My Credit Plan Blog

Media Highlights the Tools of Mortgage 850

Fri, 17 Apr 2026 23:28:42 GMT

The State of Utah has funded Mortgage 850 to help more Utah homebuyers improve their home purchasing power. Christine Flores with KUTV (CBS) in Salt Lake City reports about a young couple who utilized Mortgage 850 which has given them a roadmap to homeownership.

Clink on this link to the story:

https://kutv.com/news/eye-on-your-money/utah-funds-free-program-to-help-homebuyers-improve-credit-scores-get-better-interest-rate

The Pippins increased their home purchasing power by almost $100,000 David said. This program is unique to the tools to help prospective homebuyers find ways to purchase a home.

Deon Spilker who just retired from Utah Housing Corp, stated “I think we are scaring individuals away from even looking into housing,” Spilker said. “What they need is a roadmap — how to start, what to do.”

There will be more stories coming out about the success stories of Mortgage 850.

Stay tuned

Almost 70% of Homebuyers End Up with a Higher Interest Rate

Fri, 10 Apr 2026 22:25:00 GMT

Most homebuyers are ending up with a higher interest rate than what is the lowest interest rate. A recent review of over 1,600 mortgages in 2025 discovered that 68% of those mortgages had a higher than the lowest interest rate offered at that time.

Why?

There are several factors. Mortgage lenders have to pay extra costs to investors when a loan is sold weeks after closing. For the more popular conventional loans, these hidden costs to homebuyers are based up to nine factors:

Credit Score – 620 to 780

Down Payment – Percentage down

Type of Home – Single Family, townhome, condo or manufactured home

Purpose of Loan – Purchase, refinance or cash out refinance

Number of Units – 1, 2, 3, or 4

Fixed or Variable Interest Rate

Loan Balance

A Second Mortgage – yes or no

Occupancy – Live in it, 2nd home or investment

Lenders have to pay extra hidden fees based on your answers to these questions. For government loans such as FHA, ,VA, and USDA, these fees are based on credit score, type of home, number of units and loan balance. The higher the fees, the higher the interest rate will be. If a lender has to pay 1.00% in a hidden fee for a 730 credit score and 10% down on a 30-year fixed conventional mortgage, the corresponding fee is $4,000 on a $400,000 loan. To offset this cost, the lender will have to increase the interest rate. If the best interest rate is 6.00, the lender will adjust the interest rate higher to say 6.50% to cover that $4,000 cost.

Unfortunately, sdhopping lenders trying to find the lowest interest rate will not help reduce tis fee and lower the interest rate for a homebuyer. All lenders have to pay the same fees. So every lender will be offering 6.50% - maybe 6.375%. But no lender will absorb that entire $4,000 cost and offer a 6.00% interest rate.

Do lenders have to disclose these fees? No. These fees do not show up on any Closing Statement or Loan Estimate. They are hidden in most cases. This is why homebuyers are paying higher interest rates. They have no way of knowing. And loan officers are not going to tell you about these fees because they will tell you, "Motgages are complex."

What can you do? Mortgage 850 by My Credit Plan discloses these hidden fees and how they impact interest rates across dozens of possibilities. Knowing how these fees impact interest rates, payments and purchasing power can help all homebuyers secure lower interest rates and payments and increasing home purchasing power.

A homebuyer can increase their home purchasing power by up to 26% without increasing a payment. It is a program worth your investment becuse you can easily save thousands of dollars in most cases.

A Game Changer for All Homebuyers

Thu, 02 Apr 2026 00:09:25 GMT

This Program is Called, “A Game Changer for All Homebuyers”

The State of Utah has just funded a cutting-edge technology for future Utah homebuyers called “Mortgage 850 by My Credit Plan.”

What does Mortgage 850 offer that is not found with lenders or any resource? A lot!

Mortgage 850 offers three critical tools (not found anywhere else) to purchase a home:

The leading FICO® Score Improvement program averaging 64 points higher since 2020.

It shows in real time how changes to a credit score can lower a home buyer’s mortgage interest rate and payment, and improve his / her home purchasing power.

When a person does not qualify for a mortgage, it offers a road map to qualifying. Mortgage 850 shows multiple ways for each home buyer to potentially qualify for a mortgage through higher credit scores, more income or down payment, a reduction in monthly payments, or a combination of factors.

There are many options for home buyers.

In trials, home buyers love Mortgage 850 because it takes the guessing out of qualifying for a mortgage and does not negatively impact credit scores. It fills in more answers to questions – both asked and those not asked – in seconds instead of hours and days. It also helps identify mistakes made by loan officers that can save thousands for home buyers.

It has taken three years to build Mortgage 850. It is a new day to purchase a home.

Mortgage 850 by My Credit Plan is a non-profit / for-profit partnership between Family Financial Education Foundation and Momentum Loans.

Don’t Fall for the “Credit Builder” Loan Ad

Fri, 05 Jan 2024 21:54:56 GMT

Many lenders advertise that they offer “Credit Builder loans”. This is just a blatantly false advertisement. The sole purpose is to get you to open a credit card or take out a loan with them. Don’t do it. I’ll explain why.

There are several different lenders who advertise that they can build your credit – meaning your credit score. These are the different lenders and their advertisements to us:

Chime / Lyft states, “Start building your credit for free.”

Self states, “A fast, free way to improve your credit score.”

Creditkarma, “With Credit Builder, you could improve your credit score…”

Republic Bank states, “Our credit builder program may help you improve your credit

score within as little as 12 months.”

