We all know by now that this is a great time to buy, and it should remain that way for a few months anyway, but you need to be sure you are ready to buy! Go to www.annualcreditreport.com and you can get your credit score, and there are some things you can do to be proactive about it.
5 Factors That Decide Your Credit Score
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit www.myfico.com.
Monday, March 30, 2009
Thursday, March 26, 2009
Specialty Mortgages: Risks and Rewards
In high-priced housing markets, it can be difficult to afford a home. That’s why a growing number of home buyers are forgoing traditional fixed-rate mortgages and standard adjustable-rate mortgages and instead opting for a specialty mortgage that lets them “stretch” their income so they can qualify for a larger loan.
But before you choose one of these mortgages, make sure you understand the risks and how they work.
Specialty mortgages often begin with a low introductory interest rate or payment plan — a “teaser”— but the monthly mortgage payments are likely to increase a lot in the future. Some are “low documentation” mortgages that come with easier standards for qualifying, but also higher interest rates or higher fees. Some lenders will loan you 100 percent or more of the home’s value, but these mortgages can present a big financial risk if the value of the house drops.
Specialty Mortgages Can:
· Pose a greater risk that you won’t be able to afford the mortgage payment in the future, compared to fixed rate mortgages and traditional adjustable rate mortgages.
· Have monthly payments that increase by as much as 50 percent or more when the introductory period ends.
· Cause your loan balance (the amount you still owe) to get larger each month instead of smaller.
Common Types of Specialty Mortgages:
· Interest-Only Mortgages: Your monthly mortgage payment only covers the interest you owe on the loan for the first 5 to 10 years of the loan, and you pay nothing to reduce the total amount you borrowed (this is called the “principal”). After the interest-only period, you start paying higher monthly payments that cover both the interest and principal that must be repaid over the remaining term of the loan.
· Negative Amortization Mortgages: Your monthly payment is less than the amount of interest you owe on the loan. The unpaid interest gets added to the loan’s principal amount, causing the total amount you owe to increase each month instead of getting smaller.
· Option Payment ARM Mortgages: You have the option to make different types of monthly payments with this mortgage. For example, you may make a minimum payment that is less than the amount needed to cover the interest and increases the total amount of your loan; an interest-only payment, or payments calculated to pay off the loan over either 30 years or 15 years.
· 40-Year Mortgages: You pay off your loan over 40 years, instead of the usual 30 years. While this reduces your monthly payment and helps you qualify to buy a home, you pay off the balance of your loan much more slowly and end up paying much more interest.
Questions to Consider Before Choosing a Specialty Mortgage:
· How much can my monthly payments increase and how soon can these increases happen?
· Do I expect my income to increase or do I expect to move before my payments go up?
· Will I be able to afford the mortgage when the payments increase?
· Am I paying down my loan balance each month, or is it staying the same or even increasing?
· Will I have to pay a penalty if I refinance my mortgage or sell my house?
· What is my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?
Be sure you work with a REALTOR® and lender who can discuss different options and address your questions and concerns!
Learn about the NATIONAL ASSOCIATION OF REALTORS® Housing Opportunity Program at www.REALTOR.org/housingopportunity. For more information on predatory mortgage lending practices, visit the Center for Responsible Lending at www.responsiblelending.org.
In high-priced housing markets, it can be difficult to afford a home. That’s why a growing number of home buyers are forgoing traditional fixed-rate mortgages and standard adjustable-rate mortgages and instead opting for a specialty mortgage that lets them “stretch” their income so they can qualify for a larger loan.
But before you choose one of these mortgages, make sure you understand the risks and how they work.
Specialty mortgages often begin with a low introductory interest rate or payment plan — a “teaser”— but the monthly mortgage payments are likely to increase a lot in the future. Some are “low documentation” mortgages that come with easier standards for qualifying, but also higher interest rates or higher fees. Some lenders will loan you 100 percent or more of the home’s value, but these mortgages can present a big financial risk if the value of the house drops.
Specialty Mortgages Can:
· Pose a greater risk that you won’t be able to afford the mortgage payment in the future, compared to fixed rate mortgages and traditional adjustable rate mortgages.
· Have monthly payments that increase by as much as 50 percent or more when the introductory period ends.
· Cause your loan balance (the amount you still owe) to get larger each month instead of smaller.
Common Types of Specialty Mortgages:
· Interest-Only Mortgages: Your monthly mortgage payment only covers the interest you owe on the loan for the first 5 to 10 years of the loan, and you pay nothing to reduce the total amount you borrowed (this is called the “principal”). After the interest-only period, you start paying higher monthly payments that cover both the interest and principal that must be repaid over the remaining term of the loan.
