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NEWS FLASH!  Seattle wakes up to a new credit world.  Did you know that?  Read on… (part one)

Knowing your credit score a must in today’s mortgage market.

Many of our families have experienced late payments and short sales, which of course have a negative impact on their credit scores.  A short sale can prevent you from obtaining a mortgage for about two years.  Much better than a foreclosure which might affect your ability to own a home again for as long as five years.  You need to begin working on your credit NOW!

As a mortgage bank owner I remember clients, with really high FICO scores, commenting on how unfair it was that they had to pay the same interest rates as borrowers with much lower scores.  It was just the way it was.

Well that has changed.  And that is why you need to .  My Credit Newsletter will help you manage your credit with timely credit specific information.  You need to plan your credit future and save thousands of dollars.

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Whatever your credit score, you now need to monitor your credit score -just like you monitor your other assets!

That’s right, here on out there is no such thing as making an application for credit without knowing what your credit score is.  Why is that?

Everything has changed due to the past few years of crisis.  A new era of credit management has been ushered it.   By monitoring and managing your credit you will be better prepared for any future application which is credit dependent.  Being prepared has the potential to save you thousands of dollars every year.

How Much Is Your Credit Score Costing You?

In the past, the credit report was instrumental in determining whether a consumer had the ability to purchase big-ticket items such as homes, cars, and appliances. This is no longer the case. Today your credit report is pulled even when you start a new account for your telephone, electricity and other utilities. And it doesn’t stop there, not by a long shot. When your credit scores are low, you pay more for everything.

No one has unlimited income, and no one wants to work forever. Every opportunity you have to reduce what you pay for your mortgage, your car, and your credit cards is money you can use to fund your retirement, pay for college education, and use for a brighter future. It’s money you can use to establish a more solid financial footing so that you can be more comfortable and worry less.

How Credit Scores Affect Mortgage Payments

Here’s a short list of how much low credit scores can cost when it comes to a mortgage:

1. You May Never Own A Home AT ALL, AGAIN, or FOR YEARS

Whether or not you’ve always had poor credit, or have just suffered from the recent mortgage crisis, this is a very real possibility for individuals. If you have low scores or problematic reports, lenders will either deny you flat out or penalize you with such exorbitant rates that the outcome ranges from completely undesirable to impossible.

2. You Will Pay Higher Interest Rates

It just makes sense that if you have higher credit scores, you will pay a lower interest rate on your mortgage loan and will have to put less down. Fair Isaac’s consumer website at http://www.myfico.com offers a mortgage payment calculator that is updated regularly to show consumers how their FICO score can affect their interest rate.

Per myfico.com, if your credit scores are under 620, consumers could pay $1420 more per month than someone with a 720 credit score for a 30-Year Fixed Rate Mortgage with a loan principal amount of $300,000. That’s an additional $17,040 per year, and approximately $511,151 over the life of the loan.

Of course, interest rates are determined by many factors but the bottom line is that individuals with low credit scores will pay nearly three times more in interest than those with strong credit scores.

3. Now You Will Be Subject To Loan Level Price Adjustment Fees (LLPA’s) when applying for a conventional mortgage.
Consumers with a middle score of less than 719 will now be charged an LLPA fee which was implemented by Fannie Mae and Freddie Mac in March of 2008. See the following chart to see where your scores fall (2):

FICO Score                              LLPA You Will Pay
Below 620                                         2.750%
620-639                                            2.250%
640-659                                            1.500%
660-679                                            1.000%
680-719                                            0.250%

For people experiencing the worst-case scenario, carrying a middle credit score of less than 620 could cost you an extra $8,250 upfront on a $300,000 loan amount.

4. You Will Pay More For Private Mortgage Insurance (PMI)

PMI is insurance that mortgage lenders require from most homebuyers who have less than a 20% down payment on their property. If your credit scores are marginal, your private mortgage insurance rate might be hundreds of dollars higher per month than you expect, and you usually don’t find this out until closing.

5. You Will Compromise Your Ability To Refinance For “Cash Out”

As you build equity in the ownership of your home, you may decide to borrow against that equity for the purpose of home improvement, debt consolidation, or even to pay college tuition for your children. Lower credit scores will not only affect your ability to take out a home equity line of credit (HELOC), but you will also have to pay higher interest rates and other upfront costs if you are approved.

See Part 2 soon.