UUCU, “Credit Builder Loan…will increase your credit score.”

There are many more. You would think that everyone has a credit builder program.

Opening a new loan in most cases will not improve your credit scores. That is a true statement. Jason had mid-600’s credit scores and he went to Creditkarma to get help with improving their credit scores. Creditkarma suggested he open three credit cards with Upgrade and WebBank. His scores dropped and would only barely nudge higher month after month.

The problem? There are several problems here that are common for most consumers.

Jason did not need to open any accounts.

He had sufficient credit. In fact, he needed to close some of accounts that were hurting his scores from being derogatory, or recently opened. Opening new accounts only prolonged his efforts to improve his scores.

The wrong type of lenders

Opening the credit cards Creditkarma also recommended lowered his score even more because they are with “high-risk” lenders or as the FICO Score refers to them, “Too many finance company accounts.” Once these accounts are on a person’s credit report, they drop a lender’s FICO credit scores for ten years about 12 to 20 points.. That is a long time.

Too many active accounts.

One of the greatest, yet widely unknown, factors in a lender’s FICO Scores is the number of accounts open and the number of accounts with a balance. This will lower scores even more.

What does Jason have to do? He has to payoff and close those three accounts and his scores will recover to levels prior to taking out those accounts.

Credit builder programs are designed to have you open a new account in that lender’s name. In 90% or more of the cases, it will not improve your credit score until it has established a decent history which can mean at least one year.

Don’t fall for these mis-advertisements. They benefit them, not you.

If you think you need to open an account, go to MyCreditPlan.org and get your analysis. It will tell you explicitly that you need to open an account. Otherwise, you are wasting your time and money.

Washington, We Have a BIG Problem

Sat, 04 Nov 2023 12:54:00 GMT

This past weekend when no one was looking, the U.S. Treasury revealed how much in interest the government is paying on the ballooning national debt. With higher interest rates, the numbers were eye-popping. It will have the following repercussions going forward for all Americans.

For the first time ever, the interest paid by the federal government is more than the entire defense department budget. The interest on the debt for the last year was $879.3 billion – almost a trillion dollars. The entire defense department budget was $775.9 billion.

The first problem is the government brings in only $4.4 trillion annually which was considered a good year this past year. That means almost 20% of the budget is paying for interest for past borrowing. No benefit comes from that. For personal finances, that would not be considered bad . However, with personal finances, the debt is being paid off. For the U.S. government, that is just interest and no debt is being paid off.

The second problem is the expenditures. The U.S. Treasury is spending about $5.3 trillion and IT CONTINUES TO INCREASE. That means the U.S. Treasury is running about a 41% in deficit spending. The reason the deficit is high is from higher interest rates and escalating spending levels. And President Joe Biden wants to pay off $100 of billions in student loan debt, and leave the underlying problem continues to get worse?

Think about it for a second. If you made $50,000 annually, but were spending $70,500 each year, how long would that last? Not very long. Your money would dry up fairly quick as you head to a bankruptcy court. You would have to cut spending dramatically and probably sell possessions. The cost to borrow money would skyrocket for you as you are a definite risk of default.

It is the same problem here. The U.S. Treasury is not immune to the principles of borrowing and paying interest. We are heading for a government financial disaster unless interest rates come down dramatically and the government cuts back on spending A LOT. Social Security? How does it continue as is when there are huge deficits. It is a good question. Be prepared for a future time when the U.S. Government will be limited in providing resources to us the citizens. This is a self-made disaster made by the leaders in Congress and the President such as Schumer, Pelosi, Biden, McConnell, with Trump, and Obama not far behind in responsibility.

What does it mean for you and I.

It means less government spending and higher taxes in the future to make up the difference if we are going to get out of this. Otherwise, the disaster waiting I am afraid will be much worse than the financial crisis. And I was one of a small group that warned Congress and state politicians of the problems leading up to the Financial crisis during my presentations to them in San Francisco in 2006 and Washington D.C. in 2007. Many thought we were off the rails, and then quicky ran back to us when the problems started to unfold.

This is a serious problem and unless someone takes action real quick, a financial waterfall could be just around the corner.

When will Interest Rates Decline?

Fri, 27 Oct 2023 21:18:34 GMT

Over the last 18 months, interest rates have taken a hard hike higher evaporating the dreams of many. The question is asked, when will interest rates decline? There are some indicators to give everyone some ideas.

Many consumers falsely believe that mortgage interest rates are tied to the Federal Reserve. They are not. The Federal Reserve has a direct impact in short term lending to banks, while long term interest rates are indirectly impacted from the Federal Reserve.

There are times that the Fed’s interest rates are low, and mortgage rates are much higher, like we saw in the first part of 2022. Other times, the Fed's interest rates are higher than the long term interest rates such as the beginning of the pandemic, when mortgage rates plunged below the Fed's rates for a period of time.

When will mortgage rates decline?

Obviously the Fed keeping short term rates high around 5.00% has an impact. However, the Fed also owns over $2 trillion in mortgages they purchased primarily during the pandemic that the Fed wants to sell.

This creates upward pressure on mortgage rates because there is an oversupply of mortgages being potentially sold on the market, and an insufficient number of buyers. What happens? Mortgage rates go higher in order to keep attracting more investors to purchase mortgages. Higher interest rates attracts more investors (buyers).

