Ever Wondered If Your Old Debts Will Remain On Your Credit Forever To Wreck Your Home Buying Plans In The Future?

Is buying a home on your “to-do” list for this year? Or, have you been postponing your home-buying plans because you’re worried you may have old debts hanging around on your credit report? And what about your current debts? How much can you owe and still qualify for the 30-year fixed rate or 15-year fixed rate mortgage you want?

First, here’s what you need to know about how long old debts can stay on your credit report.

In general, an old, unpaid debt will stay on your credit report for seven years from the date it was reported delinquent. In addition to making sure your credit report is accurate and you’ve addressed any potential unpaid debt records that aren’t yours, you also need to make sure your debt-to-income ratio is as good as possible.

What is my debt-to-income ratio, and how is it calculated?

Lenders calculate two debt-to-income ratios when determining how much you can borrow for a home loan. The first type of debt-to-income ratio or DTI adds your mortgage payment, homeowners’ association fees, and mortgage insurance together, then divides them by your monthly income.

For example, if your house payment was $1,000 a month and you paid $200 a month in mortgage insurance, and your monthly gross income was $4,400 a month, your front-end DTI would be 27%.

The second type of DTI is the “back-end” DTI. This ratio adds your housing costs to your monthly revolving debt payments, which can include car loans, student loans, credit card payments, and alimony or child support. So, for example, if you had the above $1,200 housing costs, plus an additional $800 in debt payments between your car and student loans, your “back-end” DTI would be $2,000 divided by your income of $4,400 or 45%.

What are the “ideal” and maximum DTIs to be approved for a loan?

Have you heard of the “28/36” rule? Ideally, your front-end DTI for housing costs shouldn’t be more than 28%. Your back-end DTI shouldn’t exceed 36%. While there are some exceptions, the second DTI example we provided of 45% is higher than the maximum DTI for the majority of lenders, although you may be able to find some specialized lenders up to 50% DTI.

In general, the lower your DTI ratios for both front-end and back-end, the better your opportunities will be for a home mortgage. And, you can get on top of your credit and ensure you have no old derogatory reports that could be holding you back.

Sources

https://www.quickenloans.com/blog/debt-considered-getting-mortgage/

https://www.creditkarma.com/advice/i/long-collections-credit-report/

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Learn How This COVID-19 Pandemic Will Affect Your Monthly Revenue With Your Income Property And How To Cushion The Blow

As of March 25, 2020, unemployment claims grew to over 3.3 million, a record high. As states shut down non-essential activities, many businesses have been hit hard, particularly in the restaurant, retail, and entertainment industries. While the government is discussing relief proposals for individuals and businesses, rent is due across the country on April 1.

Some landlords have already gotten negative publicity for sending warning letters to tenants that no matter what type of layoff they’ve suffered due to COVID-19, they must pay their rent on time and in full. Text messages between tenant and landlord have been posted on the internet showing a range of responses, from concern and cooperation to cold-hearted “pay now or we will evict you.”

If you own property in the city of Los Angeles, Mayor Garcetti issued an eviction moratorium on March 15, 2020, due to the coronavirus pandemic. If your tenants have lost all or part of their income because they were laid off or the business where they worked has closed, they may not be evicted until the order is lifted. Similarly, they may not be evicted due to healthcare costs that they had to spend during the epidemic, or childcare costs because schools have been closed.

If you own income property, what should your response be to tenants’ ability to pay rent in the face of sudden, unprecedented layoffs?

The Los Angeles city moratorium on evictions doesn’t say that tenants don’t have to pay rent. It gives them up to six months to catch on back rent they couldn’t pay during the coronavirus crisis. Most other cities that have issued similar orders also say that tenants have a specified amount of time to catch up on back rent.

Looking at some of the harsh letters that have been publicized via social media, we advise that your best approach is to be courteous in your communications with tenants and to be flexible. The crisis may grow worse before it gets better, and aid from the government could be delayed for weeks. Work with your tenants to catch up on back rent as they get back to work.

Sources

https://www.npr.org/2020/03/26/821580191/unemployment-claims-expected-to-shatter-records

https://housing.lacity.org/

California Platinum Loans

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Given The Status Of the Fed’s Current Interest Rate at 0%, Is Now The Best Time to Refinance Your Mortgage?

Since the Federal Reserve cut its prime interest rate to zero in mid-March 2020, many onlookers thought that mortgage interest rates would drop. That hasn’t happened. With a few exceptions such as VA 30-year fixed-rate mortgages, nearly all mortgage interest rates increased. New mortgages for home purchases and refinances are all affected. The average rate of increase within the first few days after the Fed’s unprecedented announcement was 29 basis points (.29%) according to MarketWatch.

Why are rates increasing instead of decreasing?

Fears over people’s ability to pay their mortgage at all are the likely reason for short-term percentage rate increases. VA mortgage interest rates may have decreased slightly because most, if not all, reservists are either called up or have been notified to be prepared to return to service as a result of the COVID-19 pandemic. The VA home loan guaranty may be encouraging lenders to reduce interest rates slightly in response to the current crisis.

Refinance Your Mortgage

Other lenders and programs are seeing interest rate increases for a variety of reasons. Most financial advisers are saying that so much is uncertain in the current COVID-19 pandemic and crisis that it’s probably impossible to predict whether rates will increase or decrease in the weeks to come.

Other news impacting mortgage rates

The Internal Revenue Service has announced that taxpayers can defer tax payments until July 15, although tax returns must be filed by the April 15 deadline. Those who are self-employed, including people who own and lease property, will need to continue to make quarterly estimated payments, however.

Property sales will likely be impacted by the uncertainty in tax filing rules. The IRS is still considering whether to extend the April 15 tax filing deadline in general for individual and corporate taxpayers.

In the short-term, home mortgage rates have increased. Good news may be on the horizon, however, in the form of lower rates for refinancing and home purchase after the COVID-19 crisis begins to be resolved.

Sources

https://www.marketwatch.com/story/mortgage-rates-surge-to-highest-level-since-january-even-though-the-fed-just-brought-interest-rates-to-0-heres-why-2020-03-19

https://www.marketwatch.com/story/the-irs-postponed-tax-payments-but-you-still-have-to-file-your-1040-by-april-15-for-now-2020-03-19?itm_source=parsely-api&mod=mw_more_headlines

California Platinum Loans

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