Your Guide to Credit and Personal Finance

What to do when a lender says no
Take a look at your credit history and debt to income ratio if your loan application has been denied.

It’s not uncommon for prospective home-loan borrowers to receive the dreaded news that their application has been denied. While no one welcomes a lender’s “adverse action” letter, there are some steps you can take to get yourself back on track.

The first step is to relax and not panic. An adverse action letter isn’t a personal attack on you, and it doesn’t mean you’re a bad person or a failure. It may mean that you won’t be able to purchase the home you want or that you won’t be able to purchase a home right away, but it doesn’t mean you’ll never be able to own your own home.

The next step is to review your personal situation and try to find out exactly why the lender declined your application. Was your credit score too low? Was your debt-to-income ratio too high? Was the appraiser’s opinion of the home’s value lower than the sales price? Or did some other problem crop up? It’s important to find out the details because each situation requires a different solution.

Check your credit
If your application was denied due to your credit history or credit score, you should request free copies of your credit reports from either AnnualCreditReport.com or the three credit bureaus, TransUnion, Experian and Equifax. Be sure to get all three reports because adverse information in one report may not necessarily appear in the other two reports.

Loan officers rarely have the time or expertise to sort out individual borrowers’ personal financial situations, so you’ll need to swallow any pride or embarrassment that you may feel and ask a trusted family member, friend or other financial advisor to help you understand your credit report and strengthen your credit score. For more information on credit reports and scores, visit the Credit Section of the LendingTree Smart Borrower Center.

Be wary of anyone who promises to “fix” your credit for a fee. While you certainly can improve your own credit score over time, credit repair services typically can’t do much for you that you can’t do on your own if you put in the time and effort.

Take a hard look at your debt-to-income ratio
One of the reasons your loan application was denied may have been that your debt-to-income ratio was too high. If this was the case, you’ll need to increase your income, reduce your debt or borrow less money. To understand this scenario, suppose you earned $2,000 a month and applied for a loan that required a monthly payment of $900. That debt-to-income ratio of 45 percent might be within the guidelines. But if you also had a monthly car payment of, say, $400 and a minimum monthly credit-card payment of, say, $100, those debts would push your debt-to-income ratio to 70 percent, which would be too high. A monthly debt obligation of $1,400 would leave only an inadequate $600 per month for all of your other expenses.

Borrowers who receive an adverse action letter sometimes try to approach another lender in hopes of a happier outcome. That’s not always a smart idea since a lender that’s willing to be more flexible about your situation probably will offer you a more expensive loan on less favorable terms. That quick-fix may solve your immediate problem, but may not be in the best interest of your long-term financial wellbeing.

Myths and facts about credit scores
Confused about credit scores? Here are some facts you need to know.

Credit scores may be one of the most mysterious and misunderstood aspects of the home loan process. They’re also among the most important factors that determine whether you’ll be able to qualify for a specific loan product. That’s why you should educate yourself about credit scores and understand these facts:

Myth: You have only one credit report and one credit score.
Fact: You have only one credit history - yours. But you probably have at least three credit reports and three credit scores generated by the three major credit bureaus, Transunion®, Experian® and Equifax®.

Myth: The biggest factor in determining your credit score is the number of inquiries from creditors that appear on your credit report.
Fact: Your credit score is determined by several factors, and the number of inquiries is just one small piece of the credit score puzzle. The factors that determine your credit score include payment history, amounts owed, length of credit history, new credit (including number of recent credit inquiries), and types of credit used.

Myth: Too many “soft” inquiries can hurt your credit score.
Fact: “Soft” inquires made by companies that might want to offer you credit in a promotional manner have no effect on your credit score. Nor does checking your own credit report have an effect on your credit score. Rather, checking your own credit is a smart financial habit.

Myth: You can pay someone to “fix” your credit.
Fact: You can educate yourself about credit and improve your own credit score over time, but credit repair services typically can’t do much for you that you can’t do on your own if you put in the time and effort.