In addition, Congress and the Biden administration are running between $2 to $3 trillion dollars annually in the red. Where does that money come from? The U.S. Treasury issues government bonds to cover the shortfall. It is like a line of credit for the U.S. Treasury. Unfortunately for homebuyers, those U.S. bonds compete with mortgages for investors. In order to attract the investors, all interest rates go higher because of the excessive supply and lack of demand from investors. It is basic supply and demand.

There are wars now that the U.S. government is funding hundreds of billions more annually. That adds additional pressure because the U.S. Treasury does not have the money. It has to borrow for it. Which leads to higher interest rates for the foreseeable future.

How long could this last? Good question. Mortgage rates could stay relatively high for a year or two settling somewhat in the high 6.00’s to 7.00’s as the economy slows down – slightly lower than the current levels. Nevertheless, the fact that interest rates are high because of the amount of debt being issued, means many homebuyers dreams will either have to pay an additional “tax” in higher interest rates, or postpone that dream as it gets pushed farther away.

The one good news? There is some hope. Home prices are starting to decline and we should see some more settling for the foreseeable future.

Yet to be Seen if Biden Can Remove Medical Collections from Credit Reports

Fri, 29 Sep 2023 21:38:34 GMT

The Biden administration is trying to eliminate medical debt from your credit report. Is it true? There are many players in this and it will yet to be determined if that will be true. What will happen to the medical service providers? Will they be willing to provide services and not have an avenue to collect payment? That is a very good question.

The U.S. government first allowed consumers to miss payments on various types of loans without those missed payments showing up on their credit reports. The next phase removed most past due taxes and any judgments from the credit report. Now, the Biden administration wants to remove all medical collections form the credit report. There will be a fight on this one and it will create additional secondary consequences.

Hospitals, doctors and other medical providers are not going to just allow the Biden administration to take away tone of their best methods to collect payments. Just like the student loan debacle, there will be legal action because it impacts many more people.

Medical collections are primarily the result of a failed medical system that pays too much with too little benefit. Many families with at least a couple of children end up paying over ten thousand dollars annually for medical coverage. For some, it is the cost to go the doctor a couple of times a year. For others, it is the coverage to prevent a massive medical bill.

Whatever the situation, the insurance premiums for a regular size family are extraordinarily too high for the benefited that are provided. With the U.S. government subsidizing insurance premiums for millions of Americans, the root cause of the problem becomes more difficult to address because it is just covered up by more government involvement. Throwing more money is not the solution, it just exacerbates the problem.

We hear that medical debts are not a good barometer of a person paying on a loan. We also heard the same for tax liens and judgments. If a person didn’t make a house payment during the deferred payment period during the pandemic, don’t you think someone who did make their payment would be considered less risky. But yet they are all treated the same. When a debt is owed, it adds more risk to a consumers financial profile. There are repercussions for having all this derogatory information remove from credit reports.

The problem that is occurring is that credit score requirements keep increasing to qualify for the lowest interest rate and the lowest insurance premiums. Most mortgages raised their requirements from 740 to 780 in the Spring of 2023. Other lenders are following the same lead.

Those that make payments on time are wrongly hurt by not qualifying for the best interest rate because the goal posts have moved and become more difficult to reach. The end result is millions are paying more who have really good credit, but not excellent credit as now required.

It may make great headlines to say that missed payments, judgments or tax liens won’t appear on a credit report, or medical debt will disappear. When you turn around, we will all be paying more unless we have an excellent credit score. Additionally, you may be denied services because of these proposed changes. Unless we fix the problem, they are just putting a temporary band aid on the issue.

Millions of Credit Reports are Being Unfairly Treated

Mon, 11 Sep 2023 20:54:18 GMT

Over the last several years, there has been a substantial movement to allow consumers to miss payments, judgments and tax liens deleted form their report. Two states have now passed laws that create an unfair and uneven assessment with consumer credit reports. What is fairness? That some are treated one way and others are treated another way? That is unamerican.

Medical collections have been a hot topic for the last several years. Once a medical bill went six months past due, it oftentimes has been sent to a collection company. It then appears on the consumers credit report and can drop that credit score 70, 80 and even over 100 points.

Some states have stepped in to create an unfair advantage for some. Colorado and New York have recently passed state laws that restrict the ability of medical providers and collection companies to report past due medical bills to the credit agencies. What incentive does a consumer have to pay his / her medical bills now? Why do consumers in 48 other states have to pay their medical bill or that bill will show up as a collection, substantially hurting their credit rating. Only in New York and Colorado, medical collections will not show up in the credit report.

State legislators have now created an uneven credit report. Those citizens in Colorado and New York gain an extra benefit millions of other consumers do not. Now it is going to be a race to the bottom. Other state legislators will step in and pass other restrictions.

This issue should be uniform across the country. States should not be allowed to dictate what goes into a credit report. It should be a federal issue so that it is applied evenly. Otherwise, there is inequality and that is what is happening now.

Largest Credit Repair Companies Fined Billions for Illegal Fees

Fri, 01 Sep 2023 19:53:16 GMT

The credit repair industry just took a big hit. It is very doubtful you will be hearing about credit repair. With the two largest credit repair companies fined billions this week, the credit repair business is facing a big reckoning.

What happened?

Lexington Law and CreditRepair.com have been fined a $2.7 billion judgment and a ten year ban for illegally charging customers. They charged “Advanced fees” for submitting disputes to the three major credit agencies. They offered no real counseling or offer a bonafide plan-of-action to improve credit scores.

What is wrong with that? Since the companies are for-profit, it is illegal for them to charge upfront fees to do credit repair. They cannot charge for services until the items they complete the services they offer to provide.

