HELOCs are revolving lines of credit, much like credit cards. You can borrow against your home equity up to a certain limit, upwards of 90% or more of your home’s appraised value, and only pay interest on the amount you use. HELOCs have variable interest rates and can be used for any purpose.

In contrast, HELOANs are lump-sum loans that you receive upfront and pay back over a fixed term with a fixed interest rate. You can borrow against your home equity, and the amount you can borrow depends on your home’s appraised value and creditworthiness. HELOANs are often used for significant expenses like home renovations or medical bills.

When considering whether to take out a HELOC or HELOAN, there are some crucial differences to keep in mind. Repayment terms for a HELOC allow you to pay back what you use and can last for 10-20 years. HELOCs often have an introductory interest-only repayment period, often 10 years (followed by a repayment period of 20 years).  On the other hand, HELOANs are paid back over a fixed term, typically 10-30 years. Interest rates for HELOCs are usually variable, while HELOANs most often have a fixed interest rate.

In terms of flexibility, HELOCs are the better option. You can borrow and repay as needed, up to the maximum credit limit, and can reuse the line of credit over time, typically for the first 10 years. This makes HELOCs ideal for homeowners with ongoing or unpredictable expenses. HELOANs may be better suited for homeowners with a specific, one-time expense in mind.

When it comes to closing costs, HELOCs usually have lower costs, as you only pay for what you borrow. HELOANs may have slightly higher closing costs as you borrow a lump sum upfront. Both options come with some risk, such as the risk of increasing interest rates with HELOCs or larger fixed monthly payments with HELOANs.

Deciding between HELOC vs HELOAN always depends on your unique financial situation and goals. If you need ongoing access to cash or have unpredictable expenses, a HELOC may be the better choice. For a specific, one-time expense, a HELOAN may be more suitable. Understanding the differences between the two can help you make an informed decision.

MasonMac loan officers have the experience to help you navigate the two options and determine which may be right for you.  Give us a call to learn more, or you can always reach out for a quick response by asking a question here.

The post HELOC vs HELOAN appeared first on Mason-McDuffie Mortgage Corporation.

So let’s look at an example.  In 2006, we’ll take a home worth $300,000.

Price: $300,000
Rate: 6%
Monthly Payment: $1,800

Household income: $6,000/month
% of monthly income that goes to the mortgage payment: 30% 

Now let’s look at that same home in 2021

Price: $423,000 (up 41%)
Rate: 3%
Monthly payment: $1,783

Household income: $9,300 (up on average 55% since 2006)
% of monthly income that goes to the mortgage payment: 19%
These are the averages nationwide, and of course numbers will be different for every person, situation, and things vary by region, but on average, the market is about 11% more affordable today than it was in 2006.

Further, housing still has room to go – with supply lagging far behind demand and a generation of first time buyers coming of age, nearly all forecasts point to further home appreciation.  Add in supply-chain issues, inflation, and many other metrics and signs point to affordable housing being a very realistic thing.  That means today is a great time to buy, despite steep competition and high price tags.  To see what options you have in your area, you can contact your MasonMac loan officer, or contact us with questions by asking an expert here!

The post Is Affordable Housing Still Possible? appeared first on Mason-McDuffie Mortgage Corporation.

What is a Trigger Lead

When your credit is pulled, the credit bureaus have a record of the credit inquiry, and unfortunately, they sell this information to bidders in the form of “leads”.  This generated “lead” is sold to lenders, letting them know you’re in the market for a mortgage.  They sell this data with complete disregard for your privacy or your desire or lackthereof to talk with any lenders or loan officers.  Seem unethical?  Trigger leads are a hot topic in the mortgage industry and are one of things most consumers don’t fully understand.  Lenders don’t have any ability to stop the data being sold, as it’s sold from the credit bureaus.  Worse, the data is often sold to numerous lenders, which results in many phone calls after credit is pulled for a mortgage.  But there are steps consumers can take to eliminate these calls, or at least slow them down.

What You Can Do 

1. Opt-Out of prescreened offers.
2. Register with the Do-Not-Call Registry, donotcall.gov.
3. Contact the Federal Trade Commission.
4. Contact Congress.
5. Stop other forms of direct marketing by visiting the Direct Mail Association’s Web site at: dmaconsumers.org/consumerassistance.html.

Since many “trigger lead” lenders are not reputable, it’s best to ignore these calls and the mail that is likely to show up in your mailbox as well, and to pay attention to the fine print – many times the mail sent is designed to look like it’s from your current lender, with only the fine print showing who the real sender is.  These mail pieces often contain “too good to be true” loan terms, and again, in the fine print you’ll usually be able to see enormous fees and other loan terms that are not borrower-friendly.

