Money & Finances « AllPropertyManagement.com

Archive for the ‘Money & Finances’ Category

How to Improve your Credit Score

January 12th, 2010

Getting a home loan is largely based upon your credit score and if your score is below a 620 you may actually find it hard to locate a mortgage lender who is willing to give you a home loan.

Improving your credit score isn’t impossible, in fact in some cases it’s quite simple and steps can be taken immediately. You’ll notice with a better credit score you’re more likely to get approved for a home loan or you’ll get a better interest rate.

The first way you can improve your credit score is by paying down your credit cards and installment loans. If you have high balances you don’t have to worry about paying them off entirely but you should aim for getting them below 30% of the credit limit.

The next step you should take is to limit your credit card usage or quit using them altogether. Adopt a mentality that if you can’t pay cash for it then you can’t afford it.

Check your credit limits and make sure that this is what’s reported on your credit report. If your limit is $10,000 but your credit report shows it as $5,000 then it will seem like you’re borrowing a larger percentage than you actually are – just fixing this one little thing can immediately make a big change.

Use an old credit card. The longer your credit history is, the older your cards are the more valuable and credit worthy you appear. Don’t go out and make a huge purchase but a few small ones you can pay off immediately. This will actually help your rating rather quickly.

The thing to remember when improving your credit score is the longer you’ve had credit the better, the more a company is willing to lend you the better, the lower your balances the better and most importantly you want to prove that you are capable of paying off your debts in a timely manner.

photo credit:?SqueakyMarmot

Types of Home Loan Lenders

January 8th, 2010

Years ago the only way you got a home loan was through your bank, and very few people actually even shopped banks for their loans. Today people are not only shopping different banks, but there are a number of home loan lenders out there with different features that may make them an even better choice than your local bank.

Mortgage Bank

This is the old fashioned way of getting a home loan, your local bank will process your loan application and determine if you are worth the risk. They will lend you the money but will then often sell that loan on the secondary market.

Mortgage Broker?

A mortgage broker is a go between who works with a variety of lenders and can help you find the loan that best suits your situation, then you’ll often work directly with that lender.

Internet Lenders?

The internet is full of mortgage lenders, some more scrupulous than others so it’s important to do your research. Some internet lenders are simply traditional outlets with an internet portal, some are strictly internet based companies.

Home Builders?

Many large home builders actually have loan offices within their companies or they have very close affiliations with mortgage brokers. Typically they offer some sort of deal for people who want to purchase their homes.

Real Estate Offices

Similar to the home builders above, some of the larger real estate companies have in-house mortgage departments that will make buying through them more enticing.

You can research all of these options on your own and come up with the best solution for you without using a mortgage broker and paying that added middleman expense, but it will take some time and effort on your part.

Your Credit Score and Getting a Mortgage

January 6th, 2010

Your credit score is more important than ever if you’re trying to get a mortgage. Rather than having a standard percentage charged on all home loans, today’s loans are dependent on a number of things but the primary concern is your credit score.

Your credit score is based upon your credit history as reported on your credit report. A complex mathematical equation is used to determine your score but that number is key for getting a home loan. Credit scores are figured by a method created by Fair Isaac Corporation and are often referred to as FICO scores. Scores range from 300 to 900 and the typical home buyer falls somewhere in the 600 to 700 range. The higher your credit card, the better.

If you’re concerned about your credit score and getting a home loan your first step is to determine what your credit score is by ordering a free credit report. Each of the three big credit reporting agencies may have a different score for you but they’ll all be fairly similar.

Once you determine your score you can see how likely you are to get a loan and if you qualify for the better interest rates. Any rating below 650 should be boosted if you can to push the envelope and get you a better interest rate.

Private Mortgage Insurance

December 30th, 2009

If you’re considering purchasing a home or if you have purchased a home you have probably heard the term PMI thrown around. PMI stands for Private Mortgage Insurance but most people simply call it PMI. Not everyone has to pay a PMI, it is typically added to home loans if the borrower doesn’t have at least a 20% down payment on the purchase price.

PMI insurance can vary but the general range is somewhere between half and one percent and is designed to protect the lender in case the borrower defaults. It’s doubtful that the PMI actually does anything to protect the borrower but PMI is an accepted industry practice and isn’t going anywhere soon, so if you don’t have 20% to put down on your home then you’ll have to pay a PMI.

One thing to keep in mind during the course of your loan is the amount of principal you’ve paid. Once you’ve paid off 20% of your home’s assessed value you can approach your lender and ask them to remove the PMI. One would think that this would automatically be figured by your mortgage broker but it’s not so it’s something every mortgage holder with PMI should keep track of as it can save you thousands over the life of your loan.

Subprime Mortgages

December 28th, 2009

There’s been a lot of talk and concern about subprime mortgages and they are partially to blame for the housing crisis in the United States today. But what is a subprime mortgage? Subprime mortgages are home loans that are giving to people with less than optimal credit scores, typically their score is below 620. Credit scores run from 300 to 850 with the majority of people falling into the 600 or 700 range. Those who fall below 620 are considered a higher risk and if a lender decides to give them a loan they’re going to fall into the subprime loan category.

Subprime loans have higher interest rates than typical loans, but that rate can vary dramatically so if you are a subprime candidate then you must do your homework and shop around for the best loan rates and terms available to you.

Some subprime loans come with prepayment penalties and balloon payments, some even have both. It’s the prepayment penalties and balloon payments that are blamed for contributing if not starting the housing crisis. These penalties are almost impossible to deal with for many people, especially those with bad credit, and many homes ended up in foreclosure.

