MORTGAGE NEWS & VIEWS

Non-Resident Alien Home Loan

Why Refinance?

Texas Vet Home Loan Program

Know Your Credit Scores

Non-Resident Alien Home Loans

A Non-Resident Alien ( an individual with no Green Card or work visa ) may now obtain mortgage financing to purchase a home.  Gulf Coast Mortgage now offers a home loan program to assist buyers who fall within this category.  This mortgage program allows the following:

• The home buyer is not required to have a work visa or green card

• The non-resident alien can be employed or self-employed

• Stated income may be used without having to provide tax info or pay stubs

• No credit scores or credit history are required

• Down payment and closing cost funds may be entirely from a gift

• Competitive Fixed Rate Programs are available

• The home buyer must make a minimum down payment of 20%

John Shellington and the Milestone Team have the solution to many of your non-resident alien mortgage needs.

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Texas Vet Home Loan Program
How the Program Works!  Who Qualifies?  Low Rates

How the Texas Vet Program Works

The Texas Veterans Land Board is authorized to provide below market interest rates to those who qualify as a Texas Veteran.  You must first be able to demonstrate that you were in the service the minimum days required to satisfy guidelines.  This is normally done by providing a copy of your DD 214 and in some cases proof of residency for the past twelve months.  Your credit approval is determined by the everyday guidelines of a Conventional, FHA, or VA loan.  For help in determining which loan type your Texas Vet loan would fall under, contact John Shellington for assistance or complete your Pre-Approval form located in this web site ( be sure to include in the questions & comment box that you are interested in a Texas Vet loan).  Once the best loan type is known, I can provide you with an estimate of down payment( if any), closing costs, and pre-paid items.  I'll be pleased to provide you with your Pre-Approval letter to present with your offer to purchase a home.  With your home under contract, I can obtain a rate lock under the Texas Vet Home Loan Program.  The interest rate you receive is governed by the base rate which changes weekly and any adjustments that may be made.  Please review the section Low Rates for information about rate adjustments.  John Shellington and the Milestone Team will be pleased to assist you in determining your eligibility for this Low Interest Rate Program.  I will help you in the completion of all required Texas Vet forms and submit them to the Texas Veterans Land Board to obtain your certification.  There is no charge either from Milestone or the Texas Veterans Land Board for this service

Who Qualifies?

• You must have served no fewer than 90 consecutive days on active duty unless discharged sooner for a service connected disability.  Active duty is considered even if it was for training purposes in the Army, Air Force, Navy, Marines, Coast Guard or the United State Public Health Service or a reserve component of one of the listed branches.  Texas National Guardsmen are eligible after completing all active duty training requirements as a condition of enlistment or appointment.  The unmarried surviving spouse of a Texas Veteran who is missing in action, or who dies in the line of duty, or died from a service connected cause may be eligible.

• You listed Texas as your home of record at the time of entry into the military or you must have been a legal resident of Texas for at least twelve consecutive months immediately prior to filing your application for a Texas Veterans Certificate.  You must be a bona fide Texas  resident at the time the application is made for your Certificate (living in Texas).

• You have not been subject to a Dishonorable Discharge

• If you are unable to find a copy of your discharge document, form DD 214, you can obtain one from the National Personnel Records Center.  

Low Rates

Interest rates on the Texas Veteran Home Loans are set weekly.  If you have obtained your Texas Veterans Certificate and signed an earnest money contract to purchase a home,  Milestone can submit your transaction for the current available rate.  The current available rate may be lowered further for the following reasons:

(Note that the availability and amount of these discounts will change 3/4/05)

• Discount for loans with a term of 15 or fewer years                                         -.25%

• Qualified Green Building Program discount                                                      -.20%**
  The home must meet a Green Building Checklist with a score of 100

• Troops to Teachers Program                                                                              -.20%
  Veteran or veteran's spouse is a certified teacher in a Texas 
  certified school or can document they are enrolled to obtain their
  teacher's certificate

• Qualified Veterans with Disabilities Program discount                                     -.35%**
  This applies to veterans with a disability rated at ten percent or greater
  by the U.S. Dept. of Veterans Affairs

• Qualified Service Era discount                                                                             -.49%
  Applies to veterans who entered active duty prior to 1/1/1977 and have
  been discharged from active duty fewer than 30 years

**"The combined rate reduction for the Green Building, Teachers, and Veterans with Disabilities Program is .60%"

Example

Current Base Rate for week of 08/04/04                                                                            5.73%
You or your spouse is eligible under the Teacher Program                                              - .20%
Your interest rate total                                                                                                       5.53%(30 year fixed rate)*
* As a comparison, the current interest rates for standard home loans without the Texas Vet Program are Conventional 6.00%, FHA 6.00%, VA 6.00%(as of 10/6//03)

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Why Refinance?

