Michele's Blog

You’ve heard about credit scores and know that they are considered important, but why should you care about your credit score? Your credit score is looked at for multiple reasons - sometimes by employers, landlords, your bank, but also anytime you apply for a loan, including a home loan. Understanding credit scores and how they’re calculated will help you check into and improve your own score so you can have better credit when you are ready to purchase or refinance your home.

How a Credit Score is Calculated

The most common credit score used is called your “FICO™” score, standing for Fair Isaac Corporation. FICO™ scores were first used with lenders in 1989. This score can affect how much a lender will loan you and at what interest rate. The score is calculated using information contained in your credit reports with each of the three main reporting agencies.

While the exact formula is unknown, we do know that FICO™ scores are calculated by considering five different categories. The importance of each varies as well as the factors within every category:

Payment History - Weight: 35%

Have you paid past credit accounts on time? How many accounts have late or missed payments?

Amounts Owed - Weight: 30%

How much do you owe on your credit accounts and how many accounts do you have? How much of your total available credit are you currently using?

Length of Credit History - Weight: 15%

How long have your credit accounts been established? How long has it been since you last used some of those accounts?

Credit Mix in Use - Weight: 10%

What types of credit accounts do you have? How many different types of credit accounts are you using?

New Credit - Weight: 10%

How many new accounts or recent inquiries do you have? How long has it been since you opened a new account?

These are general guidelines of what is considered and can vary from person to person according to what information is contained in their credit profile.

Credit Score Ranges

Base FICO™ scores range from 300-850. Lenders have different definitions of what range of scores are considered “good” or what scores will receive better programs and rates. In general though, this range represents what the different scores mean:

800 +:     Exceptional

740-799:  Very Good

670-739:  Good

580-669:  Fair

< 580    :  Poor


Even if your credit score is not in the good or higher range, there are still plenty of loan programs that you may qualify for. Talk to APM about our minimum credit scores for certain loans and other specialty loan programs that may be a fit for your situation.

Positively Impact Your Credit Score

Once you understand how your credit score is calculated, there are things you can do to improve your score. Here are some easy ways to make a positive impact:

  • Make all payments on time. Set reminders or have payments made automatically.
  • Create some balance in how you reduce your debt. While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The trick is to get and keep your balances below 30% of your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with the highest debt.
  • Check for errors. Get a free copy of your credit report and look it over carefully.

Avoid Negatively Impacting Your Credit Score

Keep your credit score healthy and ready for that upcoming home purchase by avoiding anything that negatively impacts your credit score.

  • Avoid opening too many new accounts in a short amount of time. Let accounts have some aging time.
  • Avoid moving debt around to multiple cards. Focus on reducing the amount instead.
  • Do not close out a card. A sudden drop to your credit-spending power does not look good to the bureaus. You can keep it active by perhaps using it to pay a monthly utility bill.
  • Avoid “quick-fix” credit solutions. Manage credit responsibly over time and your score will improve.

Additional Resources

APM has you covered with all you need to know about your credit score and getting ready to start your homeownership journey. Check out the following for further information about credit scores:

Now that you have an understanding of how your credit score is calculated, you can take steps to get your credit in better shape. But you don’t have to wait until your credit score is exceptional to be ready to purchase a home. Contact us today!(Note: American Pacific Mortgage Corporation is not a credit repair company; this information is for information purposes only. We are not licensed credit repair specialists or counselors.)
Posted in:General
Posted by Michele Morse Reen on January 10th, 2019 10:58 AM

The holiday season is fast approaching, with big meals, family get-togethers, bright lights and holiday gifting.  As a parent, it’s often difficult to get children past their own wish list, and focused on the “giving” part of the holidays.  

Here are a few ideas that you, your children, or the entire family can do to help make the season brighter for others - and teach a lesson or two in the art of doing something good.

