Should I pay points?

When most people begin the online search for a mortgage company, they start looking for the lowest rate. The lowest rate is important and you should compare rates on comparable loans from mortgage companies in your area. But remember, you should always compare the “whole package” that is, all fees and costs included in the mortgage. The “lowest rate” does not necessarily guarantee a mortgage with the “lowest cost” or even with the “lowest monthly payment”, in addition the terms of the loan should be considered. Is the “low rate” offered fixed for an attractive period of time? If not, to what and when will it adjust?, and is there deffered interest involved? negative amortization? other factor that will affect the monthly payment in the future?

You should compare the Annual Percentage Rate or APR as calculated and not the interest rate alone, hidden fees and origination points will have an adverse effect on the APR and thus identify the mortgage as having a higher cost than a mortgage with the same interest rate but no origination fees.

At Florida Home Trust we will work side by side with you, and explain in simple terms the different alternatives and advantages and disadvantages of each program. Ours is a policy of full and absolute disclosure, by doing this we assure a “win-win” situation on every transaction.

After selecting a mortgage product, the application process may prove to be the easy part, we will prepare you for your initial meeting. We will help you complete a 1003 (Uniform Mortgage Application Form), examine a copy of your credit report and collect al necessary documentation.

To speed up the mortgage process, stay in touch with your Loan Officer and be prepared to answer any questions they may arise.

Once complete, your application will be given to our processing department. Our processor will organize your paperwork and may verify your employment, bank balances, and other information as previously advised and agreed with you. Depending on the selected product we may not need to verify income or employment. Remember to ask your Loan Officer about our available “no documentation” programs.

Be sure to respond promptly to requests for information while processing is taking place.

Commonly requested items during processing that may not have been collected during the application include:

The final purchase contract for the house (if applicable we will gather this from your realtor or the seller)
Updated account statements for listed assets in the application that may have changed in value.
Information about debts or credit report items that may have been delinquent or not accurate.
Evidence of your mortgage or rental payments, such as canceled checks.
An irrevocable gift letter if you are receiving a monetary gift from a relative.
The processor is collecting this information before presenting it to an underwriter. An underwriter reviews all the information in your loan file to determine if the application meets the approval guidelines. With approval, we will provide you with a letter of commitment, which is a promise from us to make a loan based on specific terms and conditions.


Getting a mortgage approved for your new or existing home might seem like finding your way through a financial maze. There are hundreds of available loan programs being offered from thousands of mortgage brokers, bankers, lenders, finance companies, credit unions, even stock brokerage firms.

Before you begin the process of choosing a mortgage company, a good first step is to determine a monthly mortgage payment that will fit into your current budget. A general rule is to keep your payment less than 30% of your gross salary. Don't forget to leave room for insurance, taxes, association dues and other costs that factor into your total mortgage payment.

The basics: 4 credit-scoring myths

By Liz Pulliam Weston

There's a lot of misinformation being propagated about what does and doesn’t hurt your credit score, and much of it is coming from sources who should know better: mortgage lenders.

Now, let me say first that I’ve worked with several excellent lenders who really knew their stuff and kept up to date, not only on loan trends but on the information that’s available about credit scoring. That’s important, because the FICO credit score, in its various permutations, is used in three-quarters of all mortgage lending.

But what I heard from several lenders responding to my recent column, “8 big mortgage mistakes and how to avoid them,” was the kind of bad advice that can cost you money and keep you from getting the best loans.

So if your mortgage broker gives you any of the following advice, take a tip from me: Find a new broker.

Closing accounts can help your credit score?
No, no, no. For the umpteenth time: Closing accounts can never help your credit score, and may hurt it.

Every time I write this, I get more e-mail from people who say their mortgage lenders told them exactly the opposite. It’s true that having too many open accounts can hurt your score. But once you’ve opened the accounts, you’ve done the damage. You can’t repair it by shutting the account, and you may actually make things worse.

