Tuesday, July 22, 2008

A Number That Can Change Your Life: Your Credit Score

How Is Your FICO?
You may pride yourself on your high credit score, but have you checked it lately? Unfortunately, bad credit scores happen, and sometimes it is through no fault of your own. A credit card company or department store may make a mistake recording one of your payments. Or you may have fallen pray to identity theft! Your score can take a dive when you are not looking and this can cost you thousands. It is your responsibility to monitor your credit, continue good financial habits and report any fraudulent activity.

If your score is not so great, right now is the time to start repairing it. Why? Because with a good score, you may get better rates on loans, insurance and credit cards to name a few. It will also save you money in the long run. Potential employers sometimes request and review your credit when you are job hunting to see if you are financially responsible. You need to make sure to keep your score stellar! Here's how...

1. Know what the numbers mean. Most lenders use what is known as the FICO score, for the Fain Isaac Corp. While a perfect score is 850, that may be a bit high to shoot for. I recommend aiming for a 780 as a suitable target score.
2. Pay current bills on time. This has the single greatest effect on your credit score. Under the current FICO system, 35% of your actual credit "score" is calculated based on how well you pay your bills. For more information, visit www.fico.com . If you aren't good about mailing off a check every month, look into setting up automatic payments with your bank's online bill pay system. Whatever you do, do not pay your bills more than 31 days late because it will be recorded on your credit report.
3. Consider a Credit Monitoring Service. Sometimes banks offer monthly monitoring services. This can aid in monitoring any and all account activity. It also helps because you can make sure all agencies are reporting correctly i.e. no mortgage or credit card lates reported incorrectly.
4. Pay Down Debt. When you go to purchase a home, lenders use what is called a debt-to-income ratio to determine how much house you can afford. Excessive debt will lower your credit score and reduce your buying power. You should strive to use no more than 30% of your available credit. For example, if you have a credit card with a $1000 limit, don't carry a balance on the card of more than $300. Your debt ration accounts for 30% of your FICO score!
5. Use your credit card responsibly. Credit cards are NOT bad! Some people hear credit card and their palms start to sweat. Credit cards help to build credit worthiness. However, reckless credit card use can also destroy it. Not everyone is hard wired to handle a credit card responsibly. If credit card debt has caused your credit score to tank, grab the scissors! You do need to keep one card open to help establish a solid credit patter moving forward. Try buying all of your gas on a credit card every month then paying them off at the end of the month. Do the same with groceries. Some cards help you to get frequent flier miles. Why not build your credit and your miles at the same time? Keep your credit cards open rather than closing them as this helps to establish a long credit history. It is good to have two or three credit cards, but much over that can hurt you.
6. Do not fall prey to credit repair scams. If you have some bad credit history, you have probably seen the signs on the side of the road talking about how they will "erase" bad credit? If it was that easy, everyone would be doing it! These credit repair companies make promises that vary, but some are rather outlandish. Keep in mind that if you become involved with any illegal activity you could potentially face criminal charges! Some companies promise to give you a new credit identity (which isn't possible...legally!). Whatever you need to do to repair your credit, you can do yourself for free. From this day forward, start moving forward establishing new credit and make a plan to fix or pay off what you have as bad debt. You can start seeing improvements in as little as a few months. A complete credit overhaul, however, may be a few years off.

For More Credit Score and Homebuying Tips, visit my website at www.nakedrealestate.org

Valorie Ford
Keller Williams Realty
Charlottesville, Virginia

What Do I Do Now That I Own A Home?

Just because the closing went smoothly and everything is perfect in Mayberry, your work isn't over yet. You just made a huge leap into homeownership and the work has just started. Below are is a small list of things that can help you stay on track now that you own your own home...

*Give your mortgage an annual once over If the last time you looked at your mortgage was when you closed on your loan, it's time to take it out for an annual once over. New loan programs and opportunities to leverage your home equity can bring you lower mortgage payments and new investment opportunities.

