Tips From a Mortgage Expert

Chip Poli, the President, CEO/Founder of Poli Mortgage Group, Inc., is consistently ranked in the top 1% of mortgage originators in the country and his expertise is broad-based. Keep reading to find out Chip’s answers to two common questions about mortgages:

How Do I Decide between a 15 yr or 30 yr mortgage?

Even though a 15 year fixed rate has a lower interest rate, because the loan is amortized, over a shorter period of time, the monthly payment is increased to accommodate the shorter term.

For example, a 30 year fixed rate of 3.75% on a $300,000 mortgage is about $1,389 per month. At the very same time, a 15 year fixed rate might be available for 3.00%. The new monthly payment at the new lower rate calculates to $2,071, which is a 50% increase when compared to a 30 year loan...even though the rate is .75% lower!

That’s a hard monthly increase to swallow and keeps many potential refinance clients on the fence. So the answer is, it’s up to you. If you can swallow the larger payment in the short term, you’re due to pay less interest and have your loan paid off in half of the time. However, if you cannot swing the higher payment, it may be safer to stick with the 30 year term.

What changes will improve a borrower’s FICO score, and what can hurt it?

Every credit situation presents a unique combination of factors that must be taken in to account when determining a correct procedure for FICO score improvement. Some of the basics to credit score improvement are as follows:

• Lowering the balance on a revolving line of credit (Credit Card or Overdraft Line) that is at or near the available credit limit;

• Removing a delinquency from a tradeline;

• Removing a collection/charge-off;

• Updating a Tax Lien or Judgment to reflect “Satisfied” or removal of the record;

• Updating a revolving line of credit to reflect an increased credit limit, thus lowering the ratio of outstanding balance in proportion to the amount of available credit.

• Things that will not improve a borrower’s FICO score, and may actually hurt the score:

• Paying off a collection or charge-off without deletion of the trade line (especially older trade lines);

• Paying off a revolving line of credit that was not previously at or near the credit limit;

• Paying off an installment loan;

Bringing current a “Past Due” balance. Usually, a past due balance is accompanied with a new 30+ day delinquency. It is this delinquency, and not the past due, that is hurting the score most, and will continue to do so even after the past due is brought current. Additionally, work with a mortgage professional who will refer you to a qualified individual to assess and help with your credit.