TheCreditGuyTV Podcast

Interview with “The Oracle of the Interest Rate” Barry Habib of MBS Highway

In this interview we talk about how Barry got started in the mortgage industry and the mortgage company he founded. We also discuss his acting career, the Rock of Ages Musical and his current passion, The MBS Highway. Barry Habib shares with us what made him one of the leading lenders in the country before he turned thirty. It is a great interview, THANK YOU Barry Habib, for more please check out this months Mortgage Professional Magazine.

Barry Habib (born January 15, 1960) is an entrepreneur, mortgage industry expert, and CEO of MBS Highway. Barry was the Chairman of the Board at Mortgage Success Source, a provider of marketing products for the lending professional. He was the founder of Mortgage Market Guide, which helped disseminate and forecast activity in the mortgage interest rate and bond markets. In 2007 Habib sold the company, remaining on as CEO until October 2010. He appears on Fox and CNBC Networks, including his Monthly Mortgage Report show, which ran for thirteen years on Squawk Box.

People always ask "How can I get a perfect credit score?" The truth is anything above 760 will get you the very best rates in lending. If you make it above 800 the only benefit that you could get is a slightly better insurance rate. What is the formula for a perfect credit score? I've seen a few perfect credit scores seen a few that we're almost there. I think the ones that are close to perfect tell a very interesting story. 7 steps to the perfect 850 credit score;

If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.

Dave: Hi everyone Dave Sullivan here with special guest Eric and Yanci, one of my very early fans on YouTube. I’m so glad that they’re here with me today. Thank you both for coming on the show.

Eric & Yanci: Thank you for inviting us.

Dave: They’ve been working very hard on their credit. We have been emailing back and forth. Now they are at the point now when they just about ready to start shopping for a new home. You get your credit scores from MyFICO.com correct?

Eric & Yanci: Yes

Dave: One of the things I like to tell people about MyFICO.com is that they need to be careful because you’re getting more than one credit score, originally you used to get only FICO9 and now MyFico.com is providing FICO5 as well as others. In the mortgage industry we use FICO5 so your scores may vary slightly.

I think Yanci is in really good shape and Eric is right there 620 is considered the minimum, but if you can get to 640 you both will be in very good shape, interest rates are so low right now it is a great time to buy a home. What is your goal? What is your time frame?

Eric & Yanci: Well our apartment lease is up June 15, we really wanted to find our own home. We opened an account with a credit union. My main reason was to start a relationship with a lender and get ready for our lease expiration. Eric and I are interested in applying for a Mortgage and seeing what happens from there.

Dave: You said that you opened an account at the credit union, what type of account?

Eric & Yanci: It was just a checking account.

Dave: Good you’re establishing a relationship, a good idea, credit unions are always a good choice in a financial partner. I would definitely tell you to shop at more than one lender. People normally will call the first company they see on TV.

Companies who advertise on TV are paying thousands and thousands of dollars for that exposure. Those companies have to make that money up somehow and usually it is on your loan, maybe not your specific loan but over the course of all the loans that they originate. Although it might feel like they’re making it up on your specific loan.

Eric & Yanci: How do we find a good lender?

Dave: I would recommend looking for your local Mortgage Association in your state. In Michigan it would be the Michigan Mortgage Lenders Association, find that group in your state then go to the president of that group because they are someone who cares about his industry to take a volunteer position like that. What state were you guys located?

Eric & Yanci: North Carolina

Dave: I’m sure there is a North Carolina Association of Mortgage Brokers. Eric specifically your credit situation, there is a variation in between your three scores. One is about forty points higher than the lowest one.

Eric & Yanci: Yes.

Dave: As you know mortgage lenders look at the middle score, that is the only score the lender care about. What I do, when there is a forty point difference, I try to figure out why there’s such a wide variation. If you take your three credit reports lay them down next to each other. Go through and find where the differences are in between your repositories files.

If you find the differences then you can figure out what your next move is. Sometimes collection companies may not reporting to all three repositories or even a balance that is not being reported correctly.

Eric & Yanci: I think I know why. I had a collection on my credit report and I tried to get it removed. I paid it and they said that they would remove it, but they never did. I called and called to try and get them to remove it but they never would.

Dave: You have to be careful when trying to get a pay for delete. If you don’t get something in writing from them before you pay it off. It can be very hard to get them to work with you after they get the payment.

