2. Some of the other features credit counselors do is tell you what balances you need to be working on to get them paid down faster. You will usually be told to do something like pay down the balances with the highest interest rates first and then work on the other debts. Again, you should know this.

3. Credit counselors will work with you and your creditors to maybe get some kind of payment plan going because of your financial problems. Sometimes this helps and sometimes this does not. More than likely you would be better off not paying the credit counselor their fee and taking that money and paying your bill off.

4. Once you make an agreement with a credit counselor they inform you to stop paying your bills. That sounds weird huh. Stop paying my bills? Yup. What happens is you pay the credit counselor and they pay your bills for you. Sometimes they even set it up with your employer to have a percentage of your wages taken out of your paycheck before you even touch the money. This all sounds so good but what about your bills and your credit report?

5. Depending on what credit counselor you work with some pay all of your debts in full and you pay them a smaller percentage than what you were paying your credit cards, home equity line of credit, car payments, personal loans, etc. This on paper seems like a better deal. You can consolidate all of your payments into one monthly payment and probably lower your effective interest rate to a lower one. An effective interest rate is one where you count up all of the interest rates you have and take their average to determine what you are truly paying. The credit counselor will negotiate with you to have a interest rate probably half of what you are paying and put it on a 3, 5, or 10 year loan with them.

6. Other credit counselors will pay your debts for you with the one payment you send them. They pretty much become your secretary and handle everything for you. Still sounds like a burden taken off of your shoulders?

7. Wrong. Once you make an agreement with them to stop making payments it takes about a month or two for them to make payments for you and during this time period you are starting to get lates on your credit report. So everything you told them to pay for you is now getting behind. This is when the late fees kick in and all of those credit card guidelines that say if you are late on just one payment they can raise your interest rate from the fixed 9.99% to 17% kick in the next month. So now you are paying more in interest, getting late fees, and your credit report is getting jacked up.

8. Even if you go the route where the company pays all of your debts off the real player in this scenario comes to life. The second you sign up with a credit counselor it gets put on your credit report. The credit bureaus recognize this and immediately your credit score will drop. In some cases people with poor credit history there score will drop 50 to 100 points. Talk about never being able to get approved on anything for awhile.

9. Don’t even think about trying to refinance your 30 year fixed rate mortgage within the next two years. Mortgage companies will see this on your credit report and it will automatically deny you. In most cases you will have to be two years out of credit counseling before any mortgage company will even look at doing any kind of mortgage with you. In the mortgage companies eyes, credit counseling is the same thing as filing bankruptcy. It proves you can’t manage your own finances and you are not capable of paying back the mortgage.

10. Think twice about going with a credit counselor. You should be smart enough to know that all you need to do is make your payments on time. If you cannot afford whatever it is your buying in the future, then do not buy it. Credit counselors charge a fee to work with them. Save that money and pay down your bills. Prepare to have your credit report destroyed and to wait at least two years before trying to refinance your home or buy a new one if you go with a credit counselor. If you do own a home and you can’t keep up with your payments, then maybe foreclosure is your only way out.

Post from: The Top 10 Reasons

The Top 10 Reasons To Never Use A Credit Counseling Service

2. The banks are the one’s that set the guidelines for anybody who does business with them. Since a mortgage broker does not lend you the money (the bank does that the mortgage broker works with) they were told that they would not be honoring anymore fixed second mortgages or HELOC’s. This lead to a mad dash from all of the smaller companies to close these loans so they could sell them to the bank before the deadline or they would not be able to close.

3. What lead to this rush was a realization that the housing bubble had finally burst. Home owners now owed more than what their house was worth and property values were dropping quickly. Most people that took out a second mortgage did so for home improvements, credit card bills, weddings, etc. The majority of people rolled in a bunch of debts so they could have one mortgage payment that they could write stuff off on their taxes instead of a bunch of smaller payments. This usually saved them payments on their overall monthly payments but all this did was increase people’s appetite to spend more and use their home as an ATM.

4. Now the mortgage companies see the dip in home prices and most could do second mortgages up to 100% of the value of their home. Appraisals were coming in much lower now than even just six months before so they could not give them another second mortgage or even be able to roll a first and second mortgage into one. Mortgage companies look at the loan to value (LTV) of the house and if both combined to over 100% there was nothing they could do.

5. When home owners started defaulting on their home loans and went into foreclosure what happens is if there is a first and second mortgage on the property the company that has the first mortgage would get paid back first in the event of a short sale or auction. The mortgage company that holds the second lien position on the house would get whatever proceeds that were left over…if any. Many received none because there was no way that the house was going to sell for what the home appraised for when they did the loan.

6. With no money coming in to cover the foreclosures the banks just said they are no longer going to do second mortgages up to 95% or above of the homes value. Many large banks like Chase, Bank Of America, and Wells Fargo might still do them because they would hold onto the mortgage note and service it themselves. What these large companies did was shut off the companies that sold the mortgage notes to them, ie the mortgage brokers. What happens is all of the mortgage notes the mortgage broker would have closed on get sold to the larger bank (that actually funded the loan) in a bundle. The banks would accept the notes in one packet and start servicing the loan and collect your interest. The banks left a lot of trust to the mortgage brokers to do the right thing (and most did) but it meant that some mortgages could squeeze through without going over thoroughly. The banks decided it would be in their best interest to get rid of all the small companies selling them the second mortgages and do it all in house.

7. The banks do not know how much farther the real estate market is going to go down. Of course the National Realtors Association says that home prices are leveling off but you should not believe that for a second. Remember that Realtors work on commission and they want to reassure you that you are getting a good deal. If you are not in a rush to buy a home right now, try and wait until about June of 2009 before you start looking to buy. You will probably save another 8%-15% on the purchase price of the home.

