Forget the adverts. Forget who your broker recommended. Forget who has the nicest offices. If you are searching for a mortgage refinance company to improve the terms of your loan, you need to forget about the gimmicks and look at what really matters in a refinance lender. This article summarizes some of the most important tips on selecting the best company for your refinance mortgage.

First Step. Forget the Annual Percentage Rate.

Many finance advisors encourage borrowers to check the annual percentage rate, or APR, of a mortgage refinance loan when deciding which is the best deal. On the surface, this is good advice. After all, the APR claims to provide a benchmark with which to compare loans by converting the total cost of the loan as a yearly percentage. If there was a standard method to calculate the APR this would be a great method, unfortunately there are no set standards to calculate a loans APR. Some lenders include certain costs and expenses while others choose to leave them out. This is not to say the APR of a loan is a worthless measure of a loan’s cost, but you do need to check what has been included in the APR. This means you cannot judge a loan by its advertised APR until you request a breakdown of how the APR has been calculated.

Second Step. Use the best mortgage brokers, but don’t let them use you.

Good brokers have access to a wide variety of mortgage providers and to the lowest mortgage refinance rates. Unfortunately brokers also have a, often deserved, reputation of charging expensive fees and offering little value to customers. However, a reputable broker with good connections can help you avoid lender junk fees and give you access to wholesale mortgage rates. How can you tell the good brokers from the bad ones? There are no easy solutions. Look for brokers with a good and long standing reputation, use brokers people you trust recommend and prefer brokers who operate as brokers and not as a mortgage banker or broker bank. Why? Because broker banks and mortgage bankers are protected from key disclosure laws which allow them to sell mortgages without the need of disclosing markup or profit margins on your loan. A broker, however, is not protected from the Real Estate Settlement Procedures Act and must comply with the Act’s disclosure laws.

Final Step. Ask for a complete breakdown of your mortgage rates.

Whoever you end up choosing, make sure you request a complete breakdown of the costs, fees, and rates applicable. Don’t let the banker or broker blind you with jargon and well scripted speeches. Ask for hard facts, in writing, and compare it to the information other lenders offer. This way you will get the best mortgage refinance lender, not the one with the best salesperson.

If you are living from paycheck to paycheck and never seem to have enough money to pay your bills, you may be a candidate for credit counseling. However, credit counselors may not be what your thinking they are. You see, there are many types of “professionals” offering you help to get back on your feet, financially speaking, and most of them will do exactly the opposite. After the real estate crisis of 2008 an army of foreclosure avoidance and debt relief “consultants” appeared out of thin air just as the business for subprime mortgage lenders ran into the ground. Needless to say, these are not type of counselors we are talking about when we mention credit counselors. The trouble is they are hard to set apart sometimes.

The government is offering struggling borrowers who are at risk of defaulting on loans or need a hand to get their financial matters in line the opportunity of speaking to debt relief specialists who know how to help you reduce debt without resorting to more high interest loans that only offer a short term relief. These are counselors financed by government subsidies who are not in it for your money. So, how to set them apart. Here are some things to look out for.

Choose credit counseling companies that help you organize your finances by creating a budget and offer you free credit workshops and educational material. Choose credit counselors that employ certified operators in consumer credit, debt management and budgeting. Avoid like the plague any company that requires you to provide personal information before they can help you. Call your state Attorney General, your local consumer protection agency and the Better Business Bureau. Find out what they have to say about the credit counseling companies you are looking into. You should only consider accepting the help of government approved credit counseling companies. How do I know if they are government approved? Easy, visit the Department of Justices’s U.S. Trustee Program website and see if your potential companies appear on their list of approved credit counseling agencies.

Strike out any company that does not pass these tests. Once you are left with an approved shortlist of credit counseling agencies ask the following questions.

What services do you offer? Avoid companies that push a debt management plan down your throat as your only option.

Do you offer information? Avoid agencies that charge for debt management information.

How are your employees compensated? Avoid agencies who offer commissions to agents who sell certain debt management products.

The Federal Trade Commission provides valuable information on how to improve your credit score. As your credit score is the benchmark lenders, investors, employers and service providers use to assess your reliability as a customer, it is kind of important to make sure your credit score is in good health. In our previous article we discussed how it is a legal right to check your credit score for free with each of the national credit reporting agencies once a year, if you are unemployed, on welfare, feel you are the victim of identity theft or have the suspicion the information on your credit report is not accurate. So let us assume you are smart and have requested your free credit report, what now?

