FROM BAD CREDIT TO GREAT CREDIT

(My Original Blog Post: http://www.minnesotainvestors.com/blog/from-bad-credit-to-great-credit/)
FROM BAD CREDIT TO GREAT CREDIT

DISCLAIMER:
My name is Ron Orr, (RonOrr.com) I have helped people in all areas of real estate since 2002. I am a Real Estate Broker with MinnesotaInvestors.com, Inc.  Before answering questions below, I am not an attorney, a CPA, or an accountant.  I suggest you seek legal, and/or a competent CPA's advice before making any decisions. What I am typing below is based on extensive research I have read. It's suggested that you do your own research on the topic of he information below, it's in no way to be used as: legal, tax or financial advice.
PART 1: BAD CREDIT
Before you decide to give your house back to the bank, walk away, go bankrupt, or fall behind on other payments, please read below as to the damaging effects all of this can have on your credit and life.  The following on bad credit is written to try to help prevent this from happening to you. After you read all of this, I'll go into part 2, how to improve your credit score.

20-25 YEAR AFFECT OF BAD CREDIT ON YOUR LIFE:

YEAR 1: LOSING A HOUSE TO FORECLOSURE

Dealing with non-stop calls from your banks' collection department

Dealing with threatening debt letters from your bank and notice of default letters

Dealing with late fees and penalties, accruing daily

Dealing with 1st lender, 2nd lender or your association initiating a foreclosure action

Dealing with repeated unsuccessful attempts to get through to your bank by yourself

Dealing with an unreasonable and unsuccessful repayment plan

Dealing with giving the bank all of your private financial paperwork which may later be used for collection methods against you

Dealing with negotiating an unsuccessful loan modification

Dealing with getting calls from your bank at work,  to your co-workers, or boss

Dealing with your family and kids getting calls from your bank at home

Dealing with bankers calling neighbor's or having them knock on your door to get a hold of you

Dealing with a banker knocking on your front door to serve your spouse or kids paperwork

Dealing with unpaid water bills and taxes, eventually becoming liens on the house

Dealing with day to day money stress, affecting your life and your families

Dealing with your house being publicly advertised in the newspaper for foreclosure

Dealing with someone to stop by and research the property for the bank for a BPO

Dealing with a sheriff sale deadline date

Dealing with a redemption period time limit and deadline

Dealing with possibly being evicted at the end of redemption

Dealing with possibly cleaning the house very well for your bank under "cash for keys"

Dealing with a possible eviction filed on your record, later making renting hard

Dealing with continued missed payments showing up on your credit report as rolling lates

Dealing with over aggressive REO agents visiting trying to get data before the bank owned listing

Dealing with the house listed with a foreclosure sign in the front yard of your neighorhood after the bank gets it back

Dealing with moving out into a cheaper place while in foreclosure, may actually hurt your "bankruptcy means" test


YEARS 2-5:

Receive collection calls from collection companies for years at work, home, during dinner and family time

The other lender(often the 2nd lender) may seek to collect on wage garnishment from the promissory note

Credit score takes a bigger dip with a foreclosure Vs. a short sale

Penalties can accrue for years on unpaid balances

High-interest can accrue for years on unpaid balances

A lender may not hire an attorney to find you for a couple of years

It may take years before you realize that the debt forces you into bankruptcy, starting a new time clock


YEARS 5-7:

Up to 5-7 years from foreclosure to get financing with lenders backed by Fannie Mae and Freddie Mac

Up to 6 years and 180 days for the creditor to file the judgment

Up to 7 years of employment background and credit checks with foreclosure shown on your credit report

Up to 7 years with foreclosure on your credit report limiting your job options or not getting certain jobs at all

While in Chapter 13 bankruptcy,repayment plan could show up as rolling late's for years on your credit report

Missing even 1 payment on a 5 year bankruptcy repayment plan possibly accrues all interest and penalties since day one.

Attorney's fees can accrue very high the entire time for every letter, or call for many years for unpaid collections


YEARS 7-10:

Foreclosure shown for 7 years on your credit report

Bankruptcy Chapter 7, 11 and 12 remain on file for 10 years from the date of filing

Bankruptcy Chapter 13 remains 7 years from the discharge date, and for a maximum of 10 years.

Tax Liens-State and Federal -if paid, remain on your credit report for 7 Years from the date of filing

Civil Judgments- 7 years from the filing date, or from the date of satisfaction.

Bankruptcy affects employment background and credit checks limiting you on certain jobs or getting a job

Bankruptcy affects receiving high-security clearance type jobs

Judgments can be collected upon for up to 10 years

Judgments are paid through bank levies, all types of property liens, or wage garnishment


YEARS 10-20:

Judgments can be renewed a 2nd time for another 10 years

When Judgment is renewed a 2nd  time, you could be levied by your bank, receive liens, or wage garnishment

YEARS 20-25:

Through the next 10-year renewed judgment, you may still have money garnished from your weekly paycheck, taking years to pay back

Tax Liens- State and Federal- If not paid, they stay on your credit report indefinitely.

