Colorado House Buyer

Getting a mortgage is one of the most complicated steps in buying a homes for sale Colorado Springs or anywhere. Will I qualify for a home loan? What do I need to get pre-approved? What type of mortgage can I qualify for – FHA, VA, conventional, an ARM, fixed rate, …? What is the best type of mortgage to get for my situation? Should I go to my bank or find a Mortgage Broker? Learning more about what you should know is important. Preparing yourself and doing your homework will take some of the stress away and speed up the closing process for you once you’ve made an offer on a house.

In other Pink Realty blogs and articles we gave you a lot of information about credit score requirements and how you can best raise your credit score to meet the minimum requirements for conventional, FHA and VA loans. Referring back to some of this information or even calling Pink Realty at 719-393-7465 (Pink) and asking to speak to our in-house lender will let you know what to expect with your credit and what work you might have to do to qualify. If you think your credit may need some improvement, our lender will help you and will work with you for however long it takes and at no cost to you to build your score and get you qualified.

Lenders can either pre-qualify or pre-approve you. What’s the difference? Getting pre-approved or pre-qualified helps you know how much of a mortgage you can afford, but there is a big difference between being pre-qualified and being pre-approved. While these terms are used pretty loosely in the industry, generally when a lender pre-qualifies you, they run a credit check and base their determination on information you provide them about your work history , income, and available down payment either verbally or maybe with documentation but possibly not complete documentation for their underwriting. The bottom line is that a pre-qualification is largely based on what you tell them. It is possible that the pre-qualification results can mislead you on how much of a mortgage you can really afford.

When you get pre-approved, lenders check your credit report and verify all documentation similar to if they were submitting the application to their underwriting department. This essentially makes the only unknown in the transaction the property.

When you are ready to get pre-approved for a mortgage, be sure to call Pink Realty at 719-396-7465 (Pink) and as to speak to our lender. She would be happy to give you a good faith estimate of what she can do for you and earn your business.

If you are getting pre-approved before you begin house shopping, consider locking in your rate for a period of time, especially if the rates have been increasing. Once you have your pre-approval letter, it shows real estate agents and sellers that you are serious about buying a house and you know what price range you can afford. This not only helps your Pink Realty agent narrow their search for a home into your price range, it also can motivate sellers.

Additionally, once you are pre-approved, don’t do anything that will affect your credit score. Don’t incur new debt (this includes incurring more debt on credit cards), don’t pay off debt, cancel any accounts, transfer any credit card balances and don’t change jobs! Your lender will pull your credit again before you close and you don’t want you credit to have changed or you could lose your approval!

Once you have chosen a lender and are ready to begin the mortgage process there is a lot of paperwork that needs to be processed. You will be required to provide copies of specific financial information. So when you are ready to begin looking for a house and a mortgage, you can start preparing by rounding up the items you will need. The following is a list of the information and documents you will have to provide your mortgage lender if you want to get approved for a mortgage loan:

Information about your employment and your income:

1. Where do you work, how long have you been at your job, and what is your income?

2. Are you a 1099 contract paid worker, paid on commission only, or do you receive a steady hourly wage or regular salary?

3. You will have to show proof of your income. This will include providing tax returns, 1099 statements, paystubs, etc.

4. If you receive disability pay or social security income, you will have to provide statements.

5. Depending on how you receive your income, a steady salary with paystubs or irregular income as a 1099 contractor, your interest rate could be higher. A steady paycheck is generally deemed less risky than pay on commission only or as a contractor.

What are your outstanding debts?

1. You will have to provide information about your recurring debts whether they are for a car loan, a student loan, or credit cards. When the lender runs your credit report these accounts will show on your record, so be honest!

2. The total amount of your recurring debt will be analyzed against your monthly pre-taxed income and a debt-to-income ratio will be calculated.

How much do you have in cash reserves?

1. How much is your down payment and do you have enough cash to make this down payment and cover the required closing costs?

