Buying a home is a complicated process, and it can be very intimidating for the first-time home buyer.  The good news is you've got someone here to help.

Today's scary market complicates what's already a daunting experience for most home buyers or someone seeking a mortgage. 

In the past, Predatory Lending has been a huge problem.  Many potential homeowners were taken advantage of, because they were unaware of  the process, had a bad financial situation, or less than perfect credit.  So...How do you protect yourself? 
                                                                           
                                                                  Education is the Key!

The following is an easy to follow step by step checklist that will help you prepare for the "Ultimate" home buying experience.  This checklist starts out approximately six months before you hope to start shopping for a home, but it can be accomplished quicker as long as you walk through all of the steps.

                                                                          6 months out

Get a copy of your credit report. Don't leave yourself in a position where you're required to pay a disputed collection account to get the loan you want or by paying a higher rate of interest unnecessarily, because of credit report errors.  Give yourself the necessary time to obtain the optimum credit score, so that you can get the best rate available when the time comes.    You are entitled to one FREE credit report per year at www.annualcreditreport.com.  But it is important to mention that this report will not include your credit scores, you usually need to pay to receive those.

                                                                          3 months out

Now, it's time to interview lenders and individual mortgage professionals, before you even start to sort through your mortgage options.  That's right...you heard me correctly, you need to interview the lender, not the other way around.  Working with the wrong mortgage professional  or lender could potentially be the number #1 biggest headache in the mortgage process.  One with detrimental ramifications that can last the entire life of your loan.  It's important to do your homework!  There is a list of 9 critical questions that you need to ask a mortgage professional to know if they are the right individual for you.  We discuss that topic in more detail in my training program, "Need Mortgage Info now!!!"  Once you have established a trusting relationship with your mortgage professional, it is time to get pre-approved.  By that I mean credit approved, and not just pre-qualified.  Getting a credit approval is as good as money in the bank and make your offer stand-out when negotiating with a seller.

                                                                         2 months out

• Reduce your credit utilization, don't open or close any accounts.
• Do you plan on obtaining a gift from a relative for down payment?  Now's the time to start documenting and creating a paper trail for source of funds.
• Begin researching neighborhoods, schools, and areas you like.
• Keep an eye on interest rates and ask how long your credit approval is valid.

                                                                     The House Hunt

This is when it gets exciting!  Have your Real Estate Professional begin to show you homes in the areas you have researched.  Have a House Hunting "Features" checklist handy to jot down all of the items to consider while you're looking at homes.  If you need a Features Checklist, you can find one here .  Take notes, a lot of notes, and maybe snap a picture.  It's difficult to keep everything straight when you've looked at dozens of homes.  When you are ready to make an offer, get a "Custom Fit" copy of your Credit  Approval Letter from your lender and submit it with your offer to purchase.

Most importantly......Have fun!  If you need more individualized coaching and someone to walk you through the process step by step...I can help!

Have a great day!

Karen :)

copyright (c) Karen Simpson-Hankins, It's Your Life, LLC, all rights reserved.

One of the most important aspects of obtaining a mortgage is getting the best interest rate.

Most borrowers rely on their bank or mortgage broker to secure their interest rate without researching rates or understanding how they change.  Whether you are someone interested in the financial markets or not, it's wise to get a better understanding of how interest rates are determined , how they move, and why.

Residential mortgage interest rates and their daily fluctuation in pricing are determined from the performance of long term mortgages that are sold on the secondary market (Wall Street) and packaged into mortgage backed securities (MBS or mortgage bonds), not U. S. 10-Year Treasury Notes, which is a common misconception.

Following the Fannie Mae (FNMA) 30-Year Mortgage Bond, along wit the 25-day moving average, will always be a good indicator of what rates are doing.  When you add-in other factors such as job reports, the Consumer Price Index, Gross Domestic Product, home sales, Consumer Confidence Index, and the release of the "Fed Minutes" or changes to the Federal Funds Rate, it can get incredibly exciting and, also challenging to forecast what's gong to happen next, but, don't let that overwhelm you.  I can help, and show you what questions to ask.  You want to work with a mortgage professional that is  on top of what's going on in the market, at any given moment, and NOT  someone just looking at a rate sheet.

Remember...this is one of the biggest purchases you will make in your life time! You do NOT want to get stuck paying more interest over the entire life of your loan , it really adds up!

