Friday, February 18, 2011
Friday, December 17, 2010
Credit Score tips
Coming back to an oldie but a goodie...I got these tips from Suze Orman. Love this book, Young, Fabulous and Broke. If you don't already own it, I suggest getting it.
1. Check your credit reports at least once a year to make sure there are no mistakes that could make your FICO score lower. You can get one free from each credit bureau at http://www.annualcreditreport.com/. You wouldn't believe the amount of people that I have given credit reports to and they don't know what a debt is. It is very important to know what you are working with.
2. File a fraud alert with a credit bureau if you think you are a victim of ID theft.
3. Complete an ID fraud affidavit if your account has been stolen or "borrowed" by a financial criminal.
4. You can also check your FICO score on http://www.myfico.com/. If your score is below 760, there are things you can do to change it over time.
5. Pay your bills on time, even if it is just the minimum, to keep your FICO score strong. This is one of the things you CAN NOT change on a credit report. The only thing that will fix this issue is time.
6. Do not cancel your credit cards as a way to improve your FICO score. It may actually cause your score to drop. This is another thing that is irreversable. Once you have your credit card paid off, just cut the card up. You don't HAVE to use it, but if you cut off that line of credit, you are shooting yourself in the foot. On the other hand, DON'T go and open a ton of credit cards!
7. Keep your mortgage shopping under a 2-week period, so your FICO score will not be negatively affected. Everyone says that if you have a lot of inquiries on your credit report, that your score will go down. This is true...if you are opening up a lot of different lines of credit. If you are shopping around for a loan, you should be fine.
8. Keep a partner with a low FICO score out of the mortgage.This will ensure that you are able to get a better interest rate, which will save you a lot of money over time.
9. Pass down your FICO score to your kids. One of the best ways to educate your children on smart financial management is to send them off to college with a great FICO score and an appreciation of why that's a very big deal. Add a child to your card and they will inherit your credit profile.
1. Check your credit reports at least once a year to make sure there are no mistakes that could make your FICO score lower. You can get one free from each credit bureau at http://www.annualcreditreport.com/. You wouldn't believe the amount of people that I have given credit reports to and they don't know what a debt is. It is very important to know what you are working with.
2. File a fraud alert with a credit bureau if you think you are a victim of ID theft.
3. Complete an ID fraud affidavit if your account has been stolen or "borrowed" by a financial criminal.
4. You can also check your FICO score on http://www.myfico.com/. If your score is below 760, there are things you can do to change it over time.
5. Pay your bills on time, even if it is just the minimum, to keep your FICO score strong. This is one of the things you CAN NOT change on a credit report. The only thing that will fix this issue is time.
6. Do not cancel your credit cards as a way to improve your FICO score. It may actually cause your score to drop. This is another thing that is irreversable. Once you have your credit card paid off, just cut the card up. You don't HAVE to use it, but if you cut off that line of credit, you are shooting yourself in the foot. On the other hand, DON'T go and open a ton of credit cards!
7. Keep your mortgage shopping under a 2-week period, so your FICO score will not be negatively affected. Everyone says that if you have a lot of inquiries on your credit report, that your score will go down. This is true...if you are opening up a lot of different lines of credit. If you are shopping around for a loan, you should be fine.
8. Keep a partner with a low FICO score out of the mortgage.This will ensure that you are able to get a better interest rate, which will save you a lot of money over time.
9. Pass down your FICO score to your kids. One of the best ways to educate your children on smart financial management is to send them off to college with a great FICO score and an appreciation of why that's a very big deal. Add a child to your card and they will inherit your credit profile.
Thursday, December 16, 2010
Today's Mortgage Rates - trending higher
Why have rates been trending higher and what does make them rise or fall? Is it the Fed? Inflation? The banks? Fannie Mae or Freddie Mac? Is it is secret conspiracy?
The answer is that it rates move based on a number of related factors, including you and me, the consumer or the "end investor".
Mortgage money can come from a variety of sources. Most of it comes from investors called "capital markets." This is where investors interested in purchasing debt instruments (bonds) come to buy these products. Sellers must attract these buyers by competing with a variety of products with different rates of risk and return over given periods of time. Many of these products include US Treasuries, corporate bonds, foreign bonds, etc.