Child Support-Can stay on credit indefinitely

TIMELINE RECAP FOR CREDIT REPORT AND MONIES DUE:
Lifetime for unpaid state tax liens
Lifetime for unpaid federal tax liens
Lifetime for unpaid child support
Lifetime positive paid trade lines
20 Years from the end date of the 1st judgment followed by a 2nd filed renewed judgment
10 Years on a credit report for a closed positive account
10 Years for Bankruptcy Chapter 7, 11, 12 from the date of filing
10 Years maximum for Chapter 13
7 Years maximum since Chapter 13 discharge date
7 Years a foreclosure is on your credit report
7 Years as paid since date of last activity on collections and judgments
7 Years for paid state tax liens from the date of filing
7 Years for paid federal tax liens from the date of filing
7 Years for a deficiency judgment to remain on your credit report
7 Years for civil judgments from the filing date, or from the date of satisfaction
7 Years for child support payments from the date of closure
7 years of employment background, credit checks with foreclosure on your credit report
7 years of employment background, credit checks with bankruptcy on your credit report
7 years of not getting a high-security clearance job, due to bankruptcy and/or foreclosure
7 Years for max reported financing when lender is backed by Fannie Mae
7 Years for max reported financing when lender is backed by Freddie Mac
6 Years and 180 days a creditor can wait to file a judgment
5 Years a 5 year Chapter 13 repayment plan could show up as rolling late payments
5 Years accrued interest and penalties can accrue on Chapter 13 bankruptcy if you fail
5 Years for earliest reported financing when lender is backed by Fannie Mae
5 Years for earliest reported financing when lender is backed by Freddie Mac
3 Years for financing when lender is backed by FHA
2 Years for hard inquiries on your credit report
2 Years charge-offs and liens affect your score a little less
2 Years from Chapter 7 bankruptcy discharge date to get a FHA loan
1 Year into Chapter 13 bankruptcy to get a FHA loan
1 Year for financing when lender is backed by FHA and "extenuating circumstances"

3 TOP NEGATIVE FACTORS ON HOW BAD CREDIT AFFECTS YOUR DAILY LIFE:
Levies
Liens
Weekly Income Garnished

Levies-This is where the bank levies and takes money out of your bank account without notice. Depending on how much money you owe, this could happen for years.  This could happen from any creditor that has a judgment against you, or if you owe any tax liens.

Liens-Liens can be placed in people's name for specific locations in the county records. Whenever you try to sell or pass title to someone else through houses or vehicles, liens can be placed on the items, where upon these liens need to be paid in order to pass clear title.

Weekly Income Garnished-Imagine having a credit secure a position to garnish up to 25% of your weekly paycheck.  Depending on how much you owe, this money could be garnished for months or years from your paycheck. When you are hired to a job, remember the IRS receives your tax information.

What makes matters worse with the above is, not only will it feel like they are taking money out of your bank accounts, properties, or paychecks forever, but don't forget all of the penalties, high-interest, and very high attorney's fees that just keep accruing along the way for every letter sent, call made, and other items in the collection process..

Note: The bank levies bank accounts to which the same SS# or tax id is attached.
Note: MN has a $300,000 homestead exemption law at this time for your personal residence

OTHER NEGATIVE FACTORS ON HOW BAD CREDIT AFFECTS YOUR DAILY LIFE:
-It's very hard to apply for a home loan with bad credit
-Bad credit limit's your finance options, often giving you a loan with much higher interest rates
-You often won't get approved for a credit card
-Credit cards you are approved for will likely come with a very high interest rate
-Your auto insurance may be denied, or it may be a higher rate
-You may not be able to get a auto loan at all, forcing you to drive cars that often need repairs
-You may not be able to get a bank account
-You may not be able to open up investment accounts
-You may be denied a job when a credit check is done
-You may be forced to only get high-interest department store cards
-You may not be able to increase your credit line
-You may not qualify for a home equity line of credit in the future
-You may be forced to pre-pay for minutes on a cell phone instead of a contract
-You may not be able to get cable tv, or have to pay a very large deposit upfront
-You may have to pay a deposit upfront with your local utility or electric company
-You may not be able to get a college loan, or start a career

REMOVABLE ITEMS:
Note: Removed items off of a credit report will still show up on county public records
where a lender could do a search to find them prior to a loan approval.
Foreclosures
Short Sales
Bankruptcies
Judgments
Charge-Offs
Collections
Repossessions
Late Payments
Inquiries


NON-REMOVABLE ITEMS:
Sally Mae and DOE student loans
Child support payments
Tax liens

BEFORE YOU CAN GET A HOME LOAN:

Tax Liens-Must be on a repayment plan with a written verification letter from State, or the Federal Government
Back Child Support-Must be current, or being repaid through wage-garnishment
Judgments-Must be paid in full, prior to final approval, sourced or gift on funds
Collections-Will review each one individually, a determination is based on individual circumstances
Bad Checks-Must be paid in full prior to Pre-Approval for those on the credit report

Chapter 13 BANKRUPTCY:
There must be 12 consecutive months of on time payments on all accounts
(including utilities, cell phones,etc) from the filing of the chapter 13 bankruptcy.

Chapter 7 BANKRUPTCY:
There must be 24 months of perfect credit from the disposition of a Chapter 7 bankruptcy.


FORECLOSURE:
1 Year: Extenuating Circumstances for financing 1 year out of foreclosure
The FHA Underwriters have the ability to manually underwrite the file and get an "exception" if there are extenuating circumstances (i.e. Medical, Death, multiple job loss).  Buyers would need to write out a very detailed explanation of exactly what happened, and will need to submit supporting docs (legal, medical, etc). Each File will be reviewed by Underwriting to determine if the circumstances warrant "Extenuating". If so, they will grant Pre-Approval.

