- Be prepared for “multiple offer” scenarios – Different markets have their “sweet spots” where the ideal size, location, condition, and price all meet. For example, if you are looking for custom homes, remember that these real estate properties will receive multiple offers, typically in a very short time period.
- Get ready to act quickly. It’s a big decision, and a lot of money, so many buyers will struggle with this. But the most desirable 2 bedroom townhomes and other properties are going under contract in 1-2 days.
- Make a strong offer – Asking prices for these uber properties are usually dead-on, or even a little low. List price or higher often is what it takes to get it done. Sellers also look carefully at your down payment, and whether or not you need to sell something else to finance your purchase.
- Do as much leg work as possible. Research your ideal neighborhoods first so that you don’t have to get to know an area the day you make an offer. And while you’re waiting for that “perfect storm” property, make sure you have your agent show you properties representative of a style or age even if they are not in the ideal location.
- Leverage resources – DAILY – Your agent should have searches that are updating you daily, or multiple times per day, giving you new listings. When you see something you like, be sure to be the first one there. Call your agent often to check-in on both new properties, and other listings you might have seen.
- Secure financing BEFORE you begin your search – Nobody will review an offer unless a buyer has been pre-approved.
To help you become mortgage free faster, here are some simple ways that you can pay off your mortgage faster, and save a lot of money over the course of your loan.
- Make bi-weekly payments
Instead of making 12 monthly mortgage payments, pay half your normal mortgage payment every two weeks. You’ll make 26 total payments per year, equivalent to 13 monthly mortgage payments. For example, if you have a $200,000 loan at 5% interest, making a bi-weekly payment will pay off your 30-year loan in 25 years and 3 months. Your total interest drops by more than $34,000.
Not every lender will take bi-weekly payments and some lenders charge a fee to accept them, so check with your lender before adjusting your payment plan.
- Make monthly prepayments to principal
Making prepayments is one of the most effective way to pay off your mortgage faster. An easy trick is to round your regular payment up to the nearest $100. Be sure that your extra payments are marked to go directly to your principal balance. By directly reducing your principal each month, you pay less interest each month and more towards your loan balance. Check with your lender to make sure the payments are properly applied and if the lender charges any prepayment fees.
- Make an extra payment at the same time each year
If you cannot commit to a fixed prepayment each month, consider using your holiday bonus or your tax refund and apply it to your principal. It’s another great way to save money and accelerate the time it takes to pay off your loan.
- Refinance to a lower interest rate
With rates still near historic lows, reducing your interest rate will can save you money over the life or your loan and also save you money, each month, because you will have a smaller monthly payment. Refinancing rates and fees vary from lender to lender, so shop around to find the best loan available.
- Refinance to a shorter term (Recommended)
Refinancing to a shorter term loan offers the best way to pay off your mortgage faster while saving you thousands in interest. 15-year ratesstill remain near historic lows, with rates significantly lower than for 30-year loans, making it more affordable than ever. Low rates may not last much longer and many savvy homeowners have taken advantage of the low 15-year rate to reduce their mortgage costs. If you can afford the 15-year mortgage payments, you could save hundreds of thousands in interest and be mortgage free in half the time.
There are enough potential trouble spots for your credit’s health without worrying about these myths.
The Internet is brimming with tales of how your complete lack of knowledge surrounding credit scores is costing you big every day.
We get it. How about some good news for once?
Finding out you had it wrong all along doesn’t have to be a bad thing. In fact, you could be relieved to learn you were mistaken.
The following are common misconceptions about credit that you’ll be happy to know aren’t true at all.
1. Closing my oldest credit card will shorten my credit history
One of the most pervasive credit myths, closing an old credit card account will not lower your credit score due to a reduced credit history. Closed accounts in good standing actually stay on your credit report longer than negative entries, thus maintaining the positive credit history that attributes to a higher score, specially if you decide to apply for credit card once again.
As credit bureau Experian explains on its blog, “Even if closed, the accounts that have no late payment history remain on your credit report for 10 years from the date closed. As long as the positive information remains, it contributes to a stronger credit history.”