Who is the "end investor"? Consumers are the end investor. If you are buying bonds, and let's say stocks are paying more, will you keep your money in bonds? The answer for most people is no, depending on the risk versus return. So, when people take money out of the bond market, rates will then rise. And, vice versa, when people take money out of the stock market and put it into the bond market, rates will get lower.
This is the easiest way to explain the market for mortgage rates. This makes up most of the explanation. There are also other factors involved, but it is mostly based on the bond market, which is controlled by the "end investor" meaning the consumer.
The answer is that it rates move based on a number of related factors, including you and me, the consumer or the "end investor".
Mortgage money can come from a variety of sources. Most of it comes from investors called "capital markets." This is where investors interested in purchasing debt instruments (bonds) come to buy these products. Sellers must attract these buyers by competing with a variety of products with different rates of risk and return over given periods of time. Many of these products include US Treasuries, corporate bonds, foreign bonds, etc.
Who is the "end investor"? Consumers are the end investor. If you are buying bonds, and let's say stocks are paying more, will you keep your money in bonds? The answer for most people is no, depending on the risk versus return. So, when people take money out of the bond market, rates will then rise. And, vice versa, when people take money out of the stock market and put it into the bond market, rates will get lower.
This is the easiest way to explain the market for mortgage rates. This makes up most of the explanation. There are also other factors involved, but it is mostly based on the bond market, which is controlled by the "end investor" meaning the consumer.
Friday, December 10, 2010
Renting Vs. Buying - Stop throwing money away!
If you believe:
- Buying a home requires a large down payment.
- The monthly payments would be too much even if you qualified for a mortgage.
- The benefits of owning a home do not outweigh the benefits of renting.
Consider these facts:
- For first time home buyers, there are loan programs that require as little as 1/2% down payment.
- For all other home buyers, there are loan programs that require as little as 3.5% down payment.
- Interest rates are at an all time low and home prices extremely affordable.
- Equity is a great benefit of home owning as well as privacy, security, and tax deductions.
If you are spending $1,000 on rent, what does that mean in 5 years? It means that you will have spent $60,000 in rent.
If you are spending $1,000 for your mortgage payment each month, what does that mean in 5 years? It means that you will have built $20,000 in equity, and if homes start appreciating, you will have been investing your money. Not to mention, all of the interest you will have paid is tax deductible!
If you have a steady job and are renting, you should consider buying a home. If you would like me to compare what you are paying in rent to how much home you can buy, give me a call or email me. I'm happy to help you decide if it is a good decision to buy a home or not.
Thursday, November 18, 2010
Paying rent? Am I throwing money down the drain?
Am I throwing money down the drain?
The average rent for a 2 bedroom apartment in St. Louis, MO is $737/month. That doesn't seem completely unreasonable, does it? But, what does that mean if you are renting for 5 years? What that means, is that you have spent $44,220 and have nothing to show for it...well, I suppose you haven't been homeless, which is always a plus.
What could $737 mean in terms of a mortgage? That means, a $145,455.17 loan. That also means a $153,110.71 purchase price! What can you get for $153,000? I was looking online today, and I found a 4 bedroom, 2 bathroom house listed for $150,000.
Now, if you are truly someone who wants to budget everything out(which is smart)...lets include taxes and insurance in that $737 payment. That means you can get a loan for $105,982.94 if you are paying $200/month in taxes and insurance. That means, you can afford a $111,560.99 home. What can you get for $111,000? I found a 3 bedroom, 1 bathroom home at $110,000 looking online.
Now, I know what your question is...how much equity will I build after 5 years of owning a home? I did an easy amortization schedule on a $105,000 loan amount, and after 5 years of regular payments of $532.o2 with no pre-payments, you will have built almost $10,000 in equity. If you pre-pay $50/month, you will have added $3,000 in equity totaling $13,000.
On the higher priced home, at $150,000, you will have built $13,000 in equity. If you pre-pay an extra $50/month, you will have $16,000 in equity.
