The Bergen County Homes Blog

Buying a home for most of us means getting a mortgage and, of course, the interest rate on that mortgage is determined in large part by your credit score.  Actually, whether or not you qualify for a mortgage is often determined by your credit score alone.  While it’s true that your income as well as your debt and assets are also important, your credit score is critical to the interest rate charged on your mortgage.

Credit scores are vital to your financial well being in so many ways that have nothing to do with purchasing a home.  For example, your credit score can impact what you are charged for auto insurance or whether or not a utility company requires a security deposit in order to get the lights turned on in your new home.

Here’s a good tip to improve your credit score – don’t pay off your credit cards; instead, get them all down to half or less of what you’re allowed to charge.  Ellen Jacobson is a Senior Mortgagage Banker with JP Morgan Chase and someone I’ve worked with for years.  She told me that most of the folks she sees think that they should pay off one credit card at a time in an effort to have fewer credit cards.  “Nothing could be further from the truth” she told me.  In fact, she said that closing a credit card can hurt your credit score. 

Of course no one is advocating that you maintain credit card debt but if you have several credit cards, try to make sure you keep them all no higher than 50% of what you are allowed and you should see an improvement in your credit score.  It’s also a smart idea to consult with your mortgage banker before you do anything.  Being careful is always a good idea.

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I’m not an economist – I’m just a real estate agent.  But, as opposed to what some of my friends will tell you, I am not crazy and I have a lot of common sense.  This is why what has happened makes no sense at all to me.

It all starts with the mortgage.  If you go to my website at www.BergenCountyHomes.com you will see an entire section devoted to how to buy a house the right way.  And what is the first thing I tell you to do?  Go to a licensed mortgage bank.  I refuse to work with any buyers who will not go to a credible financial institution.  Period.  End of story.  No way.  Can I be more direct?

It makes no sense at all for anyone to go to a credible banker who tells them they can afford $100 and then shop around on the internet and find a miracle – you can now afford $150!  Miracles, voodoo dolls, fortune tellers, glass balls with smoke inside, tarot cards etc. are not how you figure out what you can afford. 

I keep telling people, the first thing you do before you look at one house is to work with a licensed mortgage banker.  This is why what happened makes no sense to me.   Realistically I understand how it happened – of course I do.  But it still makes no sense at all to me that so many people found miracles and believed them.  What’s even worse were the people stirring that miracle pot of magic and proclaiming that they were Merlin the Magician or the Wizard of Oz.  Where was Dorothy when we needed her?

And how about those Hedge Fund folks and all the others who churned those packages of bogus loans?  Years ago you had to justify the credit worthiness of a loan to get an investor to buy it.  Well, I guess that went out the window into some dark hole.  But, again, it all comes down to that individual who only wanted to buy a home and wanted a miracle.  But, it wasn’t entirely his fault.

Have you ever tried to read a mortgage document?  If you’ve bought a home in Bergen County, you’ll remember your closing as a blur of papers you had to sign.  They are supposed to be in understandable English but no one, perhaps not even the Pope, can understand it all. 

So between greed from the mortgage broker (notice the expression mortgage broker – it doesn’t say licensed mortgage banker now does it?) who was motivated to sell a loan and get a commission, the real estate agent who was motivated to sell a home and get a commission, in many cases that agent’s manager and company who wanted even more transactions, the banking system who wanted that loan no matter whether or not the buyer could pay for the mortgage and the international investors who wanted US investments and took it “on faith” that what some salesperson was telling them (disguised as a financial advisor, trader, investment banker, hedge fund, international institution, etc) was the truth, we went down this road to a crash literally heard around the world.

So, for those of you who want to buy a home and are nice enough to work with me, understand why I have been telling people for over 20 years that you do not go to alphabet soup mortgage brokers, you go to such places as JP Morgan Chase, Huson City Savings & Loan, Classic Mortgage, New Jersey Lenders or ISB.  These are all strong, solid institutions and no they do not have the lowest rates published – I can almost guarantee you of that.  What they do have is something we used to call a “true rate” (as opposed to untrue?) which tells you what it really costs.

Remember, if these folks tell you can afford 100 or 150, that’s what you can afford.  Because not only do they figure in your mortgage amount, but good, ethical licensed mortgage bankers also figure in things like property taxes and home insurance.  As a result, the figure they give you is credible and usually not as terrific as ABC Mortgage’s phony pie in the sky miracle rate.  But, it is real and so you are protected. 

If you need some good bankers to refinance or buy a home, go to http://bergencountyhomes.com/financing.htm (and in case you’re wondering, I receive no sponsorship from any of them; they don’t participate in conflict of interest behavior and neither do I)

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