*Is a fixed rate mortgage the best choice for you? Many of us opt for the certainty of a 20 year or 30 year fixed rate mortgage when we get our first mortgage. If you anticipate selling your home within the next 10 years, one of the new hybrid loans, such as an ARM, may be a better financial fit for you. Hybrid loans typically have a lower fixed rate than a traditional 20 or 30 year mortgage. The savings you receive can well be worth switching to a hybrid loan.
Are you paying for Private Mortgage Insurance (PMI)? There are a lot of new loan programs available that can help you eliminate PMI, even if you have less than 20% equity in your home. The monthly savings adds up quickly. This money can be put to better use to help you achieve other short-term and long-term financial goals.

*Are your taxes and insurance up to date? Even though the lender servicing your mortgage is responsible for paying your taxes and insurance out of your escrow account, it just makes sense to periodically check to see that these payments are being made properly. While you're at it, you'll want to review your homeowner's insurance policy. It's a good idea to review your policy every two to three years to make sure it covers recent home improvements, replacement costs for the contents of your home, and that its reconstruction coverage is keeping pace with inflation.

*Do you have a Home Equity Line of Credit (HELOC) for emergencies? Many homeowners are making the proactive choice to secure a Home Equity Line of Credit (HELOC) for emergencies. A HELOC is a revolving line of credit that only charges interest when you actually draw money from the line of credit. As you repay the balance of the draw, the credit becomes available again. Securing a HELOC in advance can be a great help if you're ever laid off or have an unexpected medical or other emergency.

How's your credit report? The information in your credit report has a huge impact on whether or not you will again qualify for a mortgage loan. That's why it's important to periodically check your credit report. Now it's even easy to do so. A recent amendment to the federal Fair Credit Reporting Act (FCRA) mandates that each credit reporting company provide you with a free copy of your credit report, at your request, once a year. To request your free credit report, visit http://www.annualcreditreport.com.

*Are you making the most of your home's equity? You may have more equity in your home than you realize, even with plummeting home vaules. Taking out a home equity loan to payoff credit card debt, student loans, car loans and other higher interest debts may make good financial sense.

*Is it time to refinance? The timing might be right to refinance your mortgage loan. (see my section: "When Should I Refinance My Home?) New rates may help you significantly lower your monthly payment. Or you might want to "cash out" some of the built-up equity in your home, which you can use to consolidate debt or improve your home. Perhaps by refinancing you can even pay off your mortgage sooner by switching to a 15 or 20 year mortgage!

For More Tips and Information, visit my website at www.nakedrealestate.org

Valorie Ford
Keller Williams Realty
Charlottesville, Virginia

What is the Difference Between Your Interest Rate and the APR?

INTEREST RATE vs. APR: What's the Difference?

You'll see an interest rate and an Annual Percentage Rate (APR.) for each mortgage loan you see advertised. The easy answer to "why" is that federal law requires the lender to tell you both.
The APR is a tool for comparing different loans, which will include different interest rates and also different fees associated with the loan. The APR is designed to represent the "true cost of a loan" to the borrower, expressed in the form of a yearly rate. This way, lenders can't "hide" fees and upfront costs behind low advertised rates. While it's designed to make it easier to compare loans, it's sometimes confusing because the APR includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since federal law requires lenders to disclose the APR but does not clearly define what goes into the calculation, they can vary from lender to lender and loan to loan.
The APR on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. The problem is that ARMs were invented because the market index DOES change and that makes fixed rate loans either cheaper or more expensive to make (depending on the market) -- that's why they're variable rate in the first place! I hate to be confusing, but APRs are at best...inexact. The lesson is that APR can be a guide as to what loan to choose, but you need a mortgage professional to help you find truly the "best" loan for you. **Note when you're browsing for loan terms that the APR will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you'll see that APRs on 15-year loans will carry a higher relative rate due to the fact that origination points are amortized over a shorter period of time.

For More Information Regarding the Homebuying or Selling Process, visit my website at: www.nakedmortgage.org

Valorie Ford
Keller Williams Realty
Charlottesville, VA

Sunday, July 20, 2008

In Green We Trust!