Myth: Getting married merges your credit history with your spouse’s.
Fact: Getting married doesn’t merge your credit history with your spouse’s, except to the extent that you and your spouse both become contractually responsible for the same debts (e.g., a joint credit-card account). A “merged” credit report includes both your credit and your spouse’s, but doesn’t merge your separate credit histories.

Myth: Getting divorced separates your credit history from your spouse’s.
Fact: Getting divorced doesn’t end your responsibility for debts that you are contractually obligated to pay. Nor does it end your ex-spouse’s responsibility for debts that he or she is contractually obligated to pay. That’s true even if your divorce decree stipulates that one or the other of you will pay those debts.

Myth: People who earn high incomes or are wealthy always have high credit scores.
Fact: Neither income nor personal wealth has any effect on your credit score. In fact, some people who have high incomes have low credit scores and some people with low incomes have high scores. Remember, your credit score is all about how you manage your debts - no matter how big or small your income.

Check your own credit report
To check your credit situation, request a free online credit report and score from LendingTree.

Florida Mortgage - Are the current market trends favorable for you?

Mortgage rate overview..The Florida market currently reflects the nationwide drop down in mortgage rates - that of the common fixed rate loan options like 15 year fixed, 30 year fixed and the 1 year ARMs. However, the 5/1 year hybrid ARMs are slightly up by a few basis points and are currently on an upward trend.

Average mortgage rates this week

15 Year FRM
6.55%

30 Year FRM
6.83%

1 Year ARM
6.69%

The statewide 15 year mortgage rates that have been above 6% have dropped down to even below 6%. The 30 year rates have somehow managed to stay above 6% but declined slightly from the previous value. This is due to the stock market pushing long term rates lower as the 10 year Treasury note yields dropped. The 30 year fixed rate mortgage continues to be Florida’s most common home loan. Besides, Hybrid ARMs and interest-only options are quite popular these days.

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Subprime market and how it can affect youThere are concerns about the subprime mortgage market, which has been in trouble nationwide since quite some time. This has affected the secondary market where big companies like the Freddie Mac have refused to buy subprime loans till the end of September. The company has also declared that borrowers going for non-subprime loans will need to qualify at the fully-indexed rate and not the low introductory rate in order to take out adjustable rate mortgages.However, qualifying a borrower with a certain income against a higher rate does not imply that he will not get the loan. But then there are chances that the borrower qualifying for a certain loan amount at the ARM introductory rate may be offered a lower amount in comparison if he has to qualify at the fully indexed rate (higher than introductory rate). This is likely to lessen the demand for homes and that’s not so good news for the housing market which needs more stabilization.However, the expected decline in new home sales can be balanced by slow down in long term rates which are expected to be at low levels as that will help in refinancing. So, A credit borrowers having signed the deal for an ARM can avoid payment shock after a certain number of payments.Despite the delinquencies and defaults in the subprime mortgage industry, it is expected that over 80% of the market would be involved with A credit and the rest 20% would account for the subprime loans. A considerable percentage of borrowers out of the 20% is in some stage of delinquency and cannot get through on account of low equity built up and rising monthly payments. The primary reason behind this is stumbling home prices, which have made it difficult to refinance loans or sell properties to pay down debts.
Trends in Florida housing marketThe housing market in Florida reflects the national trends - slower home sales compared to what it has been last year around this time. However, prices of single family homes have remained steady even with inflation suggesting that there is some kind of stability in the housing market. Since single family housing is the area where most lending transactions happen, therefore the market looks good for investment into single family properties. However, not all markets are progressive. Jacksonville has a slow and steady market compared to Orlando, Tampa, St. Petersburg, Miami and other cities in South Florida.Economy and Florida mortgage rates forecastThe Federal Reserve has kept the Fed Funds Rate almost steady in order to check inflation. However, Consumer price Index has gone up thereby showing signs of higher inflation and hence the Fed is expected not to cut down rates but rather hold them steady. The economy is going through slower growth and this will keep mortgage rates at lower levels. This will find its reflection in the state of Florida too.