2. When people are trying to refinance their home the mortgage company will look at their credit report and will contact the local city or county government office to pull up who is on the title of the home and any outstanding liens against the property. If you default against anything including credit cards or if you are behind with taxes these can be put as a lien against the property.

3. What these companies do is register the lien with the county and it is recorded. If you ever plan to refinance the home or sell it, those liens must be paid. In the event of a sale, when the title of the home is transferred it can only be switched with a clean title. No person will ever take a home with a bunch of back taxes and liens (unless they want to and see they are still getting a deal with the purchase).

4. Mortgage companies always want to be in the first or second lien position. The government is technically always in first lien position then the mortgage companies. The county will not let you refinance the home until the property taxes are paid up. Your property taxes are vital in funding the services your city provides like the Police and Fire Departments.

5. If the home was to go into foreclosure and the mortgage company let you refinance without paying off liens or collections than they would be last in line to get paid in the event of a short sale or sherriff auction. It goes by who registered the liens first. No mortgage company will take a risk on you if when everything is added up and you owe more than what the house is worth with all of the debts not being paid.

6. When your loan application documents start coming into the mortgage companies office and they see these outstanding liens it can deny your mortgage right then and there. If you do not have enough equity in your home to pay off all of your outstanding liens than no mortgage company will look at you. You are too risky to lend too.

7. Collections will follow you around forever if you do not take care of them. Lets say that you are a first time home buyer and you know that you have some outstanding bills you refuse to pay. You make good money and have enough money in the bank account to put a 20% down payment on the house. You just do not want to pay off those old debts because of a misunderstanding about the bill or you just hate that company. Unfortunately those debts are still on your credit report ruining your credit score. You call up a couple mortgage companies and they all tell you the same thing in that you have to pay the collections off before they can approve you on a loan. Of course this gets you mad because now with interest and late fees your old debts have gone up some 25% and you have to take the money out of your down payment to pay the debt off. The reason is because that collection account will follow you onto the house you are going to buy putting the mortgage company in second lien position.

8. Self employed people always have a tricky time when it comes to income taxes. Some defer their taxes for a couple years at a time because they do not have the money to pay them. One of the first things a mortgage company will ask a self employed person is if they can show how much money they make on your income taxes. If you tell them that you have not paid them but have an extension filed with the IRS it does not matter. You must file your taxes because the mortgage company does not know for sure if you have paid them or not and will not take the risk on you.

9. If you cannot pay all of these debts off when trying to refinance your home you might be better off not doing anything. As long as it is not property taxes because that is house the government can step in and foreclose on your home. Maybe you will have to look at other ways to get the money you need. If you can still afford your mortgage payment then maybe doing nothing at all is the best way to go. In some cases the credit card companies or other debtors will call you and negotiate a debt that is half of what you owe just so they can get money back in their doors.

10. Do your best to stay up to date on all of your bills and to never get caught with collections or liens on your credit report. Not only will you not be able to buy a home or refinance your mortgage it will also ruin your credit score. The IRS makes sure you are always up to date on your income taxes and your local government just wants you to pay your property taxes. Stay on top of your bills and debts and when you do you will then be able to find a mortgage company that will close on your mortgage.

Post from: The Top 10 Reasons

The Top 10 Reasons Collections, Property Taxes, Income Taxes, And Liens Must Be Paid Before A Mortgage Can Close

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.

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The Top 10 Reasons To Never Use A Credit Counseling Service

2. During the refinance boom of 2002-2007 every single mortgage company was doing every single loan they could get their hands on. The mortgage companies had two kinds of loans, a desktop underwritten loan and a manually underwritten loan. Both were very similar in their guidelines but one had more restrictions than the other. A desktop underwritten loan was a system that the mortgage companies had connected to Fannie Mae that would approve or deny your application based on the factors you put on your mortgage application such as your income, assets, loan to value, credit score, and income. Each of those factors had a strength value that would be put into consideration when doing your home. The best factor anybody can have when applying for a home loan is their loan to value. Many think its a credit score but its not. Mortgage companies like seeing equity in the home. The desktop underwritten (DU) application would be sent and returned in less than a minute with an approval or denial. If there was a denial it would say why it was denied. In turn it would tell the mortgage broker what they need to tell the client to do for an approval. This underwriting system was and is the most flexible. You could have a 585 credit score but 35% equity in your home if your trying to refinance to pay off debt and it would approve with the best 30 year fixed mortgage rates for the day. Its like you had good credit scores just because you had some equity in your home.