2. Is the money you are using to make the down payment your own money or is it borrowed funds or a gift?

3. You will have to provide the lender with copies of bank statements to show you have enough money to cover these costs. If you are receiving a gift for your down payment from a family member, a friend or a non-profit agency, you will have to provide a gift letter to the lender.

4. Lenders need to know if your cash reserves will be completely depleted after you pay your down payment and closing costs because they want to know you will have enough money left in the bank to cover a couple of mortgage payments in case something happens!

What works in your favor?

The following is a list of things that will definitely benefit you when you are applying for a mortgage:

1. Being employed by the same employer for two or at least being employed in the same line of work for that period of time or longer.

2. Having minimal debt and no recent large purchases, such as an automobile. If your debt-to-income ratio is 36% or less, you are in pretty good shape! You can call Pink Realty, and our lender can help you evaluate your debt ratios. Call 719-393-7465 (Pink).

3. If you can afford to put at least 5% of the sales price down with your own funds. If you qualify for an FHA loan, you may only have to put as little as 3.5% down, or if you are a VA buyer, you may not have to put down anything, but the more you can put down, the better. If you are trying to qualify for a conventional loan, you can qualify for as little as 5% down, but you will have to pay private mortgage insurance which can be expensive and is added to your monthly payment.

4. Having enough cash reserves left in the bank to cover two mortgage payments after you have paid your down payment and closing costs.

Things that can make it more difficult to obtain a home loan?

1. If you are self employed, a contract worker, work on commission only, or have irregular income. You may be considered a higher risk if your income isn’t steady, based only on commissions or if you are paid as a 1099 contract worker. If you are self-employed and have tax returns that solidly substantiate your income your risk can be reduced, but in addition to tax returns, you will also have to show profit and loss statements for your business.

2. If you have a lot of recurring debt or a high amount of debt and your debt-to-income ratio is higher than 36%, you may run into issues or be charged a higher interest rate.

3. If the cash reserves you have will be completely depleted after you have made your down payment and paid for closing costs, the lender can consider you a higher risk because if you lose your job or get injured and can’t work for a period of time, there is a risk you may not be able to make your mortgage payment.

4. If you are receiving gift funds for your down payment because you have no funds of your own to purchase the home, you can also be considered a higher risk and may be charged a higher interest rate.

Before Getting a Mortgage, consider the following:

1. Know what your budget is so you know what size mortgage you can really afford. You can be given a pre-qualifying mortgage amount by a lender based on your income, but you also have to take your monthly recurring debts into consideration, along with unexpected expenses such as medical bills..

2. Depending on your cash situation, you need to know if it is more important to offset a higher rate with lower closing costs or a lower rate with higher closing costs. When you are shopping for mortgage quotes, don’t just look for the lowest interest rate. You also want to compare the terms and conditions. There is a lot of competition out there today, so be sure to ask your lender for any special incentives. Lenders may be willing to waive some fees to attract your business!

When shopping for a mortgage quote, be sure to ask the following questions?

1. What will my monthly payments be?

2. Are there any pre-payment penalties?

3. Are the terms fixed or variable? If the interest rate is variable, what is the interest rate cap? In other words, what’s the highest my interest rate can go and what will the payments be at this rate?

4. Do I have to pay any loan origination fees?

5. Do I have to pay any discount fees for this interest rate?

6. Are there any lender incentives? In other words, will the lender pay any of the closing costs or waive any fees?

7. Will I have to pay private mortgage insurance?

What not to do after you have been approved!

After you have been approved for a mortgage and have received your pre-approval letter from your lender, do not do any of the following or you can jeopardize your approval:

1. Don’t apply for new credit as the inquiries will change your credit score.

2. Make sure you pay all your recurring debt payments on time.

3. Don’t pay off collections or charge off accounts unless specifically told to do so by your lender.

4. Don’t charge more on your credit cards and don’t close any credit card accounts or transfer any credit card balances.
5. Don’t make any large cash purchases as this may decrease your verifiable bank balances.