  1. Send a holiday card to someone stationed overseas.  Being stationed far from home during the holiday season is no picnic.  Imagine getting a heartfelt message of thanks and well wishes at mail call!  You can send a card to active service members, veterans and their families via the American Red Cross Holiday Mail for Heroes program.  Contact your local chapter for information.
  2. Start a PJ drive in your community.  Often times when families are faced with hardships, they leave a situation with the clothes on their back and not much more.  Imagine being a child in a strange place with no comforts of home.  Now imagine the idea of not even having PJ’s to sleep in.  That’s where Jaz’s Jammies comes in.  They have all the information you need to start a pajama drive in your community.
  3. Commit to a day of Random Acts of Kindness.  It doesn’t take much to brighten the day of a stranger.  Taping a few quarters to a soda machine, helping someone empty their grocery cart (and then returning the cart for them), leaving a letter in a library book for the next reader to enjoy, or writing uplifting chalk messages on the sidewalk can be just the thing someone needs on that day.
  4. Visit a nursing home.  Many elderly residents of nursing homes have no family or visitors for long stretches - if ever.  Taking an hour to visit, perhaps bringing along a tray of cookies and a favorite book is something both the residents - and your family - will never forget. 
  5. Find a new lunch buddy at school.  Finding a new lunch buddy can be scary for kids, but imagine you’re the kid without a buddy, sitting by yourself.  Encourage a “lunch buddy” day at your school where NO ONE sits alone.  You might be surprised at who you meet!

Encouraging the entire family to get involved makes for a merrier and brighter season for you, as well as the recipient of your kindness.  It just feels good to do good things!  Have small children talk about the good feeling they have in their tummies and hearts so they recognize how giving can fulfill them even more than getting!

Posted in:General
Posted by Michele Morse Reen on November 28th, 2018 2:59 PM
The holiday season can be hectic with parties, shopping, cooking, gift-giving and obligations.  You may think this season to be the worst time of the year to buy or sell a home but hold that thought.  You’d be surprised that the truth is that it’s a great time of year to attract buyers and sellers who are serious and committed to the process.  In an especially tight housing market, buyers will often kick their home shopping into high gear and take advantage of the reduced competition. We actually put in an offer on our home Thanksgiving weekend :)

Once you’ve decided to sell, you’ll likely need to do some reorganizing, cleaning and staging to set your home off in the very best light.  Holiday decor can be beautiful, yet also highly personal, so it’s necessary to keep things neutral and allow for room for the buyer to envision their own holiday gatherings (without tripping over the 35 snowmen on your front stoop).

Here are a few tips on staging during the holiday season:

Stage first. Talk to your REALTOR® about how best to stage your home.  Removing clutter and personal effects is a start but take a long look at your furnishings and artwork to ensure your home shows at its very best.  Take extra furniture to storage (don’t store in your garage - buyers will see it there and wonder why it’s not in the house) and keep clear sight lines and pathways for an open and airy feeling.

Decorate with restraint.  Having a Christmas tree or a menorah on display is fine, as long as it doesn’t take over the entire room. Small, tasteful decorations sprinkled throughout the house give the buyer a sense of what they could/would do during the holidays if they lived there.

Keep it cozy.  Subtle touches that create a holiday vibe work wonders.  A bowl of cinnamon-scented pine cones in the center of your table.  A wreath hung over the fireplace gives a sense of warmth and a wonderful evergreen smell to complete the festive feeling.

Don’t lose your palette.  Be sure your holiday decor compliments your current home’s look and feel.  If your living room is painted a beautiful blue, perhaps skipping the red garland and go with a more winter wonderland feel with silver bells and snowflakes.  If your living room is gray or taupe, going with some cranberry garland or earth-toned trimmings will work nicely.

Don’t forget the outdoors.
  Keep away from large blow-up displays or lights that pulse to the beat of Jingle Bells.  Stick with simple lights and a small display on your porch this year.


At the end of the day, you want to show your home off in its best light.  That means allowing space for the buyer to see the walls and floor without dodging huge holiday displays.   Let this holiday season be your perfect season for buying or selling your next home.