· Negative Amortization Mortgages: Your monthly payment is less than the amount of interest you owe on the loan. The unpaid interest gets added to the loan’s principal amount, causing the total amount you owe to increase each month instead of getting smaller.
· Option Payment ARM Mortgages: You have the option to make different types of monthly payments with this mortgage. For example, you may make a minimum payment that is less than the amount needed to cover the interest and increases the total amount of your loan; an interest-only payment, or payments calculated to pay off the loan over either 30 years or 15 years.
· 40-Year Mortgages: You pay off your loan over 40 years, instead of the usual 30 years. While this reduces your monthly payment and helps you qualify to buy a home, you pay off the balance of your loan much more slowly and end up paying much more interest.
Questions to Consider Before Choosing a Specialty Mortgage:
· How much can my monthly payments increase and how soon can these increases happen?
· Do I expect my income to increase or do I expect to move before my payments go up?
· Will I be able to afford the mortgage when the payments increase?
· Am I paying down my loan balance each month, or is it staying the same or even increasing?
· Will I have to pay a penalty if I refinance my mortgage or sell my house?
· What is my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?
Be sure you work with a REALTOR® and lender who can discuss different options and address your questions and concerns!
Learn about the NATIONAL ASSOCIATION OF REALTORS® Housing Opportunity Program at www.REALTOR.org/housingopportunity. For more information on predatory mortgage lending practices, visit the Center for Responsible Lending at www.responsiblelending.org.
Monday, March 23, 2009
More Tips for Buyers: What You'll Need for a Mortgage
I'm on a roll to tell you all you need about the home buying process, and how to get the most out of your real estate adventure. Yesterday we talked about common mistakes buyers make, today it's all about the mortgage.
I'm sure you've heard, the mortgage company wants everything up to rights to your first born. Well especially in these days, they need to make sure they are making safe loan decisions. The best advice I can give is to go ahead and get these documents ahead of time, make copies and date when you gave each item to your lender. If you email them, get a return receipt.
Also, before you start this whole process, check your credit. Go to http://www.annualcreditreport.com/ and get your free credit report, no matter how sure you are about what is or isn't on there. Case in point: My husband and I refinanced last year, and I had not checked my credit because I've always been stellar about paying bills. You can imagine how embarrassed I was when the lender I've known for years told me that I had had a 30-day late on a Visa several months back. I looked into it and he was right, my purse had been stolen and after cancelling so many cards, there was a mixup with the bank, I had paid online on the wrong card for 2 months. The bank had straightened out my account, but failed to change the credit rating, which apparently was up to me to follow up on. This one glitch had thrown my score under 700, which in these times will kill you on an interest rate. Check your credit, contact any lenders about any discrepancies, and close any of those department store credit cards you had signed up for to get the 10% off!
Checklist for your Lender:
□ W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every
person signing the loan.
□ Copies of at least one pay stub for each person signing the loan.
□ Account numbers of all your credit cards and the amounts for any outstanding balances.
□ Copies of two to four months of bank or credit union statements for both checking and savings
accounts.
□ Lender, loan number, and amount owed on other installment loans, such as student loans and
car loans.
□ Addresses where you’ve lived for the last five to seven years, with names of landlords if
appropriate.
□ Copies of brokerage account statements for two to four months, as well as a list of any other major assets of
value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
□ Copies of your most recent 401(k) or other retirement account statement.
□ Documentation to verify additional income, such as child support or a pension.
□ Copies of personal tax forms for the last two to three years.
I'm sure you've heard, the mortgage company wants everything up to rights to your first born. Well especially in these days, they need to make sure they are making safe loan decisions. The best advice I can give is to go ahead and get these documents ahead of time, make copies and date when you gave each item to your lender. If you email them, get a return receipt.
Also, before you start this whole process, check your credit. Go to http://www.annualcreditreport.com/ and get your free credit report, no matter how sure you are about what is or isn't on there. Case in point: My husband and I refinanced last year, and I had not checked my credit because I've always been stellar about paying bills. You can imagine how embarrassed I was when the lender I've known for years told me that I had had a 30-day late on a Visa several months back. I looked into it and he was right, my purse had been stolen and after cancelling so many cards, there was a mixup with the bank, I had paid online on the wrong card for 2 months. The bank had straightened out my account, but failed to change the credit rating, which apparently was up to me to follow up on. This one glitch had thrown my score under 700, which in these times will kill you on an interest rate. Check your credit, contact any lenders about any discrepancies, and close any of those department store credit cards you had signed up for to get the 10% off!