The companies are additionally assessed $64 million in civil penalties and must reimburse about four million consumers.

In March 2023, a federal court ruled that they charged fees that violated the Telemarketing Sales Rule. That law requires that a consumer may sign up for services, but must be given a 3 day right of recission, and may not be charged until six months after the contract has been signed when credit repair is offered. Lexington Law and CreditRepair.com charged consumer upfront and charged a monthly fee, oftentimes with little to no benefit many consumers complained.

The two companies have filed for bankruptcy and their solvency is questioned. They are also banned from engaging in credit repair for ten years.

Where does that lead them? How can you make money if you cannot make money? It appears their days are numbered and we won’t have to listen to those annoying radio ads how they can fix practically anyone’s credit.

The best option is the non-profit certified credit counselors. Such entities as MyCreditPlan.org managed by Family Financial offers many more opportunities to improve credit scores.

The Federal Reserve is Adding to the Housing Problem

Fri, 21 Jul 2023 21:28:36 GMT

In an effort to address the inflation problems, the Federal Reserve has been on a march to higher interest rates. This powerful counter action over the last year has had unintended consequences and has lead to a housing deficit. It is impacting millions across the country and will take a generation to resolve unless the Federal Reserve takes some counter actions.

When the Federal Reserve pushed long term mortgage rates into the 2’s, it failed to realize that it would create a future housing conundrum where millions of homeowners could ill-afford to sell their home and move into a smaller home, but yet pay more for it. That is exactly what has happened. Most homeowners are unable to purchase the very home they currently live in because the interest rates are so much higher, they could not afford the payments.

Since more homeowners cannot afford to move, less homes come onto the market. With less homes on the market, less number of new homebuyers can afford to purchase a home. Which leaves home prices artificially high because less homes are coming on to the market.

The Federal Reserve thinks it is curtailing housing inflation, when if we really look at it, it is actually adding to it.

What Needs to Be Done?

The Federal Reserve needs to try and help mortgage rates come back to a normal range. U.S. Treasury interest rates are currently between 3.90%. The normal spread between U.S. Treasury rates and mortgage rates is about 1.75%, which would put mortgage rates at around 5.65%. But that is not happening. Demand is building up and when rates do come down, home prices will shoot up because the demand has been stifled for a period of time. It is not like young families can rent forever.

The current spread between U.S. Treasury interest rates and mortgage rates are at historic highs around 3.00%. That makes the mortgage rates be around 6.90%. The difference in payment for a $450,000 mortgage is $365 a month in principal and interest ($2,965 vs $2,598). That is a lot of money.

The Federal Reserve needs to lower mortgage rates through a commitment not to sell their mortgage securities, held by the Federal Reserve, on the market for the foreseeable future. It is driving up mortgage rates to unhealthy levels. It also need to work the monetary policies that will lower the mortgage rates to healthy levels.

Failure to act now will lead to future and more challenging housing crisis down the road. The Federal Reserve will just be chasing fires from one house to the next without end.

And we will have a growing number of potential homebuyers who will be renters for many more years.

How to Lower Your Insurance Premiums

Sat, 08 Jul 2023 12:43:50 GMT

It seems like year after year, auto, home and other insurance premiums keep going up. How can you fight back and lower your insurance premiums? There are a few steps to follow to try and lower the pain.

Insurance companies will usually increase your rates every year unless you are proactive and fight back. Recent increases have surpassed any increases over the last 15 to 20 years. I have seen insurance rates jump 20 to 30% in the last 18 months, even when there were no claims, accidents or other concerning issues arise.

Why? Homes and cars are becoming more expensive. When there is a claim, it is more expensive to rebuild or fix them up. Additionally, it is taking longer for auto repair shops to get parts for vehicles, there is a higher labor cost component, and certain housing materials are much higher. It can take upwards of 90 days for a car or truck to be repaired, all while the insurance company is paying for the rental car.

So what can you do?

Check for comparisons on rates on your renewals and any differences should be taken back to your original company to see if they can match the price and coverage. If they cannot, it is probably worth changing insurance companies.

Raise your deductible. If you calculated the difference on premium from a $250 deductible to a $500 or even a $1,000 deductible, you could save yourself some decent money sometimes. Basically, the difference in deductible for a $250 and a $1,000 is $750. But the cost for the lower deductible is quite one-sided. You could easily pay $300 for that $750 of extra coverage. Is it worth it? Probably not.

Adjust your coverage on home and auto. If you have an average older vehicle, (something over 8 to 10 years old), collision coverage is probably not worth the extra costs because the value of a vehicle has depreciated so much, you are not going to get much out of it. Lok at the entire coverage and see what makes sense and what does not and eliminate those unnecessary items.

For homes, review your entire coverage and know what coverage you would have for different situations. Ask questions and you make elect to drop some of the coverages.

Raise your FICO® Credit Scores. Remember credit plays a huge factor in an insurance premium. If you have raised your scores $50 or more, it is worth checking with your insurance agent to see if you can qualify for a lower premium of $30, $50, or even a $100 or more . It is worth it.

Finally, don’t file a claim unless you really have to. For homes, you could face substantially higher claims because insurance companies know which homes have had claims, and those that do not. They will charge more for those that have a recent history of any claims, or in some instances, not offer any coverage at all.

