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Can Your Credit Score be Too Good?

October 12th, 2009 8:55 AM

Can Your Credit Score
be Too Good?

Reported by Bottom Line Personal Newsletter

Bottom Line on the News reported in their September 15th publication about a subject that could affect people with excellent credit. What happens if you have a credit score that is "too high"?

Adam Jusko, founder of IndexCreditCards.com, based in Lakewood, Ohio, discovered that it "could mean fewer credit card offers and lower credit limits". Jusko determined, based upon a comparative analysis of more than 1200 credit cards and their credit policies, "if your credit score is 820 or higher (out of the maximum score of 850) it usually means that you pay off your credit cards on time and in full each month."

Credit card issuers "may view you as unprofitable", states Jusko. Paying off your account in full each month denies the credit card company interest income from an unpaid balance. Bottom Line's recommendation, "Make at least one small purchase on each of your credit cards every few months."

This keeps a variety of cards active so your overall credit availability remains ample, even if limits on some cards are cut back.

Maintaining a good credit score is essential in qualifying for the best mortgage rate. Mortgage loan underwriters use credit scores as a factor in determining loan approval. Simply stated, credit scores are a statistically-based tool to assess the future performance of a borrower.

In general, a credit score is based upon the following criteria - 35% on payment history, 30% for credit balances, 15% on length of credit history, and 10% on the type of credit account a borrower holds including credit cards, unsecured loans, and auto or home loans.

Fair, Isaac & Company originally developed the credit scoring system. Their website contains many valuable tips on improving your credit score which can translate into saving real dollars on a home mortgage.

MyFico.com's Loan Savings Calculator allows you to determine how much extra money you will save or spend based upon a corresponding increase or decrease in your credit score. The Calculator displays credit score ranges and corresponding sample interest rates based upon those scores. When using the Calculator it is helpful if you already know your FICO score.

Based upon the Calculator's figures, raising your present credit score as little as 20 points from 680 to 700 translates to a savings of $3,892 over the life of a 30-year loan for $100,000. A corresponding drop of 20 points to 660 will cost you an extra $4,751 on that same home loan.

My Fico's Loan Savings Calculator uses an amalgamation of interest rate averages based on thousands of financial lenders nationwide. Rates are updated daily by Informa Research Services, Inc. For an exact rate quote and monthly payment estimate contact your Paramount Mortgage Banker.

Link: Credit Score Improvement Tips

Posted by Customer Service on October 12th, 2009 8:55 AMPost a Comment (0)

Fraudulent Claims Taint Tax Credit Program

October 23rd, 2009 9:31 AM

Fraudulent Claims Taint Tax Credit Program

WASHINGTON (AP) - Congress got an earful about the $8,000 First Time Home Buyer Tax Credit this Thursday. J. Russell George, Treasury Inspector General for Tax Administration, questioned the eligibility of some 100,000 returns out of the 1.5 million tax filers who have claimed the $8,000 credit on their tax returns.

He said many claimants could possibly be illegal immigrants. Upwards of 580 people seeking a total of $4 million for the tax credit were under the age of 18. The youngest taxpayer receiving the credit was 4 years old, his office said.

George said more than 19,000 people filed 2008 tax returns or amended returns claiming the credit for homes they had not yet purchased. Those claims amounted to $139 million and it was not clear that the IRS planned to go back to verify that those purchases actually took place, he said.

He said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of home ownership. A first time home buyer may not have owned a home within the past three years to be eligible for the credit.

George, an Internal Revenue Service official testifying before a House Ways and Means Committee subcommittee will initiate further examination of these claimants and others to determine their legitimacy.

George's testimony before the subcommittee raised a yellow flag as Congress considers whether to extend, or even expand, the popular program that is set to expire within 38 days on November 30th.

Currently, applicants must fill out IRS Form 5405 to claim the Tax Credit, but do not have to supply documentation.

Linda Stiff, IRS' deputy commissioner for services and enforcement, testified that "any time that there is an opportunity to receive cash back, it tends to attract people that might have intent to defraud the government." She said the agency "will vigorously pursue those who filed fraudulent claims."

While the program has widespread support in Congress, there are growing concerns about the costs. The cause, said Sen. Jack Reed, D-R.I., "is a worthy one." But "I hope we can find ways to pay for it."

Critics have also characterized the program as a subsidy for people who would have bought a new home regardless of the tax credit. The National Association of Realtors has estimated that one-fourth of those who have claimed the credit, about 350,000, would not have purchased their homes without the credit.

Link: Fraudulent Claims

Posted by Customer Service on October 23rd, 2009 9:31 AMPost a Comment (0)

Housing Prices: A Ray of Sunshine

October 16th, 2009 9:30 AM

Housing Prices: A Ray of Sunshine

Tom McManus, Chief Investment Officer at Wells Fargo Advisors, reported this week on the "rise of home prices nationwide." In his weekly newsletter to Wells Fargo clients McManus observed, "the average home recovered about 7%" of its value between April and July from the nearly one third drop of housing value over the last three years, according to data from the Standard & Poor's Case-Schiller composite index.