*3 Years since last foreclosure if you don't qualify for above
*2-3 Years since short sale with Fannie Mae

LOAN PROGRAMS STARTING AT A 580+ CREDIT SCORE :

Alternate Credit Sources
-580+ credit Score
-12 month's into chapter 13
-2 years from chapter 7 discharge
-3 yrs from Sheriff's Sale
-12 month's Verifiable Rent (cancelled checks or Verification Form from management Company
-Insurance Bill - letter from Agent of 12 month's on time payments
-Utilities - letter from Company of 12 month's on time payments

580+ Mid Credit Score
580+ Mid Credit Score
580-619 Guidelines:
-12 month's Verifiable Rent Payments - On time
-3.50% of Purchase Price in Seasoned Funds (must be in your bank account, 60 days+)
-2 Open Trade Lines (active accounts) on your credit bureau reports
580+ Mid Credit Score*  60+ day seasoned funds, must have 3 open trade lines with a 12 month history

Federal Housing Administration Loans - OK to 580 scores
- Minimum 580 minimum middle FICO score required
- Great for first time homeowners
- 30 Year Fixed Rates Only
- Low, government sponsored, monthly Mortgage Insurance payments
- Owner Occupied Only
- 12 months verified rent history required
- Down payment MUST come from borrowers own funds
- Gifts allowed for all closing costs
- Compensating factors required for 580 scores
- NO declining market restrictions


PART 2: GREAT CREDIT

Credit Score % Breakdown:
35 percent - An individual's history of making credit payments on time
30 percent - Amounts owed vs. Credit Available
15 percent - The age and length of an individual's open credit lines
10 percent - The frequency with which someone applies for new credit
10 percent - Types of credit used


TOUGH CHOICE: 3 CHOICES TOWARD IMPROVEMENT
A. Manage your bills and pay them off
B. Negotiate collections/judgments with creditors
C. Test for Chapter 7, seek advice on filing for bankruptcy

REBUILD A POSITIVE CREDIT HISTORY: 3 OPTIONS
A. Add a primary user's positive trade line which increases utilized credit to available credit ratio
B. Deposit cash into a CD at banks, take a loan out on the CD, make payments on time, have reported
C. Deposit cash on new secured credit cards, make payments on time, have reported to credit bureaus
SECURED CREDIT CARD SOURCES:
Credit.com secured cards
Credit.com for bad credit
Credit.com pre-paid and debit
Credit.com cards for no credit
CreditCards.com pre-paid-debit
CreditCards.com for bad credit
Secured credit cards

CREDIT REPAIR:
Phone/Voicemail: 763-634-1766-These calls will be answered by a loan officer and/or a buyer's agent
ron@minnesotainvestors.com

NEVER BE LATE: One 30 day late payment could cause your score to drop 100-140 points

NEVER MAX OUT CREDIT CARDS:
(Goal: Balances under 20% preferred on all, then 30%, then 50%, then 70%)

GET SECURED CREDIT CARDS: Your on-time payments will create a positive payment history

DISTRIBUTE BALANCES EVENLY: distribute over all credit cards
(Goal: Balances under 20% preferred on all, then 30%, then 50%, then 70%)

CREDIT MIX: Establish various types of credit, mortgage, car loan, credit card account

DON'T CLOSE UNUSED CREDIT ACCOUNTS:
(This may be your long-term credit history which factors into your score)

INCREASE CREDIT LIMITS ON YOUR CREDIT CARDS:
(hIgher limits on your credit cards lowers your utilized/available credit ratio percentage)

LIMIT YOUR CREDIT INQUIRIES
(Each one can lower your credit score a few points)

DON'T OPEN TOO MANY ACCOUNTS WITHIN A SHORT PERIOD OF TIME

GET A CHECKING OR SAVINGS ACCOUNT
(Always keep a positive balance)

AVOID DEBT CONSOLIDATION PROGRAMS:
(This may continue to report as rolling late payments for years)

WATCH FOR CREDIT CARDS THAT REPORT YOUR HIGHEST BALANCE AS HIGH LIMIT
(Some credit card companies will report your highest balance to date, as the new credit limit, making you appear maxed out)

CREDIT BUREAUS MAY UPDATE BALANCES AT DIFFERENT TIMES OF THE MONTH THAN YOUR PAYMENT

ADD POSITIVE TRADE LINES TO YOUR CREDIT REPORT

HAVE A PROFESSIONAL NEGOTIATE CHARGE-OFFS, COLLECTIONS & JUDGMENTS AFTER A CLOSING

OPEN BUSINESS CREDIT, IT DOESN'T SHOW UP ON YOUR PERSONAL CREDIT REPORT UNLESS LATE

BANKRUPTCY INITIALLY HURTS YOUR CREDIT

CREDITORS ARE NOT REQUIRED TO REPORT TO THE CREDIT BUREAUS

HAVE PAID COLLECTIONS AND JUDGMENTS DELETED OFF VS. REPORTING AS 'PAID IN FULL'

BECOME AN AUTHORIZED USER ON SOMEONE ELSE'S ACCOUNT

DISSOLVE JOINT ACCOUNTS AFTER A DIVORCE



CONTACT ME:
Please answer these questions on your first Voicemail/Email before looking for a home
1. Credit score of everyone to be on the loan
2. Last Bankruptcy, Foreclosure, or Short Sale for everyone to be on the loan
3. How long of consistent work for everyone to be on the loan
4. Monthly payment you can afford
5. Total money available you have
6. Your desired move-in date

Phone: 763-634-1766-These calls will be answered by a loan officer and a buyer's agent
ron@minnesotainvestors.com

Walking away Vs. a Short Sale

(My Original Blog Post: http://www.minnesotainvestors.com/blog/walking-away-vs-a-short-sale/)
What are the disadvantages from walking away in foreclosure Vs. Selling on a Short Sale?

SOLUTION: I believe selling on a properly executed short sale is better than walking away.

DISCLAIMER:
Before I answer questions below, I am not an attorney, a CPA, or an accountant. I suggest you seek legal,and/or competent CPA's advice before making any decisions. What I am typing below is based on extensive research I have read. It's suggested that you do your own research on the topic of he information below, it's in no way to be used as: legal, tax or financial advice.