Posted in:General
Posted by Michele Morse Reen on November 7th, 2018 11:10 AM
Doctors, dentists, surgeons, veterinarians and medical students have some of the highest student loan balances, and therefore the most difficult time qualifying for a mortgage, of most any other profession. Most lenders underwrite loan transactions using a calculation for student loan payments that can work to keep these highly trained professionals out of the housing market.

A “Doctor Loan” was designed to assist these professionals in getting into a home with a low down payment, while avoiding costly PMI payments.  They’ve been around for many years, but with the renewed focus on student loan debt, they’re making a bit of a comeback. 

The advantages of using a Doctor Loan

You can get into a home faster.  A Doctor Loan takes into account a new practice, or even an employment contract, during the qualification process.  Instead of waiting for your new clinic to be up and running, and having 2 years of bank statements and tax returns, the underwriter takes your employment contract into account when calculating your income.  Most Doctor Loan guidelines require that the new position be contractually in place within 60 days of closing, so be sure to have your contract reviewed as early as possible in the loan process.

You can avoid costly PMI.  Doctor Loans typically do not require PMI for down payments under 20%, like conventional loans do.  Since PMI is expensive - and not tax deductible - this helps keep payments lower, freeing up cash to pay off other debts (such as student loans).

It’s easier to qualify.  Typically, when you qualify for a mortgage, all payments (deferred or not) are included in the debt-to-income ratio.  With a Doctor Loan, deferred student loan payments do not get wrapped into the overall debt ratios.  For medical professionals early in their careers, this can make all the difference in getting the home they need, while they’re still building their practice.

The disadvantages of a Doctor Loan

Getting in over your head.  Because you can qualify without using your student loan debt against you, it can make the overall payments difficult to manage if your practice takes awhile to get off the ground.  Additionally, those student loan payments will start up eventually, and will eat away at what disposable income you may have.

Buying a home before you’re ready.  Just because it’s faster, doesn’t always mean it’s better.  If you’re a dentist relocating for your “dream job,” buying a home to finish the picture seems like a good idea.  It’s not so great if you ultimately decide your job isn’t so dreamy - or you don’t like the new city you’ve moved to.  If you decide to relocate again, you’ll likely have to sell your home to buy a new one wherever you land.  

At American Pacific Mortgage, we have a full suite of expanded access programs for many types of borrowers.  Our Doctor Loan Program has loan amounts as high as $2,000,000 in some cases, allowing for a purchase previously out of range.  Looking to refinance an existing home loan?  We’ve got you covered - this program has guidelines for both purchase and refinance transactions.

Our priority is creating experiences that matter - for all of our home buyers and home owners.  It’s our way of saying thank you.

*with proof of 12 months deferment or forbearance.


Posted in:General
Posted by Michele Morse Reen on October 12th, 2018 11:26 AM

Looking to Buy While You Are Selling?

Buying a home is thrilling and exciting and terrifying all at once.  Add in the fact that you haven’t sold your current home, and there are many more moving parts to your transaction.  In a hot real estate market, sometimes you have to jump in and make an offer before you’re quite ready (or able) to sell your current home.  If you have a hefty savings account and income sufficient to qualify for both of your mortgages, it might not be a problem, But for millions of homeowners, this scenario requires a different solution.

First and foremost, you can consider submitting an offer with a contingency.  While this makes things easier on paper, it can affect the desirability of your offer - especially in aforementioned hot markets.  Putting your current home up for sale first can mitigate some of this risk for the seller of your new home, but there will likely still be some sort of contingency in the event your home doesn’t sell or the sale falls through.

In order to put yourself in a position of strength at the negotiating table, you’ll want your house to be sold, and all contingencies from your buyers signed off prior to submitting your offer.  Again, this is an ideal scenario, but not necessarily practical.

Enter the Bridge Loan:

A Bridge Loan is a short-term financing solution that allows you to finance two homes at once, temporarily.  Once you sell your current home, you pay off the temporary bridge loan and are left with the one mortgage on your new home.