The credit score looks at the difference between your available credit and what you’re using. Shut down accounts, and your total available credit shrinks, making your balances loom larger, which typically hurts your score.

The score also tracks the length of your credit history. Shutting older accounts can also make your credit history look younger than it actually is, which can hurt your score.

Rather than closing accounts, pay down your credit card debt. That’s something that actually can and usually will improve your score.

Checking your FICO score can hurt your credit?
Unfortunately, I heard this one from a mortgage broker who is otherwise pretty smart. He was confused about which type of inquiries hurt your score and which don’t.

Applying for new credit is generally what hurts your score. Ordering a copy of your own credit report or credit score doesn’t count. Those mass inquiries made by credit card lenders, who are trying to decide whether to send you an offer for a pre-approved card, also aren’t going to hurt you, either -- unless you actually take them up on their offers.

If you want to minimize the damage from credit inquiries, make sure that when you shop for a mortgage you do so in a fairly short period of time. The FICO score treats multiple inquiries in a 14-day period as just one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed.

For most people, one inquiry will generally knock no more than 5 points off a score (and scores typically run from 300 to 850, so that’s not a big percentage).

Credit counseling will hurt your score as much as a bankruptcy
The current FICO formula ignores any reference to credit counseling that may be in your file. That’s been true for the last three years, after researchers at Fair, Isaac, the company that created the FICO scoring system, noticed that people getting credit counseling didn’t default on their debts any more often than anyone else.

Your ability to get a loan could still be hurt by credit counseling, however. Your current lenders may report you as late, because you’re not paying what you originally owed or because your credit counselor isn’t sending your payments in on time. Late payments do hurt your credit score.

Lenders consider other factors besides credit scores in making their decisions, as well. The factors they look at can vary widely. Most want to know your income, for example. Some want to know how much savings you have or whether you’re a homeowner. Some will find credit counseling disturbing, while others see it as a good sign.

The mortgage lenders who don’t like credit counseling generally treat its enrollees the same as if they had filed for Chapter 13 bankruptcy. Chapter 13 is the kind of bankruptcy that requires a repayment plan and is looked at somewhat more favorably than Chapter 7, which allows you to erase many of your debts. You might still be able to qualify for a loan from one of these lenders, although your interest rates will almost certainly be higher than if you had perfect credit.

If you plan to get a mortgage soon, and you’re not already behind on your debts, it’s probably smart to steer clear of credit counseling. If you’re already in trouble, however, a good credit counseling agency might be able to help you get back on track.

Your FICO isn’t the only score you need to check
This came from lenders who thought the FICO score is offered by only one of the three credit bureaus: Equifax.

In reality, all three of the bureaus offer FICO credit scores using the formula developed by Fair, Isaac, but they each give the scores a different name. At Equifax, the FICO is known as the Beacon credit score. At TransUnion, it’s called Empirica. At Experian, it goes by the unwieldy title of “Experian/Fair, Isaac Risk Model.”

Complicating matters further is that you’ll probably have three different scores from the three different bureaus, largely because the bureaus don’t all share the same data. One bureau may list more accounts for you than another, for example, and the differences (in types of accounts, payment histories, credit limits and balances) will be reflected in the score that bureau computes for you.

Because of those differences, it does make sense to pull and examine your credit reports from all three bureaus before you apply for a big loan like a mortgage. Many mortgage lenders take the middle score from the three bureaus when making their decisions, so fixing errors in all three reports before you shop for a loan is smart.

When it comes to comparing your scores, however, you may be stuck. Equifax is so far the only bureau that makes it easy for consumers to get the same FICO score that lenders see. The scores typically provided to consumers by Experian and TransUnion aren't FICO scores, and they're different from the scores these bureaus provide to lenders.

But the ways you improve your credit score are the same in any case: Correct errors. Pay your bills on time. Pay down your debt. And apply for credit sparingly.