6. Don’t quite your job.

7. Don’t change your job without first consulting your loan officer.

8. Don’t bounce any checks.

Do your homework and become an educated consumer! Knowledge is power and knowing what’s required to get a mortgage, how to determine the amount of mortgage you can safely afford, and how to shop and negotiate for the best mortgage for your situation will benefit you tremendously. If you have any questions or want help, Pink Realty is here to help you. Give us a call at 719-393-7465 (Pink). Our loan officer will be happy to help you with a loan, and then a Pink Realty can help you find your dream Colorado Springs house! We want to help you through the whole process and feel all the rewards of homeownership! Give us a call today. We are here to help you!

In today’s economy, it’s becoming more and more difficult to get your bills paid on time. After a few late payments, you may wonder what the impact is on your credit report and your credit score. Whether you have lost a job, gone through divorce, lost a spouse, or dealt with a serious medical issue, you know that any hardship can wreak havoc on your financial responsibilities. You are not alone, and we at Pink Realty help people who have dealt with these all the time. More than 43 million people in the United States have credit issues that are severe enough to make obtaining credit with reasonable terms very difficult. If you want to repair your credit and improve your score so that you can buy a home, there are some things that you should understand.

Understanding your credit report and your credit score is very important when you want to get credit. There is different credit scoring models used today depending on what type of credit you are applying for. The important thing to understand about these scoring models is that regardless of what type of credit you are applying for, the human element to judge character and creditworthiness is removed from the transaction. Mortgage credit scores typically range between 350 - 800. If you are looking to buy a car, auto credit scores range between 250 - 900. If you are looking to purchase household furniture or other goods, a consumer credit score is between 300 - 900.

In the finance world, especially the mortgage industry, a lot of Federal regulation has been implemented that has caused the banks to severely tighten their credit standards and the regulations in 2011 are just as tight as they were last year. The economy, with its high unemployment rates and increased cost of living has made it virtually impossible for the average person to maintain perfect credit. The sum of this equation has about 40% of the people who are trying to qualify for a new home loan are being denied for a mortgage.

These days in Colorado Springs, the agents at Pink Realty see that about 2/3 of the real estate listings are either short sales or REOs and 40% of the people trying to buy a home, can’t qualify. Are you one of the 40% that wants to buy a Colorado Springs Houses but you can’t because your credit score isn’t high enough? What can you do about it? We’re going to take a look at what the credit score requirements are for the different types of home loans and then we’re going to address some important credit report facts so you can create your own credit report action items that will help you succeed in getting that mortgage for your dream home.

Most lenders today require a minimum credit score of 640 to get approved for a mortgage loan. What this means is that out of the 3 credit bureaus, your middle score must equal or exceed 640. While some lenders may deviate from this standard rule, they don’t without a cost. You may have to pay a higher interest rate, come up with a larger down payment and they may require that you have enough reserves in the bank to cover several mortgage payments. So, while banks may advertise that they lend on lower scores, beware of what it will cost you. Additionally, banks don’t want to lend credit to those with a lower score than 640 because it is harder for them to sell the loan to another bank, and they only want to make loans that are marketable.

If you are applying for a conventional mortgage, your credit is most likely in good standing. Conventional loans are typically for borrowers that have a sizeable down payment and a good credit score. While many lenders issuing conventional loans require a credit score of 660, ideally they look for scores of 720 or higher. Additionally, they look for a minimum down payment of at least 5% of the sales price. Most conventional loans are underwritten by Fannie Mae and Freddie Mac, so the higher your credit score, the more favorable credit terms you will get. In today’s market, you don’t see too many conventional loans being issued, especially without private mortgage insurance. If your credit score meets the requirements and you have a down payment of 20% of the purchase price, you can obtain a conventional loan without private mortgage insurance.

