Financial Information

Looking for a quick fix to solve your credit problems?

Sep 18, 2008 Mortgage

Since over half of the population has a credit score that teeters below the good line, with many people settling in at the “fair” line, or even worse, it’s no wonder that there are so many Internet scams for credit repair aimed at taking these people’s money. You do not want that person to be you, especially if you are one of these people, you really cannot afford to spend money on a scam that will not hurt you.

The internet ads that promise you a “quick solution to credit repair” are just scams placed out there by people who are taking advantage of the fact that so many people are finding themselves with low credit scores and massive amounts of debt. If you refuse to believe this fact, you can try them, but money you do not have to spare given your debt, will be going into a clever scammers pocket and adding to your debt, with nothing to show for your purchase.

If you are still interested to know how you could end up in the white and orange, here is how so that you make sure you do not employ the wrong type of credit repair. Many internet scammers will laud that they have a solution; well their solution is to create a new record for yourself that has excellent credit history. Sure starting fresh seems like a great solution, but it is illegal.

Creating a new credit record is not credit repair, it is the quick and cheap way to try and start again, and it’s also credit fraud. Credit fraud is a federal offense and punishable in the same manner as any other federal offense, prison time and/or fines. This is not a place you want to be in. Fundamentally, there are even more problems besides jail with considering this as an option.

You cannot start credit repair by insisting the problems and debt you have now are going to go away. Even with more credit available to you, you still have debt in your name, address, and social security card number. That old debt is not going to go away, and in fact, with the opportunity to get more credit, you will be twice in debt as what you thought you could be. SO if you think your situation is bad, it will only get worse.

Probably not, and that’s why people who continually skip payments receive lower credit skills and are in need of credit repair, because they are not holding up their side of the contract. Just a hint, not every company has a grace period. You may think they do, but oftentimes the grace period simply means how long until you get a late charge, not how long until you get a bad marking on your credit history.

Keeping yourself out of the land of credit repair is pretty simple if you just pay your bills on time and limit your purchases and loans to items you have the cash for. Living outside your means is never a good idea, just because someone will give you a loan does not mean you have to take it. Save your debt for the key purchases: home, school education, and vehicle and as long as you pay your bills, you should be fine.

Source: mortgage

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A Deeper Look Into the Realms of Mortgage Industry

Sep 18, 2008 Mortgage

Mortgages are designed in two simple structures; fixed rate plans and adjustable rate plans. You may also find some plans with a combination of each. A fundamental perception of interest rates and the financial influences that determine the outlook of coming interest rates can aid in the consumer’s ability to make economically sound mortgage decisions.

The mortgage business has 3 primary components; the mortgage originator, the aggregator, and the investor.

The mortgage originator is the lender. Lenders can be banks, credit unions, even mortgage brokers themselves. Mortgage originators establish and promote loans to clients. In short, they sell loans. Companies are in competition with each other for your business and what they have to offer will vary in every instance from interest rates, fees, and even service levels offered to consumers.

Most mortgage originators don’t retain the loan asset. Instead, they vend the mortgage into the secondary mortgage market. Interest rates that they charge are determined yield margins and the price at which they can sell the mortgage into the secondary market. You might consider reading Analyzing A Bank’s Financial Statements.

The aggregator purchases new mortgages from other companies. They are an element of the secondary mortgage market. Many aggregators are also mortgage originators. Aggregators band similar mortgages to form mortgage-backed securities. Mortgage-backed securities are sold to investors. The price at which they are sold in turn determines the price that aggregators will pay for recently originated mortgages.

To a huge extent, mortgage-backed securities investors establish mortgage rates offered to patrons. The mortgage production line stops in the form of a mortgage-backed security bought by an investor. The free market establishes the market-clearing costs investors will pay for mortgage-backed securities. These prices feed back through the mortgage business to decide the interest rates to be offered.

The rate on fixed-rate mortgages will be fixed for live, but, the average 30-year fixed mortgage will only last around seven years. However, this usually takes longer for people who have poor spending habits resulting to poor credit score. Homeowners often move or refinance their mortgages and have to learn new rules of mortgage industries such as how to avoid long-term standing balances on loans.