SELLING SHORT SALE SOLUTION: SOLVING THE PROBLEM SOONER Vs. SUFFERING CONSEQUECES LATER:

With a short sale, typically within only 4-8 months you have put almost everything behind you. A properly done short sale can work towards a satisfaction of the mortgages and promissory notes, eliminating the possiblities of a future deficiency judgment against you personally.  People often like to mention that short sales takes months to complete, but what they should realize  is that the negotiator, agent, or investor is the one that spends 95% of the time following up. The homeowner simply just waits and doesn't have to do much work at all other than allow for the house to be shown and sign some paperwork upfront.  Little to any money is involved on the seller's end, as the bank pays the majority of the fees. Seller's may have to pay any past due associate fees and or required city inspections.  Those are required WHENEVER you sell a house, regardless if you sell on a short sale.

WALKING AWAY CAN HAUNT YOU LATER ON:

Walking away and letting the bank take the house back seems like an easier solution today, to many, as it doesn't appear to take any work, you don't have to keep thinking about the central focus of your problem today, your house. This is because you don't know what you don't know.

"Walking away from your house is like sweeping everything under the rug, eventually, it has to be dealt with, for now you don't have to look at it or think about it, but later it comes back with an escalating number of cockroaches and ants, requiring an exterminator."

BEFORE 2012, THERE ARE SOME TAX BENEFITS:

It's true that there are some great benefits currently before 2012 allowing homeowners some great tax credits on losses due to foreclosure and short sales.  This can be seen through the IRS website IRS.gov under The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
http://www.irs.gov/individuals/article/0,,id=179414,00.html

This is great, but this is independent of the other issues. What I am saying is this only covers taxes, not deficiency judgments and lender collection attempts and wage garnishment. The lender who DOES NOT do the foreclosure by advertisement would like to collect the judgment later.

Note: Remember when you signed your mortgage and got a house loan you also signed a promissory note,  obligating you to pay your creditor/bank/lender.
You heard this goes away with foreclosure, but you only half heard what you wanted to.  Please read below, it is true that foreclosure by advertisement does waive the right by THAT lender to seek a deficiency later.  The key word is THAT.  In some cases, it may be true that only 1 lender likely initiated foreclosure waiving their rights. You may want to seek an attorney's advice on this point.  I suggest getting a satisfaction with the 2nd lender on a property executed and negotiated short sale.

FORECLOSURE BY ADVERTISEMENT:

Foreclosure by advertisement is by far the preferred method of foreclosure because it faster, more simple and less expensive. Foreclosure by advertisement is only for mortgages that include a power of sale clause. A power of sale clause simply grants the lender the right to sell the property upon default.

DEFICIENCY JUDGMENT: THE #1 THING YOU ARE TRYING TO AVOID

"If the foreclosure sale does not bring in enough money to pay off the debt, the creditor may be able to obtain a deficiency judgment against the mortgagor. If the statutory redemption period is six months, however, such a deficiency judgment can be obtained against the mortgagor only if the foreclosure was by action. No deficiency judgment can be obtained against the mortgagor if the redemption period is six months and foreclosure was by advertisement. If the redemption period is twelve months, however, a deficiency judgment can be sought. Finally, even if the redemption period is six months, a deficiency judgment can be sought against any guarantors of the promissory note." -source http://www.extension.umn.edu/distribution/businessmanagement/df7297.html

ONLY 1 LENDER INITIATED THE FORECLOSURE:

Keep in mind that often the 1st lender is the one that initiated the foreclosure. Often there is a 2nd lender in the equation who DID NOT initiate a foreclosure that does have a promissory note signed by the borrower, which they can use later against you.

DECISION TIME:

Typically what's going to happen, is that the homeowner will decide either to:
A: Give the house back (walk away-Foreclosure)
B: Sell on a short sale

BEST SOLUTION: SELLING ON A SHORT SALE:

Often when selling on a short sale the 2nd lender will release the lien/mortgage from the house, so that the seller can sell the house to the new buyer. Notice I said release, not cancel.  What this could do is make it so that the seller owes the 2nd mortgage company even more money down the road.  Often the 1st mortgage lender needs to know about this as the 1st lender only  agrees to give up a short sale discount based on dictating what the 2nd lender will receive.  At this point Private Mortgage Insurance (PMI) and others can get involved as well as the investors backing the loan such as FHA, Freddie Mac, Fannie Mae, servicers, etc.

Short sales can be the right solution, but often are too complex for a homeowner to try to do on their own.  Homeowners may get ahold of the bank after numerous phone calls for months and eventually get the house sold, but often with major mistakes along the way, that they may not catch until years later. That's why hiring a professional short sale negotiator is recommended.

With the above, we discussed doing a short sale, solving the problem and wrapping it up within 8 months or less on average. With a successful short sale you should be able to often receive a satisfaction on the loan. You should be able to minimize taxes, especially before 2012 based on current laws.  The short sale itself has a minimal impact from obtaining your next loan in 2-3 years, provided you qualify in the other required areas.  A full foreclosure could take 5-7 years with Fannie Mae and Freddie Mac, 3 years with FHA, currently less under extenuating circumstances with job loss, or medical. A short sale should have less of a credit score impact than a foreclosure.  Source: http://www.wecallyourbank.com/FREE/shortsalevsforeclosure.pdf

ALTERNATIVE TO A SHORT SALE:
WALKING AWAY:GIVING THE HOUSE BACK:FULL FORECLOSURE

When walking away from your home and giving the house back through foreclosure, your problem doesn't easily go away, in fact, it may linger on for many years. For now it appears to be the easier solution. It may give you more peace of mind today since you don't have to think about it right now.  It's very likely you will have to think about the repurcussions of walking away for years into your future.  Let me discuss some things you have to look forward to, if you choose to walk away Vs. selling on a short sale.