It’s important to know that your loan officer or lender doesn’t initiate these calls, and it’s not the credit pull itself that causes these calls, but the credit bureaus selling information after the credit pull and them placing you on a prescreened list.  One piece of good news to keep in mind as well is that these additional calls and mail do NOT mean your credit was run again – while a hard credit inquiry by your original lender will appear on your credit report, any other companies calling do NOT have access to your credit report or history, so the calls you’ll receive do not mean any of your personal private information was compromised.

Think this practice should be put to a stop?  You’re not alone!  Many others feel trigger leads are unethical, and the best way to change this practice is by voicing your concerns for your local congressional representatives (you can find them by calling 202-224-3121) or by contacting the FTC at ftc.gov.

The post Why Do So Many Mortgage Companies Call? appeared first on Mason-McDuffie Mortgage Corporation.

If you’ve shopped around for a mortgage loan, one of the things you’ve likely seen is that credit scores lenders pull tend to be different (sometimes by quite a lot) from what you see when tracking your own credit scores.  Why is that?  It comes down to how credit information is reported, which scoring models a lender uses, and how the algorithms work within that scoring model.  Seem confusing, and maybe a little bit more than a little complicated?  It can be!

How Information Is Reported

Most people know that there are 3 major credit bureaus – Experian, Equifax, and Transunion, but many people don’t realize that scores vary, sometimes by a large margin, between the 3.  The biggest reason is that not every creditor reports to every credit bureau.  For example, if you have an account go to collections for non-payment, it’s  possible a collection agency might report to 1 credit bureau.  Assuming your credit is otherwise in good standing, this could result in 1 bureau (the one with accurate collection data) providing a score much lower than the other bureaus.  This can be a benefit in situations where a lender uses a middle score where really 2 of 3 scores are important.  It can also be a problem in situations where a lender pulls just one bureau, and they happen to pull the worst score, leaving out higher scores completely.

Which Credit Scoring Model Is Used To Determine Credit Scores?

Most lenders in the mortgage world rely on Fair Isaac Corporation’s scoring algorithms and resulting scores when running your credit.  You may know them by the acronym FICO.  FICO, however, charges others to use their proprietary algorithms, and for that reason, many credit monitoring services and consumer “perks” they get with credit cards for example, use their own, separate algorithm to generate a score.  These scores are often more difficult to predict, and can be very close to a FICO score or sometimes very far off.  For example, some lenders use a “Vantage” score instead of a FICO score.  To make things more confusing, scores can use completely different metrics to determine if someone has good or bad credit, too.  For example, some industry-specific scoring models use a score range up to 900, while mortgage lenders traditionally use scoring models that go up to 850.  For this reason alone, someone may believe their credit is better (or worse) than it actually is, with the only difference from what they and their lender see being the model being used.

How Algorithms Determine Credit Scores

Algorithms are used by all of the credit scoring models, but each model uses different algorithms that put different weight on the multiple factors that determine a credit score.  For example, one algorithm out there will ignore any and all collection accounts with a balance of $250 or less.   If a consumer pulled a score through that model they might believe they have excellent credit, while a lender using the FICO model might see low scores as a result of collection activity.

While the algorithms weigh factors differently, they all have some things in common.  Of course, an on time payment history is very important to all of the scoring models.  Having a long credit history, regularly using credit, having various types of credit (mortgage, installment loans, credit cards), and keeping credit balances low compared to credit limits are generally habits that all credit scoring models reward consumers for.  Maxed out credit cards, late payments, and major derogatory events like bankruptcy or foreclosure are penalized pretty much across the board as well.

We Can Help Answer Your Questions

Your MasonMac loan officer can help answer any questions you may have about your credit, and fill you in on your FICO scores when you apply.  FICO scores are one of the major factors in determining what loan options you’ll have, and the pricing/rates you’ll be offered when applying for a loan, so it’s important to understand how the scoring works to avoid any surprises.  Just as important is knowing that while your consumer-access scores that you get on free credit monitoring services can be a great gauge of the direction your credit is headed and where you stand, the scores your lender will pull are likely going to be a bit different.

With more information and a more in depth explainer, Andrew Yamilkoski of Heartland Credit Restoration put together this helpful video with more insight:

The post Why Credit Scoring Models Show Different Scores appeared first on Mason-McDuffie Mortgage Corporation.

When applying for debt, a lot of weight is put on credit scoring. The difference between ultra competitive rates, terms, and lenders practically begging for your business and seeing terms that come with astronomical rates and costs can sometimes be just a few points in credit scoring. Most people know that paying bills on time is key to having great credit, but many people fail to realize there are other aspects of managing credit that have a major impact as well. And while paying bills on time is the MOST important thing you can do to ensure you have a good credit score, knowing ALL of the other things you can do to improve your scores can collectively have a similar impact, for better or worse.

