FICO to walkaways: You're on our screen

Fair Isaac, developer of the ubiquitous FICO score, has a new warning for homeowners plotting a strategic default or walkaway: We can now spot you in advance. FICO has developed a black-box risk-identification tool that enables lenders and mortgage servicers to tag you months in advance -- and then pursue their own strategic measures to intervene.

 

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Loan Pre-Approval Process and Checklist

The house shopping process can be somewhat complicated and the same can be said for the loan shopping experience. Before you get to the fun of house touring and decision-making for your new life, a prospective home buyer needs to be pre-approved and fully understand what the pre-approval process entails.

"Pre-approval is more involved than just having a discussion with a lender," says Lawrence Finn, Jr., CEO Owner/Broker of Coach Realtors. Getting pre-approved for a mortgage loan is a review of your financial status and lets you know exactly how much you can spend on a home. The pre-approval letter given to you by the lender after the appointment, shows prospective sellers and real estate agents that you're a serious buyer. In addition, many sellers will require a pre-approval letter prior to reviewing your offer. "So lining up your financing ahead of time is a very important initial step towards buying a home", adds Mr. Finn.

At the time of the appointment with a mortgage lender, you will need to bring certain documents with you to verify your identity, assets and expenses. The lender needs to gather all of the required information in order to offer you a loan, and your credit report will need to be checked. A pre-approval letter in not an obligation to borrow with a specific lender.

Some of these documents needed for your meeting include:

A most recent W-2 (or entire tax form if self-employed)

A copy of a recent bank statement (including any money market or savings accounts)

Proof of IRAs, retirement accounts, stocks or mutual funds

Your driver's license

A recent paystub from work

Current expenses such as auto loans

To download a complete document checklist, please click here.

Whether you're all set to buy or just trying to figure out what you can buy, choosing a lender who listens carefully, has products for your needs, responds promptly, and treats you with respect is critical. The loan officers at Residential Mortgage Division, the official mortgage partner of Coach Realtors, are trained to ask questions that will give them a clear picture of both your current needs and future goals. They can help you customize a home financing program that will not only help you buy a home now, but one that can also start you on the road to overall financial success.

Remember: just because you are pre-approved does not mean you are guaranteed to receive a loan from that lender. The actual loan is granted after the bank conducts an appraisal on the home your intend to purchase to make sure you aren't paying more than the house's value. This prevents you from over-paying and protects the bank against any buyers who may default on the loan in the future.

Four Steps to Take Before Buying a Home

Did you know that one in seven Americans has at least 10 credit cards? It's true. However, the average is four, according to a report from Experian.

If you are considering buying a home, there are four crucial elements you must have in place before taking the first steps toward homeownership. Whether you are a first-time home buyer or moving up to a new home, plan for your move by preparing for the following:

1. Create a budget. Home buyers need to have enough money to cover monthly mortgage payments comfortably. "Properly budgeting your monthly finances is a must before taking any of the first steps towards finding and moving into a new home," Lawrence Finn, Jr., CEO Owner/Broker of Coach Realtor. Though seemingly an obvious preparation, many foreclosures occur because buyers don't carefully examine their income and expenses ahead of time and fail to plan for monthly mortgage payments. "Talk to mortgage professional within our firm's mortgage partner Residential Mortgage Division or a Coach Realtors sales associate to see if you can afford a monthly mortgage. The more financial planning you do in advance, the less likely you'll be in for any surprises," says Mr. Finn.

2. Plan for taxes and insurance. On the topic of affordability, be sure your income will cover any property taxes and homeowner's insurance payments. Buyers need to make sure their monthly income covers these extra expenses. While planning your finances, include these two items in your budget. Make sure to have other spending money and extra cash available as well. You never know when something will break down or need replacing.

3. Factor in maintenance. Buyers must also have the ability to properly maintain the home. "Maintaining the home is important. If the home isn't in good condition, you will lose value on what is most likely your largest investment and set the stage for a potential loss when it comes time to sell," says Finn. Don't ignore problems that need attention.

4. Review your credit standing. Lastly, a home buyer must have good credit – especially in today's lending environment. If you have late payments, a bankruptcy or unpaid debts, it will be difficulty to lock in a mortgage. If you do land a mortgage deal, the interest rate will be higher if your credit score isn't up to par. A good line of credit will ensure the best rates possible. Pay off those debts before trying for a mortgage.

With the right funds, maintenance resources and a good line of credit, you will be well on your way to jump starting the home buying process.

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