3. A manually underwritten loan is one that is not backed by Fannie Mae but by investors such as hedge funds and pensions. These loans are tailored for each investor. For a loan to get an approval it had to meet all guidelines not just a couple. For instance if you wanted to do an 80/20 loan you had to have 720 credit scores, no cash-out, rate/term refinance, no mortgage lates in a year, debt to income ratio below 45%, 6 months worth of assets saved in accounts, been working for two years straight in the same profession, and there are a couple more to go with it. For a manually underwritten loan you would have to have a a credit score of 620 and above to get approved on one of these loans. As of the year 2008 these loans have pretty much gone away. During the refi boom these loans had the same interest rates as the Fannie Mae backed mortgages but now no mortgage company is doing them because their not backed by the government. Too much risk. There still is a market for them and they are considered jumbo loans now.

4. With your poor credit scores you want to make sure your bad credit is not going to be a factor when getting a mortgage. Let’s say that you are trying to refinance your home. On your credit report is a bankruptcy from 6 years ago (you bought the home 4 years ago when mortgage guidelines were very easy to get approved on so they found a loan for you), back property taxes, credit card bills in collections, late child support, and you have missed payments on your car loans. You don’t have any mortgage lates since you have owned the home (never miss a mortgage payment ever, especially after having a bankruptcy). Your credit score is a 590 (which is low, you want over 700), and all of the debts above equal up to $20k to get caught back up to date. You owe $125k on the first mortgage and the home is worth $175k giving you 29% equity in the home.

5. You call up a mortgage company and tell them that you need to take care of all of these past debts because they are starting to bother you and the courts and collection agencies are calling you up all hours of the day. You are really concerned about your bad credit history and feel that there is no way you are going to get approved on a mortgage. You talk to your mortgage broker and when they pull your credit they see your credit report. More than likely they are thinking that there is no way you are going to get approved on anything with your bad credit history. Back in the good old days they probably would have tried to open up a home equity line of credit for you but doing so would have been hard. You need to have credit scores over 680 now to get approved on a second mortgage with bad credit. The mortgage broker is not going to say anything but depending on how experienced this person is they listen to your whole story and take an application.

6. Your only chance now is to have your mortgage broker run your application through their desktop underwriting system. Remember how this system is flexible and looks at different factors and weighs them. Let’s say as an example you make okay money and your debt to income ratio (DTI) is 40% after including the credit card debts, you have two months worth of assets in accounts to show that you have some money to pay for mortgage payments (these could be in retirement, savings, checking, stock accounts, etc). This is low and they usually want to see 6 months of asset reserves. Your credit score is low at 590. Recently banks have started charging a 2% risk factor to your closing costs because of this low score and be prepared to have this rolled into your closing costs. The risk factor is 2% of the loan amount, i.e $145k x 2% = $2,900 in costs added on top of your normal mortgage closing costs. Then after rolling your past credit card debts and collections into the new loan your have a balance of $145k and the home is still worth $175k. This will give you a new loan to value (LTV) of 83%.

7. Your mortgage broker takes the time and inputs your information into the system. A loan officer who has done this before can enter all of this info in less than 3 minutes. You more than likely are going to get an approval based on some of the strengths of your application. Your loan to value is what’s going to save you. Fannie Mae’s underwriting system likes the equity and has decided to approve you because they know that after all of these debts are paid off that your bad credit score is going to go away and will slowly start going up. Plus, you still have 17% equity left in the home.

8. Most mortgage companies are being limited to the system now so if you do not get an approval at one place than you should try maybe your local bank and one more large mortgage company like Countrywide, Quicken Loans, or Chase. All of the exotic loans for people with bad credit are going or have gone away already. If one can’t get an approval for you on a mortgage than your probably going to find the same at the other places.

9. Even if you do not get an approval based on your application, the system will say what it will take to get an approval. Maybe it will say you need to have a loan to value (LTV) of 80%, or 4 months worth of assets saved up, or some other factors. This is when you need to hope for your appraisal to come in a little higher or see if you can lower the loan amount by not paying something off. There is usually one way or another that under the current guidelines a smart loan officer will find a loan that will help you clean up your poor credit scores.

10. Don’t give up trying to find a mortgage for your home. Your loan officer is trying to find you one because that’s how they get paid. You may need to be a little flexible in what you are trying to do with the mortgage but just be patient. Even if you do not get an approval at that time at least you know what you need to do to get approved on a mortgage with bad credit scores.

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The Top 10 Reasons You Can Still Get A Mortgage With Bad Credit Scores

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.

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