  The most common answer usually falls under one of two reasons:

Cash Out Equity Refinance Mortgage:
Texas law allows a homeowner to borrow up to 80% of the appraised value of their home.  Once you deduct the outstanding balance of existing liens and closing costs, the remainder is your net cash proceeds.

Please review the Refinance Scenarios for other valuable make sense reasons to consider refinancing.  Don't forget the Mortgage Calculator for computing P&I and the Pre-Approval section for a quick analysis of your own mortgage refinance scenario.

 Refinance Costs

Obtaining a refinance mortgage isn’t without costs.  If you can find your old closing statement from the purchase of your home, pull it out.  You’ll see a buyer and seller column of costs.  So what are your costs?  The short answer is both columns from the old closing statement.  There are some exceptions.  If the previous survey is less than 10 years old, the title company and lender may let you use it again provided you certify no improvements have been made that would alter the survey.  If your current mortgage is no more than 7 years old, you will receive a discount on the new title policy.  What about the pre-paid escrow expense you had when you purchased?  Your refinance lender may have to set up an escrow account as well.  This means that you’ll be required to pay property taxes and homeowner insurance when you close the new loan.  How much depends upon your lender and what month of the year you close the new loan.  Don’t forget that you will receive a refund of your escrow balances from your previous lender but this may take a few weeks to reach you after you close your refinance mortgage.  As you did when you purchased your home, it’s important to compare interests rates and closing costs of each lender before selecting one for a refinance mortgage.  Can you avoid paying closing costs and pre-paid expenses out of pocket?  Yes!

 No Cost Refinance

Conventional Loan – All or a portion of closing costs and pre-paid items may be added to the new loan provided the new loan (or loans if you have a 1^st and a 2^nd lien) does not exceed 95% of the appraised value.

FHA Loan – All or a portion of closing costs and pre-paid items may be added to the new loan amount provided the new loan amount does not exceed 97.75% of appraised value.

VA Loan – All or a portion of closing costs and prepaid items may be added to the new loan amount provided the new loan does not exceed the appraised value.

Lender Paid Costs – Your mortgage company may assist you by absorbing some of your closing costs with a higher interest rate but one still lower than your present rate.

 Refinance Scenarios

You want to improve your interest rate and eliminate PMI from your monthly payment.
Homes in the past few years have appreciated to the point where your current loan balance may only be 80% of market value.  If that is the case, you should contact your lender to see what proof they require to drop the monthly PMI payment.  You can accomplish this without refinancing but if today’s rates are attractive you can improve your mortgage rate and/or term as well as eliminate the PMI payment as part of the appraisal process for your refinance loan.  Even if a current appraisal does not indicate you have a 20% or greater equity in the property, you can still eliminate the PMI payment when you refinance by including a second lien in an amount necessary to bring the 1^st lien refinance mortgage down to 80% of value.  If this were done, you would eliminate the PMI, have a lower interest rate on your 1^st lien and a 2^nd lien payment which when totaled will generally be less that a higher 1^st lien loan amount with monthly PMI.  The second lien interest is tax deductible where a PMI payment is not and you are building equity faster because the 2^nd lien is normally based on a 15 year amortization.

You want to improve your interest rate and eliminate FHA MIP from your monthly payment (You may also be entitled to a refund of some of the Upfront Mortgage Insurance that was added to the loan when you first purchased.)
For all FHA loans closed before January 1, 2001, the monthly MIP (Mortgage Insurance Premium) will run the life of the loan no matter what your ratio is between present value and current loan balance.  If closed on or after January 1, 2001, the monthly MIP will drop when you reach a 78% loan to value based upon the original value when you purchased the property.  FHA does not allow you to order a new appraisal (unlike conventional loans) to prove the new loan to value (even if home values have increased significantly).
Remember that the FHA monthly Mortgage Insurance Premium is equal to ½ %.  That’s like adding a ½% on top of the interest rate you currently pay and MIP is not tax deductible.
If you have at least a 5% equity in your home, you may want to refinance using a conventional loan and a 2^nd lien to eliminate PMI when you refinance.

You want to improve your interest rate and pay your escrows separately from your mortgage payment.
If the 1^st lien on a conventional loan is only 80% or less of the value, you can waive your escrow payments and pay them separately.  If your monthly escrows are significant, this might benefit you by keeping them in an investment earning income until your tax and insurance bills come due every 12 months.  Remember, when you refinance, you can use a 1^st lien and 2^nd lien combination to keep the 1^st lien at 80% of value and have the option to waive escrows.

You want to consolidate a first and second lien or home improvement loan into one lower interest rate.
You presently have a 1^st lien and a 2^nd lien or home improvement loan.  When considered together, you might substantially reduce your total payment by combining the two loans.