If you’ve had a few dings on your credit report and you know your score doesn’t top the chart, you can apply for an FHA insured loan. While FHA doesn’t issue loans, they insure them, and their credit requirements are not as stringent. However, the lenders who are granting FHA loans may impose their own credit standards in order to better protect themselves from losses and to be able to better sell the mortgages on the secondary market. In the fall of 2010, HUD established some new credit score requirements. Borrowers with credit scores of 580 or higher were eligible for maximum financing (96.5%). Borrowers with credit scores between 500 - 579 were eligible for 90% financing and borrowers with scores below 500 were not eligible.

The VA guarantees loans to veterans and active military personnel. Lenders that issue VA loans will provide 100% financing and look for credit scores of 620 or higher.

OK, so what do you need to do to get your credit score up so you can qualify for your dream home? The first thing to do is get a copy of your credit report. You can get a free copy of your credit report from each of the 3 credit bureaus annually, however if you want your FICO score, you generally have to pay a fee. You can also ask a lender to pull your credit as well, and they can give you your FICO scores for free, but keep in mind that that credit inquiry will have an impact on your score.

We’re going to take a look at what components makes up your score and give you some tips on how you can raise your score in the fastest amount of time.

Below is a chart that defines the 5 components that comprise your FICO scores (credit score). 35% of your total score is determined by past delinquencies, 30% by your revolving credit-to-debt ratio, 15% on the average credit age, 10% based on credit mix, and 10% on credit inquiries.

Past delinquencies weigh the most heavily on your total score, which probably makes you think you should pay off all past delinquent accounts. This is not necessarily so. Depending on the age of older past due delinquent accounts, it isn’t always best to pay them off. Bad debts can only stay on your credit report a maximum of 7 years from the date of last activity. If you pay them off, the account will show paid, but the derogatory status remains and the account will now stay on your report for a maximum of 7 years from the date you paid it off. Therefore, check the dates on older past due accounts, charge-offs or collections. If the accounts are from several years ago, they will fall off your report on their own soon enough. Remember, the maximum amount of time information can remain on your report is 7 years. It doesn’t mean they will stay on there for 7 years. If you have extra money and you want to use it to better your credit score, you can pay off some recent charge-offs or collection accounts. While the derogatory status will stay, the account will show paid. Once older past due accounts drop off your report, your score will automatically improve.

The next big bang on your credit report is your revolving credit debt ratio. There are a lot of myths about credit cards and how they impact your credit score. Some people think you should only have a couple of credit cards, others think you should combine all credit cards balances into one credit card balance. Some people don’t think you should have high credit limits and some people think if you have a lot of credit cards, but don’t use them, you should cancel them. Finally, some people think if you pay off your credit card every month, you won’t establish credit. All of these are myths. The longer you have had a revolving account in good standing, the better impact it makes on your score. Remember average age of a credit file is 15% of your credit score. Keep those old accounts open! If you have one or more credit cards with high credit limits and manage them wisely, high credit limits can actually be advantageous. If you have several different types of credit cards, including department stores, keep them open.
Closing credit card accounts can actually lower your score. But be aware, lenders have started cancelling inactive accounts or lowering credit limits on inactive credit card accounts. 30% of your credit score is determined by your debt-to-credit ratio. The lower your ratio, the better! Therefore, if you have cards that have a high credit limit, but you use the cards conservatively and keep small balances, it improves your score. The rule of thumb is to keep credit card balances less than 30% of the credit limit. For example, if you have a credit card with a $1000 credit limit, you want to keep the balance on that account less than $300. The more credit cards you have with a limit and the smaller the balance you keep on those cards, the lower your debt-to-credit ratio is. If you have ‘maxed’ out your credit cards and your debt-to-credit ratio is 95 - 10%, the best way to improve your credit score is to work hard to get the balances down below 30% of the limit.