8. The banks have realized that home prices have not leveled off yet so they are not in a rush to do the second mortgages yet. What would happen if they did is let’s say that they start doing second mortgages back up to 95% or 100% of the value of the home. People default on the loans and the home goes into foreclosure. The banks should know that the real estate market is probably going to drop another 5%-15% across the country until June 2009 or when home prices get back to what they were before 9/11 happened. So now the bank would be holding onto the note for a second mortgage on a home that is worth 5%-10% less than what it could be sold for. This would leave them with a 5%-10% loss on the money that they lent. Banks are not in business to lose money and this is a losing scenario.

9. The banks are now trying to fight back to all of the mortgage brokers and correspondent lenders (Correspondent lender is a lender that is big enough to fund the home loans but typically borrows from a line of credit they have with a larger bank like Countrywide and sells that bank the mortgage note. A great example of a correspondent lender is Quicken Loans. They do not keep any of the loans and sell them after closing to the larger bank for a quick profit and releasing themselves of the note and the responsibility of the property in case of foreclosure) to take these second mortgages back. It’s becoming a game of hot potato because nobody wants these second mortgages and the finger is being pointed everywhere.

10. Instead of doing second mortgages for every body the banks have decided to only let certain borrowers take out a HELOC. The qualifications have gone up and many banks now will only let you take a second mortgage up to 80% LTV and you need to have over 700 credit scores with no mortgage lates in the last 12 months. Many also make you open up a checking account with them and you have to have to your payments automatically withdrawn. This is a safer bet for the banks because now they can handle the down turn in the market for a little longer and not have to worry about losing out in case of foreclosure or anymore short sales. If you are in the market for a second mortgage or HELOC good luck finding one. You should start out with your local bank and then call up a big bank like Chase or Bank Of America to see what they can offer.

Post from: The Top 10 Reasons

The Top 10 Reasons Mortgage Companies Stopped Doing Second Mortgages

2. The credit report is going to cost you probably $30 and you might even get told that you need to sign up for a credit watch thingy that costs you $25 a year or something. Stop wasting your money.

3. You already know what is on your credit report, or at least you should. What do you get bills for every month? Do you get a credit card bill? Yup, then it will be on there. Do you have a mortgage, car lease, boat loan, time share or any other monthly payments? Yes. Than guess what they will be on your credit report.

4. Why do you want to pay somebody money to tell you what you already know? It’s crazy. This is just a way for the credit bureaus to make more money. The credit bureaus make most of their money from charging banks and financial instituions to watch your credit and give you a credit score.

5. A lot of major financial instituions have a clause that will let them pull your credit report to make sure that you are paying on time and it also let’s them look to see if you had paid anything off. Why would they want to know if you have paid any credit card bills or home equity lines of credit? The reason is so then they will call you up and try to give you more money so they can earn interest.

6. The only reason why you should ever check your credit on your own is when you know that you have never paid anything on time and you get collection notices from credit card companies or other financial companies. This is when you need to spring into action and start cleaning up your credit report. When you look at your credit report it will tell you the names of every company that is reporting something in collection or any liens. Get to work on those right away…or not. Credit is for people who like to finance things. If you don’t see yourself financing anymore things like a car, a home, or even opening up a credit card because you are going to pay cash from now on then just let it stay on there so you can acheive the lowest credit score of all time.

7. You are serious about cleaning up your credit report because you do see a time in the near future where you are going to buy a house and you are going to need to get approved on a new home loan. You want to make sure your credit score is high so you get approved for the best mortgage rates available. It is still going to be a couple months away but its imperative to you to clean up your credit report.

8. Do not go to any of the credit bureaus websites and buy a credit report. Save your $30 and get a free credit report the easy way. Do some research on what mortgage company you want to work with when you are ready to buy a home and give them a call. They will be more than happy to pull your credit report for free.

9. Mortgage companies have to pull your credit report anyways to see if you can even get approved on a new home loan. Many larger mortgage companies like Quicken Loans, Countrywide, and Chase can in a matter of minutes look at your current mortgage situation (if you currently have one) or see if you could get approved on a new mortgage to buy a home. To be able to start quoting you mortgage rates, the mortgage banker must pull your credit report. Your credit report will pull up on their screen in a matter of seconds from all three credit bureaus. Equifax, Experian, and Trans Union will show everything you have ever financed. Most things stay on your credit report for about 10 years so the mortgage banker will see it all.

10. Even if you do not want to get approved on a new home loan and just want your credit score, just try to patronize them and tell them that your thinking about buying a home or looking to refinance your home. As soon as your credit report pops up on their screen they will tell you all three of your credit scores from the different credit bureaus. If you did not know, mortgage companies use your middle score to qualify you. After they tell you the score ask them if anything is showing up late or in collections. If there is ask them what and who is reporting it. Many mortgage bankers will give you this info because they want you to go out and repair your credit so maybe you will call them back to do a new home loan. Depending on the mortgage broker some of them might see a lot of bad things on your credit report and instead of taking up 10 minutes of their time, they will just copy your whole credit report and paste it in an e-mail and send it to you. Regardless if they do it or not (most will even if they are not supposed too) you still get the credit report for free and all it cost you was maybe 10 minutes of your time. If 10 minutes is too much then try this. Call the mortgage company and say your looking to buy a new home but your afraid your credit report may be bad. The mortgage banker will cut straight to the chase and say that they are going to pull your credit report before they go any farther. This will save you about 8 minutes. The mortgage companies get charged $10-$15 for a credit report because they do so many. In a normal day most mortgage bankers will pull 3 credit reports and with 1500 or more people doing mortgage’s for the company you can see why just 1 free credit report for you will not be so bad.

Post from: The Top 10 Reasons

The Top 10 Reasons Why You Should Never Pay For A Credit Report