Credit Score Diaries: Journey to an 850 Credit Score

Friday, March 31, 2006

How To Have Lenders Begging To Give You Low Rates

We have found several things that everyone must know about their credit and money in 2006, and one of those things is you can have lenders begging you to give you the lowest interest rate loans even with bad credit.

Tip: Find A Motivated Lender

One of the best things that happened to me while looking for a loan is I walked into Full Spectrum Lending. Full Spectrum Lending is a direct lender, that means their loan officers are not commissioned salespeople. But even better, they were looking for me. That is because some lenders have a surplus of money and are dying to lend to you. They are more negotiable than ever, and can save you thousands on rates and fees just to get your business. How did I know that Full Spectrum was motivated to lend money? They were advertising, and that’s the secret. Motivated lenders advertise. I will talk more about that in a moment. First let me tell you what kind of deal they made with me.

1) I got a better rate on a loan, 5.85% five year fixed.
2) They were willing to lend on a triplex.
3) They said I was eligible for two different programs, which both allowed a credit score down to 580, I had a score of 620 at the time.

Full Spectrum Lending offered two fantastic loan programs and they both had an interest rate of less than 6%. Remember, this was not even a conforming loan, this loan was on a multi-family property which often commands a higher rate. In addition, I’m self-employed, another situation where lenders tend to offer higher interest rates. Even in my case they wanted no documentation, not even a bank statement. I didn’t have to give them anything, and they asked for no points. So I asked, “How can you offer this rate with no points?” The only thing I had to pay upfront was private mortgage insurance (PMI) and because now more banks want you to pay that upfront anyway, I was willing to do this. Banks want you to pay PMI if you put less than 20% down. So, no cost, no documentation, self-employed, multi-family property, 5.85% five year fixed. This is a property that I intended to change into a condominium and sell fairly quickly – a short term investment. This is a fantastic loan with a 620 credit score. And how did I find it? Because Full Spectrum is looking to lend, they’re advertising, so they’re putting themselves out there. The point is that you want to find people that are looking to lend. Anyone looking to lend is advertising this fact. Which brings me to the next topic:

Where To Find Lenders?

I just gave you one name, Full Spectrum Lending, they’re an arm of Countrywide, which is the largest mortgage lending institution in the country: they are a bank. Full Spectrum Lending is a direct lender, they are directly tied to the money, not just a broker for another lender. When you talk to people at Full Spectrum Lending you’ll be talking to people who are not on commission who are ready to work for you and get you the best deal possible. They were doing a lot of advertising, in early 2005, for 2006. Who’s Advertising? Let me mention a few companies that are currently advertising for your business and I am sure they will sound familiar to you. Ditech is a direct lender, they have a national calling center. If you go to them for a second mortgage they may want to low ball the appraisal, and that’s no fun. But, for a first mortgage they’re a good company. GMAC, the General Motors credit company, bought a company in California called Call Direct, and they’ve been advertising. Call Direct is a direct lender. Ford Motor Company also went into the mortgage business, they just bought one of my home loans from Greenpoint. Greenpoint is an aggressive company and they are looking to expand right now. Greenpoint has some interesting programs, they specialize in loans that allow you to pay back your mortgage faster. (We’ll talk about paying off your house quickly in a moment.) Greenpoint is another company with their own money, and their own sales, so you might want check them out. If you do, go to that’s their web site. You always know when a company is advertising heavily. They flood television and radio with ads and put up billboards all around town. You often try to tune it out, but it if you are looking for a lender who is motivated to lend, pay attention and look and listen to those ads. In my real estate career, doing exactly this has saved me a lot of money, not to mention time and effort.

When I was in my 20’s and I bought my first condo in Los Angeles, I did a lot of driving as most Angelenos do. There was a company called Gibraltar  that eventually got bought up by Countrywide and they always had a lot of billboards. So that is where I went, and I ended up with a very good rate and almost no hassle. Look in your town at the billboards to see who is advertising, who wants to loan you money. Often they are direct lenders - like a savings and loan, but without a banking business to support their loan operations and bring in customers. They are really hoping you will come to them and they will give you a good deal with less paperwork.

