Costa Mesa's Neighborhood Blog

A blog about Newport and Costa Mesa with an emphasis on Costa Mesa Real Estate and Newport Beach Real Estate, written by a lifetime local resident of coastal Orange County whose knowledge of the area, combined with a strong background in mortgages, real estate and being an attorney, gives her clients many advantages.

One Quick and Easy Way to Help Your Credit Score

One Quick and Easy Way to Help Your Credit Score

 

There are many things you can do to increase your credit score and to harm it.

 

But, there is one simple way to help your credit score, and it's counterintuitive to many.

 

Many people decide to cancel credit cards after paying them off thinking that it is a good thing.

 

 

The problem is that the score models look at the amount of debt you have compared to your available credit balance. 

 

For instance if you have $5,000 in debt and $20,000 in available credit, your debt ratio is considered low.  However, if you have $5,000 in debt and only $6,000 in available credit, you have a high debt ratio.  So if you canceled three credit cards, you might show a higher debt ratio and thereby lower your credit score.

So, what should you do?  Don't cancel your credit cards unless you know that you will be unable to avoid the tempation of using them if you don't. 

Instead, use the credit cards a couple of times per year to purchae necessities such as food or gas, and then pay them off.  If you like, you could write a check (or set up an online payment) immediately after using the card.  This shows credit worthiness and prevents incurring finance charges.

 

If you would like additional tips for helping your credit, please give me a call at 714-319-9751.

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About the author: Christine Donovan is a California Residential Real Estate Broker with experience in assisting clients buy and sell residential real estate.

Are you upside down in your home? Is it worth less than you owe? Are you concerned about making your mortgage payment? For more information see Options to Foreclosures, understanding short sales or contact me at christine@donovanblatt.com to discuss your options.

If you want to buy a home or to list your property for sale, please click Newport Beach homes, Costa Mesa homes, Huntington Beach homes or Orange County homes.  Click the link if you are interested in buying a home at a courthouse auction sale.

Contact me at christine@donovanblatt.com or 714-319-9751 to learn about her system which will make your buying and selling experience easier.

Disclaimer: All information in this blog is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warantees either express or implied. This blog is not intended to offer any legal, tax or other advice.

Federal Government Disclaimer (MARS) 

  1. You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject or accept the offer, you do not have to pay us.  
  2. Christine Donovan, DonovanBlatt and Donovan Group are not associated with the government, and our service is not approved by the government or your lender; and 
  3. Even if you accept this offer and use our service, your lender may not agree to change your loan.

Click Orange County homes for sale to view all OC homes for sale.

14 comments • Christine Donovan Costa Mesa CA Homes Broker/Attorney 800-610-7253 DRE01267479 • January 10 2011 09:54PM

How Does the Bank Determine How High a Loan I May Have on My Orange County House?

I have many people who would like to buy a home in Orange County, CA who wonder if the banks are even lending right now.

Some would like to take advantage of the Huntington Beach First Time Buyer Program or the Fountain Valley First Time Home Buyer program but don't think they will be able to get a first mortgage.

I believe it's very important that potential buyers understand that they will only be able to use a particular percentage of their income towards their mortgage, and Chris Thomas does a great job of explaining how the numbers come together below.

It's important to make sure that your mortgage consultant does an accurate job of calculating your income and what your debt to income ratio is so that you can be approved for the correct loan amount.  This is especially important if you are self employed, have more than one job, work hourly, receive bonuses or get over time.

If you have any questions, or would like to be referred to an experienced mortgage broker, please call me at 714.319.9751.

 

Via Mortgage Support Services:

We get a lot of questions about debt-to-income ratios these days.  Here are the underwriting guidelines for the various types of loans: 

Conventional (non-government) loans:

  • If the loan is underwritten manually (by a person), the debt-to-income ratio (DTI) is 36%.  If the borrower has strong compensation factors, the DTI can be as high as 45%.  Compensating factors include such things as very high credit scores, large down payment, large amount of reserves (money in the bank), etc.
  • If the loan is underwritten by the underwriting software that is available to some lenders, the DTI ratio is 45%, and it can go as high as 50% with strong compensating factors.
  • IMPORTANT NOTE:Individual lenders are allowed to impose their own, more restrictive DTI guidelines on top of Fannie Mae's, so make sure you are using a lender who does not do that.
  • SUPER IMPORTANT NOTE:Private mortgage insurance companies impose their own, more restrictive DTI guidelines on top of the lender's guidelines and Fannie Mae's guidelines.  At the moment, 41% is the maximum allowable DTI at most private mortgage insurance companies.  Their guidelines change constantly, so this needs to be checked every time a loan is originated.
  • In the old days, there were two DTI ratios for conventional loans - one for the housing expense ratio and one for the total expense ratio.  Fannie Mae no longer uses two DTI ratios.

FHA loans:

  • Unlike Fannie Mae, FHA uses two DTI ratios.  The front-end DTI ratio (housing expenses) is 31% and the back-end DTI ratio (total expenses) is 43%.  This only applies if the loan is manually underwritten.
  • If the loan is underwritten by the software FHA provides to some lenders, then the ratios are not specified.  It depends on credit scores, down payment, reserves, etc.  We commonly get approvals from the software for ratios of 40-46% for the housing ratio and 50-55% for the total expense ratio.
  • Lenders are allowed to add their own, more restrictive guidelines on top of FHA's, so it is wise to use a lender who does not.
  • Mortgage insurance is not an issue with FHA ratios because FHA insures the loan.  There are no additional restrictions for mortgage insurance with FHA loans.
  • If a borrower is using alternative credit (they have no credit scores and are using other trade lines to establish credit - rent, utilities, etc.), then they are restricted to the manual underwriting guidelines - 31% front-end and 43% back-end.