Checklist for your Lender:
□ W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every
person signing the loan.
□ Copies of at least one pay stub for each person signing the loan.
□ Account numbers of all your credit cards and the amounts for any outstanding balances.
□ Copies of two to four months of bank or credit union statements for both checking and savings
accounts.
□ Lender, loan number, and amount owed on other installment loans, such as student loans and
car loans.
□ Addresses where you’ve lived for the last five to seven years, with names of landlords if
appropriate.
□ Copies of brokerage account statements for two to four months, as well as a list of any other major assets of
value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
□ Copies of your most recent 401(k) or other retirement account statement.
□ Documentation to verify additional income, such as child support or a pension.
□ Copies of personal tax forms for the last two to three years.
Sunday, March 22, 2009
Getting through the ABCs of Buying a Home
I've been selling homes since 1997, and when working with both buyers and sellers I try to make sure that I cover all of the details involved before the question even comes to their minds. Of course it doesn't always work that way, sometimes I take for granted that they may know more than they do. For the next couple of weeks, I'm going to post different tidbits of information, first for buyers because, especially if you haven't owned a home in the past three years, this is the time to buy, with rates as low as they've been and prices even lower. Then I'll cover all the tidbits for sellers.
Now of course, you don't have to wait for me to post these on the blog....feel free to email me with any questions and I can help you right away.
If you know of anyone thinking of buying, please share this information with them, or suggest they subscribe to my blog. Even better, suggest they contact me to help them through the process, I will take great care of them!
Okay, we'll start with the first tidbit.....
Common First Time Home Buyer Mistakes
Now of course, you don't have to wait for me to post these on the blog....feel free to email me with any questions and I can help you right away.
If you know of anyone thinking of buying, please share this information with them, or suggest they subscribe to my blog. Even better, suggest they contact me to help them through the process, I will take great care of them!
Okay, we'll start with the first tidbit.....
Common First Time Home Buyer Mistakes
1. They don’t ask enough questions of their lender and end up missing out on the best deal.
2. They don’t act quickly enough to make a decision and someone else buys the house.
3. They don’t find the right agent who’s willing to help them through the homebuying process.
4. They don’t do enough to make their offer look appealing to a seller.
5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.
Source: Real Estate Checklists and Systems, www.realestatechecklists.com.
Wednesday, March 18, 2009
Important lesson in backing up your hard drive
This morning I turned on my trusty Lenovo laptop to find an unfamiliar site, the Rescue and Recovery screen. What it was apparently telling me was that I my system had failed and I needed to go through all of these steps to hopefully save my documents. Not only am I not the most technical person on the planet, but my husband is convinced that the electrical chemistry in my body works havoc with anything electronic. I'll be leaving a voice mail message for someone and my voice cuts off the message, and I don't have a shrill voice! Anyway, I called our IT guru and left him a message, but didn't hear from him for awhile because our MC's computer had crashed as well, and since she's the one who writes the checks she gets first dibs. Not wanting to cause further damage I decided to do nothing, I just left the laptop on and worked from my desktop until I got in touch with IT, which was about 3 hours later. (In the meantime, my home printer runs out of ink and my Treo crashes again, I'm telling you it's me!) When I spoke to Paul, he instructed me to bring it to the office but to turn it off, because the longer it stays on the more likely my hard drive will be corrupted. So for the next few hours I was so afraid that my unbacked-up computer with all of my listing information, budgets, etc., was gone, vanished, and that I was going to have to start my life as a Realtor over again. I have been crying on Facebook, Twitter, whoever would listen, all morning, because of my stupidity of not backing up my data.
Fortunately all was well, the computer came on fine for Paul and there is no damage to the hard drive. I of course went straight out and bought an external hard drive, where I'm committed to backing up my information daily and hiding it in a fireproof filing cabinet so it won't ever be lost, ruined or stolen. And that's why I'm leaving this post, so everyone will learn from me and do the same thing! They're on sale at Office Depot!
Fortunately all was well, the computer came on fine for Paul and there is no damage to the hard drive. I of course went straight out and bought an external hard drive, where I'm committed to backing up my information daily and hiding it in a fireproof filing cabinet so it won't ever be lost, ruined or stolen. And that's why I'm leaving this post, so everyone will learn from me and do the same thing! They're on sale at Office Depot!
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