The older your credit history is the better. The longer you keep and maintain accounts in good standing, the more positively it impacts your score. If you have a credit card account that has been opened for 10 years, don’t stop using the card or the issuer might decide to close the account or stop reporting to the credit bureau. While the information might still be available, it won’t add as much weight to your score. So keep older card accounts active even if it means charging a recurring monthly bill to the account and then paying it off each of month.

While the mix of credit you have on your file only makes up 10% of your total score, it is important for lenders to see how you handle different types of credit. If you are trying to build new credit, one of the best ways is to take out an installment loan. This might be for a car or household goods. Showing that you can make regular monthly payments over time is very important.

Finally we get to inquiries, which also make up 10% of your score. There are two types of inquiries: Hard inquiries and soft inquiries. If you are requesting your own annual credit report or applying for a job and your potential employer is pulling your report, these are soft inquiries and do not impact your score, however, hard inquiries do.
If you are shopping for a new car and go to 3 or 4 different car dealerships and each one runs a report, it will impact your credit score. However, the credit bureau system detects the similarities in reports pulled and the 3 or 4 reports will count as only one inquiry. The same happens if you are shopping for a home loan. If 3 different mortgage lenders run your report, it will count as one inquiry. Where inquiries really begin to hurt your score is when you apply for various types of credit in a short period of time. If you are trying to apply for credit cards and buy a car and a house at the same time, the inquiries will not only lower your score, but raise a red flag for lenders!

In summary, we mentioned the following points that can help improve your credit score:

• If you have old past due accounts, leave them alone. Let them age and fall off your report on their own.

• If you do have past due or delinquent accounts that are current, you can pay them off. The derogatory information remains, but the status changes to paid. While this does not impact your score, it is beneficial.

• Pay down your credit cards. Lenders like to see a big gap between your balance and your credit limit. While it makes sense financially to pay down high interest cards first, if you are looking to raise your credit score, it is best to pay down the cards that are closest to their limit! Work to keep a low debt-to-credit ratio on all of your revolving credit card accounts. Keep long standing accounts active, keep high balance accounts open, but use your cards conservatively so your debt-to-credit ratio stays low. If you have high balances on your credit card accounts, you will be most rewarded by paying the balances down until they are less than 30% of the credit limit. This is where you will get the biggest bang for your buck.

There are a few other things you can do to improve your score.

• If you have accounts that are old and due to fall off your report soon, you can contact the credit bureau to dispute the account. If it is old and has a small balance, there is a good chance the collection agency won’t dispute the charge and it will be removed.

• Look for errors on your credit report. If you see accounts that are not yours, dispute them. 70% of the credit reports have errors on them. The chances of there being an error on your report are good. So review your report and if there are errors, dispute them to have them removed.

• Old, past due accounts don’t get discarded because you have new, current accounts. Sometimes time is required to raise your score. Let old bad debts just fall off when they’ve aged. To mess with them will add 7 more years of derogatory information.

• There are a few other things you can do to increase the improvement. If you have accounts that are old and due to fall off your report soon, you can contact the credit bureau to dispute the account. If it is old and has a small balance, there is a good chance the collection agency won’t want to dispute the charge and it will be removed.
Other things to consider:

Your credit score is based on the information in your credit report, so check for errors. Some of these errors can really hurt you, so review your credit report thoroughly and look for any errors in the following areas:

• Correct any late payments, charge-offs, collections or other negative items on your report that are not yours.

• Correct any credit limits that are incorrect. If your credit card company has reported a credit limit lower than what it actually is, get it fixed.
• Correct any accounts that may be listed as “settled,” “paid derogatory,” “paid charge-off” if you paid them on time and in full.

• Correct any accounts that are still listed as unpaid that were included in a bankruptcy.

• Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your reports.

• If you’ve closed accounts and they still show open, don’t correct this. Closing accounts can actually lower your score.

• If you are trying to establish credit because you have not credit, apply for a credit card. Charge something small each month, such as a tank of gas or dinner, and pay it off each month. After establishing some credit with a credit card company, apply for an installment loan. It can be a simple personal loan that you can pay off in 12 months. You want to do this to build a mix into your credit file.

