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Improve Your Credit Score

Posted on June 23, 2014 at 12:00 AM Comments comments (4206)
Take These Steps to Improve Your Credit Score A credit score reflects credit payment patterns over time, with more emphasis on recent information. You can check your credit report to read a summary of what goes into your credit score.Pay your bills on time. Delinquent payments and collections can have a major negative impact on a credit score.Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a credit score.Apply for and open new credit accounts only as needed. Don�??t open accounts just to have a better credit mix. It probably won�??t improve your credit score.Pay off debt rather than moving it around. Also, don�??t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.Protect your credit information from fraud and identity theftPay Your Bills on Time (and other important tips)Paying your bills on time is the most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should:Minimize outstanding debtAvoid overextending yourselfRefrain from applying for credit needlesslyApplications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly. It Takes Time to Improve Credit ScoresIf you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores. How Changes Affect ScoresOne common question involves understanding how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.Credit scores are based entirely on the information found on an individual�??s credit report.Any change to the credit report could affect the individual�??s credit score.Simply closing two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called thebalance-to-limit ratio (which generally lowers scores). One change actually affects many items on the credit report. It is impossible to provide a completely accurate assessment of how one specific action will affect a person�??s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action. How Long Does It Take to Rebuild a Credit Score? Actually, you don�??t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.Delinquencies remain on your credit report for seven years.Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 10 years.Inquiries remain on your report for two years. by Experian

Foreclosure Forbearance

Posted on June 11, 2014 at 11:30 PM Comments comments (2845)
Forbearance is where the lender works with the homeowner to modify the existing loan and avoid foreclosure. (e.g., the lender might put the arrears at the back end of the mortgage, creating a longer time period in which to pay off the mortgage). Or the lender may allow the owner to pay a certain amount extra each month to make up the back payments. Sometimes they will put the back payments along with late penalty fees into a new loan

What is Foreclosure?

Posted on June 9, 2014 at 7:10 PM Comments comments (14180)
Foreclosure is the legal process whereby a creditor forces the sale of a property that was pledged as a security for debt owed to the creditor when that debt has not been paid. Usually the creditor is the "bank" or lending institution.

First Time Homebuyer Program

Posted on June 7, 2014 at 2:30 PM Comments comments (18479)
First Time Homebuyer Program Florida Housing�??s First Time Homebuyer (FTHB) Program offers 30-year fixed rate FIRST mortgage loans to first time homebuyers through participating lenders and lending institutions. However, if you are not a first time homebuyer, you may still be eligible if you are purchasing a home in a federally designated targeted area or are a qualified Veteran. This Program uses income and purchase price limits to determine eligibility. Additionally, a potential homebuyer must complete a 6-8 hour face to face homebuyer education class, be able to qualify for a first mortgage loan, and have a minimum 640 FICO score. To determine if you qualify to participate, please contact a loan officer from approved loan officers. They will be able to determine if you qualify to particpate in the First Time Homebuyer Program and can assist you with any questions you may have specific to your credit history.

The Benefits of Owner's financing for sellers and buyers

Posted on June 6, 2014 at 11:30 PM Comments comments (16080)

There are many benefits for doing an?? owner-carry installment sale?? (owner financing, as opposed to conventional bank financing) for both the buyer and seller. Sometimes the advantages inure to the benefit of one or the other, but in most cases the transaction is "win/win" for both parties.

Benefits of owner financing for the seller

Most sellers of real property insist on the highest price and all cash. Sellers want a fast closing with little hassle. Sellers also want to pay as little taxes as possible on the gains incurred. In many cases, the seller can have most of his needs satisfied by an installment sale rather than a traditional cash sale. Let's look at these needs one by one...?? 

1. Highest Price.?? There is no doubt that a seller can insist on and receive the highest price when offering flexible owner-financing terms. In many cases, the seller can receive more than the?? fair market value?? of the property by offering these "soft" terms. People are always willing to pay a premium for non-qualifying financing.?? 

2. Cash.?? Nearly every seller says he wants all cash, but few need it. What the typical seller wants is the most net cash from the deal. Often, the seller has to pay closing costs, title insurance, broker fees, and the balance of the existing financing.?? 

In addition, there may be capital gains tax due to Uncle Sam. In many cases, the sale of a property by an installment sale (particularly a "wraparound") will net the seller?? more future yield?? than any source from which the cash proceeds were reinvested.?? 

3. Fast Closing.?? Nothing holds up a sale more than new lender financing. In some areas of the country, it can take months for a buyer to qualify and close a new loan to purchase your property. Since most standard real estate contracts contain a financing contingency, you may end up back at square one if your buyer does not qualify.?? 

Furthermore, if your house is not particularly nice or unique, it may take you some time to even find an interested buyer. Since you are competing with all of the other houses for sale, you may need to spend thousands of dollars in paint, new carpet and landscaping just?? getting the house ready?? for the market.?? There are very few "assumable" loans and few sellers are offering "soft terms." Thus,?? owner financing?? makes your house unique. Furthermore, an owner-financed transaction can be consummated in a matter of days, since there is no appraisal, underwriting, survey, or other nonsense involved. In many cases, you will be able to sell the property yourself, saving thousands in real estate broker fees.?? 

4. Tax Savings.?? On an installment sale, you only pay gains to the extent you receive payments each year. This can be particularly advantageous if you have owned the property for several years. Furthermore, you can combine the installment sale with an I.R.C. 1031 Tax-Deferred Exchange for further savings.?? As you can see, owner financing provides many advantages to the seller. Let us now turn to the advantages for the buyer.

Advantages of owner financing for the buyer

Despite the elevated purchase price and higher interest rate, there are?? many?? benefits to a buyer who engages in an installment sale transaction.?? 