These days with energy prices so high, many are turning to "Green" building in hopes of reducing our environmental footprint (and to ease the strain on our pocket books!). Today, homes with the "Green" label areone of the few hot trends in an otherwise morbid real estate industry and builders are jumping on board! This has given some builders a much-needed niche, but it's spurring others to apply the term with very little to back it up - a problem that is being termed "greenwashing" and it is spreading throughout the building industry like wildfire.
This has been a common complaint from both real estate professional and builders alike and advocates fear that the ever-more-widespread use of "green" confuses and misleads the public. "Some of these builders are putting that on as a tagline, when all they might be doing is putting in compact fluorescent light bulbs and Green Label carpet," says Drew Smith, a founding member of the Florida Green Building Coalition. So how do we as agents and consumers know if we are getting the real deal? The only real way for valid assurance seems to be an independent, third-party inspection that can verify what has been done will actually provide a green benefit.
There are sites that you can look at to further increase your "green" knowledge and soak your brain with the LEED for Homes, NAHB Model Green Home Building Guidelines, the SBIC Green Building Guidelines, and the ICC-NAHB National Green BUilding Standards, and you will begin to find common threads between the different programs. They are based off of project design, energy efficiency, water efficiency, construction best practices, renewable energy source, material selection, lot planning and site preparation, and indoor air quality and maintenance. There is a LOT more to it than energy efficient lights and recycled carpet!
Always remember, buyer beware! Just because it says green, doesn't mean it is!

What Is Important When Buying a Home?

Right now is a great market for first time home buyers! Interest rates are still low and home prices are plummeting. If you have been renting all this time, now is your time to buy. Wouldn't you rather have your monthly rent payment every month going toward equity in your home rather than into someone else's pocket? Well...here is some advice to help you start your journey to home ownership. Also, check out my site at nakedrealestate.org. There you will find lots of useful information regarding the path to ownership as well.

First and foremost, you need to find a good mortgage professional who will take care of you and explain the mortgage process rather than fleece you. Some mortgage brokers/loan officers see first time home buyers as targets because they can make more money on then since they are inexperienced in home ownership. A good mortgage professional will prequalify you based on your income and credit rating. They will make sure you do not max out your budget so there is still room for savings every month.

Secondly, you need to find a good real estate agent who has all of your best interests in mind. One of the reasons I became an agent (rather than just a mortgage broker) was because my husband and I had such a TERRIBLE agent when we purchased our first home. We were taken to the cleaners! Having a good agent is VERY important because he or she will explain every step along the way so you wont be left in the dark.

Thirdly, make sure you have a good home inspector. The most important things to check are the roof, foundation, structural integrity, plumbing, electrical and HVAC systems. In newer homes you will have a new roof, HVAC, plumbing and electrical, but there still may be structural issues. With older homes you definitely need to see how old the roof is and how old the systems are. You also need to make sure the electrical has been upgraded and that there is not new plumbing tied into old pipe.

If you can nail down those three things, you should have a fairly stress free home buying process. A good agent and good mortgage professional should help to greatly facilitate this process. Good luck and happy house hunting!

Valorie Ford
Keller Williams Realty
Bright Vision Mortgage

Foreign Nationals: It's Your Time to Buy!

The US Dollar has reached the lowest in...ever! Housing prices are falling and homeowners equity is the lowest since 1945! Homeowner equity is dipping below 50% which is the lowest on RECORD!

Lending to foreign nationals has become easier than ever with 50-60% down, a clear copy of your passport and funds in a US bank. What are you waiting for! You can buy a $1 million home in the US for roughly $750K 0K (or $670K with where the dollar is trading today) because of the value of the dollar vs. the Euro. There are so many options out there. Agents, the riches are in the niches. Foreign Nationals, welcome to the United States where houses are pleanty and prices are low! Charlottesville has been voted as one of the top places to live the past couple of years. We have great estate homes just waiting for new owners. Charlottesville is rich with history and horse country galore. Give me a call and I would be more than happy help you find your perfect home.
Valorie Ford
Charlottesville, Virginia Real Estate