American Pacific Mortgage offers two programs to secure your bridge financing:

  • The first is our Close with Confidence program, which is used when your current home is already pending sale, but not yet closed.  The equity from your current home is used to fund the purchase of your new home. This option can have a term as long as 3 months and can exclude the payment on your departing residence from your overall qualifications on your new home if the home is in contract.
  • The second option is our Debt Inclusive program, which doesn’t require that your departing residence is sold - only that it is listed for sale.  The term for this option can be as long as 4 months but includes all of the payments (current mortgage, bridge loan, new home) to be factored into your qualifications on your purchase.

Either way, you can get the equity out of your current home to facilitate your new home - without the seller looking askance at whether your offer is bonafide.  Add an APM approval letter and you’ve put yourself as close to a cash buyer as possible without having to actually have cash on hand for the purchase. This puts you in a much better negotiation position with the seller and takes a load of the worry out of the gymnastics required when buying and selling at the same time.

Be sure to talk to Michele about what option might work best for you, and put yourself in the driver's seat for your next home purchase.

Posted in:General
Posted by Michele Morse Reen on September 11th, 2018 12:36 PM

As a first-time home buyer, it can be overwhelming to hear all the stories from friends and family about home loans. Often times you’re left with a lot of assumptions and not all of the facts about the process, possibly keeping you from taking the steps toward getting the home you’ve been dreaming about.

We’re happy to clear up the facts and make sure you’ve got the information you need to make a homebuying decision. Let’s bust some down payment and private mortgage insurance (PMI) myths right now!


Down Payment and PMI Myths

Myth #1: Borrowers need at least a 10% down payment.

The Facts: The majority of first-time home buyers believe they need at least a 10% down payment (source: NAR), but that’s simply not true with all of today’s different loan types and programs. Average down payments are generally in the range of 5-10% but there are loan programs that allow as low as 3% and even a few no-down loan options.

Myth #2: PMI is always required on home loans with less than 20% down.

The Facts: PMI is generally required by the lender when a borrower purchases a home using conventional financing with less than a 20% down payment. But there are loan programs available that don’t require PMI. VA Loans do not require PMI and neither does our new No MI Advantage Loan. There are other loan programs with possible reduced mortgage insurance, so be sure to check in with us to find out what might fit your particular situation.

Myth #3: PMI protects the borrower.

The Facts: Many borrowers make the mistake of thinking that PMI is insurance that either protects the home or protects them if they end up in a foreclosure situation. PMI is in place to protect the lender from default on the loan, which enables lenders to help more borrowers get loans. It does not provide protection for the borrower if they go into foreclosure. And PMI is not to be confused with Homeowner’s Insurance, which is required and protects the physical home and property.

Myth #4: PMI cannot be canceled.

The Facts: PMI is in place to protect the lender when there is less than 20% equity built up. Once more than 20% equity is in place, PMI can be removed. PMI will automatically be terminated when the principal balance reaches 78% of the original value. You can also request cancelation sooner in writing if your home value has increased enough (contact your lender for exact requirements and instructions).

Now that you know more of the facts about down payments and PMI, are you feeling motivated to begin your homeownership journey? APM is here to help educate you and clear up any misinformation on the home loan process. We are standing by to answer your questions and help you every step of the way!

Posted in:General
Posted by Michele Morse Reen on August 28th, 2018 11:17 AM

If you have been contemplating buying a house, we are here to help you think through the possibilities.

When to Buy a House - Factors to Consider

There are several factors to consider before you decide it’s time to buy a house. Here are a few:

  • Is it better to rent or buy? You’ll want to consider your long-term goals; whether you will stay in the area; if you would like more control in customizing and making a home your own; if you are ready to make an investment in real estate; as well as a cost comparison taking into account taxes, insurance, and maintenance/repair costs.
  • Are you financially ready? Have you saved enough money for a down payment and closing costs? Are you prepared for monthly mortgage payments? Estimate your monthly payments using our mortgage calculator and aim for that number to be no more than 28% of your pre-tax income. Have you considered the maintenance and utility costs of owning a home?
  • What are your family’s needs and desires for housing? Do you need more space for your family or a space that is arranged differently? Are you looking for a yard, outdoor space, or a garage or more room to park? Think about home features that may be important to you and what will ultimately be a good fit for your family situation.
  • Are you satisfied with the location you currently live in? Do you want to live in a different neighborhood or school district? Are you looking for somewhere closer to work? You may decide that you either want to be in a brand new neighborhood or you may want to live in an established neighborhood where the homes aren’t as close together.
  • Are interest rates and market conditions favorable? Interest rates and market conditions are always changing. We can forecast what may happen, but can never predict the future. Are interest rates at a reasonable level that you can afford? Is it a seller’s or buyer’s market? You can buy a house in either type of market, but you’ll want to adjust your home buying expectations differently for each.
  • Does the season or time of year affect when is a good time to buy? Spring/Summer is the busy season for home buying and Fall/Winter is slower. You can buy a house whether the market is busy or slow - there are pros and cons to each. In the busy season, there may be more inventory available but also more competition trying to buy. In the slow season, there are generally less homes coming onto the market, but you could have fewer buyers to compete with and possibly get a better price on a home.

Once you have carefully considered all of the above and decided it’s time to buy a house, get ready for your next steps!

When You Have Decided to Buy a House - Next Steps

Now that you have decided it’s time to buy a house - what next?

  • Do your homework. Check out our free resources below and read up on important topics on our Home Buyer Blog to help you to know what to expect throughout the home buying process.
  • Contact Michele Morse Reen. The time to get your loan advisor is before the whole process begins! Our helpful and friendly advisors can answer your questions, help you find a loan program that suits you, and advise you on what information you’ll need to begin your homeownership journey.
  • Apply for a pre-approval. Don’t start home-shopping without a pre-approval. You’ll be ahead of the competition and will know exactly what price range of homes you should be looking for. Your loan advisor can get you started.

Free Resources

As you decide when to buy a house, check out our free resources to help you through your journey!


5 Step Road Map of the Home Loan Process

 

5 Step Roadmap of the Home Loan Process

We’ll take you step-by-step from start to finish of the homeownership journey so you’ll know what to expect and can better prepare.

 

Am I Financially Ready to Buy my First Home

Am I Financially Ready to Buy My First Home?

Get your financial questions answered as you work toward your homeownership goal. You may be ready sooner than you think!

Deciding when to buy a house is a big decision. There is a lot to think through but we hope you’re closer to making that decision now that you have the information you need. Are you ready to take that next step? We are standing by to help!

Posted in:General
Posted by Michele Morse Reen on August 16th, 2018 12:42 PM

One of the obstacles that keeps first time home buyers out of the housing market is the misconception that they need to have a 20% down payment.* As housing prices have risen, saving up a 20% down payment* can seem like a far-off goal. Are you trying to save up to buy a home? Did you know that there are plenty of low down payment options for you?

The down payment is the portion of the home price that you pay cash for rather than financing it - most lenders require that some percentage of the purchase price be paid at the time of closing. Though a 20% down payment* will allow you to avoid paying private mortgage insurance, the average down payment size for borrowers is typically in the range of 5-10%.


How a Low Down Payment Helps You

You can definitely purchase a home with less than a 20% down payment!* Being able to make a low down payment can benefit you in a few ways:

  • You may be able to buy a home sooner since you’ll need less money down.
  • You may be able to afford a higher priced home if the down payment is no longer an obstacle.
  • A low down payment lets you use more of your money toward closing costs or new home expenses.

Low Down Payment Programs for First Time Home Buyers

There are several loan programs that allow low down payments and APM is proud to offer these loans to help first time home buyers like you. Here are some of our programs that allow low down payments:

*There may be qualifying factors. Please visit our Disclosures page for more details on loan types.

There are more specialty programs with APM that can help you afford a home by allowing a lower down payment - check out a few programs below!