Biden's Student Loan Debt Debacle was a Crazy Proposal

Sat, 01 Jul 2023 13:17:49 GMT

I told you so last year.

https://mycreditplan.org/Blog/what-to-do-with-your-student-loans

Biden’s student loan relief disappeared like a bubble in a gusty wind. Giving something for nothing in return makes no practical sense. Now, President Joe Biden has put more people in a bad situation by giving them a false hope for something that the Courts determined has to be approved by Congress.

Imagine what the Biden administration was wanting. They wanted to be able to spend money whenever they want, to however they want and to whoever they want. The Supreme Court said it is the Congress’s responsibility to do that. In fact, President Biden when he was in Congress spoke about the responsibility for the budget remains with the Congress. Now he’s president, he thinks it does not apply to him. Now President Biden said that the Court “misinterpreted the Constitution.” What part of the Constitution says that? I’m looking -- and I am sure I will still be looking at the end of Biden’s term. There is NOTHING in the Constitution that says anything about student loan debt.

There is none. Biden was trying to buy votes. This was stupid policy that was going nowhere.

Let’s look at who Biden was trying to help.

Former New York state Democrat Sen. Alessandra Biaggi, who purchased a $1.2 million home recently, took to social media to complain about the Supreme Court’s decision, "In 2012, I graduated from Fordham Law School with $180,000 is student loan debt, (and) I’ve been paying loans for 11 years. Even paid two of them off completely. In 2023, my balance is $206,000.”

Who responsibility is it to pay your debts? Every American taxpayer? I don’t ask others to pay my debts. My debts are my debts to pay, and your debts are your debts to pay. Someone who supposedly got a law education almost assuredly is demonstrating that she didn’t get much of a quality education about the Constitution.

From then House Speaker Nancy Pelosi,

“People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress."

That pretty well says it all. So why is anyone complaining?

For those with student loan debt who want the government to take this responsibility from them – don’t ask other people to pay your own debts unless you are willing to pay theirs? You signed on the bottom line, not the American taxpayer. You pay your debts even if you have to pick up a second and even a third job. I, along with many others have too. That is America.

That is only fair - and the U.S. Supreme Court confirmed it.

There are other methods Congress can look at to help students work off their student loan debt. Just forgiving that debt without something in return - is not an option.

Is Now the Time to Purchase a Home?

Fri, 16 Jun 2023 21:27:52 GMT

The housing market has been going through a substantial reset in most parts of the country over the last year. With interest rates high, is this a good time to purchase a home?

Interest rates are high and many homebuerys are sitting out right now. They are not even looking. They think that they will wait for interest rates to settle before they start looking for a home – along with the hundreds of thousands of other potential homebuyers.

Is now the time to buy a home?

Home values have settled in most areas and have come down tens of thousands to hundreds of thousands of dollars. What happens when interest rates go down? Those thousands of homebuyers will start looking for homes and the challenge to get an offer accepted will elevate. It will become a bigger challenge.

With the Federal Reserve approaching the end of its cycle of raising short-term interest rates, long term mortgage rates are set to decline some in the coming months. Unless something unforseen happens, interest rates could be much better within the next few months. With that decline, more homebuyers will enter the housing market.

It is always best to have little competition in purchasing a home. If a home is on the market, but there are no potential homebuyers, the homebuyer has the leverage to the home sale. There is where you can possibly find a steal-of-a-deal when someone is anxious to sell their home. You could save tens of thousands of dollars.

This could work as long as you could afford the higher payment. When rates come down, you could refinance to a lower interest rate. This way, you could get a better price on a home and end up with a lower payment. That could be a better opportunity than waiting for interest rates.

Now could very well be the best opportunity to purchase a home through this interest rate cycle. When the numebr of buyers are down, is usually the best time to make a jump. Savvy consumers often make smart decisions when a good prospect is nearing the end of a down cycle.

The next month or so may be the best opportunity to purchase a house.

Looking for Options Repaying Your Student Loans

Mon, 12 Jun 2023 18:00:23 GMT

Almost 44 million Americans have had their student loans in deferment since March 2020. Those payments will start up again the end of this summer – around September 1, 2023. Many of these borrowers have not had to budget for the student loan payments, possibly creating some real challenges. There is fear that student loan delinquencies will jump to 10% or more. What can you do if you are one of these borrowers that need to start paying? There are some options.

Unless the U.S. Supreme Court unexpectedly rules in favor of the Biden’s Administration’s loan forgiveness program, student loans will be an extra heavy burden for many borrowers. Many borrowers have dropped out of school, but yet still have to pay their student loans back. The day of reckoning is fast approaching. An estimated 18 Billion dollars in payments will be made each month.

Oftentimes, refinancing the multiple student loans into one provides a better opportunity to lower the monthly payment. You need to ask if the student loan consolidation will push out the term of the student debt.

Another option is to refinance the student loans into your mortgage if you have sufficient equity. The good side of this option is the major lenders consider this as a “Mortgage Balance Refinance” which is a lot cheaper than the “Cash-out Refinance”. The bad side is your current first mortgage may have a really good interest rate from refinancing a few years ago, and interest rates today are much higher.

The Graduated Repayment Plan allows a payment that starts out lower and then increases every two years. The loans term remains at t10 years. It just starts off with lower payments and ends with much higher payments.

The Extended Repayment Plan allows the term of student loans to be up to 25 years. This allows lower payments, at the expense of having payments over a longer period of time. You will pay more interest over that time frame, but it may be a better option if you cannot handle the current payment.