Avoid these common credit mistakes when you are trying to improve your credit scores:

• Don’t ask a credit to lower your credit limit because it reduces the gap between your balances and your available credit. The lower the gap, the more it hurts your scores.

• Avoid making late payments. While a missed or late payment will do more damage to a good credit score than it will an already low score, you definitely want to avoid missed or late payments if you are trying to improve your score.

• If you are trying to improve your scores, applying for a new account or additional credit when you already have enough credit can ding your scores, unless you are recovering from a bankruptcy. In this case, applying for an installment loan can help.

• Don’t transfer credit card balances from a high-limit card to a lower-limit one or transfer small balances to a high limit card. It’s better to have smaller balances on a few cards than a big balance on one. Remember the debt-to-credit ratio.

Having good credit and being an educated consumer can save you money. You will get better interest rates and better terms, which saves a lot of money in the long run. Additionally, you can save money on insurance. Know what is in your credit report and know what your score is. Lenders are in business to make money. If you don’t know what’s in your credit report or what your score is, a lender can charge you more. Understanding what’s in your credit report and knowing what your score is can give you bargaining power when negotiating interest rates and terms.

For more information on your credit, how to improve it, or to see what kinds of loans you qualify for, call Pink Realty today at 719-393-7465 (Pink) and ask to speak to our lender. She will gladly help you. Once you are qualified for a loan, one of our experienced agents will help you find your perfect Colorado Springs homes!

Today’s economy has caused many people financial hardship. Whether your hardship is the result of a loss of employment, illness or injury, death of a spouse, divorce, or bankruptcy, hardships can result in derogatory information ending up on your credit report. Unfortunately, derogatory information leads to further hardship as needed credit is denied, future employment is affected and interest rates and insurance premiums go up leaving you in a ‘debtor’s prison’ that seems to have an endless sentence with no right to appeal. While solving credit report and credit repair issues may seem to be a mystery, there are myths and truths you should know and this article addresses them and think before you get Colorado Springs Foreclosures

Myth # 1: I can pay off my past-due charge-offs and collection accounts and my credit report will show ‘paid’ and will no longer be a negative strike against my credit score.

While it is difficult to fully repair your credit if you have outstanding past-due accounts, paying off old accounts that will automatically be removed shortly in the future, can harm your credit for a longer period of time. Past due accounts, collections, charge-offs and judgments can stay on your credit report for a maximum of 7 years. Bankruptcies and foreclosures can stay on your credit report for a maximum of 10 years. This length of time is determined from the last date of activity posted on your account. If you have an old collection that was placed on your credit report in 2000, it would automatically be deleted in 2007. However, if you pay off the ‘bad’ debt in full in 2005, the account will show ‘paid’, however the account is still reflected as an account that was past due, or a collection and that negative mark will now remain on your credit report until 2012. Therefore, if you have funds to pay off any delinquent accounts or collections, it makes more sense to pay off the recent derogatory accounts as the old accounts will drop off on their own within 7 years of the last posted activity.

Myth # 2: If a negative item is deleted from my credit report, it will just come right back on my report.

In truth, credit bureaus will temporarily delete a negative listing if they have not heard from the creditor within 30 days of an item being disputed. If the creditor submits verification of the account, even after 30 days, the credit bureau can re-insert the negative account back onto your credit report. However, many times the creditor fails to respond and the negative item is deleted permanently. If the creditor does verify the account and it gets put back onto your credit report, it is oftentimes deleted again because the challenge process to fully verify the account is intensified and the creditor no longer pursues the account.

Myth # 3: Items such as bankruptcies, foreclosures, judgments and tax liens are impossible to remove from a credit report.

While it can sometimes be a difficult and time-consuming process to remove these types of accounts, every type of negative listing has been removed from a credit report.

Myth # 4: Disputing a credit report is easy. Any consumer can do it themselves.