This is all not to mention that prices and rates are at an all time low right now. If you are renting and you have a steady job, you really need to look into buying a home. If you don't take advantage of this opportunity, you could be wasting a lot of money.
Please contact me if you want me to equate your rent to what you can afford if you buy a home. It could be a lot higher than you think!
The average rent for a 2 bedroom apartment in St. Louis, MO is $737/month. That doesn't seem completely unreasonable, does it? But, what does that mean if you are renting for 5 years? What that means, is that you have spent $44,220 and have nothing to show for it...well, I suppose you haven't been homeless, which is always a plus.
What could $737 mean in terms of a mortgage? That means, a $145,455.17 loan. That also means a $153,110.71 purchase price! What can you get for $153,000? I was looking online today, and I found a 4 bedroom, 2 bathroom house listed for $150,000.
Now, if you are truly someone who wants to budget everything out(which is smart)...lets include taxes and insurance in that $737 payment. That means you can get a loan for $105,982.94 if you are paying $200/month in taxes and insurance. That means, you can afford a $111,560.99 home. What can you get for $111,000? I found a 3 bedroom, 1 bathroom home at $110,000 looking online.
Now, I know what your question is...how much equity will I build after 5 years of owning a home? I did an easy amortization schedule on a $105,000 loan amount, and after 5 years of regular payments of $532.o2 with no pre-payments, you will have built almost $10,000 in equity. If you pre-pay $50/month, you will have added $3,000 in equity totaling $13,000.
On the higher priced home, at $150,000, you will have built $13,000 in equity. If you pre-pay an extra $50/month, you will have $16,000 in equity.
This is all not to mention that prices and rates are at an all time low right now. If you are renting and you have a steady job, you really need to look into buying a home. If you don't take advantage of this opportunity, you could be wasting a lot of money.
Please contact me if you want me to equate your rent to what you can afford if you buy a home. It could be a lot higher than you think!
Thursday, September 30, 2010
Should I be paying Private Mortgage Insurance?
Should I be paying Private Mortgage Insurance?
Other than permitting someone the privilege of borrowing money - Private Mortgage Insurance(PMI) actually does little for Homeowners. The original intent was to expand the scope of home ownership beyond individuals who had 20% down payments. However, in these cash-strapped times, people with good credit scores view mortgage insurance either as a nuisance or a hurdle to home ownership. Even people that HAVE 20% to put down prefer not to part with that much cash. So the question is Why - Mortgage Insurance?
It is time to pose this legitimate question: is there a direct correlation between lower down payments and mortgage delinquencies? The stock answer is - Yes, just ask the mortgage insurance companies. But not so fast! Hundreds of thousand of loans that HAD MI went belly up. Taking a Bad loan and adding mortgage insurance does not make it better! Many of those loans should never have been made in the first place. The follow-up question that begs to be asked is: if a loan is good, will it perform better by adding an additional $100-$150 per month? I don't think so...
PMI is not a bad thing, but does it make sense? For some individuals - absolutely. It is the only option. However, there is another large group of clients that should be told about another existing option other than paying PMI. There is an additional option to be considered and here is why: if an individual already owns a home and is paying PMI and is making monthly payments on-time, who would refinancing out of PMI and dropping payments make the loan more risk? It doesn't. Dropping some one's payments is a good thing! Especially when clients can cut mortgage insurance AND reduce their interest rates!
Example:
A customer has a home worth $195,000. Their rate is 6%.
6% rate + PMI = Monthly payment of $1139
Let's say they refinance down to a lower rate with PMI.
4.25% rate + PMI = Monthly payment of $1056 (they save $83/month)
NOW...let's see what happens when we get rid of PMI altogether....
4.25% rate + NO PMI = Montly payment of $928/month (they save $211/month)
Which option would you rather take? I would take the $211 savings and get rid of MI altogether.
If I could be of service to you or someone you know in getting rid of their PMI, please get in touch with me. I'm happy to give you a complimentary comparison.
Other than permitting someone the privilege of borrowing money - Private Mortgage Insurance(PMI) actually does little for Homeowners. The original intent was to expand the scope of home ownership beyond individuals who had 20% down payments. However, in these cash-strapped times, people with good credit scores view mortgage insurance either as a nuisance or a hurdle to home ownership. Even people that HAVE 20% to put down prefer not to part with that much cash. So the question is Why - Mortgage Insurance?
