If you’re applying for a new mortgage, refinancing an existing mortgage or applying for a loan modification, your FICO® credit score plays a key role in helping you qualify and get better terms.

Happily, there are things you can do to raise that FICO® score!

Last week, I posted tips on managing debt and credit cards. This week, I’ll cover how to rate shop for a loan without hurting your score and more overall credit scoring tips.  Remember, there are no quick fixes to improve your credit score, but it can be done.

1. Do your mortgage rate shopping in a timely manner. FICO scores make a distinction between a search for a single loan and pursuing many new credit lines. Making several rate inquiries in a short period of time for the same kind of loan, such as a car loan, is usually treated as a search for a single new loan. Stretch those inquiries out over several months, though, and it could look like you’re applying for several new credit lines. That would hurt your score. Learn more about what to know about rate shopping.  
2. If you’ve had problems, take immediate steps to re-establish your credit history.
   Open new accounts in a responsible manner, pay them on time, and keep any credit card balances low. Your credit score will slowly rise.
3. Don’t be afraid to check your own credit report. Contrary to popular belief, requesting your credit report doesn’t lower your score, as long as you order it directly from the credit reporting agency or through an organization authorized to provide consumers with reports. It is important to review your credit report to make sure it’s accurate and make corrections if you find discrepancies. 
4. Open new credit accounts only as needed. Applying for and opening new accounts or credit cards probably won’t raise your score and could lower it.
5. Have credit cards, but use them responsibly. Generally, having credit cards and installment loans will raise your credit score — if you pay them on time and keep balances low. Someone without credit cards may be seen as a higher risk than someone with credit cards who has handled them responsibly.
6. Remember that closing an account won’t make it go away. It will still appear on your credit report and may be taken into consideration by the score.

These actions won’t instantly improve your score, but as you start to manage your credit and pay on time, your score will eventually go up. If you need extra help, don’t hesitate to consult with a credit counselor.

The maximum $729,750 conforming loan limit is due to expire on Dec. 21, which would drop the loan limit down to $625,500. This is leaving lenders in a bit of a holding pattern as to whether they can approve balances above $625,500 for mortgages they’re dealing with now.

Good news to keep things stable: The Committees on Appropriations agreed this week in a Continuing Resolution (CR) to maintain housing loan limits for FHA, GSE and HECM single-family mortgages at $729,750 through end of calendar year 2010. And, Congress passed a stopgap funding plan that the loan limit extension is attached to — it just needs President Obama’s signature, which is expected today, if not early next week.

That means FHA loans, and GSE (Fannie Mae and Freddie Mac) loan limits will stay the same for another year.

Earlier this week, Treasury Secretary Shaun Donovan was urging Congress to approve the conforming loan limit measure, which is part of his three-part proposal to help heal the housing market:

• Extend the First Time Homebuyer Credit, with strong anti-fraud measures
• Extend Loan Limits for Mortgage Loans
• Secure Financing for the Housing Trust Fund

According to the BAI survey, the perception is:

• 31% of the consumers thought it was harder to get a mortgage.
• 5% thought it was easier.
• By default that means that 64% thought it was about the same as 6 months ago.

What do I think?

If you have good credit, can document your income and assets, have enough assets for a downpayment, and are working with a MORE THAN competent mortgage lender who knows how to navigate the complexities of today’s market, then it’s no harder now than it was 6 months ago.

If your credit is struggling, you can’t document your income (sorry – self employed people who write everything off are out of luck) and don’t have either equity or a downpayment or you’re working with a lender who isn’t on top of things, then it is harder.

So, tell me – what’s the perception that you’re seeing?

31% of BAI Survey Respondents Find Mortgage Access Worsening : HousingWire || financial news for the mortgage market

Financial services information and intelligence provider Bank Administration Institute (BAI) launched the BAI & Finacle Banking Confidence Index, which tracks the effect of upheaval in the financial services industry on consumers’ views.

The index measures consumer views across five areas: financial stress and the economy, access to credit, fees and disclosure, managing personal finances and consumer trust.

The index’s findings, released Tuesday, indicate one-third of consumers feel their financial situation has deteriorated in recent months, but few expect conditions to grow even worse.

Of those surveyed, nearly one-third — or 31% — indicated access to mortgages is worse now than six months ago, while only 5% said it improved. The projections indicate 12% of respondents expected access to improve in another six months, while 15% expect access to worsen.