Important Note: Those doing loan modifications, then later walking away after 2012, are even worse off as the IRS tax benefit expires after 2012. See: The Mortgage Forgiveness Debt Relief Act and Debt Cancellation http://www.irs.gov/individuals/article/0,,id=179414,00.html

SOLUTION: Sell on a short sale before 2012 if you are or will be over-financed on your home.

FUTURE PAIN OF WALKING AWAY:
(FORECLOSURE  RECORD AND ON YOUR CREDIT REPORT)
ENVISIONING YOUR LIFE'S FUTURE THE NEXT 20-25 YEARS:
HINT:(IT'S NOT A WONDERFUL LIFE)

YEAR 1:

Dealing with non-stop calls from your banks' collection department

Dealing with threatening debt letters from your bank and notice of default letters

Dealing with late fees and penalties, accruing daily

Dealing with 1st lender, 2nd lender or your association initiating foreclosure action

Dealing with repeated unsuccessful attempts to get through to your bank by yourself

Dealing with an unreasonable and unsuccessful repayment plan

Dealing with giving the bank all of your private financial paperwork which may later be used for collection methods

Dealing with negotiating unsuccessful loan modifications

Dealing with getting calls from your bank at work or to your co-workers, or boss

Dealing with your family and kids getting calls from your bank at home

Dealing with bankers calling neighors or having them knock on your door to get ahold of you

Dealing with a banker knocking on your front door to serve your spouse or kids paperwork

Dealing with unpaid water bills and taxes, eventually becoming liens on the house

Dealing with day to day money stress, affecting your life and your families

Dealing with your house being publically advertised in the newspaper for foreclosure

Dealing with someone to stop by and research the property for the bank for a BPO

Dealing with a sheriff sale deadline date

Dealing with a redemption period time limit and deadline

Dealing with possibly being evicited at the end of redemption

Dealing with possibly cleaning the house very well for your bank under "cash for keys"

Dealing with a possible eviction filed on your record, later making renting hard

Dealing with continued missed payments showing up on your credit report as rolling lates

Dealing with over agressive REO agents trying to get data before the bank owned listing

Dealing with the house listed with a foreclosure sign in the front yard of your neighorhood after the bank gets it back

Dealing with moving out into a cheaper place while in foreclosure, may actually hurt your "bankruptcy means" test

YEARS 2-5:

Receive collection calls from collection companies for years at work, home, during dinner and family time

The other lender(often the 2nd lender) may seek to collect on wage garnishment from the promissory note

Credit score takes a bigger dip with a foreclosure Vs. a short sale

Penalties can accrue for years on unpaid balances

High-interest can accrue for years on unpaid balances

A lender may not hire an attorney to find you for a couple of years

It may take years before you realize that the debt forces you into bankruptcy, starting a new time clock

YEARS 5-7:

Up to 5-7 years from foreclosure to get financing with lenders backed by Fannie Mae and Freddie Mac

Up to 6 years and 180 days for the creditor to file the judgment

Up to 7 years with a foreclosure shown on your credit report

Up to 7 years of employment background and credit checks with foreclosure shown on your credit report

Up to 7 years with foreclosure on your credit report limiting your job optios or not getting certain jobs at all

While in Chapter 13 bankruptcy,repayment plan could show up as rolling lates for years on your credit report

Missing even 1 payment on a 5 year bankruptcy repayment plan possibly incures all interest and penalties since day 1

Attorney's fees can accrue very high the entire time for every letter, or call for many years for unpaid collections

YEARS 7-10:

All discharged bankruptcies, whether a state or federal filing remain on a Credit report for 10 years

A dismissed chapter 13 remains for 7 years

A dismissed chapter 7 remains for 10 years

Bankruptcy affects employment background and credit checks limiting you on certain jobs or getting a job

Bankruptcy affects receiving high-security clearance type jobs

Judgments can be collected upon for up to 10 years

Judgments are paid through bank levies, all types of property liens, or wage garnishment

YEARS 10-20:

Judgments can be renewed a 2nd time for another 10 years

On the 2nd renewed judgment, you could be levied by your bank, receive liens, or wage garnishment

YEARS 20-25:

Through the next 10-year renewed judgment, you may still have money garnished from your weekly paycheck, taking years to pay back

----------------------------------------------------------------------------------------------------

Please contact: ron@minnesotainvestors.com if you would like to sell on a short sale, or
if you already gave your house back to the bank and need a place to live, and future loan.
http://www.ronorr.com/2010.html
Real Estate Broker
MinnesotaInvestors.com, Inc.

Short Sale vs. Loan Modification vs. Short-Refi

(My Original Blog Post: http://www.minnesotainvestors.com/blog/short-sale-vs-loan-modification-vs-short-refi/)
You are in your current home right now and you are deciding what to do, you are looking at all of your options:
There is 1 decision you MUST consider as the first step:
Are you staying in your house, or leaving your house?

Let's go one step further...
Do you want to stay, or are you being forced to leave your house.
We understand why you want to stay, you have money in the house, your kids grew up in the house, they are in the
school system, and many other reasons.
Let's look at the reasons that you are being forced to leave your house:
A: Your payment is adjusting upward and you can't afford it
B: You, a spouse, significant other or family member have lost their job
C: You have had some health problems and set backs
D: You have far too much debt or credit card debt
E: You are near bankruptcy
F: The house needs too much fix up, or maintenance and you can't afford it
G: Their has been a death in the family, and costs are incurred
As we've discussed above there are a lot of reasons why you must leave a house.