Some major credit events like Bankruptcies, foreclosures, or repossessions, can hang around on a credit report and negatively impact scores for a long time. Some other things the credit bureaus view as negatives, though, can be quick fixes that can substantially increase credit scores, and fast! If you’ll soon be applying for credit, these are some things to consider taking action on before you apply to make sure you maximize your chances to get the best rates and loan terms.

Paying Down Your Debt (not paying off!)

One thing credit bureaus take into consideration in a big way when determining your credit score is the amount of debt you’re using compared to the amount of credit you have available. This is called your credit utilization ratio, and it plays a big role in your credit scores. Scores are impacted by both individual accounts, AND your entire credit profile. For example, if you have a $1000 credit limit on a credit card with a $900 balance, that would be a 90% ratio. If you have 2 cards, one with a $1000 limit and $700 balance, and another with a $2000 limit and a $1500 balance, that would be a total 73% ratio (all limits divided by all balances). To maximize your credit scores, you should aim to use less than 25% of all the credit extended to you. So if you have a card with $1000 as a limit, don’t exceed $250 as a balance. The good news though, is that if you pay down a card that is close to maxed out, the positive impact on your credit scores happens quickly, as soon as the updated balance is reported to the credit bureaus!

Because the credit bureaus look at individual accounts AND your collective credit, if you have a lot of cards that are maxed out, it may help your scores more to pay MOST of the balances on many cards instead of ALL the balances on a few cards. And always ask a credit expert before you pay off a card – having low balances is good, but paying off and closing your cards can actually have a negative impact on your scores. Banks want to know you can responsibly use your credit, so keeping small balances and paying them down or off regularly will maximize your scores.

Make a phone call!

These days, you may not even need to make a call! Most creditors (for credit cards) have the option to request credit line increases. In some cases, small line increases don’t even require a credit pull – so you can avoid an inquiry, and get your available credit increased. Why would you do this? Because the ratios noted above work in your favor when you pay down debt, but they are really looking at the % of debt you’re using. So if you have a $1000 credit limit card that is maxed out with a $1000 balance – you could pay it down to $500 to get to a 50% credit utilization ratio, OR, you could request a credit line increase to $2000, which would also get you to that same 50% ratio, without you spending a dime.

This is an affordable way to almost instantly boost credit scores. Keep in mind though, this works best if you already have good to excellent credit, because lenders often require a good credit history to grant increases to your credit lines.

Dispute & Delete

According to CNBC, 34% of Americans have found at least one error on their credit report. Credit bureaus are charged with making corrections and providing accurate data, but they can only work off of the data they receive. We recommend looking at your credit annually to check for mistakes. If there’s anything negative on your credit that doesn’t belong to you, you can dispute it and request the credit bureaus delete it. This can happen for many reasons, but regardless of why there is incorrect info on your report, it’s important to fix it, and once updated, your scores should improve accordingly!

The post 3 Tips to Increase Credit Scores FAST appeared first on Mason-McDuffie Mortgage Corporation.

The 2 biggest factors that go into mortgage rates are equity and credit scores.  For conventional loans especially, rates are largely driven by how much home equity your mortgage loan is tapping into.  Higher LTV loans (loans using a lot of home equity) tend to have higher rates than lower LTV loans.  Other aspects of equity come into play as well.  Have a 2nd mortgage?  Conventional mortgage loans have rate adjustments for that.  Using that home equity to take cash out of your home rather than just seeking out a reduced rate?  You guessed it – rate adjustments!

Many factors determine mortgage rates, but there are some things that can put you in the best position to get a great rate

On top of the amount of equity used, credit scores play a huge factor in many loan products, especially conventional loans.  A rate for a borrower with a 620 FICO score can be vastly different than a borrower with an 820 FICO, even with all other loan details being equal.  The highest rates for conventional products tend to be for borrowers seeking high LTV loans with low FICO scores.  The best rates tend to be offered to high FICO scores with large down payments or large amounts of equity.

On top of those 2 factors, there are various other things that determine rate – borrowers seeking alternative (nonQM) loans like bank statement products or investment property products that qualify on debt-service of a property will generally see higher rates.

Government loans (FHA, VA, USDA) are great programs that can offer competitive rates that are not as sensitive to LTV and rate.  While rates will vary depending on credit score, they don’t vary as much because many of the rate adjustments present on conventional loans do not exist in government lending.  So for someone with less than perfect credit, this type of loan product may still offer an extremely competitive rate.

Rates vary substantially from lender to lender and borrower to borrower, but in general – better credit, larger down payments, government loans (VA mortgage loans usually offer extremely competitive rates), and full doc (income derived from W2s and paystubs instead of alternative documentation) loans tend to offer the best rate.

The post How To Get the Best Mortgage Rates appeared first on Mason-McDuffie Mortgage Corporation.