And don’t forget - many first time home buyers can also get assistance with down payments:


Down Payment Saving Tips

Now that you know you have several low down payment loan options with APM, you can focus on saving up the amount you will need. Saving up a down payment doesn’t have to feel like such a chore. Try a few of our saving tips:

  • Set up an auto-transfer to a savings account for a set monthly amount. Chances are when it happens automatically, you won’t even miss those extra dollars.
  • Adjust your monthly bills - try going without or reducing your Cable bill,  or increasing car insurance deductibles and adjusting coverages to reduce your expenses.
  • Skip eating out for a month and put all the money you saved toward your down payment.
  • Put your tax refund, bonus pay and unexpected monetary gifts toward your down payment savings.

Achieving your homeownership dream may be just around the corner! Research your low down payment options, start saving your dollars, and contact one of our friendly loan advisors today so they can help you discover the programs that will work for your situation and help you plan ahead for your purchase.

 

Posted in:General
Posted by Michele Morse Reen on July 3rd, 2018 2:11 PM


The Bay Area real estate market continues to grow at exponential rates. Over the last six years, the median home price has surged by 143%. The area is currently experiencing a feverish high-demand, very-low-supply dynamic. The near-continuous hike in home prices means that many Bay Area homeowners have enjoyed surge in equity, thereby giving them the means to upgrade to larger homes.

However, many of the would-be homebuyers have their wealth tied up in their first home. They can’t afford to upgrade to a new house without selling the old one first. They could put in contingency offers on the homes they hope to buy, but with a long line of other buyers ready to put down all-cash offers, it may be difficult to compete.  

In an ideal world, they could sell their property at the same time as buying their new property, but two escrows would mean double the risk. If they sell their home first, they would need to rent until they find a new home and their offer gets accepted. However, with the high-demand of the Bay Area real estate market, it could take months or more, which means potentially wasting thousands of dollars on a rental property.

A potential solution to this type of dilemma is a getting a Bridge Loan. A Bridge Loan is not a replacement for a mortgage; it’s a loan secured by your current home as collateral. This type of loan is typically used by home buyers to purchase a new home prior to selling their current home. It’s a short-term loan that gets repaid within a six-month to three-year timeframe, depending on the terms that are negotiated.

Essentially, a Bridge Loan allows a Bay Area home buyer to purchase their second home, even if their first one hasn’t sold yet. Since the Bay Area real estate market is in no short supply of buyers, selling a home usually isn’t a problem, it’s just a matter of time – Bridge Loans allow for time.

If you want to further explore whether a Bridge Loan is right for your situation, contact us today. The Reen Team will give you the individual attention you deserve. We will help you understand the process to qualify, apply and be approved.

Call today at (408) 626-1879! You can also apply here.

Posted in:General
Posted by Michele Morse Reen on June 21st, 2018 12:41 PM
When you apply for a mortgage, we calculate your debt-to-income ratio to ensure you have enough income to comfortably pay for a new mortgage while still being able to pay your other monthly debts. Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36.

The Front-End Ratio considers and adds up your anticipated monthly mortgage payment, plus other monthly costs, such as homeowner association (HOA) fees, property taxes, mortgage insurance and homeowner’s insurance, and divides it by your gross monthly income.

The Back-End Ratio looks at your other payments and revolving debts such as minimum monthly credit card payments, student loan payments, alimony, child support and car payments – all of which are analyzed and added together. Then, those payments are added to your estimated monthly mortgage payment and housing expenses, and divided by your monthly gross income for your total debt-to-income ratio.

Here are some examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,880 can be applied to recurring debt, plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt, plus housing expenses

If you would like to run your own numbers, we offer a Mortgage Loan Qualification Calculator. Remember, these ratios are only guidelines. Contact us and let us help you figure out what kind of payments would best fit your budget. We help home buyers every day achieve the dream of home ownership!

Posted in:General
Posted by Michele Morse Reen on May 29th, 2018 3:21 PM

Archives:

My Favorite Blogs:

Sites That Link to This Blog: