money deposit.  Earnest money deposit must be made from seasoned funds (funds already deposited in your account for at least 2 months). Cash earnest money deposit is not acceptable. 

e) What is an impound account? Please read more here

f) What is an escrow? Please read more here

g) What fees and closing costs will I have to pay? Closing costs can generally be broken down into 2 parts:  

i) Customary closing costs such as an appraisal, credit report fee, title policy, escrow and recorded fees and taxes. 
ii) Prepaid items such as property insurance, property taxes and per diem accrued interest charges.  This part is indifferent from lender to lender.  Here's more information on closing costs. Since implementation of TRID in 2015, lenders are required to deliver a Loan Estimate within 3 days of receiving your completed loan application.   

h)  Do you charge origination charges?  As your mortgage broker, our commission is being paid by our lenders. We do not charge origination charges.   

i) Do you offer loan-rate locks? Lenders generally offer from 15 to 120 days lock. As a general rule, the higher the lock days, the costlier the lock fee is. 

Not all lenders are alike - mortgage rates are a good comparison but equally important are customer service and ability to close on time.  

Posted by Sam Kader on June 7th, 2019 9:57 AM



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