There are the income repayment options including a couple of income repayment programs such as Pay As You Earn Repayment Plan. This keeps your payment at 10% of your discretionary income. The Income-Based Repayment Plan keeps payment under 15% of your discretionary income. Payments are recalculated each year based on income and family size.

There are some options and it best to contact your loan servicer as soon as possible because the longer you wait, the more difficult it could become to try to reach someone as that September 1, 2023 date is fast approaching.

What Consumers Think They Know & What They Actually Know are Two Very Different Things

Fri, 12 May 2023 16:35:49 GMT

In a recent survey on credit scores, those between the ages of 25 and 70 graded themselves as having a “B” grade understanding about credit scores. When they took a subsequent questionnaire, their passed rate was 29%. Do consumers really think they are much smarter than what they really know about credit scores? The correct answer is a resounding “Yes” and this costs every such consumer a lot of money.

How, let’s look at why.

Let’s take a look at some of the question in the survey. 47% said they track CreditKarma to track a credit score. CreditKarma provides a consumer credit score – one that is different and not used by lenders. A consumer thinks their credit score is say “740” only to find out it is “715” when they take out a loan. That leads to much higher interest rates y misled to the actual lender’s credit score.

The survey also shows that 59% of consumers checked their score within the last week. But, if it is not accurate, what real purpose does that bring to the consumer? CreditKarma can be used for a view from 40,000 feet. But if you are takin gout a loan, you need precise credit scores. You cannot afford to be guessing or you will pay much more for loan fees and rates.

53% of respondents say they will track a credit score for free, even if the consumer knows it is inaccurate. This highlights the lack of awareness by many consumers how credit scores impact their purchasing power and their payments for different loans. This isn’t hand grenades or horseshoes. One point in a credit score can cost any consumer lots of money on a loan.

Most consumers think one of the three major credit agencies can provide the same credit scores lenders use. Experian®, Equifax®, and TransUnion® do not provide the 3 lender’s FICO® Credit Scores. You have to go to MyFICO.com or a certified credit counselor such as MyCreditPlan.org to access those outside of a lender.

Only 6% correctly responded to how long an inquiry lowers the lender’s FICO scores of 12 months. 41% put 6 months and another 35% put 3 months. Finally, 18% of consumer correctly answered that there are up to 33 (one is 33, one is 32, and the third is 31) different measuring factors in a lender’s FICO Score. 53% put 24 different measuring factors. The bigger issue is knowing how different issues impact a credit score.

Knowing correct information about credit scores will help you from being misled. This survey simply identifies many deficiencies about a consumer’s understanding (or lack thereof) about their credit scores as viewed by lenders. In actuality, most consumers have a failing or “F” grade. Following correct information will help all consumers

How Those Loan Fees Determine Your Interest Rate on a Mortgage

Fri, 05 May 2023 21:40:38 GMT

The FHFA has responded to criticism about their new fee structure. How does the fee structure for a conventional mortgage work and how does these changes impact a homebuyer’s interest rate?

LLPAs – also called Loan Level Price Adjustments

LLPAs have been in the news a lot lately. What are they and how do they work?

When you apply for a mortgage, there are several criteria the lender looks at to evaluate your credit worthiness. Different issues will increase your risk. Those risk factors (also called LLPAs) set out by Fannie Mae and Freddie Mac – the two biggest institutional mortgage agencies – are:

Credit Score
Down Payment
Living in the House or Rental Property, or even a Second Home
The Purpose of the Loan – Purchase a Home, refinance the Mortgage or take Money Out of the Equity
The Type of Home – Stand alone home, Condo, townhome, or Manufactured Home
Fixed or Variable Interest Rate
Property a Single Unit, a Duplex, a Tri-Plex, or a 4-Plex
Term of the Mortgage – 30 year, 20 year or 15 Year

All these factors will impact the interest rate on a regular conventional mortgage. How?

Since these issue are predetermined by Fannie Mae / Freddie Mac, the lender identifies all the appropriate risk factors before you close on the loan. The lender then knows what fees Fannie Mae or Freddie Mac is going to charge the lender -- and ultimately the borrower - for that loan. If there is 1.50% in loan fees (LLPAs) for example that need to be paid (in addition to the regular closing fees), the lender makes adjustments to the loan interest rate or fees to offset those LLPAs.

Those LLPAs fees are paid within a couple of weeks after you close on your mortgage. On a $400,000 mortgage, 1.50% is $6,000 in LLPA fees. The lender has to pay that money upfront. In turn, the mortgage lender will go back to the borrower and charge higher fees, or a higher interest rate.

If the lowest interest rate available at a particular moment is 5.00%, the lender will raise the interest rate to offset that 1.50% fees from Fannie Mae or Freddie Mac. The lender may raise the interest rate to 5.75%. The payment jumps $187 a month. The lender will recoup $187 a month to repay the $6,00 back.

This leads to another question. Once the $6,000 is paid, does the lender automatically lower the interest rate? No. The lender will continue to take that higher payment until the loan is paid off.

That is how LLPAs work.

Consumers with Higher Credit Scores Set to Pay Higher Interest Rates than Those with Lower Credit Scores - WHAT?!?

Fri, 28 Apr 2023 19:19:13 GMT

The FHFA – the federal regulator for Fannie Mae & Freddie Mac -- set out new guidelines for interest rates and one part of the change has certain consumers with lower credit scores qualifying for lower interest rates than other consumers with higher credit scores. Someone with a 640 credit score in essence will qualify for about ¼% lower in interest rate on a 30 year mortgage than someone with a 740 credit score. This is flat-out wrong! How does this happen?

