Times are tough, and some homeowners feel defeated by impending foreclosure. Some try to work out a solution with their bank. Others try to do a short sale. Terry Hoskins of Moscow, OH, tried another approach. After years of arguing with the River Hills Bank of New Richmond, OH, as well as the IRS, Hoskins bulldozed his house rather than let the bank take it away.
He had paid over $200,000 on his $350,000 home, as well as numerous attorney fees and thought the threats from the bank and IRS were unfair. Rather than being victimized, he powered up the dozer. Hoskins, also in trouble with his commercial property that he built from the ground up, threatens to leave the land in the same barren condition he found it.
Express Homebuyers buys homes from homeowners. A simple call could yield you a $2,500 advance and a way out of your housing debt in about two weeks. Contact us today for all the details.
As anyone who has watched silly commercials about people with poor credit being doomed to drive hoopties or make their living in costume at a Renaissance fair knows, a bad credit score costs you! You may be denied the card you want, a gas card, a job, or an apartment plus embarrassment, with or without costume.
If your credit score is low and you want to buy a home, how much will those credit-card funded dinners and shoes of the past cost you? The results are amazing.
According to Credit Technologies, who spoke at a recent National Association of Mortgage Brokers seminar, the difference between having a credit score over 720 vs. 620 is an interest rate of 5% versus one of 8.75%. As the chart shows, a differing interest rate on a 30 year mortgage can have a big impact on the payments for a $125,000 mortgage, including taxes.
Credit Score
ARP
Interest over
loan term
Total Amount Paid
Monthly payment
760-850
5%
$127,715.56
$307,194.73
$853.32
700-759
5.5%
141,2338.38
$321,130.05
$890.03
680-699
6%
$155,318.57
$335,422.74
$931.73
660-679
6.5%
$169,638.94
$350,055.61
$972.38
640-659
7%
$184,229.87
$365,011.12
$1,013.92
620-639
7.5%
$199,177.78
$380,271.53
$1,056.31
600-619
8%
$214,412.81
$395,819.06
$1,099.50
580-599
8.5%
$229,917.32
$411,636.07
$1,143.43
550-579
9.0%
$245,621.84
$427,705.18
$1,188.07
500-549
9.5%
$261,613.56
$444,009.39
$1,233.36
If your household income is about $35,000 a year, a house with $125,000 mortgage might put your monthly cost for a house at about 25%, so a payment of $853.32 might be just about right. If your credit rating is over 760, the payment would be right there. The lower your credit score is, the higher your payment will be. If your score is only 620, your payment would be $200 higher. If is it 580, your payment will be nearly $300 higher.
Needless to say, the total amount paid for mortgages also increases with the combination of a low credit score and higher interest rates. Most people do not think about that in our mobile society where people move about every seven years, but the $127,000 difference from the highest to the lowest rating is staggering.
The most obvious thing about these numbers is that a lower credit score can put an “affordable” home based on income, out of the range of affordability. To keep the payment around $850 dollars per month if you have a 620 score, you could only afford a mortgage of $105,000. If your rating was under 550, you could only afford a mortgage of $87,500.
Why is this? Banks maintain that the chance of delinquency increases as the credit score decreases. According to BCS Alliance, a person with a 780 score has 576 to 1 odds of becoming delinquent by 90 days; a 700 score has a 288 to one chance. At 630, the odds are 17:1; after that the likelihood increases rapidly: 616 score, 9:1 odds, 600 score 4:1 odds, and 585 score 2:1 odds.
If your card score is low, you may have the best intentions in the world, but it will be a hard sell to find a reasonable mortgage rate. This is why it is important to start getting your credit report in order before you start looking for a home. If you have one that is costing you too much in interest and payments, this could be a good time to sell your home and get your credit straight before taking on home ownership again.
Express Homebuyers can help you by emptying your plate of a big portion of debt within two weeks. We buy houses fast. Contact us today for all the details.
The dilemma today for many considering loan modifications or even considering whether to move from the trial to the permanent phase of the process is whether it is worth it in the long run. Current programs lower interest rates and make the payback longer but do not address the loan’s principle. With many homes worth less than the principle or “under water,” some owners feel negative about paying for a home that could not command the price they paid.
This is encouraging some homeowners to strategically default on their loan before they are even delinquent. Knowing that delinquency might affect their ability to apply for a new loan or even to get a decent rental, they are getting their next step in place before they make a move. Even if they can pay the loan, the decision to strategically default may be based on the math of it all. They determine that over the life of the loan, they will pay 10’s of thousands of dollars more for their property than it is worth. They know their credit score will take a hit, but they anticipate that by the time their credit rebounds they will have saved a bundle.
This is a new variation on what some homeowners do out of frustration: walk away from a house they are delinquent on and mail the keys back to the bank. Banks hate this “jingle mail.” While it may seemingly solve a problem for someone already deep in debt, they may well receive a double whammy: they now have bad credit AND a bank may be coming after them. The bank may come after the first group too, but the strategic defaulters are betting this won’t happen.
According to a new study by credit bureau Experian and Oliver Wyman Consulting, twice the number of people who did this in 2007 did so in 2008. Based on their evaluation of 24 million credit files, strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and nosedived since 2006. The study found a 68% increase in strategic defaults in California, compared to a 9% increase elsewhere.
Not surprisingly, banks are less enthusiastic about strategic defaulters than regular walkways. The major credit bureaus are developing tools to identify strategic defaulters and refuse loan modifications to this group, as they are likely to strategically default even after the modification.
All of this lends some background to what can be a more personal problem: the need to sell your house, fast. If that is the case, contact us at Express Homebuyers. We buy houses, no matter what the condition. We’ll give you a fair shake and you can sell your house for cash, fast. Check out our website for some useful secrets to selling your home fast, then give us a call at 1-877-804-5252.