According to the Federal Trade Commission, the first step you should take is to check if the information on your credit report is accurate. If it is accurate, there is not much you can do. You cannot delete accurate data from a credit report legally. However, you may find solace in the fact that credit scores focus more on your latest credit score reporting steps than the black spots in your distant past. Although missing mortgage or other loan payments will always be somewhere on your credit history file, the credit reporting agencies focus more on the more recent events of your financial life than with the black spots in your report which are now ancient history. Back to our point. You can only find out if your credit history and report are accurate if you check it.

If you do find inaccuracies in your credit report, you have the right to contact the relevant consumer reporting agency in writing and explain where the mistake is and what is the correct information. Make sure you provide accurate information and keep a record of your meetings with the reporting agencies. A main reporting tool against incompetence in the credit history industry is to send a dispute letter.

Dispute Letters

Dispute letters have the following sample format. This format was provided by the Federal Trade Commission.

Sample Dispute Letter

Date
Your Name
Your Address,
City, State, Zip Code

Complaint Department
Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing.)

The first step to repairing your credit is to know what you are facing. It is not only important to know what your current credit score is, but also what black spots on your credit history are lowering it. Credit repair clinics may offer you this service: finding out your credit score and a report of your credit history, but the truth is you can find all this yourself for free. The Fair Credit Reporting Act, also known as FCRA, dictates everyone has the right for a free credit report if a) a company denies you service or takes adverse action against you based on your credit score, or b) if 12 months have passed since the last time you applied for a free report. Let us look more closely at the details of these rights .

Imagine you apply for a mortgage loan and your bank denies your application based on your credit score or some problem with your credit history. In that case the bank has the legal obligation to tell you why they denied your application and you will have the option of asking for a free report. If this happens, you would be well advised to make use of this right and request your free credit report. Of course, there are some rules you must take into account. You must apply for the free credit report within 60 days of your loan or service denial. You also have the right for a free credit report if you’re unemployed and considering looking for a job within 60 days. You see, your credit report is no longer only used to assess loan applications, it is also a factor when you apply for a job. If you are on welfare, you fear you have been the victim of identity theft or you believe your report is inaccurate, you also have the right for a free report.

In effect, you have the right for a credit report with each of the main credit reporting agencies in the United States: Equifax, Experian and TransUnion. What is more, you have the right for a free report from each of these organizations once every 12 months. You just have to ask for it.

How do you do that, you may ask. Does it involve a long and tedious process requiring sending coupons or waiting for hours on the phone? It can, or you can go to annualcreditreport.com and do it online. The other option is to call 1-877-322-8228 or send a credit report request form to 

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You have probably heard the rates for refinancing a mortgage are at historical lows. If that is the case, you may ask, why are the rates I am getting from my bank so high? Is it my fault? Unfortunately the quick answer is yes. However, have heart, there might be something you can do about it.

First, your information was good. Refinance rates are mighty low right now. They have risen a little since the 2010, but only slightly. However, these record low rates are not for everyone. I know that, you say, but why?

Well, although refinance rates of well below 5 percent are to be found, they are only available to those with good to great credit scores. So there you have it, your credit score may be to blame for your not so great refinance rate quotes.

Refinance Rate Variability

The Washington Post recently published an interesting article on how refinance rates vary from householder to householder based on their credit  score. For instance, a home owner with a $200,000 mortgage with a credit score of 850, a rather good score, is likely to get a refinance interest rate of around 4.27 percent. This means that by the time he pays of his mortgage he will have paid $131,350 in interest, which translates to payments of $986 a month. However, what happens if your credit score is not so amazing. Maybe you missed a few payments on a credit card, or there is a bankruptcy or foreclosure looming in your far past, or you are new to the credit market an you don’t have much history to base a credit score, what then? There’s no nice way to say this…get ready to pay more. For example, if you have a credit score of 620, the bare minimum if you are to get your mortgage refinance application approved, you will be doing well if you find an interest rate of 5.86 percent. This translates into interest payments over the lifetime of the loan of $183,521 and monthly payments of $1,181.

So, a difference of 1.6 percent in your refinance rate means you have to pay around $52,000 more over the life of the mortgage and around $170 more a month than your neighbor with a 850 credit score. That teaches us one thing: we need to get our credit score in line. How do we do this? That will be the theme for a new series of articles on Government Mortgage Help.