The FHFA issued new directives in a 2-part series. First in November 2022, the FHFA pulled back all additional fees – called loan level price adjustment fees – for first time homebuyers below 80% of the average medium income. There is a lot there.

Based on Average Household Income

For example, Salt Lake City, Utah has an average medium income of $102,200 while Chicago Illinois has an average medium income of $105,350. Take 80% of that income and it comes to $81,760 in Salt Lake City and $84,560 in Chicago. Every city and county has an average medium income. As long as the household income is below the average medium income, those prospective homebuyers will most likely qualify for the lowest interest rate and fees for a conventional (Fannie Mae / Freddie Mac) loan.

It doesn’t matter if their credit score is 700 or 640. As long as they meet the other loan qualifications, that prospective homebuyer will get a better interest rate and lower fee than someone with an 800 credit score. This is not a joke. Here is the link to the story that broke in from WBZ in Boston.

Click or copy and paste the following link -

https://www.cbsnews.com/boston/news/mortgage-fee-changes-good-high-credit-scores/

Rewarding Bad Behavior

Why is this happening? FHFA put out a press release with the following:

FHFA launched such a review in 2021. The objectives were to maintain support for purchase borrowers limited by income or wealth, ensure a level playing field…

Basically, the objective was to force those with higher credit scores with higher rates and fees, and those with lower credit scores with lower interest rates and fees. In short, someone with a 640 credit score putting 3% down will qualify for a 6.25% interest rate. While someone with above average income and a 740 credit score will qualify for an interest rate of 6.50% -- a full ¼% high.

All to try and equal out the playing field. This will not end well.

Dave Ramsey is Flat-Out Wrong!

Sat, 22 Apr 2023 11:34:34 GMT

For many years, Mr. Dave Ramsey, debt solutions guru, advocates a position that no consumer needs a credit score. He claims that you can purchase a house or anything else without a credit score. He basically tells his followers that a credit score is a bad thing. Since he doesn’t understand FICO credit scores, he pushes a position that is financially illiterate.

Mr. Ramsey has some great points of emphasis to help consumers get out of debt. They should be applauded. It is always a good position for consumers to get out of debt. That should be the ultimate goal for every consumer. Find ways to pay off debt sooner rather than later. Following such sound advice, consumers can put more money towards their retirement at a faster pace and attain greater returns, and more wealth.

Mr. Ramsey’s Position

However a FICO® credit score still matter even to those who have all the money in the world. I often am questioned by thousands who have followed Mr. Ramsey’s financial tools. They always ask me, “Is not having a credit score a good thing?” My answer is that anyone who follows this poor advice will be limited in their financial decisions and end up paying much more (even if they can qualify for any loan) for a mortgage, an auto loan, and even their insurance premiums.

Mr. Ramsey states to his followers, “Want to know how to improve your credit score? It’s simple: Pay off your debt, don’t add any new debt, and let your credit score dwindle until it’s completely extinct.”

He continues, “Not the answer you were expecting? If you’re like most people, you’re probably shaking your head in disbelief wondering, How can I improve my credit score by letting it go extinct? And don’t I need a credit score to buy a house? Trust us: Not having a credit score is a good thing—a really good thing! And you absolutely don’t need a credit score to buy a house.”

Mr. Ramsey adds, ”We’ve said it before, and we’ll say it again: The best way to really increase your credit score is by ditching your credit altogether. Peace out, credit score—you’ve been dumped!

Oh, and don’t worry about a credit score when it comes time to buy a new home. You don’t need a stinking credit score for that either (despite what people might tell you). There’s a process called manual underwritingthat looks at the full picture of your financial stability, rather than just your credit score. See? You can breathe easy.”

Breathe easy? I have been a mortgage lender for over 30 years. Manual underwriting was done over 20 years ago. I have not seen a mortgage be approved without a credit score for all these years. It is a non-starter. It could possibly happen somewhere. I don’t know anyone who does it. Even if some underwriter or lender approves a loan without a credit score, that lender has put themselves in a precarious financial position of trying to get a loan insured (sold off) through major investors without a credit score. That usually doesn’t happen. All these investors require credit scores. The lender would then just have to keep the loan on their own books potentially costing them $10,000’s of dollars – and there are not many lenders who want to do that. If they do, the borrower ends up paying a higher interest rate and higher fees, costing themselves a lot more money.

It's a Marketing Theme, Not Reality

Why does Mr. Ramsey advocate such a position? To maintain a certain position with his philosophy. It is all about selling books and his own programs. He makes more money selling such points of view and he doesn’t want to run counter to this. Imagine if he came out and said to use some debt to do something. It would run counter to everything he advocates for. He would lose money.

He may be rich and not need a credit score to take out a loan. For the millions of other common consumers, they do not have the same financial position. Mr. Ramsey is putting such consumers in a worse financial position. His position doesn’t make financial sense. It is our financial reality today. He is advocating a position from many years ago that was possible then, not now. Since Mr. Ramsey doesn’t know how credit scores work, he just says you don’t need one. But Mr. Ramsey won’t admit that he doesn't understand FICO scores, or he would lose credibility. But he doesn’t realize it, he has already lost credibility advocating such poor financial advice.

What do you do?

Getting out of debt is a good thing. I have done my financial instructional, The Drive to 850, with thousands of those who have taken financial instruction from Mr. Ramsey. I am always asked the question, “Is a credit score a bad thing like Mr. Ramsey advocates?” I reply his position is unrealistic. Simply having a credit card, using to charge monthly expenses, manage it properly and pay that debt off before the due date the following month to avoid interest is sufficient to build and maintain a really good credit score. This is sound advice that will save you a lot of money.