While it is easy to dispute accounts on a credit report, getting results can be difficult. Credit reporting agencies are publically traded, profit seeking entities and their time spent investigating consumer disputes cuts into their profits. Therefore, they work harder to hinder your progress to repair your credit than they do to help your progress. There are companies that tell you getting disputes resolved yourself are complex, time-consuming, and frustrating and many of these companies charge high, upfront fees and make false promises about getting all your negative information removed from your credit report. Beware of these companies and their scams. You can get more information about how to repair your credit yourself and credit repair scams that you should be aware of by going to the FTC (Federal Trade Commission) website at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm or you can simply call us at Pink Realty at 719-393-7465 (Pink) and ask to speak to our lender. She will be happy to help you get your credit score up.

Myth # 5: The credit bureau allows me to submit a 100-word explanation to tell my side of the story. Creditors read my statement and take it into consideration.

While the credit bureaus do allow you to submit an on-line explanation to dispute an account, the creditor does not necessarily take it into consideration. While credit reporting agencies are supposed to forward the information to the creditor, there is a good chance the creditor will never see your explanation! To file a dispute, send a letter to the credit reporting agency with attached copies of any documentation you have to support your dispute. Be sure to send this letter by certified mail - return receipt requested, so you can document that your information was received by the agency. Additionally, send a letter to the creditor and again, sent the letter by certified mail - return receipt requested so you can document it was received by the creditor. The consumer reporting agency must investigate your dispute within 30 days. They are required to forward your information to the creditor. The creditor must respond and if the investigation proves the information reported to the credit bureau is inaccurate, the creditor must notify the credit reporting agency and they must correct your file.

Myth # 6: The credit bureaus are a government agency and therefore infallible.

Credit reporting agencies, such as Equifax, Experian and TransUnion are publicly and privately traded companies that are in business to earn a profit for their stockholders. They are not government agencies and are very heavily regulated as a result of public abuse and mistakes. The consumer protection legislation and laws allows consumers to challenge these agencies and can force the removal of inaccurate, outdated, unverified or unverifiable information.

Myth # 7: I can create a totally new credit file by getting a Federal Tax ID number or changing a few numbers on my social security number.

There are credit repair companies out there that let you believe you can obtain a completely new credit file by doing this. Beware! This is a fraudulent scheme! It is a criminal offense to lie on a credit application. If you are caught doing this, you will suffer the consequences.

Myth # 8: If I build enough good credit, it will offset my bad credit and make me creditworthy.

Today, computers compile a point score to determine your creditworthiness. There is no longer a human element that can determine your creditworthiness by your character or current situation. Therefore, any negative credit information can hinder your ability to get future credit. However there are things you can do to help improve your score. First and most importantly, review your credit report for accuracy and dispute any inaccuracies! You are entitled to a free credit report each year. AnnualCreditReport.com is the ONLY authorized source for the free annual credit report that’s yours by law. Based on a study done by PIRG (Public Interest Research Groups), 70% of consumer credit reports contain incorrect information, so there is a good chance you may find errors on your report that can be removed. Secondly, strive to bring recent past due accounts current. Remember from Myth 1, the old accounts will be removed automatically after a maximum of 7 years from the date of last activity. Also work to reduce the balances owed on revolving credit accounts to 50% or less of your approved credit limit. Approximately 35% of your credit score is determined by past delinquencies and 30% is determined by your revolving debt ratio (balance due / credit limit). Because past due accounts and Revolving Credit Debt Ratio equal 65% of your total credit score, these are the accounts that you should address first to make the biggest impact on raising your credit score.

Myth # 9: It is illegal for creditors to remove negative accounts on my credit report. The law requires these items stay on the credit report for at least seven (7) years and in the case of bankruptcies, 10 years.

The law states that negative information can appear on your credit report for a maximum of 7 years, 10 years in the case of bankruptcies. Creditors and credit bureaus may choose to delete negative items anytime they see fit, however they cannot let them say on longer than the maximum amount of time.

