WHAT IS A REVERSE MORTGAGE?
By · CommentsIf you are 62 or older and have built up enough equity in your home, a reverse mortgage will allow you to borrow against that equity payment free. Instead of continuing to make mortgage payments, you get paid back the money you already have in it—that’s the reverse part.
You never have to repay the loan as long as you live in your home and you can choose to receive the cash disbursements as monthly income, a line of credit, or a lump sum. Also, because the FHA/HUD program is backed by the US government, you will never owe more than the value of your home—even if you receive monthly payments for the next 20 years. Finally, you keep title to your property so it stays part of your estate.
THE WORST MISTAKES OF MORTGAGE BORROWERS
By · CommentsWhen you are in the market to buy a TV, for example, you first have to decide what features you would like the TV to have. Once you have determined these factors, you usually narrow it down to one particular TV that you are interested in purchasing. Let’s say you decide you want to buy the XYZ Super TV. In order to get the best deal on the XYZ Super TV, you are going to look at least three local stores in town that sell the XYZ Super TV. You wouldn’t walk into three stores, choose three very different TVs in each of the stores, and then make your decision on which one to buy. Why? Because you aren’t comparing apples to apples in a situation like that, and wouldn’t be able to accurately and fairly decide based on pricing alone.
This same problem holds true when people are shopping for a mortgage. Probably one of the most frequent and damaging mistakes that mortgage shoppers make is not comparing apples to apples and oranges to oranges. When you approach a lender for the terms that you can obtain a mortgage, the lender will provide you upfront with a Good Faith Estimate (GFE) of your costs. The GFE will list out each cost line-by-line. It is extremely important that when you compare GFEs from different mortgage lenders that they contain the same information. For example, if one lender provides you with six costs of obtaining the mortgage and another lender only provides you with three of the costs, then the total cost is probably going to be lower on the one that only lists three of the costs.
It may be that the lender does not charge those other three costs or it may be that they just aren’t disclosing those other three fees to you.
If a lender provides you with a GFE that is missing costs that you see on another lender’s GFE, call the lender back and ask them to provide you the estimate of costs that are missing. By comparing the same line items on each GFE form is the only way to truly deduce which costs are actually lower. If you try to compare an apple to orange, you are going to walk away with a distorted picture of what you are actually walking away with.
WHAT MAKES UP GOOD CREDIT?
By · Comments| The good news: you took the advice of all the financial experts and checked your credit score. The bad news: your score is lower then you would like. If you find yourself looking at an abysmal score, there are plenty of ways for you to start rehabilitating your credit, but some will be more effective and faster acting then others. To fix your credit score as fast as possible, follow these steps:
1. Check your credit report for accuracy One of the first things you should do is ensure that all of the information on your credit report is accurate. Credit bureaus occasionally make mistakes, and you should also check to be sure you have not been the victim of identity theft. Correct any errors as soon as possible. 2. Make sure your credit limits appear on your report When your credit card companies report your history to the credit bureaus, they should also be reporting your credit limit. Without a limit listed, the credit calculating software will consider your cards to be at the limit or “maxed out.” The further your balance is from the limit and the closer it is to zero, the higher your score. The software will deduct from your score in percentage zones: Any balance higher than 70 percent of your maximum limit is in the highest zone and will cause the most damage to your score. The next zone is between 70 and 50 percent, than between 50 percent and 30 percent. Once you make sure that your balances are present on your report, work to pay down your accounts as much as possible. If you are unable to make a significant dent on your balance, distribute your balances between multiple cards, keeping all of the balances as low as possible and out of the 70+ percent zone. 3. Pay past due accounts After correcting all errors, look for a column titled PAST DUE. This is a list of all delinquent accounts and the software the credit bureaus use to calculate your score punish you the most for these accounts. If you have limited funds, pay off these accounts first in order to see the fastest boost in your score. 4. Pay new liens or charge-offs Any liens or charge-offs applied to your account within the past two years are wreaking havoc on your credit score. You should pay off your balances on these accounts as soon as you pay off your past due accounts. However, once those liens and charge-offs are older than 24 months, they have done all the damage they can do. Paying them off after 2 years will not help your credit score, so put all your old liens at the bottom of the pay off priority pile. Once you have paid off any of these liens, be sure your lien holder reports the account as paid to the credit bureau. 5. Do not close credit cards When the credit crunching computer software calculates your score, it looks at the ratio between your debt and your available credit. If you have a total limit of $10,000 across multiple cards and you have charged $5,000 worth of debt, you have a balance that is 50% of your total credit limit. However, if you close one of your credit cards, say one with a $2,500 limit, you have effectively reduced your overall credit limit to $7,500 and raised your debt to credit ration to 66%, dangerously close to the 70% zone. If you have absolutely no self control or more than 6 open credit cards, you might be the exception to this rule. The optimal number of credit cards for an individual is between 3 and 5. If you have more than 6 cards, close the ones you have opened in the last 2 years first. Then close your department store cards and the ones with the lowest credit limit, until you reach 5. 6. Keep old credit cards active 15% of your credit score comes from the age of your credit, in this case, the older the better. The logic is that the longer you have had an account open, the less likely you are to default on that account. If you close your oldest cards, you will decrease the average age of your credit and this can reduce your score. However, just keeping the card open and in your wallet will not maintain your credit’s age. You must use each of your credit cards at least every 6 months or your cards will be deemed “inactive” and will no longer be counted by the credit calculating software. The phrase “use it or lose it” applies here, meaning you want to keep the benefits of a low balance and a positive payment history on those older credit cards. The one thing all scores over 800 have in common are a credit card that has seen more than 20 years of use. |
GET TO KNOW YOUR FICO SCORE
By · CommentsYour credit, or FICO, score may be the single most important factor in determining your ability to buy a
home. In fact, most loan programs have a minimum acceptable FICO score, and if you do not meet or
exceed this benchmark, you will not qualify. However, there are programs available for individuals with less
than perfect credit, but you can expect to pay a much higher interest rate. For this
reason, understanding the scoring system and what factors influence your score will
help you tremendously when it comes time to buy.
Many years ago, Fair Isaac Corporation developed a comprehensive system for
determining the likelihood that an individual will repay a loan. Since it was decided
not to simply take borrowers at their word, lenders adopted this system and FICO
was born. This system eventually evolved into the industry standard and is currently
used by all lenders to evaluate a borrower’s creditworthiness.
Essentially the model seeks to quantify how likely you are to pay off your debt without being more than 90
days late on a payment. Scoring in the FICO system can range between a low score of 350 and a high of
850 with anything over 720 being basically perfect credit. The higher your score, the less likely you are to
default in the eyes of the lender and the more likely you will be approved for a loan.
To put the scoring into perspective, far less than 1% of borrowers have a credit score above 800. These
borrowers will receive the best loan programs and interest rates available. On the opposite end of the
scoring spectrum, only about 12% of borrowers have a score under 600 and will have trouble finding a
loan. As you can see, a vast majority of borrowers will fall somewhere in-between and will not be too limited
in the financing options available to them.
Call Amerimortgage and lets discuss what we can do to improve your score.