Credit Scores and Home Buying
July 1st, 2009 categories: Finances, Home buying
Five points to fixing your credit
A couple of months ago a friend was telling me about some financial difficulty with their business and remarked how fortunate they were to have their credit line on their home available for backup. I advised them to check with their bank to make sure their credit line was still available. Unfortunately, I was correct because their credit line had been closed without their knowledge.
Another client called to ask about buying a home and when I asked about their credit history they said they were trying to pay down some credit cards only to find that once the amount due was paid the bank reduced their limit.
The first basic in credit scoring is to understand what the numbers mean. FICO or the Fair Isaac Corporation is the company that for the past 53 years has offered a measurable number by which creditors can determine your credit worthiness. Credit scores range between 200 and 800. Scores above 720 are considered desirable for obtaining a mortgage. They have determined five main factors will affect your score…things you ultimately have control over.
1. Your payment history. Whether you paid credit card obligations on time.
2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.
3. The length of your credit history. In general, the longer the better.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay 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.
There are some variations on the theme but the basics itemize your scores and more importantly indicate how you can improve your scores, which in turn, improves your life.
I spoke with Linda Ferrari who has a FREE ebooklet called: “Save Your Credit, Save Your Life” which is a 10 step action plan to help clean up your credit. She offers great advise starting out with only ordering your credit report when you visit the various agency websites. Apparently even the credit agencies are trying to sell additional services that you may not need. Another point she makes is that everyone is entitled to one FREE credit report each year and to be sure you order only from www.annualcreditreport.com …all other sites offer paid services so don’t be fooled.
Another option is to pay a credit repair company to “scrub” your credit. Typically this is done once you have a complete copy of your credit report from the three main agencies: Experian, TransUnion and Equifax. Thoroughly examine your report, line by line, and be ready to prove any incorrect information. Once you challenge any information they are required by law to look into and correct anything false. If you find you are having trouble this is where a credit repair service can come in handy.
First time buyers need to understand that they didn’t get into their situation overnight and it might take just as long to correct the situation so don’t despair. There is gold in those hills and it’s in the form of tax credits BUT they are due to expire Nov 30th 2009 so NOW is crunch time. Making the effort to improve your credit will pay big dividends and could ultimately result in home ownership…don’t let this market pass you by.
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Homes Sales up 13.6% in Sacramento County
June 8th, 2009 categories: FHA, Finances, Home buying, Sacramento, Tax Incentives, VA
April 2009 statistics show increase in sales volume
Great news! Sales are up, prices are down and interest rates are holding! If you can afford to buy a home now is definitely the time to do it! According to DATAQUICK Sacramento has seen a reduction in price point of 30% since 2008 and so long as interest rates keep steady we’re expecting to see a good summer for real estate sales. The actual numbers reveal that Placer & El Dorado counties are each down 16% with Sacramento closing 2130 homes in April 2009, Placer coming in at 457 and El Dorado at 155 homes sold. To put this in perspective you need to understand that Sacramento county had 4786 homes on the market in April so we’re absorbing a lot of inventory and starting to see multiple offers on the nicer properties.
My local banker tells me that the interest rates are slowly climbing and we’re up from 4.6% to 5.25% in some instances. For every .25 point increase in the interest rate you can expect to to pay anywhere from $30-$130 more per month depending on your loan amount. For a $300,000 home expect to see an increase around $50 per month. There needs to be a sense of urgency because as we get closer to the end of the buying season rates will most likely increase just as the inventory starts to decrease. Remember that on average it takes 2-3 months to find and purchase a home from start to finish.
Another piece of good news is the $8000 tax credit can be used for closing costs. For a VA loan that means you don’t have to pay a penny to buy a house! There are also FHA loans available with as little as 3.5% down. On a $300,000 home that’s only $10,500 down and your closing costs are pretty much covered. There are lots of other opportunities for vets and their families as well as those who need a helping hand through FHA. For instance there is a FHA loan to improve the property that rolls the costs of the improvements into the loan. If you would like to talk to a lender who can explain these loans I can offer a couple of seasoned professionals who specialize in VA and FHA who would be happy to go over the details with you.
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Buying Foreclosures Basics
June 4th, 2009 categories: California Property Taxes, Finances, Foreclosures, Home buying
Tips to protect your interests in real estate
Now is a great time to take advantage of buying foreclosures, bank owned homes and even short sales. But how do you lessen the risk of liens and judgments attached to a home? That is one of the many fears buyers have when shopping for a home and another good reason to have a seasoned real estate broker representing you at the table. I’m going to outline the process and highlight some ways you can protect yourself from absorbing the previous homeowners bills.
The typical escrow begins with a preliminary title report which itemizes all the liens on the property. In our region the escrow officer will order the report and the buyer should receive it within 72 hrs of depositing their check with the title company. This report gives a full disclosure of all the liens and judgements on the property and identifies who holds those liens and how much is owed. I cannot emphasize enough that buyers need to carefully review this information.