Myth # 10: Nonprofit organizations like Consumer Credit Counseling Service (CCCS) can help me restore my credit.

While these agencies may be non-profit, they still charge for their services. Oftentimes, seeking help from these agencies can prove to be a red flag for creditors and your credit can be treated similarly to a Chapter 13 bankruptcy. Again, if you seed credit help, beware of the many credit repair scams that are out there. The Credit Repair Organizations Act requires credit repair organizations to give you a copy of the “Consumer Credit File Rights under State and Federal Law” before you sign a contract. They must also give you a written contract that spells out your rights and obligations. Read these documents before you sign anything!! And before signing, know that a credit repair companies cannot do the following:

• make false claims about their services

• charge you until they have completed the promised services

• perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Before you sign a contract, be sure it specifies:

• the payment terms for services, including the total cost

• a detailed description of the services the company will perform

• how long it will take to achieve the result

• any guarantees the company offer

• the company’s name and business address

Today, nearly 70% of Americans are denied credit because of their credit scores. At Pink Realty we see this all the time, so we understand the credit help that’s needed. Our Colorado Springs realtor work with many people that are trying to buy homes, but just don’t qualify because of their credit score. This is why our agents work with several reputable lenders that work with these buyers at NO charge. They help you understand your credit report and your credit score. They will work with you to help you improve your score. So, before you spend your hard earned money on what might be a fraudulent scam, call us at 719-393-7465 (Pink). We can put you in touch with a lender who will work with you to get your credit where it needs to be so you can buy that home you want to buy! You can reach Pink Realty at 719-393-7465.

Many Colorado Springs house hunters have lost confidence in the housing market due to some news released in the media. Here are some of the misconceptions out there which after this, hopefully will be dismissed.

Misconception number 1: Home loans are impossible to get right now

Traditional loans are available from as low as 5% and less. Another option is an FHA loan and they only require a 3.5% deposit. If you have not owned a home for 3 years, you even qualify for a first time home buyer loan. El Paso County has a 14 million dollar bond for you that you can get with a 3.9% fixed rate and down payment aid that you won’t have to repay. Colorado Housing and Finance Authority (CHAFA) also has funds that carry a small interest rate and down payment. There are other ways to receive assistance to purchase a house both on the local and national level.

The misunderstanding comes from the fact that the way in which persons qualify for loans has changed. For example, currently, you have to be able to prove appropriate income and a good credit score to get a mortgage loan. All that means is that the days with little or no documentation for loan approval are over. This is a good thing as this is one factor that led to the amount of foreclosures now being experienced. In addition, if you have a real estate broker that’s a good negotiator, you may be able to include your closing costs in the final agreement further reducing your home-buying expenses.

Misconception number 2: Rates aren’t increasing now so there’s no rush

Let’s look at an example. The typical 30 year fixed mortgage rate for the year 2003-2007 was 5.75%. Therefore, if you had a $200,000 mortgage, the monthly payments would work out to $1,167. Today, the same 30 year mortgage is between 4% to 4.25%. That same $200,000 mortgage at 4.25% would work out to $983. Imagine if you sold the $222,000 house and purchased a $300,000 house. The payments would move from the 5.75% rate to the recent 4.25% rate so that equates to a difference of $144 per month in payments for $80,000 more of house.

Misconception number 3: You’re better off waiting until there’s an improvement in the market

History always repeats itself. It’s not the first time that prices have fell. Markets are cyclical and knowing this we know that once again, prices will go up. If you do not currently own a Colorado Springs house, or are considering an upgrade to what you currently have, then this is the perfect opportunity for you to buy. If you are even only thinking about investing, it makes sense to buy when prices are low as well as interest rates and there is a lot of inventory.

Prices are beginning to stabilize and the economy is in the process of improvement. As a result, prices may increase soon in order to keep inflation steady so it is the best time to buy. Not to mention that banks want to get rid of their foreclosures and are reducing prices.