“In today’s fast-changing scenario, consumer opinion counts more than ever before and technology has made the consumer highly empowered,” said Haragopal Mangipudi, global head at Finacle, a solution from Infosys (INFY: 46.39 -1.70%). “Presented with diverse and ever-dynamic consumer segments, banks need to anticipate changing requirements and fine-tune business strategy.”

Lots of news happening today:

• Gross Domestic Product for the 3rd quarter came in on a preliminary reading at 3.6% up.   That’s great news, right?  Well, it’s good news, but look at the temporary stimulus measures that propped that up.   The cash for clunkers auto stimulus program is supposed to have added 1.7% to the overall number.   So we’d be at 1.9% without that.    What do you suppose the housing market would look like without it’s $8,000 version of cash for clunkers?   Yeah, that’s right.    So, besides for the temporary stimulus measures, which are exactly that, temporary, we’re not looking all that good.   Temporary euphoria going on in the stock markets and on CNBC right now though.
• Speaking of temporary euphoria - the markets are happy because initial jobless claims fell by 1000.   That’s right ONLY 530,000 people got laid off last week.   Whew, that feels better.    NOT.
• Exxon Mobil’s earnings fell - but remember what oil prices were like a year ago?   No big surprise there.
• The talk continues in Washington about whether there really is a too big to fail and what to do with the likes of Citibank, AIG, GMAC and the like.   
• The talk continues about an “extend and pretend” home buyer tax credit designed to push the housing troubles down the road.   Lots of talk, lots of people saying that it’s passed.   It hasn’t yet.    Passed a couple of committees, yes, but a true up or down vote in front of the House and Senate and signed by the President, nope.    When we do have a solid plan, I’ll tell you what I know and what I like or don’t like about it.   Until then, it’s all rumor and innuendo.

So what are mortgage rates doing with all of this news?   Really nothing.   Rates have remained stable today.

My recommendation remains to lock all loans because the potential for an increase in rates is greater than a potential for a decrease.

Stay tuned, it could be an interesting week with the jobs claim next Friday, the Fed meeting soon and just a lot of stuff going on.

“I want my $8000 NOW!”

Great news on the $8,000 first-time home buyer tax credit! If you bought your first home this year — or are in the process of closing on or before November 30th, 2009 — you won’t have to wait until April 2010 to get your tax credit. You can file an amended 2008 return and claim your 2009 tax credit on your 2008 return. In other words, you can get paid much sooner than you thought.

Here is a summary of how to qualify for the credit:

• You must buy the home between 1/1/09 and 11/30/09
• The purchase must close by 11/30/09
• If you are building a house, you must be living in the house by 11/30/09
• The home must be a primary residence - the credit does not cover second homes, vacation homes, or investment properties
• Your adjusted gross income must be less than $75,000, or $150,000 for married filing jointly, to obtain any credit
• If you cease to use the residence as your primary anytime in the next 36 months, you will have to give back the credit

Get the complete overview of how to claim the $8,000 first-time home buyer tax credit, and get an overview of other things you need to consider before amending your 2008 tax return. And please remember to consult your tax accountant before actually filing an amended 2008 tax return.

Private Mortgage Insurance (PMI) is one of the most common yet most widely misunderstood concepts in mortgage lending today - at least from the borrower’s viewpoint. When many borrowers hear “mortgage insurance,” they tend to thing hey - that’s great!  I’ll be protected in case I can’t pay my mortgage!” However, this mortgage insurance is not in place to protect borrowers.  Rather, it’s put into place to protect lenders.

See, in situations where borrowers are unable to put down 20 percent or more for a home purchase, lenders tend to get a bit hesitant to lend - at least with out a hedge against their bet.  Experience has shown them that borrowers with less than 20 percent down tend to default on their loans more often.  So, lenders require those borrowers to pay a monthly fee to cover an insurance policy that in turn, protects  - or insures - them in case you can’t meet your financial obligations.

How Private Mortgage Insurance (PMI) Breaks Down Here’s How PMI Works

Say you’re getting an mortgage and are prepared to put 5 percent down on your home.  The lender requires any borrower putting down less than 20 percent to pay for an insurance policy that protects them in case the borrower becomes unable to pay on the loan.  In this scenario, you’ll likely pay a set fee per month as part of  your mortgage payment to cover this insurance.

Should you at any time default on your mortgage loan, the lender would benefit by receiving the 15 percent you did not pay as part of your down payment at closing.  Remember - 80 percent.  That’s the magic number lenders feel comfortable lending without requiring PMI.