It is important to understand that the preliminary title report is only good from the day it was printed which is usually 14-21 days prior to the escrow being opened. In other words if you open escrow May 21st then your preliminary title report will show all the activity on that property up to May 1st. This is to allow time for the recordings against that property to show up in the system. The escrow officer will pull another title search just prior to funding the loan to ensure no additional liens were placed on the property between the time the purchase contract was signed and the transfer of title to you.
On this report you will see everything that is attached to the home and if there are outstanding bills like water, sewer or garbage. Most of the banks that I have worked with paid off the utility bills for the short sales that I have closed but it is never safe to assume that they will. I have seen water bills in the $800 range because some utility companies will not close the account out until the final bill has been paid. Even though the homeowner may have vacated the home the monthly cycle continues until the final bill shows paid in full. The escrow officer should follow up to confirm all utilities are clear prior to funding the loan but it doesn’t hurt to ask at the time your sign your paperwork.
Judgements are another issue that can be resolved at the time of closing so long as they are paid in full. They can range from child support to back taxes. The title officer will do a check against all parties social security number to make sure each party is free of judgements. My recommendation is for the title officer to do this early in the escrow so that no surprises show up at the end. I once had a judgement show up for a buyer of $45,000 for back taxes happen 3 days prior to closing the escrow. Fortunately they had the cash to bring to the table but if they didn’t then the entire deal would have blown up.
After all is said and done there is a title insurance policy that is taken out for the buyers to ensure a free and clear title to the property should anything show up after the escrow has closed. Of course the buyers pay for this but it is money well spent especially if a lien shows up or a judgement from some government agency happens without notice. The bottom line is to work with a realtor who has good relationships with title companies…they are your allies and are there to protect your interests.
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Home Loan Modification Help
May 15th, 2009 categories: Finances, Foreclosures, Loan Modifications, Real Estate
Red Flags To Watch Out For
Yesterday the California Association of Mortgage Brokers (CAMB) held their 5th Annual Expo for the lending industry in Sacramento, CA. The topic of the day was Loan Modifications and how to help consumers obtain a successful loan modification while protecting both consumer and vendor.
One statistic that raised eyebrows was the number of pending cases against attorney’s for fraudulent loan modifications throughout the state of California…117! According to speaker, Jack Williams, past president of CAMB attorney’s getting into the loan modification business when previously they practiced another area of the law is not in the best interest of the consumer. Some were charging up-front fees and not delivering a successful loan modification while others just plain didn’t do a thing for the homeowner. Seems there are always some who take advantage.
This brings up a couple of good questions to ask potential law firms prior to paying a retainer for their services. The first being: How many and how long have they been doing loan modifications and what is there success rate? There is a difference between hiring an attorney and completing the transaction. You certainly don’t want to pay for some attorney’s learning curve.
Another question is: Do they offer to return your money if the loan modification is turned down? Most successful firms will run your numbers up front to determine if you fit the criteria. Gone are the days of no documentation or stated incomes. You will need to prove your income, account for all expenses and back up everything you claim with a paper trail. The bottom line is that the bank wants to see if you make the money to sustain the new loan and can weather the usual bumps of life without defaulting.
For those who don’t qualify for a loan modification and need to consider alternatives you can email me to discuss your situation. For related articles see:
http://folsomlakehomes.com/2009/05/06/foreclosures-fixer-scams/
http://folsomlakehomes.com/2009/04/28/short-sales-impact-on-credit-scores/
http://folsomlakehomes.com/2009/04/14/california-prevention-act/
http://folsomlakehomes.com/2009/02/16/loan-modifications-vs-short-sales/
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Teen Entrepreneur Workshop in Folsom
May 7th, 2009 categories: Finances, Folsom, Special Events
YoungBiz is coming to Folsom and I would encourage parents of teenagers to get their teenagers involved. This workshop is designed to teach basic financial skills and offer aspiring entrepreneurs the structure and encouragement to pursue their dreams. According to the Young Americans Center for Financial Education nearly one third of high school seniors use credit cards. Another statistic: the average college student graduates with $22,500.00 of debt and that is not counting those who don’t actually get their diploma! I wish they had this workshop around when my teenagers were in high school because they could have benefited greatly.
The format is designed for high school students and encourages creative thinking while developing fundamental financial skills coupled with real time examples of peer success. The venue is the Folsom Public Library (Stafford St.) and begins at 4:30 until 7PM. Students will have the opportunity to meet successful business people (their own age!) and find out how they succeeded. Some of the ideas are as basic as breakfast cereal! Seating is limited so call 916-806-3989 to reserve your seat. For more information contact: mariehall@youngbiz.com
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