Eric & Yanci: I actually got into contact with them, I was going to offer to pay it in order to get it removed from my credit report. I went ahead and made the payment. Later, when I accessed my credit report it was still there. They keep giving me the run around, telling me that they were going to take care of it, but the collection company never did.

Dave: You made the right move, at least you got some documentation from them that said it was paid. As long as it’s showing paying on your credit report that is all you can do now. As it gets older and older, further back in time, the collection account will have a reduced impact on your score.

I’m sure you’ve seen this already as you work on your credit, your scores have come up obviously, when we first we emailed your scores were very low.

Eric & Yanci: Oh yeah! It was Yanci, She did most of the work.

Dave: It is a team effort. I don’t know if you watched the interview I did with Wes a couple weeks ago? He works in state government and he had very bad credit. He fixed his credit on his own. The most important thing he said was “don’t give up”. Obviously you guys have not given up. It is really important that people realize that it doesn’t happen overnight. If you can stick with it, you can get there. One thing that you can do is bring down your revolving balances to 5 percent of the high credit.

I probably would start the mortgage process right now. Yanci you look stressed?

Eric & Yanci: Very nervous Dave.

Dave: It will be fine, like I said if you go to the right person. You should be fine. In the mortgage industry which I’ve been a part of for twenty years now, there were a lot very bad apples. Now because of all the regulations that are in place, almost all of them are gone. Go to your local mortgage association president or officer. They will take good care of you.

Eric & Yanci: Last year we tried, I work in a Doctor’s office and a lady came in there and asked me if I knew of anyone looking for a mortgage. I told her I was and I gave her all of our bank statements and w-2’s. She tried to work with us, but our credit was just not ready. So we have been trying to establish a good credit history ever since. That is when I found you and your website.

Dave: I think that you are ready to talk to a mortgage lender again. One thing I would tell you is to go to more than one. I think that is the best advice I could give. Get all your documentation together because like before the lenders are required to document to death. They’re going to ask you for all kinds of stuff but don’t get freaked out it is just part of the process now.

Eric & Yanci: okay, I get a little tensed up, they question you about everything.

Dave: I know it can feel that way. Don’t feel like it is only you, it is everybody. It is just all of the regulations that the government has brought on the industry. As long as you guys have all your ducks the row and it looks like you do you will be fine. Don’t make any career changes how long have you been at your jobs?

Eric & Yanci: Eric has been there two years, Yanci has been at her job for almost three years.

Dave: You guys are fine then. Get your bank statements and tax statements together, then you’ll be prepared. Let them pull your credit before you give them anything. You guys have done a great job and I want to congratulate you both. I definitely want to hear back from you when you move in to your new home.

Eric & Yanci: I have a question though, with our tax returns, Do they have to go behind our back to the IRS and pull the 4506T?

Dave: They’re not looking behind your back, it is just that HUD mandate that they go and get copy of the tax forms that you filed with the IRS directly. It’s not that they’re doing this to go around behind you. It is just mandated by the government.

Eric & Yanci: Well the reason I ask is because we’ve been doing it separate for the past three years. I had some debt and I wanted to get it paid before we started to file jointly. Last year they questioned me about it.

Dave: People are allowed to do that, you’re not required to file joint returns. I think there is some advantages from a tax perspective that you might want to take advantage of by filing joint. If Eric is not ready to make that commitment I understand. J It’s not a big deal. You guys will be fine don’t stress out.

Eric & Yanci: Alright.

Dave: I’m very excited for both you please keep in touch.

Eric & Yanci: Thank you very much.

What is the impact on a person’s credit history, if they buy or lease a car? With both situations a borrower will have a new installment loan and a new inquiry. So expect your credit score to dip down just a little bit when you first apply for auto financing. As time passes, it will help you establish a good payment history on that new account and the inquiry will fall off.

An individual’s credit score will actually improve quite a bit more than it would have without the auto account, provided you make the payments on time. I would say about eight to nine months, from that point forward your score is going to be higher than it would have been without the loan. Long term, an auto loan is probably the best choice, from a credit perspective because you will add an installment type of account. Provided that you make all the payments on time. When you enter into a lease agreement those are usually a shorter term agreement.

Borrowers are going to have an inquiry ether way and are going to have the new installment type of agreement. The same reasons a car buyer’s credit score will drop, a auto lease will also create a temporary drop. After five to seven months borrowers can expect their score to start to improve.