That’s not to say, however, that closing a credit card account can’t hurt your score. If you are presently carrying debt — whether it’s an outstanding loan or another credit card balance — eliminating a portion of your available credit will increase your credit utilization ratio and using a free online credit card processing is a good choice for this. And that’s bad news for your score.
2. Checking my own credit will ding my score
It’s true that multiple credit inquiries can have a negative affect on your credit (depending on the circumstances — more on that in No. 6), but not if you’re the one doing the inquiring. You could check your credit every day if you wanted, with no harm to it.
In fact, staying on top of your credit reports and scores is a smart way to help catch errors or instances of fraud right away. The sooner these problems are addressed, the faster your credit will recover.
3. Working with a credit counseling agency will be reported to the credit bureaus
Simply seeking out the advice of a credit counselor will not be reported to credit bureaus and won’t affect your scores positively or negatively. However, the actions you take at the recommendation of a credit counselor can impact your scores.
Credit scoring agency Fair Isaac explains on its website:
“For example, choosing to make partial payments or agreeing to settle for less than the full amount on accounts may be regarded negatively by the FICO scoring model. Additionally, any late payments occurring either before or after you began the plan may also be regarded negatively.”
4. Earning a lower income means being stuck with a lower credit score
Like credit counseling, your income has no correlation to your credit score.
Claire E. Murdough, a contributing writer to personal finance blog ReadyForZero, explained, “A high earner can have terrible credit and a low earner can have excellent credit. Just because you make a good wage does not mean you’ll have high credit and salary does not necessarily indicate financial responsibility.”
She added, “Instead of focusing on simply making more, it’s helpful to focus on the ways that you can work to solidify a solid financial foundation.”
5. Paying off my cards will prevent my score from increasing
A common credit myth is that you have to carry a balance on your credit card in order to generate activity. The truth is that paying off your bill in full every month is the best thing you can do for your credit rating. As long as you are using the card regularly, the activity will be reported to credit bureaus regardless of whether or not you pay the entire balance.
Credit Reporting Expert and President of Consumer Education at SmartCredit.com, John Ulzheimer, stated on the site that, “Another thing to consider, along with expensive interest, is the impact on your credit scores of carrying a balance … Carrying a large balance relative to your credit limit can have a negative impact on your credit. Less than 10 percent should be your target.”
6. Rate-shopping for a loan will result in several dings to my credit score
When you apply for a credit card or loan, the lender performs a hard pull of your credit report to determine your creditworthiness. One or two of these hard pulls can cause a slight, temporary decrease in your credit scores. Many inquiries over time can result in a significant decrease in score and is a big red flag to creditors. If you’re in need of credit repair Atlanta services. It always helps to get professional help when it comes to dealing with your credit.
That is, except when you’re shopping around for a loan. Since getting the lowest interest rate possible on a home, auto or student loan is incredibly important, credit bureaus understand you will want to get quotes from several lenders before settling on a deal.
Fair Isaac explained “the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.”
It’s recommended that if you are looking for a loan, keep rate shopping limited to within a 30-day period to protect your credit score.
7. A low credit score could cost me my job
This last myth is more about the perceived consequences of a low credit score, but bears discussion nonetheless.
Although it’s not uncommon for employers to review certain parts of your credit report as part of the hiring process, no one will ever look at or consider your credit score. These two words are often used interchangeably, but mean two very different things.
“It is illegal for credit scores to be used as a tool for screening potential employees,” Kimberly Foss, certified financial planner and founder of Empyrion Wealth Management, told Daily Worth.
An employer can only pull your credit report with your permission, and even then, they don’t get the full picture. Essentially, they’re looking for major warning signs of irresponsible behavior — but your score, whether high or low, should never be a determining factor.
Myth 1: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.
Fact: False. Most traditional mortgages require income qualifications and a monthly mortgage payment; however, the HECM (Home Equity Conversion Mortgage) reverse mortgage generally does not use income as a factor and it pays you. Many seniors who don’t qualify for traditional financing are eligible for a reverse mortgage.
Myth 2: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time using tools like Showcase IDX. As long as the borrower continues to live in and maintain the home and property taxes and homeowners insurance are paid, the loan cannot be called due.