Applying for a mortgage can be a daunting exercise, especially if you have made financial mistakes in the past and feel that your credit score may interfere with your loan application. This also applies to government subsidized loans through agencies such as the Federal Housing Administration which offers low-cost mortgages to medium- to low-income families. However, if you feel your credit rating will get in the way of your home purchasing dreams, take heart, this is not necessarily the case. Although your credit score is a significant factor when applying for an FHA loan, it is not the only factor. The FHA lending and underwriting rules allow for flexibility with reliable lenders which may have had some credit hiccups in the past.

So what are the FHA rules on lending? This article provides a brief overview on what the FHA looks at when assessing a loan.

There are four factors that determine the eligibility of a borrower to a loan: credit history, steady employment, debt-to-income ratio and your payment history in the last 12 to 24 months. This means that if your credit score is low because of a financial problem or mistake you made several years ago, but you score well in the other areas, you may still qualify for an FHA loan. Nevertheless, what constitutes a good or acceptable credit score for the FHA? This depends on the loan, but the FHA does have a general standard for most of its loans.

The FHA and Credit Scores

The FHA applies a sliding scale rule on loans depending on the credit score of the borrower. Borrowers with a higher credit score can apply for a higher loan to value percentage of the purchasing price of a property. For example, credit scores between 500 and 579, which would be considered very low by commercial lenders without the insurance of the FHA, can qualify for a maximum of 90 percent of the loan to value rate of the property. If your credit score is higher than 580, you may be eligible for the maximum FHA loan financing, as long as the other areas are also satisfied. If your credit score is below 500, you are not eligible for an FHA loan.

Therefore, the answer to the initial question of this article, the minimum credit score to be even considered for an FHA loan is 500. Anything less and your application will not even be considered. However, even applicants with credit scores as low as 500 to 600 can qualify for loans as long as the other elements the FHA looks into are above board.

In the current economy, few of us have the savings or income to finance the purchase of a brand new home. Even second hand homes in prime condition can be out of the reach of the average household. So what can you do if you need a new home or you are a first-time buyers looking to buy yourself a slice of the American dream? A good option for many, especially those not scared to invest some sweat and elbow grease in their home, is investing in a fixer upper and doing or at least supervising the work required to make the home livable again.

Rehab Loans with FHA

If that is your plan, you can get government mortgage assistance from the Federal Housing Administration. The FHA has a specific product for buyers interested in saving money and investing money and hard work in a fixer upper home. If you know where to look (think foreclosures, auctions, repossessions…) you can buy homes that have fallen into disrepair and need some heavy doses of tender loving care at bargain prices. Remember banks, which more often than not end up with dilapidated homes, are not in the real estate industry; they are in the lending business. So, they are often very happy to unload properties in need of renovation.

The loan you may be looking for is the FHA’s 203(k) Fixer Upper Loan. This product is based on the Housing and Urban Development’s, HUD, 203(k) program and allows buyers invest in fixer-uppers with a FHA guaranteed loan. The best things about this loan is that it is especially designed for fixer-uppers and comes with an inbuilt protection for borrowers if the repair work costs more than they expected. And let’s face it, it is next to impossible to estimate accurately how much a fixer-upper will cost to get back into shape until you actually get started.

How Do You Apply?

As usual, the FHA does not provide loans directly to borrowers, but uses lending partners. Approach a selection of lenders and request information on their 203(k) fixer-upper loans. The application process is similar to a normal FHA loan. The lender will go through the regular credit checks and debt-to-income analysis. In addition to the basic paperwork requirements of an FHA mortgage, you will need to provide a detailed list of the repairs the property requires and the estimated cost of those repairs.

The real estate meltdown of the last two to three years has hit the housing, real estate and mortgage lending industries hard. What previously seemed a risk-free investment, now is viewed with suspicion and caution. However, we have all heard that smart investors make more money during the bad times than the good. Could this be the time to buy a home? If you are a first-time buyer or have the capital to cover the down payment and initial costs of buying a home and your credit rating is good, the answer to that question may be a resounding yes.

Fannie Mae, the government sponsored secondary market real estate investor, has just published a survey showing that according to the latest estimates home prices will continue to decline during the next 12 months. The same survey reports that the price of rents is set to rise. More specifically, homes are projected to drop in price by 0.5 percent while rents are expected to rise by 4 percent. Of course these are just educated guesses by consumers who are responding to the current market. This survey reflects the attitude of consumers to the real estate industry. This gives you an idea of the general “feeling” of the industry that bare figures cannot.