The problem with a car lease is that it is a shorter term obligation. Consumers will have a shorter period of time when their credit score will benefit from the lease account. Normally, you will need a new lease sooner than a car loan. Consumers could have two or three leases in the time that they would have had one car alone. That situation is not as good for a credit score as just buying a car and then keeping that car until the loan is paid off. Leasing is not hugely negative from a credit score perspective, but not as good as just financing the purchase of a car.

If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.

Originally when the IRS set up this program, the maximum was lien amount was $30,000 (there is talk about upping it to $50,000). What my viewer told me was she negotiated her debt down from above $70,000 to the level that was acceptable for this program. Then she went through the process to remove the tax lien and was very successful. She used two forms the IRS Form-656 an the Offer-in-Compromise) She now has a credit report with out any mention of the IRS tax lien.

More than ever, it is important to you peak your score before you get pre-approved for a home loan. A 700 credit score is no longer good enough to get the best mortgage rate. I am going to give you three ways to really peak your score right before your next a loan application.

1. Pay down your credit card balances to 5-9 percent of the high credit and you need to do that before the statement date. If you want more information about that Click here.

I had an interview with the chairman of the Mortgage Bankers Association and student debt was his biggest concern the way student loans are killing the first time home buyer. Young people fresh out of college are not able to qualify because they are graduating on average with $30,000 in debt.

That includes the people who graduate with zero debt meaning that half the students are above that amount and half are below, When you consider the costs of buying a new home. income that could go to housing costs has to go to student loans instead.

Last year at this conference as I started to cover this strategies on how to handle student loans, someone from the audience said “what about debt forgiveness?”

Is there anyone here that was actually able to get someone’s loan debt forgiven? How many?

Audience: I had four!

Dave: Could you come here for a second please?

Dave: My strategic is when you come home from college you will have one loan for every term, that is killing your credit score because it looks like you have 10-15 accounts all at the high balance. The first step to repairing your credit after college is to get a consolidation loan.

Unless you can get the debt forgiven, can you tell me the story of how you were able to get college loan debt forgiven?

Audience: Unfortunately, it was because the borrower became permanently disabled. When someone becomes permanently disabled you can get student loans forgiven. That is the only way I was able to get the debt forgiven.

Dave: ok great thank you, well that is an option but not a great option.

The date when the creditor sends the information to the repository that is the reporting date. When the consumer looks at their credit statement online they will have all the current charges listed in date order for the month. Then one day the consumer logins and the current charges are all gone. There will be no current charges. That is the reporting date. It is the date consumer’s credit information goes from the credit card company to the repositories (TransUnion, Equifax, Experian), consumers should strive to have their credit card balances at a five to nine percent balance on the reporting date. If they do that they will get the most possible points from that credit card account. If you want to then pay the reporting date in full that is the time to do it. That is why I say “never pay your credit card balances on the due date for the best credit score.” Consumers should always pay before the reporting date.

If your credit card balance is due on the thirteenth of the month and you charge purchases just prior to that your reported balance will be higher than normal and your credit score will suffer.

Let’s say you pay off your credit cards every month and you charge purchases right up to your high balance every month. If consumers wait to make the payment until the due date their score will be lower because of the higher reported balance. If consumers make their payment before their reporting/statement date they will have higher scores for the entire month because that information is only reported once a month. This is how you take advantage of that, consumers should pay their balances before the reporting/statement date.

How do you know what the reporting date is? Have consumers log into their account every day for a month and go to current activity. They will watch the current activity, as the month goes by, the transaction list will get longer and longer. Then the one day it will be zero. The day before that date is the reporting day or statement date.

The three major repositories in the olden days collected the data from the credit card companies using large magnetic tapes. the credit card companies would put all the consumers’ information for the month on the tapes. The tapes would be sent pony express to the repositories.

The repository took that information and added it into the main repository database. The date when they took the consumers account history and added it to the main repository database that is the reporting date. That is the date when the information goes from Visa to Equifax.

So if consumers can get their balances down to five to nine percent the day before the reporting date they will get the most point from the FICO® scoring model.

If consumers pay on the due date let’s say July 13th and the reporting date is July 4th. If consumers get their balance down on the third and the balance is reported on the fourth. They could then pay the rest off on the due date, if that is important to them. Thank you everyone for coming out and I would like to thank MSHDA for asking me to present today. Pay credit cards early for the best credit score.

The IRS will now REMOVE a tax lien from your credit report “if requested by the tax payer” when payment in full is made.... Continue Reading »