Below I am going to discuss all of the major options for leaving your house and staying in your house,
Then I am actually only go into detail on Short Sale, Loan Modification and Short-Refinance.

Staying in your house
1. Do a Short-Refi-
-Before foreclosure is filed
-Current lender or new qualified FHA lender
-Close within 120 days or less
-Loan amount for new BPO at market value
-Approximately $225 out of pocket
-Need tax returns, w-2’s, 1099’s, check stubs, bank statements, etc
-Discharged Debt (Taxes possible see Mortgage Debt Relief Act of 2007)
-Debt-to-income as high as 45%
-Don't need to be behind in payments
2. Do a Loan Modification-
-Usually no loan principle reduction
-Usually redo the amortization
-Usually redo the interest rate, sometimes lower
-Usually fixed interest rate
-Usually if you are behind in payments
3. Do a Foreclosure Extension-
-Delay foreclosure 6-12 months
-Doesn't always work with a short sale
-Great for little time left in redemption
4. Do a Refinance-Rate/Term and Cash-out Refinance
FHA Streamline
620 Minimum (currently)
No Appraisal
No Income Verification
No Asset Verification
Will need to Credit Qualify
Cash Out up to 85% LTV will require new Appraisal

Rural Development Streamline
620 Minimum (currently)
Available with or without Appraisal
Income and Assets Verification Required
Will need to credit qualify
Cash Out up to 95% will require new Appraisal

VA Streamline
620 minimum (currently)
Appraisal may not be required (varies by Lender)
Income/Asset Verification may not be required (varies by Lender)
Will need to credit qualify
Cash Out will require new Appraisal

Leaving your house
1.Rent out your property-
-If you aren't in foreclosure, or don't plan on it
-If rent may be less than your mortgage payment, must be able to afford
-Can provide you with property management
-Provide you with rental placement of the tent, credit checks, marketing, etc
-Renters insurance recommended
2.Lease Option your property-
-Ideal for a little bit more of a serious renter with an option to buy
-Could be your potential future buyer
-Typically a little more money upfront with an option vs. a deposit
-RTO buyer recommended to enter credit repair
-Owner still pays insurance and property taxes
-House shouldn't be over-financed
-Repairs are negotiable in the contract
-Option and monthly payment credits towards purchase are negotiable
-12-36 months until financing are standard terms
-Renters insurance recommended
-Owners judgments could still attach to the house
-Once recorded owner may not easily be able to file new mortgages
3.Sell on a Contract for Deed-
-May make sense for taxes on an installment sale, ask your accountant
-Buyer pays property taxes and insurance, added additionally insured recommended
-Buyer puts down 5-10% typically
-Down payment should be able to be used for future purchase
-12 months of on-time payments typically qualifies for a buyer's refinance
-Owner still has the deed
-Minnesota law requires to be recorded
-Owners judgments could still attach to the house
-Once recorded owner may not easily be able to file new mortgages
-Seller please see due-on-sale clause in mortgage contract per the lender
-Quick closing
4.Sell your House's Deed-
-If you don't think you can sell, sell your deed and the house, vacate the house
-If you have little equity, sell your deed and the house, vacate the house
-Mortgage will still stay in owner's name until new buyer gets a loan and pays off liens
5.Sell your equity house by listing it-
-List it on the MLS
-Full service listing/marketing/selling by a listing agent
-Agent shows houses, or has a buyer's agent show houses
6.Sell for higher than the low bid at the sheriff sale-
-These days, lenders often sell short at the sheriff sale off the original loan amount
-List it on the MLS for more than the low bid amount at the sheriff sale
-Full service listing/marketing/selling by a listing agent
-Agent shows houses, or has a buyer's agent show houses
7.Sell on a Short Sale-
-Best for little, no equity, or over-financed houses
-Beneficial for satisfaction and discharging debt negotiating
-Minimal fees- city inspection, association dues may apply
-Great for those with 2nd and 3rd mortgages
-Great when you want to sell
-Take many months of bank negotiating, and listed on the market
-Often you can take advantage of the mortgage debt relief act until 2002
8.Property Management-
-Renter placement
-Fix up and contractor calls taken care of
-Leases
-Credit/background checks
-Can manage entire portfolio's
-much much more

*If you can't sell, by renting or selling on a contract for deed, you can count 75% of rental income to offset your
Debt-to-Income Ratio (total monthly payments divided by gross income) when qualifying for a loan
*if there is an outstanding mortgage debt, must have 6 months PITI and MI in reserves for both properties"
*FYI, there is a very beneficial IRS tax law that requires you to live in your house 2 of the last 5 years before selling

Now that you as the homeowner know your options, let me discuss: Short Sales, Loan Modifications, and Short-Refinance

Deciding amongst the 3 options above come down to this:
Staying = Loan Modifications and Short-Refinances
Leaving/Selling=Short Sale

Principle Reduction (Discharged Debt) *Possible tax benefits until 2012 see Mortgage Debt Relief Act of 2007 IRS.gov
Short Sales reduce the principle balance so that you can sell
Short-Refinances reduce the principle balance so that you can adjust for a new lesser loan amount
Loan Modifications as a general rule will not offer the principle balance, even upon success, you may miss the 2012 deadline above

Timelines
The timeline you are at in the process may determine which option you need to go with:
0 payments behind-Generally a short-refinance is best, a short sale can be tough, but doable if it looks like you may fall behind
1-3 payments behind-Generally all 3 are a good option in this situation, just decide if you are staying or leaving, and principle reduction
Entered foreclosure-At this point loan modification and short sale are your two options decide if you are staying or leaving
After the sheriff sale-At this point short sale is your option, you have to come up with the full loan balance or sell on a short sale
After the sheriff sale-If your house sold for much less at the sheriff sale, then you could list the house for sale over that amount
4 months left in redemption-This is the minimum amount recommended to have time to negotiate and market your property
3 months or less in redemption-With little time left, a foreclosure extension may be your only option, please contact me

Money
Expensive-Most loan modification 3rd party companies want money upfront for doing loan modifications, sometimes in the thousands
Affordable- Short-refinances can be as little as $225.  Short Sales are no cost, but selling may require assoc. dues, city inspections, both affordable.