Myth 3: There are restrictions on how reverse mortgage proceeds may be used.
Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.
Myth 4: Only low-income seniors get reverse mortgages.
Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.
Myth 5: If I outlive my life expectancy, the lender will evict me.
Fact: False. Reverse mortgage lenders put no time limit on how long the borrower(s) can stay in their homes. Since homeowners still own the property, lenders cannot evict them as long as the borrower continues to live in and maintain the home, and property taxes and homeowners insurance are paid.
Myth 6: A reverse mortgage will affect my government benefits.
Fact: A reverse mortgage generally does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive would count as an asset and could impact Medicaid eligibility. To be sure, we recommend that potential borrowers consult their federal benefits administrators or a reliable financial advisor.
Myth 7: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Fact: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.
Myth 8: My children will be responsible for the repayment of the loan.
Fact: If the borrower or their estate wants to retain the property, the balance must be paid in full. However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the HECM loan balance exceeds the home’s value at maturity. Any equity remaining in the property after the reverse mortgage is retired belongs to the borrower or their estate.
Myth 9: Reverse mortgage lenders take advantage of seniors.
Fact: Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with reputable lenders. Protect yourself by conducting as much research as possible by consulting government agencies, your financial advisors and NRMLA, the National Reverse Mortgage Lender’s Association.
Myth 10: I cannot get a reverse mortgage if I have an existing mortgage.
Fact: False. If your house isn’t paid off, the proceeds you receive from the reverse mortgage must first be used to pay off any existing mortgage.
By MSN Real Estate partner Wed 10:25 AM, 3/19/2014
Buying a home with a mortgage comes with plenty of strings attached, aside from just interest and principal.
While you’ll have a general sense as to what your monthly mortgage payment will be, this complacency likely prevents you from reading over the specifics of your mortgage statement. By simply writing a check each month and skipping over the details on your statement, you’re missing out on a variety of potential savings.
First, examine the line item “unapplied funds” on your statement and make sure the balance is zero. The reason money would be in the unapplied funds account is if you made a partial mortgage payment that didn’t cover the entire amount. For example, you might be making payments every two weeks or an extra $50 here and there with the goal of paying your mortgage off faster. If you don’t tell the bank to direct this money toward the principal, it’ll sit in the account.
“The bank can still put toward principal, even if it’s not the full payment, but you have to tell them first,” says Dani Babb, founder and CEO of The Babb Group.
Alternatively, the bank would rather put that money toward interest, which is essentially giving them free money, because interest is calculated based on the new principal amount. If you’re not making a dent in your principal, you won’t see your interest expense drop.
Next, double-check the escrow balance to see if you have an impound account. With loans, the bank adds up your insurance and taxes for the year, divides by 12 and adds this amount to your monthly mortgage payment. However, if you switch insurance companies or your property taxes change, the bank may still charge you the old amount, unless you tell the bank. If you need help with regards to the terms of your property taxes, you may always consult professional property tax services for help.
If it happens that you have had a tax penalty and you’ve been consistently paying your taxes on a regular and timely basis, you can see this post to get a relief from tax penalties or tax penalty abatement.
“Sometimes the mortgage company over assess and ends up owing you money,” Babb says.
Additionally, be cognizant of how much you are paying for private mortgage insurance, which typically ranges from 0.3 percent to 1.15 percent of the loan. This is charged when the loan-to-value ratio is higher than 80 percent. In other words, when you don’t make at least a 20 percent down payment on the loan, this insurance is charged to compensate the lender for taking on additional risk.
As you pay off your mortgage and should your home increase in value, your loan-to-value ratio fluctuates, sometimes falling into the threshold where private mortgage insurance is not charged. If you fail to keep an eye on this, you’ll end up paying private mortgage insurance for no reason.
“Homes appreciate much faster than the time it takes to pay down 20 percent of your loan,” Babb says. “But if you have equity, you can get the home reappraised and have the private mortgage insurance taken off.”
