Credit changes Revolver or Transactor

Are you a “transactor” or a “revolver” when it comes to your credit? Terms like these never have mattered much to home buyers seeking a home loan. You’ve probably never heard of them. Yet they are about to become more important to millions of home loan-seekers and they may even help determine whether you qualify for a loan in the first place. A transactor is someone who pays off credit bills in full every month or makes more than the minimum required payment. A revolver is the opposite: someone who routinely makes the minimum payment on credit cards and other debts, rolling balances over to the next month. Credit industry statistical research suggests that, all other factors being equal, revolvers tend to present higher risks of future default to lenders, especially when they are accumulating substantial unpaid balances. Transactors tend to be lower risks. Until now, lenders and investors had difficulty distinguishing revolvers from transactors. Credit reports told them whether you as an applicant were late on card payments and whether you defaulted on your car loan, but they didn’t show what you paid on your balances month by month over extended periods. Fannie Mae, a dominant player in the housing market, will soon begin evaluating how all loan applicants have managed their credit over the previous two years: how much they owed in revolving debt each month, the minimum payment allowed on each debt and how much they actually paid. As a general rule, according to Eric Rosenblatt, Fannie’s Vice President of Credit Risk Analysis and Modeling, the new system will “benefit borrowers who regularly pay off revolving debt” and should “provide more creditworthy borrowers access to credit.” Starting June 25, the new reach-back data will become an integral part of Fannie’s automated underwriting, an online system that is used by the vast majority of lenders to determine whether applicants are eligible for the loan they’re seeking. Source: Ken Harney, The Nation's Housing Note: The date of implementation is likely to be delayed by Fannie Mae

VA Loans

Active Military Are Buyers Active-service military buyers between the ages of 18 and 35 are purchasing homes at a “far greater rate” than non-military buyers – 51 percent versus 34 percent, according to the National Association of Realtors®’ newly released Veterans & Active Military Home Buyers and Sellers Profile. This is the first time NAR has released such an in-depth look at the military with the aim of evaluating the differences between active-service/veteran real estate clients and those who’ve never served. Despite their lower median income ($76,800), active-service military members tend to have more job security, says Lawrence Yun, NAR’s chief economist. "No-down payment financing options...are giving aspiring home owners in the military a deserving advantage over their civilian peers,” he adds. “Furthermore, their tendencies to marry and raise a family at an earlier age and carry less student debt make buying a home a more desirable and achievable option.” Because of the tendency to marry and have children at younger ages, active-service members often purchase larger homes that cost more than those purchased by non-military buyers and veterans alike, according to the study. The loans available to the military prove to be a big perk. Veterans Affairs loans offer 100 percent financing for veteran and active-service home buyers. Source: National Association of Realtors®

The 3 C's of Mortgage lending

From an earlier post this week. The 3 "C's" of lending why it is important to have a Mortgage Originator take you through the process. Credit: An acceptable credit reputation is established by a history that, when viewed as a whole, evidences a borrower’s willingness to make timely payments on obligations. Capacity: The borrower must have the ability to repay the mortgage in the amount and terms stated. Adequate capacity is established by documenting stable monthly income and/or assets along with other information about how the borrower paid obligations in the past that, when viewed as a whole, evidences a borrower’s ability to make periodic payments approximating the amount of the proposed monthly debt payment. Regardless of the level of the borrower’s previous monthly payments, the file must contain evidence of the borrower’s ability to meet all new obligations after the new mortgage is made. When the borrower’s obligations will increase significantly with the mortgage, the Brokers Transmittal Summary must contain an explanation as to how the borrower will meet the higher payment. Collateral: The collateral must meet minimum property requirements as specified herein. Each property must also have an established value to support the loan transaction. This value will help in determining the risk associated with the loan transaction. Just Saying Mr. Will