Qualifying
Not Qualified-If you shouldn't have been qualified originally or your circumstances may have changed you may not qualify for a loan mod or short-refinance
Qualified-If your credit/assets/money/job/debt ratio look strong on paper, then you may qualify for better rates and terms

Situation
Divorce may force you to sell
Probate or a death may force you to sell
Separation may force you to sell
Job transfer may force you to sell
Growing family may cause you to sell
Kids moving out may cause you to sell
Retirement may cause you to sell
Job loss may cause you to sell

As you can see much of the above is based on the factors that you decide, and the situations that decide for you.
Generally speaking when you try to qualify for a loan modification or a short-refinance, the qualifying will be like a home loan, but usually not as tough.
In all cases, short-refinance, loan modification and short sale, you have to prove to the lender your financial situation good or bad and why you
deserve to negotiate away your debt, or in the case of staying why you need better rates and terms.  In all scenarios as you can imagine the lenders
will need to see paperwork and gather your financial information to see the full picture of why they will work with you. Below I have created a list
of what will be needed for all three.  Please keep in mind that I used home loan qualifying steps for Short-refinance and loan modifications, whereas
they usually require a few less things, but could require a few different things.

I'd appreciate an email to ron@minnesotainvestors.com on your situation and how I can help you. At this time I am looking to work with
those not currently working with an agent/broker.


Short-Refinance and Loan Modifications

Pre-Approval Checklist-(It's recommended that you are pre-approved before looking at homes)
1003 Application Form for home loans Filled out by: Phone, Fax, In-Person, Mail, or Email (Please write Ron Orr on top)
Employment
____ Name, address and phone number of employers for the past two years
____ Copy of pay stubs for the previous 30 days
____ Copy of last 3 years w-2/1099 forms
____ Copy of last 3 years complete federal tax returns with all Schedules)

Self-employed
____ Copy of last two years tax returns (personal and corporate);
____ year to date P&L and Balance Sheet through the most recent quarter, must be certified by Accountant/CPA

Liabilities
____ Name and account numbers for all revolving and installment accounts
____ Name and account number for all mortgage loans for the previous two years
____ Name and address for landlords for the previous 3 years

Assets
____ Name, address, and account number for all bank accounts
____ Name, address, and account numbers for all brokerage accounts
____ Copies of statements covering last 3 months on asset accounts
____ Copy of most recent statement for 401K, Savings Plan, etc.

Miscellaneous
____ Copy of driver's license and social security card
____ Copy of fully executed divorce decree if applicable
____ Copy of fully executed child support court order if applicable
____ Copy of signed earnest money contract
____ Copy of lease agreements on rental properties.  must have 2 year history reflected on Taxes to use Rental/Border income
____ Veterans! Copy of DD 214 and Eligibility Cert. if you have it, if not need Company Clerk contact info
____ Check for the cost of your credit report and appraisal

Short Sale Information:

Property Title Info:
Currently Single?
Divorced?
Divorced When? Borrower Info:
First Name:
Last Name:
Home Phone:
Cell Phone:
Best Time to Call:
Email:
Fax: Co-Borrower Info:
First Name:
Last Name:
Home Phone:
Cell Phone:
Best Time to Call:
Email:
Fax:

1^st Lender Info:
Lender Name:
Amount Owing:
Monthly Payment:
Payments Behind:
Reinstatement Amount:
Type of Loan: Conventional, FHA,VA
Do you pay PMI:
Account #:

2^nd Lender Info:
Lender Name:
Amount Owing:
Monthly Payment:
Payments Behind:
Reinstatement Amount:
Type of Loan: Conventional, FHA,VA
Do you pay PMI:
Account #:

Property Info:
Are you working with a real estate agent currently? MLS#?
Address: City: Zip: County:
Bed: Bath: Garage Stalls:
Property Style Type: Multi-Unit? Sq Ft? Year Built?
Estimated Market Value:
Does it need repairs: Estimated $:
List of repairs needed:
Sheriff Sale Date:
End of Redemption Date:
Is the property currently occupied or vacant?
Have you had a bankruptcy? Date When? Date Discharged: Chapter 7? Chapter 13?
Other liens on the property? Any judgments? Past due water bills? Past Due Taxes?

Short Sale Documents that we will need soon from the homeowner are:
1. Signed Authorization to Release form
2. Tax returns for the last 2 years (1040)
3. Pay stubs from last 2 months (+spouse)
4. Bank statements last 3 months+ (joint accounts)
5. Recent mortgage statements for all properties
6. Hardship letter (handwritten)
7. Financial form will be provided
8. P&L statement for Self Employed and Properties