Finally, if you have a variable-rate mortgage, periodically check the reset date, which is when the loan’s interest rate changes from fixed to adjustable. Generally, this switch happens several years into the mortgage, but if you’re not careful, you could be blindsided by a painful payment increase.
Want to get a handle on your credit? Well, first you’ll have to learn what factors impact your credit score. Unfortunately, there are a number of myths that can cause your brain to spin like the Tasmanian Devil from information overload.
Let’s take a look at those fallacies. Then we’ll explain what actually affects your credit score, and what you can do to improve it. Here are some common credit score myths:
1. My employment history will make or break my credit
Your employment history has nothing to do with your credit score, but some lenders may review it to determine if you are stable enough to repay a loan. Frequent job changes or layoffs may indicate otherwise.
2. The more money I make or save, the higher my credit score will be
It’s not what you make, but how you spend it. And how much money you have in savings has nothing to do with FICO’s credit scoring equation. However, some lenders may consider these factors to determine the likelihood that you will default on a loan.
3. Poor credit will keep me from getting a loan
This is false because there are a lot of greedy lenders who will be willing to lend you money — at a very high interest rate.
4. Bad credit never goes away
With sound debt-management practices, the negative marks will eventually vanish. Late payments, bankruptcies, foreclosures and collections typically remain on your credit report for seven years. (The exceptions are Chapter 7 bankruptcies and tax liens, which remain for 10 years and indefinitely, respectively.)
And even before they drop from your credit reports, their impact diminishes over time.
5. All credit scores are created equal
Each of the three major credit bureaus produces a FICO score based on the information it has about your credit history. “That FICO score is calculated by a mathematical equation that evaluates many types of information from your credit report,” myFICO says. Some things are known about how that works, but the specifics are a well-kept secret.
The credit bureaus also produce other types of credit scores, although FICO scores are the ones most widely used by lenders. MyFICO notes that “it’s important to understand that not every credit score you can buy online is a true FICO score.”
And, not every FICO score you buy is the one your lender will see.
6. Having too many credit cards will wreck my credit
While excessive credit card applications in a short window of time can create issues, having a variety of magic plastic in your wallet won’t necessarily hurt your credit score.
However, it becomes a problem when the balances spiral out of control and your debt-to-available-credit ratio skyrockets.
7. Pulling my credit will lower my credit score
The only inquiries that impact your credit score are those that are made to obtain credit.
8. Where I live has an impact on my credit score
This couldn’t be further from the truth, unless of course you can’t afford to pay the mortgage or rent where you reside.
If you’re interested in a comprehensive list of what’s not included in your credit score, check out this myFICO post.
How your FICO score is calculated
Now that you have a better understanding of the factors that have no bearing on your FICO credit score, let’s take a look at what does:
- Payment history — 35 percent of your credit score is determined by whether or not you make timely payments.
- Amounts owed — 30 percent of your credit score is based on your debt.
- Length of credit history — 15 percent is based on how long each of your credit accounts has been in existence. In the case of your FICO score, old age isn’t always a bad thing.
- Types of credit in use — 10 percent is based on the types of credit accounts you have open. These include credit cards, installment loans, mortgage loans and auto loans.
- New credit — 10 percent is determined by the amount of inquiries recently submitted for new credit. Try to keep this number as low as possible or your credit score could take a dip.
Find your score
You can visit AnnualCreditReport.com to pull a free copy of your three credit reports. But to view your FICO scores, you’ll likely have to cough up some cash. An alternative is a site like Credit Karma, which provides non-FICO TransUnion scores for free.
And if you’ve recently been denied credit or gotten an unfavorable interest rate, you’re also legally entitled to a free credit score. Some financial institutions also provide them to customers. You can also get financial guidance through support from a Couples Money Management Coach.
Does your credit score need a boost?
Start by examining your credit reports for errors. If you notice any, use this template provided by the Federal Trade Commission and follow the corresponding instructions to get the dispute process started.
Spare yourself headaches by staying away from companies claiming to have some sort of magic wand that can repair your credit in a flash.
The next step is to establish a realistic budget and debt-management plan that will force you to get a handle on your spending and reduce thos outstanding balances.
This post comes from Allison Martin at partner site Money Talks News.