Archive for Credit & Credit Reports

Jan
30

Shopping for the Best Mortgage Rates

Posted by: | Comments Comments Off

 Are you enticed by the mortgage interest lowest rates in decades? If so you’re not alone, but they are often out of borrowers’ reach. Lenders base their rates on perceived risk. Only if you can show you’re low-risk would you qualify for a rate that matches those seen in headlines.

If you’re looking for the lowest available rates consider these basic factors:

  • Credit Score: The ideal FICO score is around 740 or higher. This will put you in the best place for pricing.
  • Points: 1% of the loan amount is a point, and by paying points you can reduce your mortgage rate. Be sure to ask for a zero point quote as well to compare the two rates.
  • Property Types: Such property types as duplexes, condominiums in newer buildings or with lower down payments, commercial properties or non-owner occupied properties come with higher rates.
  • Down Payment: Experts say putting down at least 25% could lead to more attractive pricing. Lenders offer different breaks on rates if equity is higher.
  • Loan Length: ARM and 15-year loans are often lower than those on the 30-year loan. Consider how long you plan to live in the property and weigh your options.
  • Other considerations:
    • Lock-in: You may receive a lower rate for a shorter lock period 30-45 days rather than the usual 60 days
    • Additional ownership costs, taxes, insurance and maintenance.

 Inspired by New York Times Article by Vickie Elmer published January 12, 201

 

 

 

 

 

 

 

Jun
03

The Mortgage Maze – A Road map to approval

Posted by: | Comments Comments Off

In years past, nearly anyone who could fog a mirror could qualify for a mortgage.  Not anymore.  Those days are long gone.  From stricter underwriting to more documentation, face it, getting a mortgage isn’t as easy as it once was.

Be prepared is the name of the game. 

  • As part of your real estate team, in addition to an attorney, financial advisor/accountant and real estate broker, seek out a mortgage professional you can trust.  They will be privy to all aspects of your financial life.
  • Check your credit score and review credit reports
  • Gather your Documents
    • Two years of complete Federal Tax Returns including W-2s
    • Two recent and consecutive period’s paystubs
    • two complete and consecutive months bank statements
    • two complete and consecutive months brokerage account statements
    • one recent quarterly retirement account statements for each retirement account
    • photo ID
    • Mortgage professional will review and point out any potential red flags
    • Complete mortgage application and submit to lender.
    • Get a pre-approval letter.

With the approval letter in hand, your real estate broker will have a better understanding of the price range you qualify and can show you properties that fit your needs and budget.  Your broker will be able to negotiate from a stronger position.  Before you know it, you’ll be moving into your new apartment.

 Adapted from an article written by Richard Martin/SVP/DE Capital Mortgage an affiliate of Prudential Douglas Elliman.

Jun
03

ARMs Making A Comback?

Posted by: | Comments Comments Off

ARM (Adjustable Rate Mortgage) were very popular during the boom years, but fell out of favor because the rates were very close to those of fixed-rate mortgages.  Recently, because of historically low interest rates for fixed rate mortgages, the difference between fixed and adjustable-rate loans is targeted to bet widest in eight years, according to HSH Associates, which tracks mortgage rates.

 Do they make sense?

 Ask yourself:

  • Are you going to stay in the property 5 years or less?
  • Are you going to be able to refinance within 5 years?
  • If the rate adjusts upward in 5 years, are you going to be able to make increased payments?
  • Will you be able to sell for more than the loan balance when you want?

If you are a gambler, betting that interest rates won’t rise or you can sell before they do, maybe.  If you will only stay for 5 years or less, an ARM possibly makes sense.

Let’s look at some numbers.  One popular ARM loan is a 5/1 ARM.  It has a fixed rate for the first 5 years, then adjusts every year thereafter.  A recent ARM 5/1 was quoted at 3.4%.  The average 30 year fixed rate mortgage is 4.72%.  The difference between the two is called the ‘spread’.  In this example, the spread is 1.32%, big enough to save thousands of dollars during the first five years of a mortgage.

Although there are naysayers, ARMs are becoming more attractive, and may be an option for some borrowers. Weigh the pros and cons, speak to your financial advisor and make sure the ARM is right for you.

Based in part on an article from the Wall Street Journal by AnnaMaria Androitis

More and more people are talking about the importance of an excellent credit score,  so if  your credit score is low or just downright bad, there are proactive steps to take that will not only improve your credit score , but increase it enough to turn it into a good credit score.

  1. Check for accuracy. Remember that your credit report is based on information from the three credit reporting companies: Equifax, TransUnion and Experian and you can download a free report from each of them by accessing AnnualCreditReports.com (this is the site with the really annoying TV commercials).   On each of the reports, make sure all credit accounts listed under your name belong to you and make sure that all balances and payment histories are correct. Immediately contact-in writing – the reporting company and the information provider if you see inaccurate or incomplete information.
  2. Lower your debt ratio. When using credit cards or other credit lines, keep your balances low rather than maxing the line out. If your credit card balances are high, pay them down or pay them off to bring the outstanding debt ratio down. Use some of your savings, apply extra payments each month, or get a second job to lower your debt ratio. As you lower your debt ratio, you’ll see your credit score gradually improve.
  3. Make your payments on time. Always make sure that your payments reach your creditors on or before the due date. Making your payments on time is the number one way to increase or improve your credit score. As you continuously do this you’ll gradually see your credit score increase.
  4. Keep accounts open. Many New Yorkers think if they close credit accounts they’re not using their credit scores will automatically improve.  The opposite is true. One of the factors used to calculate your credit score is the longevity of your relationship with your creditors. If you have a credit card or home equity line of credit that you’re not using, the longer you have the relationship established with the creditor, the more of a boost it can give to your credit score. Closing long-term accounts can cause a decrease in your score so only close credit accounts if absolutely necessary.

If you have a low credit score (a score of 760 or higher is considered high by co-op and condo mortgage lenders) or bad credit, use one or all three of these steps to transform your bad credit into good credit. It’ll increase your chance of getting loan approval—helping you to achieve your goal of being a New York City condo or co-op owner.

Graph: myFICO.com

Graph: myFICO.com

Your credit score plays the starring role in whether or not you qualify for almost any loan, mortgage or consumer credit you apply for. Other factors are taken into consideration when you’re applying but your credit score is one of the most important factors—especially in current hard economic times when lending requirements are stricter than ever.

Did you know, for example, that when you apply for a mortgage to finance a NYC co-op or condo, to get the best rate, lenders today are requiring your score is at least 760? This means that if your credit score isn’t this high, it may hold you back from your dream of being the owner of a Manhattan condo or co-op. Low credit scores can also mean higher interest rates or less favorable lending terms than applicants with high credit scores.

What affects your credit score

There are several factors that go into the calculation of your credit score . While each factor is weighted differently, payment history, the amount of debt you have, the length of credit history, the variety of credit, as well as how much new credit you’ve established are all used to calculate your score. Since higher interest rates on an approved loan or getting turned down for the loan completely are outcomes directly related to low credit scores, it is important to check your credit report and score for accuracy and to keep your credit score as high as possible.

Resources for monitoring your score

Since your credit score is so important to almost any lending decision, you need to monitor it and be aware of anything on your credit report that may bring it down. You should pull your credit report and credit score at least twice a year. There are a number of resources available to pull your credit score and/or full credit report.

Check out  Credit Karma to receive your free credit score. To supplement that, get your free full credit reports from FreeCreditReport.com. This site accesses the three credit reporting agencies TransUnion , Experian and Equifax Almost as annoying as the AnnualCreditReport.com commercials, is the fact that you will have to pay each of them to receive your score!