It is time to pose this legitimate question: is there a direct correlation between lower down payments and mortgage delinquencies? The stock answer is - Yes, just ask the mortgage insurance companies. But not so fast! Hundreds of thousand of loans that HAD MI went belly up. Taking a Bad loan and adding mortgage insurance does not make it better! Many of those loans should never have been made in the first place. The follow-up question that begs to be asked is: if a loan is good, will it perform better by adding an additional $100-$150 per month? I don't think so...
PMI is not a bad thing, but does it make sense? For some individuals - absolutely. It is the only option. However, there is another large group of clients that should be told about another existing option other than paying PMI. There is an additional option to be considered and here is why: if an individual already owns a home and is paying PMI and is making monthly payments on-time, who would refinancing out of PMI and dropping payments make the loan more risk? It doesn't. Dropping some one's payments is a good thing! Especially when clients can cut mortgage insurance AND reduce their interest rates!
Example:
A customer has a home worth $195,000. Their rate is 6%.
6% rate + PMI = Monthly payment of $1139
Let's say they refinance down to a lower rate with PMI.
4.25% rate + PMI = Monthly payment of $1056 (they save $83/month)
NOW...let's see what happens when we get rid of PMI altogether....
4.25% rate + NO PMI = Montly payment of $928/month (they save $211/month)
Which option would you rather take? I would take the $211 savings and get rid of MI altogether.
If I could be of service to you or someone you know in getting rid of their PMI, please get in touch with me. I'm happy to give you a complimentary comparison.
Tuesday, August 31, 2010
How much do I need to make to afford a house?
How much do I need to make in order to afford a house payment?
Good question. The answer is, not that much..........as long as you don't have a lot of debt.
If you are making $30,000/year, you can probably afford a $125,000 home pretty easily. This will make up 35% of your expenses if you add in about $200 for taxes and insurance. This means that your other debts that are being reported to the credit bureaus cannot exceed 10%, or $250/month. This is assuming a 5% rate, which is high considering today's rates in the low 4's.
If you are making $40,000/year, you can probably afford a $160,000 home pretty easily. This will make up 35% of your expenses if you add in about $300 for taxes and insurance. This means that your other debts that are being reported to the credit bureaus cannot exceed 10%, or $330/month. This is also assuming a 5% rate, which is high considering today's rates in the low 4's.
If you are making $50,000/year, you can probably afford a $197,000 home pretty easily. This will make up 35% of your expenses if you add in about $400 for taxes and insurance. This means taht your other debts that are being reported to the credit bureaus cannot exceed 10%, 0r $416/month. This is also assuming a 5% rate, which is high considering today's rates in the low 4's.
Just think about your budget, and you can most likely afford a home and stop wasting your money on renting. You definately need to make room for utilities you are not used to paying, though, like sewer, trash, water, etc.
Good question. The answer is, not that much..........as long as you don't have a lot of debt.
If you are making $30,000/year, you can probably afford a $125,000 home pretty easily. This will make up 35% of your expenses if you add in about $200 for taxes and insurance. This means that your other debts that are being reported to the credit bureaus cannot exceed 10%, or $250/month. This is assuming a 5% rate, which is high considering today's rates in the low 4's.
If you are making $40,000/year, you can probably afford a $160,000 home pretty easily. This will make up 35% of your expenses if you add in about $300 for taxes and insurance. This means that your other debts that are being reported to the credit bureaus cannot exceed 10%, or $330/month. This is also assuming a 5% rate, which is high considering today's rates in the low 4's.
If you are making $50,000/year, you can probably afford a $197,000 home pretty easily. This will make up 35% of your expenses if you add in about $400 for taxes and insurance. This means taht your other debts that are being reported to the credit bureaus cannot exceed 10%, 0r $416/month. This is also assuming a 5% rate, which is high considering today's rates in the low 4's.
Just think about your budget, and you can most likely afford a home and stop wasting your money on renting. You definately need to make room for utilities you are not used to paying, though, like sewer, trash, water, etc.
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