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In Bad credit and Good credit


In Good Credit and Bad Credit
House Hunting with a Partner’s Challenging Credit Score

By Iyna Bort Caruso

What happens when you’ve met the right person, with the wrong credit score? It may seem to be a deal-killer, at least to lenders - but there are options. Here’s how others have tackled this situation together!


Myrlin Hermes and her boyfriend, Jeremy Capps, knew the kind of house they wanted to buy in Portland, Ore., and had an idea of how much home they could afford. Myrlin, a novelist, has an excellent credit score of 765. Jeremy earns a solid living as a network engineer for Intel. Their mortgage prospects looked bright.

Or so they thought.

Despite Jeremy’s steady income, his credit score came up as “not available.” According to Myrlin, he had no credit cards, and had never bought a car on payments. In other words, there was nothing to assure lenders that Jeremy was creditworthy. “We thought living within your means was supposed to be a good thing, but now we're stuck renting for another year or two, at least while he tries to build up a credit history from scratch.”

It’s a common scenario for many couples today. One has stellar credit, the other has no credit or, worse, poor credit, throwing home plans into disarray.

Balancing Acts
Couples can combine bank accounts and assets, but they can’t combine credit scores. Each goes into the partnership with an individual credit history and, sometimes to their surprise, discover that having disparate credit scores can and does affect their borrowing power. One’s good credit does not outweigh the other’s bad. And not even a sizeable combined income is always enough to set things right.

“For the most part, all mortgage programs are going to take lowest of the two-partner score,” says Jeri Lynn Fox, president of the Illinois Association of Mortgage Professionals and President-Broker/Owner of USA Mortgage Corporation in Elmwood Park, Il.

Many couples become disheartened, thinking they’ve got few good options. But the news is encouraging. Even if your better half has a questionable financial record, there are strategies for keeping the home-buying dream intact.

The most important thing? Don’t be blindsided. Know your creditworthiness before you begin the process. “Find out what your credit rating is and if there are any challenges,” urges Fox. “If you don’t give yourself time, you’ll be forced into less pleasant choices.”

For one thing, you could find yourself throwing money away. Fox has seen couples make offers on homes without knowing their credit ratings, hire attorneys and pay for inspections only to find out after they’ve laid out the money their mortgage was denied.


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Establish a Game Plan
By finding out your credit score and consulting with a mortgage professional early on in the process, you can explore options for establishing a credit history.

In an era of credit tightening, individuals who simply have no credit history are considered mortgage risks. Those who haven’t used credit cards or taken on, say, car or school loans have not yet proven to lenders they can manage credit responsibly. That’s typically a situation that can be remedied in a relatively short period of time, as few as a couple of months. Sometimes a mortgage professional can even help prove an applicant’s worthiness by providing a lender or underwriter with an alternative means of credit history such as a cell phone, cable, car insurance or utility bill, says Fox. Otherwise, it’s a matter of building up a credit history by applying and using credit cards, paying down the debt and paying them off on time.

Remedying the situation in which a partner has poor credit score is more challenging. If the derogatory credit is tied to a specific reason, such as a temporary illness or short-term job loss, lenders may look more kindly on the situation.

Mortgage-seekers on the bubble should consider a portfolio lender such as a credit union or community bank, says Louis Spagnuolo, vice president mortgage banking of WCS Lending LLC in Boca Raton, Fl. Portfolio lenders have their own loan products and set up their own guidelines. “They can use compensating factors to make up for one of the spouse’s credit score. They have more latitude, and they look at the broader picture,” he says.

Spagnuolo also counsels clients with challenging credit scores to pay down their credit card balances and contest anything derogatory being reported on their credit report.

Going it Alone
A partner with good credit can go it alone as long as the single salary is sufficient to support the mortgage. Fox cautions there may be ramifications relating to the title of the home and future credit rating of the spouse left off the mortgage. “In some states, it’s not as easy as it sounds so check with an attorney about implications you might face later on.”

Another option? Find a co-signer, such as a close family member, who will agree to guarantee the loan in the case of a default. The co-signer is liable for repayment until the loan is satisfied, which means it’s not a commitment to be taken lightly.

The important thing to keep in mind is it’s not always necessary to postpone your dream. “People get discouraged because they’re not informed and they give up. There’s definitely hope and definitely options,” Spagnuolo says. In the meantime, Jeremy Capps is building a credit history. He obtained a secured credit card, tied to his savings account. In addition, Hermes added him as an authorized user on her credit card. The plan is to make payments on time and “hope Jeremy will at least be a blip on the radar, enough to qualify for a loan, even if it is at a higher interest rate,” she says.


 


Bailey Properties offices


 


First -Time Home Buyer Tax Credit


$8,000 First-Time Homebuyers Tax Credit

The Economic Stimulus Bill signed by President Obama offers first-time homebuyers a tax credit equal to 10% of the cost of their home up to $8,000. This tax credit is available to first-time homebuyers who purchase a home in the United States as their principal residence on or after January 1, 2009, and on or before November 30, 2009.

Just announced on May 29, 2009, HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.

To quality as a first-time homebuyer, you cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To quality for the full amount of the tax credit, you must earn no more than $75,000 if filing as Single or Head of Household. If filing a joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000.

The tax credit must be taken as a credit from your total tax liability for the 2008 or 2009 tax year. Also, the tax credit is "refundable," meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability.

This credit does NOT have to be repaid, making the tax credit a fantastic opportunity that anyone considering becoming a first-time homebuyer cannot afford to miss.



GREAT NEWS FOR BUYERS!!



Buying Services for Scotts Valley Home Buyers



Congratulations!  You have decided to purchase a home, or are thinking about buying one.  You'll be joining the ranks of hundreds of families who realize that home ownership offers a number of benefits including building equity, saving for the future, and creating an environment for your family.  When you own your own home, your hard-earned dollars contribute to your mortgage. The equity you earn is yours.  Over time, your home will increase in value.

In the following reports, you'll find the information you need to make a wise buying decision.  We'll take you through the planning process step-by-step , to help you determine which home is right for you.  You'll find a host of informative articles on mortgages, viewing homes, the offer, closing details and moving.

Please contact me if you have any questions about buying a home in Scotts Valley or elsewhere in California.

Below, select desired reports and complete the form provided.



Buying Your First Home

Many renters are starting to think about purchasing a home of their own. This article highlights several factors that should be considered when purchasing a home.

The Right Home at the Right Price

This article helps you become a savvy buyer, by pointing out some of the pitfalls inherent in the home-buying process.

Avoid Common Buyer Errors

Some buyers, however, caught up in the excitement of buying a new home tend to overlook some items. When you have a systematic plan before you shop, you’ll be sure to avoid these costly errors. Here are some tips on making the most of your home purchase.

But Do You Need It

Buying a home can be an emotional, time-consuming, and complex process. There are a few things that you can do to help make the process go as smooth as possible.




Good to Know


Do Employers really check your credit? 42% do, 58% do not Many do, according to the Society for Human Resource Management. They state that 42% of U.S. employers routinely do credit checks on job applicants. If a new job is your goal for the New Year, now’s a good time to review your Report.

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