VA loans:

  • VA only uses one, total expense ratio as well.  It is 41% if the loan is underwritten manually.
  • If the underwriting software that VA supplies to some lenders is used, then the DTI ratio is not specified.  We typically see loans approved with DTI ratios in the 45% - 55% range.  It all depends on credit scores, reserves, etc.
  • Lenders are allowed to add their own, more restrictive guidelines on top of VA's, so check with your lender before assuming VA's guidelines can be used.
  • There is no mortgage insurance with VA loans, so there are no additional restrictions related to mortgage insurance.

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About the author: Christine Donovan is a California Residential Real Estate Broker with experience in assisting clients buy and sell residential real estate.

Are you upside down in your home? Is it worth less than you owe? Are you concerned about making your mortgage payment? For more information see Options to Foreclosures, understanding short sales or contact me at christine@donovanblatt.com to discuss your options.

If you want to buy a home or to list your property for sale, please click Newport Beach homes, Costa Mesa homes, Huntington Beach homes or Orange County homes.  Click the link if you are interested in buying a home at a courthouse auction sale.

Contact me at christine@donovanblatt.com or 714-319-9751 to learn about her system which will make your buying and selling experience easier.

Disclaimer: All information in this blog is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warantees either express or implied. This blog is not intended to offer any legal, tax or other advice.

Federal Government Disclaimer (MARS) 

  1. You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject or accept the offer, you do not have to pay us.  
  2. Christine Donovan, DonovanBlatt and Donovan Group are not associated with the government, and our service is not approved by the government or your lender; and 
  3. Even if you accept this offer and use our service, your lender may not agree to change your loan.

Click Orange County homes for sale to view all OC homes for sale.

2 comments • Christine Donovan Costa Mesa CA Homes Broker/Attorney 800-610-7253 DRE01267479 • February 06 2010 11:12PM

9% of All Mortgages Are Delinquent or in Default - Mortgage Free Fall? Where Will It Stop?

According to the latest numbers from Mortgage Bankers' Association, 9% of all Americans with a home mortgage are either in delinquent or in default on their mortgages.

The effect is being felt in record number of foreclosures and also in bank failures, and now the U.S. Government is planning on taking over Fannie Mae and Freddie Mac. Fannie and Freddie are government sponsored entities which, between the two of them, own or guarantee nearly one-half of the approximately $12 trillion in mortgages in the U.S.

In July 2008, Orange County ranked 35 of the 56 counties in California in terms of foreclosures with 2206 notice of defaults filed and 2128 notice of trustee sales. 

Where will all of this end? Are we going to start to see an improvement? 

Though there was a slight decrease in NODs filed in July, some believe that this is a result of Countrywide not filing as many during their integration with BofA.  We'll have to wait another month or two to see.

Additionally, there are still many two and three year fixed adjustable mortgages scheduled to reset in the next year or two.  When this happens, and the teaser rates that have been in effect no longer are, there are likely to be many more homeowners who cannot afford their new payment, potentially fueling the foreclosure fire.

However, despite all of this negative news in the housing industry, there is some potentially good news.  In Costa Mesa in August 2008, 61 homes sold compared to only 40 homes in August 2007.  Though this might indicate that the market is beginning to recover as more homes are selling, it is also important to note that in August 2008, the median price of homes sold was $485,000 while in August 2007 it was $640,000. 

Costa Mesa Home Sales' Comparison

This is a whopping 24% decrease in median values with potentially a corresponding increase in the number of homes sold of over 50%. See the following links for more information on Costa Mesa Real Estate and Costa Mesa Real Estate Values.

With this decrease in price has come a corresponding increase in the number of people who can afford to buy a home.  According to CAR (California Association of Realtors) in the second quarter of 2006, only 23% of first time home buyers could afford to buy a median priced home in California.  By the first quarter of 2008, this had increased to an incredible 44%.

So in answer to the question of where it will stop, perhaps as the number of mortgages that are to reset decreases and the affordability index for first time buyers increases, hopefully we will see the market start to see some stabilization.

Interested in taking advantage of the current values in Orange County, click Find an Orange County Home to begin your search.

 

Information obtained from several sources, including but not limited to: CAR, Dataquick, SoCAl MLS.  Information deemed reliable but not guaranteed.

 

Please contact me at christine@donovanblatt.com for additional information on Costa Mesa Homes.

***************************************************************************

About the author: Christine Donovan is a California Residential Real Estate Broker with experience in assisting clients buy and sell residential real estate.

Are you upside down in your home? Is it worth less than you owe? Are you concerned about making your mortgage payment? For more information see Options to Foreclosures, understanding short sales or contact me at christine@donovanblatt.com to discuss your options.

If you want to buy a home or to list your property for sale, please click Newport Beach homes, Costa Mesa homes, Huntington Beach homes or Orange County homes.  Click the link if you are interested in buying a home at a courthouse auction sale.

Contact me at christine@donovanblatt.com or 714-319-9751 to learn about her system which will make your buying and selling experience easier.

Disclaimer: All information in this blog is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warantees either express or implied. This blog is not intended to offer any legal, tax or other advice.

Federal Government Disclaimer (MARS) 

  1. You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject or accept the offer, you do not have to pay us.  
  2. Christine Donovan, DonovanBlatt and Donovan Group are not associated with the government, and our service is not approved by the government or your lender; and 
  3. Even if you accept this offer and use our service, your lender may not agree to change your loan.

Click Orange County homes for sale to view all OC homes for sale.

0 comments • Christine Donovan Costa Mesa CA Homes Broker/Attorney 800-610-7253 DRE01267479 • September 07 2008 06:43PM