Economic potentials determine the cost and value of U.S. Treasury bonds. Inflation is a bad thing for a bond. Inflation wears down the value of upcoming bond payments. When inflation is high, bond fees fall, which means their yields increase.

The interest rate on an adjustable rate mortgage may change month to month, bi-annually, or annually, depending upon the stipulations of the mortgage. The interest rate consists of an index value plus a margin. The index worth is variable, while the margin is fixed.

The interest rate on an adjustable-rate mortgage is linked to an index. Most short-term interest rates, including those used to construct indexes, are closely connected with the Federal Funds Rate.

Source: Finance

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A Deeper Look Into the Realms of Mortgage Industry

Sep 18, 2008 Mortgage

by Darren Cason

Mortgages are designed in two simple structures; fixed rate plans and adjustable rate plans. You may also find some plans with a combination of each. A fundamental perception of interest rates and the financial influences that determine the outlook of coming interest rates can aid in the ..

Source: mortgage

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The Top 10 Reasons Why Your Mortgage Has Made You House Poor

Sep 18, 2008 Mortgage

1. Many people over the past 5 years who bought homes thought they were getting rich by buying bigger homes. Many were told that homes always went up in value and that they needed to get into the market as soon as possible before prices went up more. With history on your side, buying a home was the safe bet because they were going up in value across the U.S at an alarming rate. Little did the home buyer know, that they were about to become house poor.

2. House poor is a relatively new term. You never really heard any terms like negative amortization mortgage, option arm loans, or adjustable rate mortgage before the refi boom. They became common place during the refi boom and were supposed to be good home loans. Unfortunately they were some of the worst loans ever. Nothing can ever beat the 30 year fixed interest rate mortgage.

3. So what is house poor? House poor is a combination of factors. The biggest factor is for people who are either first time home buyers or people looking to upgrade and move to a bigger home. When looking at all of their options they are told from their realtor and their mortgage banker to get approved for the biggest loan amount that they can. When you buy a bigger home you bring on more debt and expenses. Bigger home loan, bigger utility bills, more costs for upkeep,etc. House poor is when you make enough money to make the payments on your things like your house, cars, boats, student loans, and credit cards but cannot save any money for retirement, a trip, kids college funds, money to go out for dinner, or money to see a ball game. Everything looks good on the outside. You have a big house, nice cars, boat (maybe) but you are one missed check away from total financial disaster. If you were let go from your job tomorrow you would be screwed. Smart financial people would rather take a smaller house with a smaller mortgage payment and have money left over to play with.

4. As most of us know, realtors work on straight commission. So when you hear a realtor say “buy the bigger home” or “the one with all of the upgrades” you really need to step back. Of course they are going to say that. The difference on a $100k or $200k house is $6k more in commission for them. That is a ton of money. On the mortgage banker side, they also get paid a percentage of the loan amount. The bigger the loan amount, the bigger the commission check for them. Most of the times the mortgage banker will love to see you buy the bigger house but does not really care. What most of them do is tell you what you can be approved up to and then its up to you to work your way down from that number. The realtors for the most part are trying to find a home for you regardless of the price because they also want a sale. Do not fall for the “you’ll probably be making more money as your progress in your career” or “now you will never have to move.” Those are both ways to make you comfortable with buying a bigger house. Last time I checked homes were foreclosing all over the country and there are layoffs going on in every single industry. Might be hard trying to make payments on that larger house or even trying to sell it.

5. Going into your home search you kind of have an idea of what you can afford. Most people who are first time home buyers want to keep their first mortgage payment around what they pay for their rent payment. This is a good practice but what most home buyers forget is that all of those things like a hot water heater going out, cutting the grass, fixing the roof, and all other repairs add up. All of those things are just one call away to the apartment manager and they call a guy to come and fix it. Nothing comes out of your pocket for those expenses. When it happens in your home you have to pay for all of those out of pocket and still pay your mortgage payment. Expect to double your mortgage payment just in monthly maintenance and up keep to your house. I hope your starting to see why you do not own the home, it owns you.