1. Easy Qualification.?? The buyer, in many cases, prefers an installment sale to conventional financing because it does not require traditional bank income and credit approval. The buyer may have poor credit because of a divorce or recent bankruptcy. He may be self-employed and cannot prove income. He may be new to his job and cannot meet strict lender guidelines.?? 

Even if he could qualify for a loan, the rate will be astronomical if he has poor credit. Furthermore, few conventional lenders offer fixed interest rate loans to people with a poor credit rating.?? 

As you can see, there are dozens of reasons why a buyer cannot qualify for a conventional bank loan. Owner financing becomes the perfect solution for him.?? 

2. Credit Rating.?? An installment sale may give the buyer a chance to improve his credit rating by owning a home and making payments timely.?? 

3. No Loan Costs.?? One of the biggest benefits for the buyer is not having to pay the costs associated with conventional loans. Points, origination fees, underwriting charges, appraisal, credit reports, title insurance and the plethora of other "junk" fees charged by conventional lenders can amount to thousands of dollars at closing. The buyer is free from these with an owner-financed installment sale.?? 

4. Fast Closing.?? A buyer can close and move into a property within days, since there is no third party lender holding up the transaction.

By William Bronchick, J.D.

What are closing cost? How much are closing costs typically?

Posted on June 4, 2014 at 4:30 PM Comments comments (13926)

WHAT ARE CLOSING COST?

When you get a mortgage, you will need to pay closing costs, which are fees ??? charged by lenders and third parties -- related to the purchase of the home. So, in addition to owing the lender the down payment on the home and the principal and interest related to the mortgage, you will also owe the lender and third parties closing costs, which you usually pay at the time that you close on your mortgage. Most of the time, it is the home buyer who pays the closing costs, rather than the seller, though on some loans such as VA loans, the seller pays a portion of these costs.

WHAT CHARGES GO INTO YOUR CLOSING COST?

Closing costs vary widely based on where you live and the property you buy. Closing costs often include things such as:

  • A fee for running your credit report.
  • A loan origination fee, which lenders charge for processing the loan paperwork for you.
  • Attorney???s fees.
  • Charges for any inspection required or requested by the lender or you.
  • Discount points, which are fees you pay in exchange for a lower interest rate.
  • Appraisal fee.
  • Survey fee, which covers the cost of verifying property lines.
  • Title insurance, which protects the lender in case the title isn???t clean.
  • Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.
  • Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.
  • Pest inspection fee.
  • Recording fee, which is paid to a city or county in exchange for recording the new land records.
  • Underwriting fee, which covers the cost of evaluating a mortgage loan application.

HOW MUCH WILL YOU PAY IN CLOSING COST?

Typically, home buyers will pay between about 2 and 5 percent of the purchase price of their home in closing costs. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, buyers pay roughly $3,700 in closing costs, according to a recent survey.Lenders are required by law to give you a good faith estimate (GFE) of what the closing costs on your home will be within three days of when you apply for a loan. But these are just an estimate, and many of the fees listed on the GFE can legally change by up to 10 percent, potentially adding thousands of dollars to your final closing cost bill. Within a day of your closing, the lender should give you a HUD-1 settlement statement, which outlines closing costs. Compare this to your GFE and ask the lender to explain what each line item on your closing costs is and why it is needed. Often, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative, mailing or courier costs charged by your lender. If the closing costs come in high, you can walk away from the loan; there are plenty of lenders who might be willing to offer you lower closing costs.

HOW CAN HOME BUYERS AVOID CLOSING COST

You can also avoid upfront closing costs by getting a no-closing cost mortgage, in which you don???t pay any of the closing costs when you close on the mortgage. Typically, when a lender offers a deal like this, it does end up costing you in the long run: The lender may charge you a higher interest rate on the loan for not paying closing costs, or the lender may wrap the closing costs into the total mortgage owed, in which case you end up paying interest on the closing costs. Finally, home buyers can negotiate with the seller over who pays these closing costs. Sometimes the seller will agree to assume the buyer's closing costs.

By Zillow

Rent to Own/ Lease Option

Posted on June 1, 2014 at 11:40 PM Comments comments (13497)

Sometimes the prospect of purchasing a house can be extremely intimidating. Potential buyers often overlook several options that can ease the process of home purchasing. One of these options is the "rent-to-own" alternative. In a rent-to-own situation, the buyer signs a contract which is a mixture of lease and an option to buy the house within a certain period of time. Then, the buyer lives in the house and pays rent with an additional rent premium that will be credited to the purchase price if the house is bought. An "option fee" is also usually required, and can range from 1-5% of the purchase price of the house.

Essentially, the way rent-to-own leases work is by giving the buyer time to build equity, save cash, and repair credit. At the same time, the seller gets an opportunity to sell the house, as well as gain additional income from the rent premium and option fee. Furthermore, the seller's risk is lessened because even if the buyer does not exercise the purchase option, the seller gets to keep the option fee and additional rent premium, which would have gone toward the house in the event of a purchase. That being said, the "option period," the period during which the buyer can purchase the house, is usually less than three years. If this period comes and goes, and no other negotiations or arrangements are made between buyer and seller, then the lease is probably over and the seller will look for a new tenant to take the rent-to-own option.

The sale price and rent amount are determined by the market, but negotiations can be made, as with any financial dealings. If you are a buyer, make sure you do your research so that you are on equal footing with the often-knowledgeable sellers. Furthermore, buyers generally try to get a longer option period, so that they have more time to build up savings and prepare for the large purchase. Sellers usually try to get a shorter option period, so that the buyer is forced to purchase the house sooner and thus the seller will receive those funds. However, if the buyer selects a long option period and is never able to exercise the purchase option, they will lose all of the money that was invested via the rent premium and the option fee.

Posted on January 23 By MLP Lending Guide


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