If you’ve got a poor credit score, rather than diving into a subprime loan which could cause you more trouble in the future, work instead to improve your credit score so you’ll be able to qualify for a traditional mortgage.

Things to Ask a Mortgage Lender

December 22nd, 2009

Too many people who are looking to buy a home spend all their time researching homes and almost no time at all researching mortgage lenders. This can be a huge mistake that could cost you thousands if not tens of thousands throughout the course of your loan. As your mortgage lender the following questions to make sure you’re getting the best loan for you.

What is the interest rate? This is a question that almost everyone knows to ask a mortgage lender, it’s a key determining factor.
What is the point situation? How many points will you have to pay, how much are they and what kind are they? This information will also affect the size of your loan.
What are the closing costs? The closing costs can add thousands onto your loan from the get go.
Are there prepayment penalties? Prepayment penalties hit in a number of situations, if you refinance, pay off a loan early, or sell a home and you want to avoid them if possible.
What is the down payment? Some loans require a minimum down payment, and the percentage required can vary drastically. For people without much savings this is critical.

By asking these questions you’ll have a better feel for your loan and be able to get the best loan terms possible.

photo credit:?woodleywonderworks

From Renter to Home Owner

December 1st, 2009

Making the transition from renter to home owner is exciting, instead of giving someone else that monthly check you?re putting it toward your home’s equity.

But there are other things to consider when purchasing a home, like the additional costs. Of course you?ll have your monthly mortgage payments but there are more costs associated with owning a home like property taxes, home owner?s insurance, closing costs, maintenance fees, and then the dreaded emergencies.

Another thing you have to consider before making the switch from renting to owning is the commitment. You?re certainly not tied to your home forever but moving is much more involved and difficult than it is when you?re a renter. If you?re not committed to the area then holding onto the freedom of being a renter may be worth it for you.

The freedom that comes with renting also includes the freedom from having to worry about maintenance and upkeep. Of course it?s up to you to keep the interior of your apartment in good shape or you?ll have to pay when you move out, but typically the exterior is maintained without the renter?s assistance. When you own a home you?ll either be responsible for doing all of the maintenance or for hiring and paying someone else to do it.

So there are plusses and minuses on either side of the coin, you just have to look at your particular situation and decide what means the most to you and whether you?re ready to make the change from renter to home owner.

photo credit:?tomeppy

Preapproval Letter for Home Buyers

November 27th, 2009

If you?re thinking about investing in a new home you may find that having a preapproval letter from a mortgage lender is a great way to start. The preapproval letter isn?t necessary but it can help you seal the deal and speed up the process once you find the home you want.

Preapproval letters hold more clout than prequalification letters and the extra paperwork will let you know exactly how much the lender is willing to give you. Sellers tend to prefer working with a buyer that is preapproved because the there is no question about whether they will qualify for a loan and how much they can get. If there is a bidding war the preapproval letter can be key in swinging things your way.

You may also find that realtors are a bit more zealous when you have a preapproval letter as it signals to them that you?re serious about making a purchase.

While a preapproval letter may help you throughout the home buying process it doesn?t necessarily guarantee you?ll get the amount you?re preapproved for. The bank does reserve the right to learn about the property to make sure it?s worth the investment. Preapproval letters are also limited to a certain amount of time so if your preapproval letter expires you?ll have to get a new one and complete all the paperwork again.

Short Selling for the Home Seller

November 25th, 2009

With the housing market down as drastically as it is and with prices as sky high as they were in the recent past, in addition to the less-than-scrupulous mortgages that were becoming the norm a lot of people are finding themselves in a situation where they owe more on their mortgage than the home is currently worth. This is called being upside down on your mortgage or your property.

The best thing for an upside down property seller to do is to hold onto their home if they can until the prices turn around, but if this isn?t possible there are a couple options. The dreaded foreclosure or a short sell. A short sell is a way to avoid a foreclosure and it can save the bank some money, in fact the bank won?t approve a short sell unless it is a financially good deal for them.

So a short sell may be a good way for a seller to go, they can get out from under their home and sell the property at a price that is reasonable for the current market. But you don?t get to walk away unscathed. A short sell will affect your credit rating, it won?t be as bad as a foreclosure would be but it?s still going to be a negative notation. A short sell is considered a settlement and will remain on your credit report for seven years. This can affect your ability to get another mortgage for a few years, depending upon the rest of the credit report.

Buying a Short Sell Home

November 23rd, 2009

Buying a home that is being sold on a short sell situation can be a good deal. In these situations the owner owes more on the mortgage than they?re willing to accept as the purchase price. The problem for buyers is that the bank ultimately has discretion on whether they will accept the short sell or not.

This means that you can go through every step in the process from paperwork to an accepted offer, from inspection to down payments and the bank can still refuse the deal. You?ll get your down payment back but not any money you?ve put toward inspections or other services. You?ll also have wasted a significant amount of time which can be crucial for some people. Not to mention the emotional rollercoaster a short sell can be.

The bank basically wants to make as much money as they can, in a short sell situation they?re accepting a loss and their major determination is whether they?ll lose more on the short sell or a foreclosure. As a last ditch, after a potential buyer has done everything from their end the bank will try to work out a deal with the seller to keep them in their home and not write off the short sell amount. This is where the potential buyer can totally lose out so one thing to look for is a short sell where the seller has already moved, they?re less likely to deal with the bank to keep their property.