According to 70 percent of those questioned in the survey felt now was a good time to buy a home. Of course, the reverse is also true. It is also a hard time to sell a home. If you have the cash and the credit to be a buyer in this difficult economy, you can call the shots. This is a buyer’s market and you have a wide selection of properties and prices you would not have had access to three or four years ago.

However, the Fannie Mae survey was not all good news for buyers. Another point most consumers agreed on was in a lack of confidence in the ability of investors to sell the properties they buy at a profit. The old saying “as safe as houses” is no longer true in the minds of many consumers. So how does this lack of trust in the market affect the opportunity created by lower house prices? The current market seems to be especially designed for first-time buyers and people investing in a home to live in. If you are looking for a home to live in for the foreseeable future and have the cash and credit to buy it under the more stringent credit environment we are now in, it maybe just the time for you to buy a home.

News of the approval by the House of Representatives of the Emergency Homeowners Loan Program has fed the hopes of those that though the program would never start. Now only the signature of the Senate remains, many unemployed workers who are at risk of losing their homes to foreclosure may again put their hope in a mortgage assistance program that can see them through their temporary financial difficulties until they find work again.

However, not all states are participants in this unemployed workers mortgage assistance program, up-to-date only 27 states were part of the scheme. These states included Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming and Puerto Rico.

Since the news of the approval of the House of Representatives, five more states have announced similar programs which will also receive funding through the Dodd-Frank Act. The Housing and Urban Development Department will also have a monitoring and supervisory role in these programs, although it will delegate most of the management roles to state level agencies (both governmental and non-profit community organizations). These states include Pennsylvania, Maryland, Connecticut, Idaho and Delaware. Although they are not part of the sates that applied for the Emergency Homeowners Loan Program the programs they are now offering their citizens are very similar. Since April 2011, they have accepted applications from unemployed workers who are delinquent on their mortgages. To qualify, an unemployed worker must be at least 3 months behind in his mortgage payments and have received a notice from his lender warning her of the intention of foreclosing on the mortgage.

Successful applicants will receive bridge loans of up to $50,000 to help them cover late payments, insurance, tax and ongoing mortgage payments for up to 24 months. The programs are restricted to unemployed workers who have a debt to income rate of 55 percent of less. This means the total monthly housing payments must represent less than 55 of their total income. For example, a household with an income of $4,000 a month, must not pay more than $2,200 in mortgage and other housing expenses.

These five states also have similar assistance programs under their respective housing finance agencies, which has moved the Housing and Urban Development Department to allow them to start accepting applications before the other 27 states which are part of the EHLP.

The California Housing Finance Agency is California’s main housing agency. It has several mortgage assistance programs designed to both help first-time buyers purchase a home and assist those that already have a home keep it. Those programs designed to protect Californian homeowners from foreclosure are under the Keep Your Home California program, which provides up to $2 billion in cash for foreclosure prevention programs. However, previous eligibility criteria was too stringent to allow many struggling homeowners qualify for assistance. The California’s Housing Finance Agency has reduced the requirements of these programs to help more struggling homeowners benefit from them.

Unemployed Workers

Under the new rules unemployed workers who are at risk of losing their homes can request federal mortgage assistance of up to $3,000 a month. Similarly, homeowners who are facing financial hardship can apply for up to $15,000 a family to reinstate mortgages at risk of foreclosure. Even homeowners who have no choice but to let their homes go can apply under the new rules for assistance for relocation expenses. These and many other changes have been backdates to mortgages originated after January, 1, 2009. This means that even if your application for help previously put down, you may reapply and see it approved under the new rules. 

These changes have come after the California Housing Finance Agency collected information on the existing programs and identified the areas where improvements were required. One of the main factors considered were the ongoing high-rates of unemployment in California which increased the risk of households, which had previously being regular with their mortgage payments, would lose their homes to foreclosure.

The California Housing Finance Agency acts  as an intermediary between the Housing and Urban Development and servicers in some programs and as principal program manager in others. The servicers used by the CalHFA include the Guild Mortgage, GMAC, the California and the Department of Veteran Affairs. Funding for the programs originates from the Housing and Urban Development Department and the Dodd-Frank Act. Funds of up to $1 billion have been assigned to unemployed workers struggling to pay their mortgage and over $450 million will go to the State of California. Other states that have relaxed the eligibility criteria of their mortgage assistance programs and will receive assistance from the Dodd-Frank Act include Delaware, Idaho, Pennsylvania and Maryland.

One of these programs, is the Emergency Homeowner Loan, which is available for unemployed workers who had an income of 120 percent the median income and who had seen their income drop by at least 15 percent since they lost their job.