When it comes to buying a home, many people are concerned with their debts.  Headlines frequently discuss student loan debt, and how it holds people back from home ownership – particularly the millenial generation.  Another easy “fact” to find online is that lenders want your total debt, mortgage included, to exceed no more than 36% of your gross income.  Like most things online, these headlines are at best misleading, and usually, just blatantly false.

You can get a mortgage loan even with student loan, auto, credit card, or other debt

While mortgage lenders do look at a borrower’s total debt picture – credit cards, student loans, auto loans, and other debt – it doesn’t keep as many people from home ownership as the headlines would lead you to believe.  Some loan programs allow borrowers to have a debt-income ratio (the amount of debt, including your mortgage, as a percentage of your total gross income) as higher as 55%.  And lenders do not look at debt that’s not on your credit report (with the exception of some loan programs like VA loans, which look at utility costs and disposable income more than actual debt load), so things like your cell phone bill, cable, and utilities aren’t factored in.  So while it’s a good idea to keep your debt carefully managed and to not borrow more than you can handle, lenders are more flexible than most people are led to believe.

Buying a home with debt is in fact very common – nearly everyone has some kind of outstanding debt – be it student loans, auto loans, or credit cards, and certain loan programs can be extremely flexible – especially when it comes to mortgage with student loan debt.  For some loans, people can qualify based on income-based repayments, or loan forgiveness, depending on the student loan terms.

Bottom line, having debt should not prevent you from looking into home ownership.  In fact, with heavy debt being one thing that prevents the accumulation of wealth, having a home and mortgage that offers the benefits of appreciation and amortization is a great way to build a healthy financial future while paying off student loans or credit cards.  Even better, once you own a home, you can use your home equity to access cash to pay down or off higher interest rate debt – for example, if you have an 18% rate credit card, and can take cash out of your home at a rate of 4-5%, you can potentially see a huge monthly savings and use that savings to pay debt down faster – home ownership offers options.

So can you buy a home with debt?  Can you qualify for a mortgage even if you have a lot of student loan or credit card debt?  Ask an expert today to find out what options are available to you – we’re happy to help!

The post Can I Buy a Home If I Have Debt? appeared first on Mason-McDuffie Mortgage Corporation.

Experian, one of the 3 major credit bureaus, has recently rolled out a marketing campaign to highlight their ‘Boost’ product – one which a customer can use to report accounts that traditionally do not get reported to the credit bureaus, to increase their credit scores.

Sounds great, right?

Well to see a higher score, it is great, but to get a loan or approval through a lender, it may cause problems for consumers who don’t understand how the program works or the impact it can have.

Experian boost links to a consumer’s financial institution to see bills being paid, and uses this data to “boost” credit scores based on timely monthly payments.  While on the surface this sounds great, the lack of transparency in what’s being reported can cause issues for lenders, and on the mortgage side of things, “boosted” scores can’t be used for qualifying or for the purpose of getting a better rate or any other benefit to a loan program.  And lenders won’t overlook “Boosted” credit.  There are obvious markers showing a report that’s been updated with boost:

Boosted tradelines will show lenders that the information is “self reported”

In fact, consumers can actually be inconvenienced when using Boost because to get their loan processed, a borrower must first actually remove the boosted accounts from their credit reports.  So in these cases, Experian Boost makes the loan process more inconvenient for a borrower, and offers no benefit at all.  In fact, even Experian acknowledges this, at least somewhat, on their site.  On the Boost landing page, they include the disclosure:

“Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.”

“Not all lenders” means any mortgage lender using conventional or government financing, as MasonMac already confirmed with HUD and FannieMae that Experian Boost credit scores will not be considered in financing offerings from them.

Another potential downside to consumers is that even with an Experian Boost score, most lenders use averaging or more often, the middle score of the 3 credit bureaus.  In the latter case, if a consumer has 3 scores – a 550, 575, and a 750 (higher than the other 2 assuming that’s the Experian Boost score), the middle score will still be 575, so the boosted score offers no benefit.

So what could Experian Boost be beneficial for?  Well, for anyone looking to establish credit with limited credit history, Boost could provide a ….. Boost!  Sorry, we couldn’t help ourselves.  Also, while we’re mortgage experts, we aren’t experts across every field that uses credit scores, so there may be potential benefits elsewhere to using the boost product.  That said, though, it’s important to weigh the positives and negatives, and be informed that if you’re looking for a mortgage loan, Experian Boost is going to cause you more headaches than it’s worth.

Have questions about Experian Boost, want helpful tips for boosting your credit profile prior to getting a loan, or anything else from the mortgage world?  Ask an expert here!

The post Does Experian Boost Work? appeared first on Mason-McDuffie Mortgage Corporation.