FORECLOSURE INTERVENTION

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As a Homeowner in Leelanau County, Michigan

Understanding Homeownership and Credit
Establishing credit
Undertanding credit scores
Restoring you credit
Mortgage borrowers rights
Predatory lending
Foreclosure Prevention
New REACH homes FOR SALE

What Are the Risks?

Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home.

If you are at risk of Foreclosure, please contact REACH c/o 231-256-9812 (Ron Crummel, Housing Coordinator) and ask for information and an application for the program.

So what are the risks of homeownership?

• Monthly housing expenses can increase.
  Your monthly mortgage payment may be larger than your rent. These higher monthly payments may be offset by a tax benefit at the end of the year. Talk to a tax professional to understand your particular situation.
• You become your own landlord.
  If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property.
• You must sell your house to move.
  Depending on the local real estate market, you might not be able to sell your home quickly. You should also factor in the likely expense of hiring a real estate professional. Fees can be negotiated and vary across regions. They also vary from professional to professional.
• Property values can depreciate.
  You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full mortgage

Understanding Homeownership and Credit return to top

If you're thinking about buying a home, you should also be thinking about your credit. The first step in the home buying process is understanding your credit.

When you apply for a mortgage, lenders will review your credit report. Your credit report is a history of how you've managed your finances: it's a record of money you've borrowed and your history of paying it back.

Your credit report is a record of all your credit transactions whenever and wherever you've used credit to purchase goods and services. Your credit will have a big influence on whether or not you can get a mortgage, the terms of that loan, and the interest rate. If you have good credit, you may have a much wider range of mortgage offers with lower rates.

So how do you better understand credit?

• Be aware of how important your credit history is to the process. Establish good credit and protect your credit.
• Look at your credit report and credit scores.
• Make sure you correct any mistakes on your credit report right away.

Establishing Your Credit return to top

Don't have credit? Would you like to improve your credit? Building good credit doesn't have to be difficult, but it does require time and patience. Follow these tips and you're on your way:

• Pay your bills on time. Credit scores emphasize your most recent payment record. Paying on time raises your credit score. If you've been late, start paying on time!
• Pay at least the minimum amount required. You can always pay more - and it's a good idea if you can afford it. But you should never pay less than the minimum.
• Keep your credit card balances low. Don't "max out" your credit cards - that can lower your credit score.
• Don't apply for too many loans or new accounts. Applying for a lot of credit in a short period of time may concern lenders that you won't manage your debt well. Only apply for credit when you need it.
• Keep your debt-to-income ratio at 20%. Generally, you should not have credit card or other installment debt that's more than 20% of your net monthly income.
• Establish credit if you don't have any.  Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards

Understanding Credit Scores return to top

A credit score is a single number that helps lenders and others decide how likely you are to repay your debts. One common credit score is a FICO score. (FICO stands for Fair Isaac & Co. Credit, the company that developed the scoring method.) FICO scores range from 300 to 850 points.

When you apply for a mortgage, your credit score is evaluated. Your credit score may also be a factor used to determine the mortgage interest rate.

Your credit score is based on several types of information contained in your credit report:

• Your payment history.
  Late payments will decrease your credit score.
• The amount of debt you owe.
  If your credit cards are at their limits, this can lower your credit score - even if the amount you owe isn't large. Similarly, consolidating your debts onto one card can also lower your score.
• How long you've used credit.
  Your credit history is important. If you show a pattern of managing your credit wisely, keeping credit card balances low, and paying your bills on time, your credit score will be positively affected.
• How often you apply for new credit and take on new debt.
  If you've applied for several credit cards at the same time, your credit score can go down.
• The types of credit you currently use.
  This includes credit cards, retail accounts, installment loans, finance company accounts, and mortgages.

Your credit score is only one factor in the credit decision. Mortgage lenders also look at your credit report, employment history, income, how much of your income goes to pay debt, and the value of the home you want to buy.

Restoring Your Credit return to top

If you would like to improve your credit score, don't worry. No credit score lasts forever - it changes over time, so you can improve it over time.

Every time you apply for a loan or credit card, use credit, or make or miss a payment, you build another entry in your credit report. You also raise or lower your credit score.

Here are ways you can improve your credit score over time:

• Don't spend money you don't have.
  If you have a budget, stick to it. If you don't have a budget, make one. [PDF 76K ]
• Make the minimum payments, on time.
  You can begin to improve your credit rating right away by making at least the minimum payment, on time.
• Pay off your accounts.
  If you have several accounts with small balances, try to pay them off.
• Understand the implications of declaring bankruptcy.
  Filing for bankruptcy can keep you from getting a loan for a long time, raise your interest rates, and stay on your credit record for 7-10 years.
• Get help from a credit counselor.
  Fix errors on your credit report.

Sometimes, credit reporting agencies make mistakes that can damage your credit record. If you see something wrong on your credit report, fix it immediately.

To talk to a housing counselor that serves Leelanau County call Northwest Michigan Human Services Agency at 947-3780

Mortgage Borrowers' Rights return to top

This may be the largest and most important loan you get during your lifetime. You should be aware of certain rights before you enter into any loan agreement.

• You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.
• You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.
• You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
• You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.
• You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.
• You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.
• You have the RIGHT to ask questions about charges and loan terms that you do not understand.
• You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.
• You have the RIGHT to know the reason if your loan was turned down.
• You have the RIGHT to ask for the HUD settlement costs booklet "Buying Your Home."

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email: RCrummel@co.leelanau.mi.us
Address: Leelanau REACH, P.O. Box 546 Leland MI 49654 231-256-9812