Some analysts were concerned that values could have fallen much further, but homes in many areas have become significantly more affordable. The rebound in prices has been supported by some extraordinary programs engineered by policymakers.

Currently, the $8,000 first-time homebuyer tax credit, part of the American Recovery and Reinvestment Act of 2009, has been a strong engine propping up home prices by introducing a new set of buyers into the housing market.

This Wednesday, October 14th, news from Washington reveals that the House has passed a one-year extension of the $8,000 tax credit through November 30, 2010 for a limited group of Military, Foreign Service and Intelligence Officers.

The Senate is expected to approve the measure. The same first time buyer rules will apply to this select group, but with the additional requirement that the borrower must have completed 90 days of continuous military service in calendar year 2009.

For everyone else, the countdown continues to the November 30, 2009 deadline of the tax credit expiration date. There are only six and a half weeks left to complete a home purchase transaction to claim the tax credit.

"If the recent turn indicates that home prices have truly hit bottom," continued McManus, "this would be an important step on the path to an improvement in the outlook for employment, consumer confidence and the solvency of our financial institutions."

In their Housing Opportunity Index (HOI), economists at Wells Fargo combine data on income, home prices and mortgage rates nationwide to determine housing affordability. According to McManus, "the HOI improved from 40.5 in 2006 to 72.3 in the second quarter of 2009."

For the average family whose annual income is equal to the national median income of $64,000, this "implies an increase of nearly one third in the number of homes deemed affordable," stated McManus.

A score of 72.3 indicates that 72.3% of the recent house sales occurred at prices that would be within the means of a family earning the national median income.

"In most areas," McManus continued, "where families are earning a steady income, a much wider range of housing opportunities is achievable if they can put together a down payment and qualify for a mortgage."

Link: Housing Opportunity Index

Posted by Customer Service on October 16th, 2009 9:30 AMPost a Comment (0)

What the housing 'rebound' means for you

October 1st, 2009 4:49 PM

What the housing 'rebound' means for you

Homes are selling again, but the market today is divided by price point. What's the best strategy for your buyer or seller in this market?

Reported by Amanda Gengler, Money Magazine staff writer

Money Magazine reported this week, "Home sales are rising." Mortgage applications increased nearly 10 percent for the week ending September 3. With housing prices no longer in free fall how do you approach this housing market?

Whether you're selling or buying, your strategy will depend on the value of the home you want to buy or presently own. Cheaper homes are selling fast - but mid-range properties are still lingering, and high-end homes are gathering dust. "The luxury market still looks ugly," says economist Joshua Shapiro at economics consultancy MFR.

HOT
(The bottom tier - big demand and less supply)

Buyers: See homes the first day they're listed. If you find one you want, "submit an offer immediately," says Phoenix realtor Susan Ramsey. "Don't expect a deep discount; prices for lower-end homes are stabilizing. Put down 20% or more, if you can, to compete with cash-rich investors." Pat Lashinsky of ZipRealty offers "Buyers in most areas are now going up against multiple offers." Offer not accepted? Check in with the seller's agent a few more times; many deals fall through, so persistence pays off.

Sellers: Forget trying to compete with foreclosures on price. Some buyers will pay more for a home in move-in condition, so spruce yours up and sell that fact hard in your marketing materials. Many of the other listings are likely to be short sales which can take months to close. Offering a quick, flexible closing date will give you the advantage.

COOL
(The middle tier - demand is soft)

Buyers: Unload your current home first, so you know what you can afford to spend on a new place. "When you find a home you like, offer 10% less than the asking price - a realistic discount for a lukewarm market," says realtor Ramsey.

Sellers: Stand out from the pack. If your home is sitting on the market, go for one big price cut instead of slowly ratcheting down. A bold move will attract attention and prevent the listing from going stale. Offer to cover closing costs and throw in some necessary improvements, such as new carpeting, blinds, or painting.

COLD
(The top tier - prices may fall 10%)

Buyers: Get pre-approval before you shop. Ask for freebies. While sellers often balk at low-ball offers, they should be willing to negotiate, including paying closing costs and other extras. Moreover, foreclosures are rarer at this price level, and homeowners, unlike banks, are reluctant to slash their price. "You can set the terms," says ZipRealty's Lashinsky. If the seller refuses, move on.

Sellers: You'll need to seriously undercut the competition. The reason is "prices on high-end homes will probably fall another 10% until the market hits bottom," says Mark Zandi, chief economist at Moody's Economy.com.

Link: Housing Rebound

Posted by Customer Service on October 1st, 2009 4:49 PMPost a Comment (0)