You’ve improved your credit scores since obtaining the original high rate sub prime mortgage and want to reduce your rate.
Credit scores improve over time if you have maintained your credit history since a previous bankruptcy or foreclosure.  They may have reached the point where you could refinance with a market rate of interest.  Even if you scores have not improved significantly, a new sub-prime interest rate might be much better than your current rate.

You want to switch from an adjustable rate to the security of a fixed interest rate.
With fixed rates at 45 year lows, you may want to consider the security of refinancing out of an adjustable rate loan and into a fixed rate.  True, adjustable rate loans are less than the fixed interest rates but what is the likelihood of them going down further as they  adjust over the life of the loan.  The probability say rates will go up from here

You wish to obtain cash out of the equity of your home.
Texas laws permit a homeowner to borrow up to 80% of the appraised value of their home.  You now have a tax deductible loan source to pay for college tuition, large purchase, home improvements, other investments, or payoff debts, collection accounts, or judgments.  The interest rate on your new loan may be less than your present rate which increases the benefits of the cash out refinance mortgage.

Buy out the equity of a joint owner of the property.
You’ve had the misfortune of a divorce and the decree states you owe a portion of the equity on your home to an ex-spouse.  Why not buy out their interest with a refinance mortgage?

As you can see from these scenarios, the two percent rule mentioned earlier does not always apply.  Your motivation to refinance may be a combination of reasons.  I'm sure you might think of scenarios not mentioned here.  For help in deciding what’s best for you and the math involved in refinancing complete the Pre-Approval section or contact John Shellington  for more information.

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The Most Commonly Used Word In The Mortgage Business

"FICO"

Know Your Scores ....... Your Credit Scores

A long, long time ago (1956) in a land far, far away (California), two mathematicians got together to provide decision making solutions to a wide range of industries one being Credit Reporting.  The two men were Bill Fair and Earl Isaac.  Thus we have the company name FAIR ISAAC Co. or "FICO".  The company proclaims it pioneered credit scoring although it's somewhat a mystery as to why it took over 35 years to convince the credit industry to use scoring.  My guess is lawsuits.  Lenders and credit reporting agencies were involved in a growing number of lawsuits alleging bias and discrimination in their credit granting process.  Credit scoring was thought to provide an unbiased framework for decision making related to credit "risk".  Recent Federal legislation allows anyone to request and obtain at no cost a credit report from all three credit bureaus once a year.  Please go to www.annualcreditreport.com for additional information and to request a credit report.  Although you can obtain your reports for free, the credit bureaus may still charge you for providing a credit score with each report.  

Your ability to obtain your free report will be phased in by region

December 1: Western States (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming)
March 1st: Midwestern States (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin)
June 1st: Southern States (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, Texas)
September 1st: Eastern States (Connecticut, Delaware, District of Columbia, Indiana, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia) Puerto Rico and all other U.S. Territories

Although income and assets play a major role in approving a mortgage loan, your credit history is critical in the outcome of this process and the interest rate at which credit is granted.  You need to know your "Credit Score" and the affect it will have on the terms of your credit.

How the FICO Score System Calculates Your Credit Score

The FICO Scoring Model is proprietary and not published but we do know that the model contains 33 variables that were found in combination to be predictive of an individual's future ability to repay a loan.  These variables are grouped into 5 categories:

• Payment History - accounts for approximately 35% of your score.

• Amounts Owed - accounts for approximately 30% of your score.

• Length of Credit History - accounts for approximately 15% of your score.

• New Credit - accounts for approximately 10% of your score.

• Types of Credit in Use - accounts for approximately 10% of your score.

What FICO Scoring Ignores

FICO Scoring ignores your race, color, religion, national origin, sex, and marital status.
In addition, it ignores:
Your age
Your salary, occupation, or employment history
Where you live
Certain types of credit inquiries (requests for your credit report):
    The score does not count consumer disclosure inquiries (requests that you've made for
    your credit report to check it).
    It does not count promotional inquiries (requests by lenders in order to make you a pre-
    approved credit offer) or administrative inquiries made by lenders to review your account
    with them.

How to Interpret Your Credit Report and Scores

Since credit scoring is here to stay, it's important for you to know the information contained in your credit report and how it affects you when applying for a mortgage.

When applying for a mortgage, there are three credit scores for each borrower on the loan application.  The lender obtains FICO Scores on each individual from three major credit bureaus, Equifax, Trans Union, and Experian.  Each bureau has your credit score and all label it with a different name, Beacon, Empirica, or Fair Isaac.  Although the score names are different, they each use the FICO Scoring model.  You will notice that the three scores are different between bureaus.  Creditors do not report to each bureau and items of public record such as bankruptcies and judgments are not picked up by each bureau.  As a practical matter, the lender normally uses the middle score in it's evaluation of your risk profile (probability you will repay the loan).  What is the minimum and maximum score?  As an example, Experian's scores range from 350 to 900.  Can an individual receive a zero or no score?  Yes, occasionally a credit report is issued with no score when there is insufficient data to review.

