Bad Credit a Bigger Risk than Terrorism...

Bad credit a bigger risk than terrorism…

Yes according to an article written by Dan Seymour of the Associated Press on Monday, the biggest short term risk to our economy is bad credit. According to a survey of 258 members conducted by the National Association of Business Economics (NABE) credit has replaced terrorism as the gravest immediate threat to our economy.

It almost sounds surreal but I actually agree with the findings of the survey. As we continue to deal with the “credit crisis”, the issues have trickled down into our everyday lives at a record pace. The stock market being our first indicator, followed by the fact that 2 million people are expected to lose their homes this year to foreclosure. Even the big boys like Home Depot are taking the hit. Folks, real estate drives are economy far more than we would care to admit. Ask the car dealers, airlines, and other companies that depend on high discretionary income if real estate drives our economy. With less people able to tap cash/equity out of their mortgages through refinancing, Realtors not spending at a very high clip either, and the 100,000+ loan officers who have left the industry our entire economy is feeling the crunch. It is a serious trickle down effect. Builders are building less new homes being which means less work for the blue collar individuals ultimately leading to higher than normal unemployment rates.

Whoever though that a few missed payments here and there would supplant Osama Bin Laden and his terrorist goons as one of the greatest risk to the USA. I believe it goes back to my blog from last week about “Was the Mortgage a Mistake”. The consumerism mentality of our culture has left us in a very tough position for now. In a perfect world maybe we should have purchased smaller homes with stable fixed rates and chose not to drive our gas guzzling oversized SUV’s. But who know the bottom was going to fall out so quickly.

Listed below are 5 tips I encourage you to use, so we do not continue to add to the threats bad credit is placing on our society:

1) Stop using the credit cards unless you can afford to pay the balance in full for that month. This tip alone will give you a raise in income by having your money work harder for you because it won’t be spent paying high interest credit debt.

2) Pick up the book Smart Couples Finish Rich by David Bach. Married or single this book has some great tips on budgeting and other financial tools that will help you weather the storm and plan for the future


3) If you know you are going to be late contact your creditors in advance. Most creditors will be more forgiving of customers who are proactive about there obligations.

4) Don’t run from your history. It is important to review your credit at least one time per year but twice a year is ideal. You can receive a free report at www.annualcreditreport.com it really is true knowing is half the battle.
5) If you have derogatory or past due accounts that are now collections and charge-offs try to call and negotiate settlements with the creditors. My company has created a script to help our clients with the calls to creditors.

In closing, bad credit is not only a greatest short term risk to our economy; it can become the greatest risk to our personal quality of life as well. Today, credit is reviewed for everything from car insurance rates to homeowner’s insurance rates. Let alone applying for a mortgage with low money down and attractive interest rates. Even the ability to get a cell phone with an affordable, economical plan is nearly impossible when you have poor credit. Some employers even view credit, so it could have an affect on what job you get. Don’t let this happen to you!

If you have good credit by all means keep up the good work. If you have some credit challenges start working today to better your scores. Don’t let the four-letter word FICO be your downfall, because you will feel like your financial life is under terrorist attack!

Was the Mortgage a Mistake?

This is the actually the headline from an article on the front page of the Business section in this past Sunday’s Washington Post. In the wake of the “Credit Crisis”, a couple was discussing their regrets and fears about their adjustable rate mortgage. Their chief concern is will they be able to afford their home once their rate adjusts or will there be loans and programs available to refinance when the time comes. Honestly they share the same fears and worries of many borrowers who purchased homes in the last couple of years with adjustable rate mortgages. Are you starting to worry as well? If not maybe should.

First let’s examine the problem. According to the media, all the issues of the “imploding mortgage market” were caused by mortgage lenders and bankers such as me. Quite frankly we all played apart in this disastrous market; lenders, realtors, and borrowers alike. Realtors listed properties at astronomically high prices causing bidding wars for hot properties. In some cases, sellers had not owned the property even a year and were able to buy and then sell for high dollar profits. They were happy and Realtors too as they skipped to the bank with “fat” commission checks from the higher than “listed” sales prices. As mortgage lenders, we placed a great deal of our clients in Adjustable Rate Mortgages without any regard for the future market. Just as the Realtors many mortgage lenders and brokers benefited handsomely from these shorter period loans with no regard for the clients financial future. I believe myself to be one of the responsible lenders not out to overcharge clients with excessive points and fees but I too am guilty of placing at the least three out every five clients in an ARM. Let’s not forget the buyers who’s only question was,” What is the lowest payment I can get?” so I can afford this overpriced home. So even when trying to be a trusted advisor and present more than one option for mortgage financing inevitably most chose the lower payment adjustable rate programs versus the more stable, higher payment fixed rate options they were given.

Well none of us can cry over spilled milk. So instead of asking, “Was the Mortgage a Mistake?” it is time to review your current situation and figure out where we go from here. Which the couple mentioned in the Washington Post attempted to do by calling there financial planner. Noticed I mentioned attempted because the correct thing to do now is to call your local and accountable Mortgage Lender to schedule a review of your current financing situation. And maybe consider that fixed rate loan before it is too late. The initial discomfort of the possible payment increase will be much less painful than the discomfort of losing your home to foreclosure or premature sale because you cannot afford the new payment when your rate has adjusted too high, credit scores have dropped, or the homes value has significantly decreased. Don’t leave your family’s future to chance with some unscrupulous mortgage lender.

And buyers as well don’t get caught in the future asking “Was the Mortgage a Mistake?” If cost per month is the determining factor, which it typically is for 99% of home purchasers, make sure you are pre-approved before buying and don’t review properties outside of your price range which can lead to that question, “How can I get the lowest payment for this house?” Basically it will be like starting our cycle of creative financing i.e. interest-only adjustable rate mortgages all over again. Or maybe not(which I will discuss why at a later date) as the credit crisis continues and people are left asking “Was the Mortgage a Mistake” and the answer is probably yes but it doesn’t have to be…..

Contact, Markita Aldridge-Woods, local and accountable Woodbridge, Virginia area lender at (703) 497-3936, email at markita@weststarmortgage.com or visit her site at www.TheLendingAdvisors.com so you don’t have to ask the question "Was the Mortgage A Mistake!"

The Credit Crisis....What Does It Mean To YOU

It means plain and simple, if you are going to be in the market for financing in the next 18 months you need to consider this. As huge companies close their doors so goes the creative mortgage financing. If you are a potential buyer you can no longer afford to sit on the fence. Beware that the volatile credit market can change overnight which will leave fewer options for financing. This is even more true for those looking to refinance.

Sellers need to be more flexible and willing to accept reduced prices. As the mortgage products diminish, the pool of qualified buyers will decrease as well. It is no time to "holdout" for the best price possible.

As an educated mortgage professional, I will utilize experience and resources to help you or your loved ones to navigate through these turbelent times. Don't leave your future in the hands of some random mortgage provider. I'm local, accountable, and you can trust I will do the best thing for you....