Leaving Your House Vs. Staying

(My Original Blog Post: http://www.minnesotainvestors.com/blog/leaving-house-vs-staying/)
HTML clipboard C: Leaving your house
1.Rent out your property-
-If you aren't in foreclosure, or don't plan on it
-If rent may be less than your mortgage payment, must be able to afford
-Can provide you with property management
-Provide you with rental placement of the tent, credit checks, marketing, etc
-Renters insurance recommended
2.Lease Option your property-
-Ideal for a little bit more of a serious renter with an option to buy
-Could be your potential future buyer
-Typically a little more money upfront with an option vs. a deposit
-RTO buyer recommended to enter credit repair
-Owner still pays insurance and property taxes
-House shouldn't be over-financed
-Repairs are negotiable in the contract
-Option and monthly payment credits towards purchase are negotiable
-12-36 months until financing are standard terms
-Renters insurance recommended
-Owners judgments could still attach to the house
-Once recorded owner may not easily be able to file new mortgages
3.Sell on a Contract for Deed-
-May make sense for taxes on an installment sale, ask your accountant
-Buyer pays property taxes and insurance, added additionally insured recommended
-Buyer puts down 5-10% typically
-Down payment should be able to be used for future purchase
-12 months of on-time payments typically qualifies for a buyer's refinance
-Owner still has the deed
-Minnesota law requires to be recorded
-Owners judgments could still attach to the house
-Once recorded owner may not easily be able to file new mortgages
-Seller please see due-on-sale clause in mortgage contract per the lender
-Quick closing
4.Sell your House's Deed-
-If you don't think you can sell, sell your deed and the house, vacate the house
-If you have little equity, sell your deed and the house, vacate the house
-Mortgage will still stay in owner's name until new buyer gets a loan and pays off liens
5.Sell your equity house by listing it-
-List it on the MLS
-Full service listing/marketing/selling by a listing agent
-Agent shows houses, or has a buyer's agent show houses
6.Sell for higher than the low bid at the sheriff sale-
-These days, lenders often sell short at the sheriff sale off the original loan amount
-List it on the MLS for more than the low bid amount at the sheriff sale
-Full service listing/marketing/selling by a listing agent
-Agent shows houses, or has a buyer's agent show houses
7.Sell on a Short Sale-
-Best for little, no equity, or over-financed houses
-Beneficial for satisfaction and discharging debt negotiating
-Minimal fees- city inspection, association dues may apply
-Great for those with 2nd and 3rd mortgages
-Great when you want to sell
-Take many months of bank negotiating, and listed on the market
-Often you can take advantage of the mortgage debt relief act until 2002
8.Property Management-
-Renter placement
-Fix up and contractor calls taken care of
-Leases
-Credit/background checks
-Can manage entire portfolio's
-much much more

*If you can't sell, by renting or selling on a contract for deed, you can count 75% of rental income to offset your
Debt-to-Income Ratio (total monthly payments divided by gross income) when qualifying for a loan
*if there is an outstanding mortgage debt, must have 6 months PITI and MI in reserves for both properties"
*FYI, there is a very beneficial IRS tax law that requires you to live in your house 2 of the last 5 years before selling

CONTACT ME:

Email subscribers- Go to any of these sites, to get info by email: RonOrr.com,
RenterLeads.com , RentToOwnBuyers.com , Contract4Deed.com , HomeLoansMN.com ,
MinnesotaInvestors.com, SellMnHouse.com, OverFinanced.com, BankOwnedForeclosure.com

Scenario's can be emailed to: ron@minnesotainvestors.com

Please answer these questions on your first Email
1. Credit score of everyone on the loan
2. Last Bankruptcy, Foreclosure, or Short Sale for everyone on the loan
3. How long consistent work for everyone on the loan
4. Monthly payment you can afford
5. Total money available you have
6. Your desired move-in date

Staying in your home vs. Selling

(My Original Blog Post: http://www.minnesotainvestors.com/blog/staying-in-your-home-vs-selling/)
B: Staying in your house
1. Do a Short-Refi-
-Before foreclosure is filed
-Current lender or new qualified FHA lender
-Close within 120 days or less
-Loan amount for new BPO at market value
-Approximately $225 out of pocket
-Need tax returns, w-2’s, 1099’s, check stubs, bank statements, etc
-Discharged Debt (Taxes possible see Mortgage Debt Relief Act of 2007)
-Debt-to-income as high as 45%
-Don't need to be behind in payments
2. Do a Loan Modification-
-Usually no loan principle reduction
-Usually redo the amortization
-Usually redo the interest rate, sometimes lower
-Usually fixed interest rate
-Usually if you are behind in payments
3. Do a Foreclosure Extension-
-Delay foreclosure 6-12 months
-Doesn't always work with a short sale
-Great for little time left in redemption
4. Do a Refinance-Rate/Term and Cash-out Refinance
FHA Streamline
620 Minimum (currently)
No Appraisal
No Income Verification
No Asset Verification
Will need to Credit Qualify
Cash Out up to 85% LTV will require new Appraisal

Rural Development Streamline
620 Minimum (currently)
Available with or without Appraisal
Income and Assets Verification Required
Will need to credit qualify
Cash Out up to 95% will require new Appraisal

VA Streamline
620 minimum (currently)
Appraisal may not be required (varies by Lender)
Income/Asset Verification may not be required (varies by Lender)
Will need to credit qualify
Cash Out will require new Appraisal

CONTACT ME:

Email subscribers- Go to any of these sites, to get info by email: RonOrr.com,
RenterLeads.com , RentToOwnBuyers.com , Contract4Deed.com , HomeLoansMN.com ,
MinnesotaInvestors.com, SellMnHouse.com, OverFinanced.com, BankOwnedForeclosure.com

Scenario's can be emailed to: ron@minnesotainvestors.com

Please answer these questions on your first Voicemail/Email
1. Credit score of everyone on the loan
2. Last Bankruptcy, Foreclosure, or Short Sale for everyone on the loan
3. How long consistent work for everyone on the loan
4. Monthly payment you can afford
5. Total money available you have
6. Your desired move-in date