Accompanying every credit score are four "reason codes".  These codes identify some of the 33 variables that had the most influence in lowering your credit scores.  Examples of the 10 most common reason codes are:
1)   Serious delinquency
2)   Serious delinquency and public record or collection filed
3)   Derogatory public record or collection filed
4)   Time since delinquency is too recent or unknown
5)   Level of delinquency on accounts
6)   Number of accounts with delinquencies
7)   Amount owed on accounts
8)   Proportion of balances to credit limits on revolving accounts too high
9)   Length of time accounts have been established
10) Too many account with balances

How Long Does Your Credit History Remain on Your Report

The length of time information remains on your credit file is shown below:
Credit Accounts - 
      Accounts paid as agreed remain for up to 10 years*
      Accounts not paid as agreed remain for 7 years*
Collection Accounts remain for 7 years*
*   These time periods are measured from the field on your credit report titled "Date of Last 
      Activity" for each credit account. (The question remains as to what constitutes the the
      last activity date on the account.)
Courthouse Records (Public Records section of your report)
      Bankruptcy - Chapter 7 & 11 remain for 10 years from the date filed.
      Bankruptcy - Chapter 13 non-dismissed or non-discharged remains 10 years from date
      filed.
Unpaid Tax Liens remain indefinitely.
Paid Tax Liens remain for up to 7 years from date released.
Paid or Unpaid Judgments remain on file for 7 years from date filed.
(New York State Residents Only: Satisfied judgments remain 5 years from the date filed, paid collections remain 5 years from date of last activity.  California State Residents Only: All tax liens remain 7 years from date filed.)

How Do People Score Based On General Population

    Examples of Credit Score Risks

Scores below 601 yield 8 good loans for each bad loan
Scores from 700 to 729 yield 129 good loans for each bad one
Score above 800 yield 1292 good loans for each bad one

Credit Scores and Terms of Your Loan

Remember your credit scores are a measure of risk, the risk of your loan going into default.  As the level of risk increases, a lender requires greater compensation (higher rate) to assume the risk of default.  It can also affect the level of down payment (higher for higher risk) and term of the loan (shorter term for higher risk).  This all means money from your income and asset resources.  Why wait?  Investigate now and start raising your credit scores.  It makes sense to periodically obtain a copy of your credit report to review payment records and scan for errors with each reporting agency.  Take action!  Don't forget that improving your credit score is a time related process but, to borrow a phrase, it "Really Will Save You Money".

How Your Loan Is Underwritten

A discussion of credit scores would not be complete without mentioning a relatively new tool in the loan approval process.  FANNIE MAE (Federal National Mortgage Assoc.) and Freddie Mac (Federal Home Loan Mortgage Corp.) have developed software programs to automate and expedite the loan approval process.  These 2 programs are called Loan Prospector (LP) and Desk Top Underwriter (DU).  They analyze and approve a mortgage based upon data entered for income, assets, and liabilities including "credit scores".  This allows the homebuyer to obtain an approval even before finding their home.  Traditional Underwriting (using a human) simply can't compare when it comes to speed of analysis for your approval and loan terms.  The loan officers and staff at Milestone employ both automated programs to assure proper analysis.  We also have a capable and experienced staff available for traditional underwriting when circumstances dictate it's use.  You or your clients should demand this level of service and Milestone is equipped to provide it.

The Gulf Coast Mortgage Commitment

I'm committed to making your loan process as stress free as possible.  To that end, I look forward to answering your questions regarding credit scores or any mortgage related topic.   Use my knowledge and experience to provide the service you expect and deserve. 

Please visit other pages of this site for additional information on John Shellington and Gulf Coast Mortgage as well as general information covering basic facts and figures for FHA, VA, and Conventional loans.  In particular,  click the navigation bar for the Pre Qualification / Pre Approval page for a quick review of your income, asset, and liability information.  Complete the form and I can quickly pull a one bureau in-file credit report to review one of your credit scores relative to the other income and asset information you provided.  You'll also find an on line "comment box" to add any detail to your information or simply ask a question. 

For "On Line Convenience with Local and Personal Service", you've reached the best.  I strive for a problem free transaction but if title, appraisal, or credit issues arise, I'm not just a phone or internet connection.  I'm here to resolve any problems.  John Shellington and Gulf Coast Mortgage want your business.

Credit Resources

Equifax - 800-685-1111 or http://www.equifax.com/

Experian (formerly TRW) - 888-397-3742 or http://www.experian.com/

Transunion - 800-916-8800 or http://www.transunion.com/

http://www.myfico.com/