Credit Unions and Banks

Another place to look for a loan is at your credit union. Credit unions also often advertise and credit unions can offer a super deal. What I’ve found is that credit unions are a little behind the times concerning self-employed customers.  Sometimes they can make the requirements more rigid for those people. But if you have a job, and you’re banking through this credit union – they can really be a good source for home lending. I tend to stay away from traditional banks such as Washington Mutual and Wells Fargo, large banks here in the Northwest, although they are getting more creative and aggressive with their lending practices, especially about having more stated income loans. A stated income loan is when you don’t have to provide a lot of detail, like tax statements or income verification. Often you are just required to provide 12 or maybe 24 months of bank statements. Sometimes, you can get stated income loans where only two months of bank statements are required. (Remember, I went into Full Spectrum Lending, and they required none at all.) If you have a good credit score (650+), and traditional banks tend to be conservative about credit scores, you can get a good deal through one of those lenders right now. The best tip I can give is to tell you to watch for who is advertising. This past year it was Full Spectrum, and Ditech and some of the other ones, just always be aware so you can benefit from this really good tip.

Wednesday, March 29, 2006

Shop Around, But Don’t Get Your Credit Pulled

Many consumers just fall into something without shopping around. For instance, if you call Ameriquest, a company that specializes in customers with less than perfect credit, they have a tactic to prevent you from shopping around—they pressure you to give your social security number and run your credit. Ameriquest has very aggressive brokers, and they will convince you that you must give them your social security number and your information saying they will not talk to you without pulling your credit report. The best thing to do is to find a lender who is considerate enough of your credit, your credit score, and your financial situation to just give you a good faith estimate of everything they can do for you. All the fees, everything right up front on a good faith estimate, with no credit score. If a lender is really considerate of you, that’s what they’re going to do.

The people I have done business with have not asked me for my social security number up front, they have told me what they could do for me. And that’s how you shop, you don’t want to shop by just giving your social security number to everyone, and having them all pull your credit report and lowering your score each time that is done. You want to be able to tell people “look, I will do business with you, if you can tell me what you can do for me.” And make them give you a good faith estimate. That’s a full estimate of everything, a complete break down of costs; the appraisal, the PMI, that’s if you’re putting less than 20% down. A lot of loans don’t even have PMI, but they sort make you prepay as an upfront cost. But do negotiate to see what they can do.

Remember that the best way to negotiate is to not negotiate at all, but to just know which lenders to use, the ones that are really looking to get your business, and are advertising. Find lenders with good programs in our "MUST HAVE AUDIO" for 2006.

You Can Get A Good Loan With Bad Credit

I recently got a loan for a triplex for 5.85% five year fixed, with no fees, no prepayment penalties, no documentation, and this loan was available with a credit score down to 580! You don't have to have great credit any longer. The trick is knowing which lenders to use. They are usually "direct lenders", lenders with fewer commissions because they directly own the funds for your loan. They are also usually lenders that have "money on sale", lenders that are desperate to unload all their excess funds. We provide names of some lenders with really good programs in our "MUST HAVE AUDIO" for 2006. Don't settle for less than the best ever!

The best way to find these companies is to see who’s advertising. A couple of years ago, Ameriquest was advertising a lot, and they specialize in sub-prime loans, or loans where people don’t have the best credit score. When a company’s advertising to lend, that’s a great indicator that they really have a lot of money. Banks borrow the money at the federal funds rate, which is, 3.5 to 4% right now. Some of them have a surplus of reserve funds, So, they advertise to get more customers. Most consumers don’t notice advertising as a subtle sign that a certain lender has better deals.

It is estimated that 70% of all the loans are being written through commissioned third parties—mortgage brokers or loan brokers. In the Northwest they have names like Pacific Mortgage, or Pacific One Mortgage. These mortgage companies advertise in the paper and have commissioned salespeople. Personally, I don’t like to deal with broker firms. These people are experts at talking you out of a good interest rate because they put food on the table by talking you out of the lowest rates.