Buy a new Home for what you pay in Rent!

Ok, the holidays are just about over with and 2010 will be here very soon.  Right now, you are renting a townhome or an apartment and paying $1,000.00 a month.  You have just graduated from Radford or Tech and have started that coveted new job that appears to have you living in the area for a few years.  What's next?  Instead of going out and buying that new car that will zap you for $450.00 per month, why don't you consider buying a new home?

See, here is the thing.  Right now the Federal Government is "paying" you to buy a home.  Whether we like it or not......whether we think we should be doing this or not.......if you are a first time homebuyer and you fall within the parameters that make this tax credit available to you, then you should take advantage of it.

You may have heard that there are no 100% loan products out there anymore.  Well, while we don't have nearly the number as say 4 years ago, but there are still loans out there that offer 100% financing through USDA, VHDA, and Veterans Affairs loans.  Most have income restrictions so call me to discuss if these loans are a fit for you.

So, what to do.  Before you start looking at homes online or in the rags at the grocery, you should contact a lender and get pre-approved.  Don't let a lender write you a pre-qualification.  They are not worth the paper they are written on.  Make sure that the lender pulls a credit profile on you, looks at a paystub and bank statement, and asks you the right questions.  Those lenders that freely hand out a pre-qualification letters without reviewing your credit are not only doing you an injustice but are wasting the time of the sellers and REALTORS that are working with you to do your deal.

Next, ask your lender for suggestions as to the real estate agents he/she works with.   Think about it.  When you go to a used car lot, chances are you have your mechanic look at the car before you buy.  If the mechanic works at the car lot, your comfort level certainly is higher with the product than if you were buying a car without an inspection.  Same goes for REALTORS.  You need to interview them and ask the right questions.  A good lender who has a working relationship with specific agents typically can assist you with this process so don't be afraid to ask.  It is imperative that you work with an agent that best fits your needs and personality.

Now you have a pre-approval and a great agent.  Start the search.  The REALTOR will pull listings within your desired price range as well as discuss with you how to negotiate the contract.  Once all parties have agreed to sell and buy, the lender then takes over and works on getting your loan from a pre-approved state to an approved state for closing.  This involves appraisals, income and asset verifications from the borrowers, as well as employment and school transcripts and diploma verifications.

The final step is the day of closing.  You go to the settlement company and begin signing your loan documents.  This typically takes about 45 minutes or so and then you are done.  Your agent gives you the keys to your new home and off you go.  No more rent!  Now you have obtained the American Dream of home ownership.  Building equity and later income for the years to come.  Congratulations.

For more information about first time buyers and the fine art of obtaining home ownership, please give me a call.  Remember, the first step is to talk to a mortgage lender before you talk to a REALTOR.  Doing so will get you on the right path as to how much you can buy as well as assist you with finding an agent who will tend to your needs.

What can damage the coveted credit score the most.

From time to time, I get the question "I missed my credit card payment last month, how badly will my score take a hit?" Well, the answer is not quite that specific. The deal is, it depends on what your credit score is at the time of the miss.

According to MyFICO.com, if your credit score is a 680 and you have a 30 day late payment, you can reasonably expect a drop of between 60 and 80 points. If your middle score is a 780, expect a drop of between 90 and 110 points.

Got a maxed out credit card? Not good my friend, expect a drop of 10 to 30 points on a 680 middle score and 25 to 45 points on a 780 middle score.

With lending guidelines having greater restrictions pertaining to credit scores and the information that is used to determine a score, maintain as high a score as possible is imperative to receiving the best interest rates from lenders.

Whether you are buying a car, obtaining a credit card or buying a house, your credit profile is scrutinized far more intensely than it would have been 2 years ago. Do your part to maintain a favorable credit profile.

What factors actually determine your credit score.

In my searches on the MyFICO.com website, I also came across this wonderful piece of information. This specifically outlines what factors determine what percentage of a consumers credit score. As you can see, 35% of a score is determined merely by the payment history to a consumers existing debts. Further more, 30% of a consumers score is determined by how much a person owes on their credit lines. Balances that are greater than 50% of the available credit line, will typically cause a consumers score to be less than if that balance was below 50% of the line. Length of credit history, new credit lines and types of credit in use all round out the remaining 35% in the scoring model.

A good rule of thumb is if you have established credit in place, not to take on additional credit as this may lower a consumers score. Also, watch your line usage. If you are creeping above that 50% or your available line, you may want to put the brakes on as you may have a score that is in jeopardy of dropping as well.

For more information, please visit www.MyFICO.com.