Ending Your PMI Payments

The Homeowner’s Protection Act of 1998 requires lenders to automatically suspend PMI billing once you’ve attained 22 percent equity in your home.  However, once you have paid on your mortgage to a point where you have the required 20 percent accumulated, you can and should request that the PMI fees you pay each month be suspended.

Markets: The bond market has reversed itself the last two days and is headed higher once again.  It has broken through a couple of lines of resistance and is now trading at what my sources say is “an unsustainable level”.  More on that below.  Current levels on the FNMA bond correspond to 30-year fixed rates below 5%, though not very much below.  Still.

Analysis: What is the definition of “unsustainable”?  If you ask me, unsustainable means “you can’t keep doing this forever”.  These days, it seems to also mean “you can’t keep doing this for long enough to matter,” as when a football team grabs an early lead through fancy trick plays, but shortly runs out of those and cannot sustain the advantage.  It matters which we’re talking about, because the bond market certainly is in Unsustainable 1 territory, but not - again, just as clearly - in Unsustainable 2 territory.  We know this because we’ve been here before.

So we’re here, and we’re here long enough to matter, IF.  It is absolutely true that most lenders (and this is especially true with the new federal babysitting regulations) cannot react fast enough to help you take advantage of rates that will be abnormally low for only a few hours.  It is also true, however, that some lenders can, and the number that have that capability can be increased by your timely action.  DO NOT WAIT FOR RATES TO HIT YOUR TARGET ZONE BEFORE YOU START TALKING TO YOUR LENDER.  That’s not going to work, people.  For most, a couple of hours is just not enough time to get all the documents whizzed back and forth before a lock becomes possible, not with rates moving with this kind of volatility.

Since I already used the running analogy last time, let me use a hunting one here.  If you think you’re going to get the perfect shot on a deer by waiting for the deer to get in the right area, then going in after it, you’re crazy.  The way to make sure of a good shot is to get there first and wait.  Similarly, the way to make sure you get the rate you want - and 15-year rates are in the very low 4s right now, for instance, with 5-year ARMs in the mid 3% range - is to get your documentation together and go over it with your lender BEFORE you need to shoot.  That gives you the very best possible chance to get exactly what you want.

These days, a couple of extra days is a godsend.  Get moving now, and give yourself a break.

In today’s economy, many first-time home buyers find it challenging to make a hefty down payment towards a new home loan. Luckily, FHA financing is available for conforming loans (less than $417,000) with down payments as low as 3.5%.

Loans made by FHA (the Federal Housing Administration) haven’t always been applicable to every home on the market because of longstanding guidelines and restrictions. For example, if you wanted to sell your condo to a buyer ready to bring 3.5% down, that buyer couldn’t obtain an FHA loan if your condo bylaws gave the board the “right of first refusal.”

But now, FHA is making it easier to obtain approval for condos. They’re allowing lenders to determine project eligibility, review project documentation, and certify federal compliance for condo projects.

In accordance with the 2008 Housing and Economic Recovery Act (HERA), FHA is implementing a new approval process for condo projects to insure mortgages on individual units closed as of October 1, 2009.

Now, the right of first refusal is permitted - unless it violates discriminatory conduct under the Fair Housing Act. Eligible spheres include projects with 2 or more units carrying hazard, liability and flood insurance. For these projects, no more than 25% of the units can be used for commercial space – and no more than 10% of the units can be owned by more than one investor. Additionally, 50% of the units must be sold and owner-occupied. Projects listed as “Proposed / Under Construction,” “Existing Construction” or “Conversion” are also eligible.

Ineligible Projects include Condotels, Timeshares or Segmented Properties, Multi-Dwelling Units, and Commercial Properties.

So what does this mean for you?

As a buyer
Buying a home is a big investment - and saving for a down payment can be a tough proposition, especially when you include closing costs and tax escrows. FHA is making condo purchases with 3.5% down even easier. Look for FHA-approved buildings (or buildings with pending FHA approval) - and talk with your mortgage consultant to see if you qualify for a low-down payment loan through FHA.

As a seller
Your condo association or developer can work with a lender to get your building pre-approved for FHA loans. This allows for more flexible compensating financial factors for potential buyers (i.e. cash reserves, credit scores, etc.) and attracts more buyers, leads to more saleability, and greater home value appreciation.

Score one for the little guy: New York judge wipes out borrower’s mortgage debt when lender can’t produce the note.