6. When you buy a house that is at the maximum amount that you are approved for you have already began to handcuff yourself to this house. During the height of the refi boom, some people could get approved for mortgages with a debt to income ratio of 55% depending on their credit score. This means 55% of what is showing on your credit report is going to pay your new mortgage payment plus any car and credit card payments. This does not take into account things like car insurance, gas for your car, maintenance for your car, gas for your lawn mower, heating bills, water bills, cable bill, phone bills, etc. These are probably the largest of the bills that are not on your credit report. I bet if you added all of those up on top of your mortgage payment you will start to kick yourself because now you probably do not have anything left over for anything. You are now working for your house.

7. Here is a quick example. You and your spouse have a combined income of $125k a year. You pay $700 a month for car payments and $300 a month for pesky student loans. You do not carry any credit card debt at all and you have outstanding credit. You have saved up $30k in a savings account to be used for a down payment and have about $25k between 401k’s and retirement accounts. You currently pay $950 a month in rent. You are a first time home buyer and want to find something with a similar monthly payment. You call up your mortgage broker and tell him what your looking for. He says what you are looking for would be a home worth $125k. You can put 20% down of $25k and have $5k left over for closing costs. You decided to pay your property taxes and home owners insurance separately so you do not need to have anything for an escrow account. Your loan would be for $100k and lets say interest rates are 7% and if you were paying an escrow it would be $400 a month. Your principal and interest is $665 plus escrow of $400= $1065. This is still about a $100 more a month than what you were looking for but not bad since you get to write your taxes, insurance, and interest off on your taxes. Your debt to income ratio is calculated by adding all of your out going bills on your credit report $1065 + $700 + $300 =$2065 then dividing by your monthly income of $125k/12 months= $10,416. You get $2065/$10,416=19.8%. This is great. You will have more than enough money to save, make your payments and have enough money for repairs and upkeep.

8. But you really like that bigger, newer house the next street over. It has all of the upgrades you could ever want. You decide its the home of your dreams. Your realtor starts to smile because they know that you have sold yourself on the bigger house which means a bigger commission for them. You call your mortgage broker back up and ask them what the maximum amount you could get qualified on would be. Using the example above you could get approved for a home roughly in the $350k range. You could put your entire $30k down payment into the house and negotiate sellers concessions so they cover your closing costs. Your $30k only covers about 8% of the down payment which gives you a loan to value of 95%. You decide to only put down 5% and use the extra for closing costs. Your new monthly mortgage payment on $332,500 at 7% now includes private mortgage insurance (PMI). This will probably be another $200 or more (probably $400) a month and it is because you did not put 20% down payment. Your new payment is $2,212 + $200 (PMI) + escrow of $400 (it will probably be $700 because of the house value)= $2,812. To figure your DTI you have the $2,728 + $700 (cars) + $300 (student loans) = $3728. Your new DTI is $3728/$10416= 35%. As you can see this still sounds pretty good. I was saying how mortgage companies were approving people up to 55% DTI.

9. The thing of it is that the mortgage company has a way of making you think your approved for the loan. What they look at is your income before taxes to get you approved on a mortgage. They need all the income they can get to get you approved and this is why they do it. They need to close loans to stay in business. So those DTI numbers above really do you no good. What you need to do is take your combined family income of $125k and take out at least 15% which is probably what your income tax bracket is, i.e $18,750. Then use $125k-$18,750 = $106,250 to figure what your after tax income ratio. Now you have $106,250/12 months= $8,854. Using our first example of $2065 you get $2065/$8854=23.32% DTI. Still not bad. On the second one you get $3728/$8854=42%. Big difference. What you need to ask yourself is that if you are okay knowing that almost 40% of what you make in your family only gets you the keys to the house and your cars. This does not include operating them, just the keys. When you add up all the other costs like I did above you will see that by getting the bigger house you are probably going to have 5% of your monthly income laying around for saving and entertainment purposes.

10. Americans were very greedy during the housing boom. Homes were being sold at inflated prices. People assumed that home prices would keep going up and decided it was the time to buy bigger because they would never be able to afford the house later. The sad thing is that they could not afford the house at the time they closed on it. Underwriting guidelines were to relaxed. Everybody was getting approved on loans. Not only were they buying homes, they were taking advantage of 0% car loans and other things they did not need. I always get a kick out of the people that have a big house, nice ,cars, and lots of things they do not need and complain about HAVING to work 60-70 hours a week. I smile and wonder if they would be happier without the bigger house. They probably would but nobody will admit it. As long as we can show off to one another what we have this “house poor” phenomenon will continue.

More Reasons

• The Top 10 Reasons You Do Not Have To Wait To Refinance Your Mortgage After Buying A Home
• The Top 10 Reasons Adjustable Rate Mortgages Will Have Higher Rates Than Fixed Rate Mortgages
• The Top 10 Reasons To Not Refinance Out Of Your Interest Only Mortgage
• The Top 10 Reasons Foreclosures Will Keep Going Up Until 2010
• The Top 10 Reasons Mortgage Companies Do Not Refinance Mobile Homes

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The Top 10 Reasons Why Your Mortgage Has Made You House Poor

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Source: Real Estate

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Your Credit Card - The Perfect Accompaniment for Your Vacation

Sep 18, 2008 Mortgage

Visa Credit Card

Each and every year, many of us go on vacations. Vacations are a great way to relax, and get away from the everyday pressure of life. Over half of all American families take their vacation between April and September, meaning that they spend a lot of money on travel. Whether it’s international or domestic travel, you can spend a fortune before you actually realize it.

As we all know, traveling with cash or checks isn’t always a wise decision. Renting cars, flying in airplanes, or checking into hotels is a much easier task if you have a credit card. Even though you may decide to use your credit cards for big purchases only, you’ll find that the traveling experience will be a much smoother process.

Unlike cash or checks, credit cards make handling your documents and receipts much easier. If you purchase something, records from that purchase will be made with your credit card manufacturer, which you can always fall back on if something happens. Things can go wrong without notice, so you’ll always want a backup plan or something to have as proof in the event of a disaster. With a credit card, all you need to do is look back at your statement and you’ll find everything that you purchased in one easy to find location.

Credit cards are also much easier to handle and keep track of than cash. If you decide to go to a theme park or a resort, you’ll find that cash can be a bit bulky to handle. Carrying a large amount of cash can be hard to keep track of, even though it isn’t recommended. Credit cards use up less space, and you can keep them in your pocket. When you need to pay for something, you don’t need to count through your cash, simply hand over your credit card and sign your receipt.

if you don’t have any credit cards, you can always get them for vacation purposes only. There are many benefits to having credit cards, besides the fact of them being easier to keep track of. There are many different credit cards out there to choose from, including those that will give you cash back or rewards when you make a purchase. Cash back is normally a small percentage of what you spend, and is given to you at the end of the month.

Some of the Credit cards will give you reward points for every dollar you spend, which can be redeemed with several merchants offering a variety of products. Although cash back is always a great thing, many people find reward cards to be just as good. You can enjoy your vacation, buy just about anything you want, and know that the money you spend will help you to buy other things that you may need when your vacation is over. Actually, can you think of this as having your cake and eating it to.

All in all,Credit cards can make your vacation easier than ever before. You can earn rewards and cash back with purchases you make using your card. Although you may think cash is the preferred way to go, there are several merchants who actually prefer credit cards. They are more professional, and easier for you to handle than cash or checks.

They are easy to obtain as well, providing you have good credit. If you don’t have a credit card, you should look into getting one before you take your next vacation. All you need to do is look for your favorite company online and apply through their website - you’ll normally receive a response in a matter of minutes.

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Source: mortgage

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Multiple Lines of Credit - Not Necessarily a Bad Thing

Sep 18, 2008 Mortgage

A line of credit can be a very valuable part of your financial planning. Having a line of credit open and ready to use is beneficial in case of an emergency. One nice benefit is that you use it at your discretion and there is no obligation. You only use it if you need it.

Having two different types of lines of credit allows you to both look at your life situation and pick the line of credit which best works for you.

At least one credit card is basically an essential in today’s world. People rarely carry cash anymore because paying with credit cards has become the way to go. If you find yourself in an emergency or unexpected situation and don’t have enough cash, a credit card can be a life savor.

When you think about the possibility of being stuck short of cash in the face of an emergency, being able to use a credit card for minor unexpected expenses is very valuable.

For more unexpected expenses that are larger a line of credit may be helpful. Drawing money out off a line of credit can be as simple as writing a check to your bank for cash, or writing a check to yourself. It can also be used to catch up and get back on track if you find it difficult to meet your debt obligations.

If you have problems with your line of credit, it can be a good plan to have a backup just in case. This is where having a credit card and a line of credit or a home equity line of credit can prove to be very helpful.

Though your intentions may not be to always use your credit lines, having them available is good financial planning.

Having different types of credit lines gives you options so many do not enjoy. It allows you to choose the best way for you to finance your needs, keep your monthly expenditures low and save yourself from high interest payments.

Source: mortgage

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What is the Pending Home Sales Index?

Sep 18, 2008 Mortgage

by Rob Kosberg

The National Association of Realtors measures the number of pending homes nationwide on a monthly basis. They do this by tracking when there is a status change from an active listing to a pending sale via the Multiple Listing Service. This is called the Pending Home Sales Index.

The NAR assumes that 75%-80% of all homes pending will close within 60 days while the remaining will close within 120 days. Thus it is considered a prediction of future home sales.

The index is intended to predict home sales but it may not be it’s best use for several reasons. 1. It doesn’t track FSBO sales 2. It samples only 20% of all the MLS transactions 3. it doesn’t take into consideration new construction.

Since many transactions do not close these days due to the mortgage crisis the PHSI may be skewed. it is, however, a great ..

Source: mortgage

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Buyer Beware: High Cost of Converting A Variable Rate At A Bank

Sep 16, 2008 Mortgage

To be sure you have access to the most current, most accurate mortgage rate information in Vancouver, BC, or anywhere else in Canada, you need the expertise of mortgage brokers like those at Averbach Mortgages. Their experienced and dedicated staff offers a full range of services and products for home buyers.

The trick to making a variable rate mortgage work for you is to purchase a variable rate mortgage with an option to convert to fixed rate at some point in the future. When the interest rates cycle down, switching to a fixed rate mortgage ensures you keep your payments low, even after rates begin to rise again. Do you have the expertise to time your decision correctly? Are you confident you’ll receive the most competitive fixed rates available and that you are being offered sound financial advice?

Mike Averbach of Averbach Mortgages cautions, ‘Buyer Beware: Banks may cost you when converting a variable rate mortgage.’ Banks and credit unions may offer great variable rates initially, but when you decide to lock into a fixed rate, you may find yourself at a disadvantage. There are mortgage options that the big banks and credit unions are probably not telling you about.

Contrary to what buyers believe, many banks have no obligation to give you their prime market rate. Many bank agreements do not state in the contract that you will receive their best rate. Instead, at conversion from variable rate mortgage to fixed rate mortgage, banks often offer a posted rate or a rate that is slightly discounted off the posted rate. Because of this, buyers can end up paying more interest than they need to, ultimately losing money over the life of the loan.

Let’s examine a situation where a buyer has a $250,000 mortgage with a 25-year amortization. They have a five year variable rate mortgage and decide to lock in after one year. Converting to a fixed rate mortgage after one year at .25 percent higher than the best market rate equals $625 per year in additional interest costs. Over four years the buyer will pay an extra $2500 in interest. Over 25 years that amounts to $15,625. If you could save even a portion of that amount, isn’t it worth at least a phone call to Averbach Mortgages?

Mike Averbach says, ‘Buyers falsely assume that their big bank will treat them fairly or give them a better discount because of their long-term customer status.’ What buyers don’t know is that the big institutions and credit unions have NO incentive or obligation to give you their best rate. In fact, they have more incentive to treat new clients better than existing ones.

As an existing client, once you sign the agreement, the mortgage is already a done deal; you are essentially locked in. If you want to convert, the bank can offer you their posted rate - NOT necessarily their best rate. If you, the client, decide to seek financing elsewhere you will probably be charged a penalty. It’s a win-win situation for the bank. You, however, are left paying more in the end.

How do you prevent paying too much? Do your research either before entering a borrowing agreement, or when renewing your mortgage agreement. Make sure that your agreement has that crucial clause in the contract, ‘Client will be offered best rate upon conversion to a fixed-rate mortgage.’

Many mortgage brokers (like ING, First National, MCAP and Merix) do not have posted rates, and have a commitment in writing that offers clients the best rate if they choose to lock into a fixed rate at their particular lending institution. Even knowing this, many brokers still offer variable mortgages from the Big 5 banks purely for brand recognition to the client.

Mike Averbach, Accredited Mortgage Professional at Averbach Mortgages, can be contacted via email at mike@averbachmortgages.com or by phone at 604-710-2550. Averbach Mortgages’ Mortgage Manager, Justin Blacklock, can be reached via email: justin@averbachmortgages.com or at 604-707-6339. Justin, Mike and the entire Averbach Mortgages Team will explain the fine print in mortgage loan documents. They will help you chose a mortgage that truly reflects your situation and respects your best interest.

Source: Mortgage Broker

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Buying a Home

Sep 16, 2008 Mortgage

by Direct Mortgage

When you’re thinking about buying a home, there are two keys activities in which you have to engage. One is finding a house you want to buy. The other is finding the money with which to purchase that home once you have found it.

A smart first step to finding a home is choosing a good neighborhood. By entering the terms “neighborhood profile” or “city profile” into a search engine, you’ll find a website on the Internet that can give you valuable information. For instance, you’ll be able to find out about a city’s median age and income, unemployment rate, population, percentage of the population that are Republicans or Democrats, air and water quality, sales and city income tax amounts, median home values, teacher-to-student ratios, demographic make up, information about the climate, overview of the crime in the area, and even information about ..

Source: mortgage

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What is Bank Foreclosure?

Sep 15, 2008 Mortgage

When homeowners are not making their mortgage payments on time bank foreclosure takes place. In order to collect the funds they are owed, the bank they got their mortgage through takes over the home and sells it.

Obviously, no homeowner ever wants to deal with as bank foreclosure is an awful thing. There are a few things that you are going to need to realize and a few important steps that you will need to take in order to avoid it.

Don’t Ignore the Problem

If you do start getting bank foreclosure statements in the mail, it is important that you do not ignore them. If you do ignore the bank, it’s going to think that you do not care and are probably going to move forward with the process as quickly as possible. This is actually the last thing that you want to happen.

On the other hand, if you want to stop the foreclosure before it happens, you will want to contact them and let them know what is going on. The sooner you do this the better, and you really want to keep them abreast of the situation. They will probably be more than willing to work with you and come to some sort of an agreement in terms of repayment.

Know Your Mortgage Rights

You must be aware of all your mortgage rights in order to make sure you have the most success with the bank foreclosure issue. In particular, know what your lender is able to do if you are not making your payments. Find your loan documents and read them so that you know what your options are.

So never assume that just because a bank foreclosure for one of your friends went one way that it will go the same for you. This will vary from one situation to another.

Obviously, these are all helpful once you have started going into foreclosure and after you have not been making payments. The best thing of course is to make sure that you make all your mortgage payments in a timely manner so that the foreclosure issue is one you will never have to worry about to begin with.

Budgeting is one of the most crucial steps, something that all homeowners need to do if they want to ensure that they are bringing in enough money, not spending too much, and getting all of their bills paid on time.

Check out this excellent no cost artice, What is Bank Foreclosure? It’s happening often to today’s homeowners. Stop it before it happens to you. To browse more articles on foreclosure visit, http://www.foreclosure.jsgenterprises.com.

Source: Loan Documents

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