When you go to purchase a house, auto or other type of loan, you don't have to be on pins and needles begging to be approved for a loan. You won't have to beg or face the prospects of being denied for a loan. In most cases, you can also qualify for lower auto and homeowners insurance premiums. This way, you can breathe easier.

Loan Officers Cost Consumers Lots of Money with Bad Advice

Sat, 15 Apr 2023 12:47:08 GMT

I recently walked in another loan officer’s office when I overheard his conversation with a client he was on the phone with. He was trying to tell her how to raise her FICO® Scores. However, the information he gave was inaccurate. After he finished the call, I asked him about his incorrect credit score comments to the client. He responded, “It doesn’t matter. She won’t know the difference.” This is not out of the ordinary. Loan officers too often give bad advice that end up hurting their clients. Why does this happen?

Another loan officer called me several weeks ago to ask me some specific questions a lender gave at a luncheon to several agents. We went through two issues and both times, the luncheon speaker gave substantive incorrect information. Then the caller said he told his clients something completely different and wanted to verify that the speaker was incorrect. But then he told me what he tells his clients, and it is something completely different. I was stunned. His suggestions were not accurate either. He has been costing his clients many credit score points!

Why does this happen? Because the client doesn’t know, and second, most consumers think loan officers know credit scores very well – especially the more experienced one. Additionally, there is no one there to call out the loan officer to tell them that the information is incorrect. So practically any loan officer can say anything, and many consumers can consider it Gospel, when often, the suggestions are incorrect.

The Difficulty of Validating Loan Officers

Finding the right answers to a credit score question is very difficult. Sometimes a person can ask multiple loan answers and then quickly discover, that the initial answer may or may not be correct. There is no one there to back check the information given to anyone.

The Stunning Results

I have been on the SAFE MORTGAGE test writing committee since 2009. About 50 of us are scattered throughout the country and have to come together every few years to help write and review national test questions. Those that deal with credit and credit scores are particular interest to me, and to many other of the committee members.

One particular session, we reviewed several questions on credit scores that were very basic. There was nothing remotely advanced or required a lot of experience. The success rate was varying between 21% and 42% passage rate. The testing company wanted to discard the questions because the pass rate was so low. The committee members pushed back and the questions remained in the exam. It was the first result to show that loan officers are quite inept with understanding credit scores.

Other surveys I have done have validated those results. The passage rate is slightly higher to the low 40s. The questions being missed are basic questions like how long an inquiry impacts a credit score. Or how long does someone have to shop an auto loan or mortgage to have it only count as one hard inquiry for the Classic FICO® Scores. How long does a bankruptcy stay on a credit report. These are not hard questions, but loan officers are failing at remarkable levels.

Some lenders have told their loan officers to not give credit score advice because of some of the complaints that have come in.

The problem with credit scores is they are multi-dimensional in that there are an array of possibilities. In one instance, a suggestion could be true. While another situation, that suggestion could be totally false. But lenders tend to give the same suggestion regardless of the differences or changes in circumstance from one client to the next.

What tends to happen is that a lender may give a suggestion that improves a credit score a few points – say up to 10 points, when the score could have improved 40 or 50 points if the lender could recognize all the issues. But lenders practically never recognize all the underlying issues and leave the consumer short of where they could have been.

What Can You Do?

Recognize that loan officers are not credit score experts! They are not. They make too many mistakes and a consumer will be hard pressed to see that. It does not matter how long they have been in the business. They don't take the time to learn all the ins and outs about credit scores.

My Credit Plan has done a fantastic job in identifying all the underlying issues in a credit score. The average score improvement for 2022 was 76 points. When a program has such stellar results, you can tell they are hitting all the relevant factors and provides clear and precise answers for consumers.

Want to improve your scores? That is what you need.

How Much Can You Increase Your Home Purchasing Power?

Fri, 07 Apr 2023 20:58:56 GMT

Everyone knows that interest rates are impacted by credit scores. The lower the credit score, the higher the interest rate. But hardly anyone understands the impact of a lower credit score to your home purchasing power. It is a lot more than everyone understands, and even mortgage loan officers.

If you have an average credit score of 690 and want to purchase a single family home with 5% as a down payment. You look at a particular home and figure a monthly payment of $2,500. including principal and interest, property taxes, home insurance and mortgage insurance.

Sales Price: $318,000

Loan Amount: $301,750

Interest Rate: 7.25%

Total Payment: $2,499.87

If the borrower raised her / his FICO® by 10 points – only 10 points, the borrowing power for that home buyer jumps $13,000, all for the same payment. Here is an outline of the new profile:

Sales Price: $332,000

Loan Amount: $314,750

Interest Rate: 7.00%

Total Payment: $2,498.63

An increase of $13,000 for the same payment!

This happens all along the credit score spectrum. But loan officers are not even aware of how much their purchasing power changes by increasing their FICO Scores just a few points. It is usually $10,000’s of thousands of dollars.

Mortgage FICO Scores are like grades. They are as follows:

780 and above

760 to 779

740 to 759

720 to 739

700 to 719

680 to 699

660 to 679

640 to 659

640 and below

Increasing your scores to the next grade can be substantial. Since mortgage lenders never discuss this with their clients, I will be talking more about this in the coming weeks and where you can find this great information.