Here are a few important questions to ask:

• Ask you mortgage professional how they keep track of what the financial markets are doing and their affect on interest rates. 
  
• Do they have the ability to anticipate, if and when, there's going to be a rate change?
• Do the interest rates they offer change more than once a day?
• What is their interest rate lock policy?  Is the interest rate automatically locked-in at application?  Do you have the ability to play the market and take advantage of interest rate decreases during the loan process?

Locking in the interest rate at application is NOT always the best plan and that's when the relationship with your mortgage professional becomes extremely important!

Make sure that you are working with someone that you feel comfortable with and trust.  Build that relationship before you even begin the house hunting process and the entire process will go a lot smoother and you will save big bucks.  Don't wait until you're in the middle of a 30-day closing and get stuck with whatever is given to you.  There are so many more options available to you...

To subscribe to my blog and stay up-to-date on what's happening...click on the RSS Feed in the side bar to the right ------->

Wishing you great success,

~Karen

What’s Your score?
 
The first step in becoming an educated, savvy mortgage “Shopper” is to know your credit score.

In some cases, people end up paying a higher rate of interest at the last minute, because they didn’t do their homework and find out exactly what their credit history and credit score looked like.

Credit report errors do happen!

   Get a copy of your credit report about six months before you’re ready to start shopping for a home.  That way, if there are errors, you will have the opportunity to clean things up and correct any mistakes or dispute items without the pressure of a 30-day closing hanging over your head.  Talk about stress!

I can’t tell you the number of times that I’ve worked with clients who end up paying anywhere from .50 to 1.50% higher interest rate, because they didn’t have time to fix their credit and satisfy their closing deadline. 

On a $100,000 loan @ 4% interest, if there is a 2.75% add-on to pricing for a low credit score, it could raise your interest rate up to 4.75%. That’s a difference of $750.00 per year in extra interest that you will be paying over the life of the loan or you would be required to pay up to $2,750.00 in additional origination fees to keep the original interest rate of 4%. 

Ways to raise your credit score

  Raising your credit score is a task that must be accomplished over time.  The credit score is an assessment of credit history factors.  Therefore, it’s extremely difficult to raise your score during the short period of time that you’re applying for a loan.

It is also important to be aware of the positive and negative factors that affect your rating.  The higher the key factor or reason code that is listed on your report, the more negative weight it’s given in the calculation of the credit score.  The credit scoring systems use your credit history to generate your score, sometimes referred to as your FICO score.

Credit scoring is not underwriting a loan, but assessing the risk of repayment based on the consumer’s pay history and debt utilization.  It’s like taking a photograph of the consumer’s credit profile at the particular time the report is obtained.

• 35% of your score reflects late payments, collections, public records, and past due accounts.
• 30% is outstanding debt balances on revolving credit.
• 15% is length of credit history.
• 10% comes from credit inquiries.

The best way to clean up your credit is to do the work yourself and establish positive credit habits.  Avoid companies that promise to fix your credit for a fee!  Sometimes, referred to as “credit repair” companies or rapid re-score companies.

There are a number of services that claim to clean up or “fix” your credit, whether the items are correct or not.  They are using the “Fair Credit Reporting Act” to often manipulate the 30-day investigation process. Theses services are expensive, with no guarantees.  If the item is correct and someone lies about it, it could be construed as fraud.

These days…Lenders are very sensitive to anything that even resembles fraud…don’t go there!

Have a great day!

~Karen :)

Did you know that only YOU can determine the mortgage debt that you can afford?

Here are a few questions that I would ask a client sitting at my desk:

1. How much do you feel that you can afford?
2. Have you thought about what monthly payment would feel comfortable to you?
3. Have you calculated your other monthly expenses?

I can’t tell you how many times I’ve asked those 3 questions, and the client just looked at me with a blank stare and said, “I don’t know…that’s what I thought you were going to tell me?”

I would follow up with another question.  “Are you currently paying rent?”  The client would then say something like, “Well...I’m paying $800 a month now, but I think I can pay more?”

I would then ask, “Do you know what your total out-of-pocket expenses are per month?  Expenses like car payments, credit card payments, student loans, food, clothing, gas, entertainment, gifts, day care.  I can tell you what the lender will be willing to lend based on your income and current debt, but that doesn’t really tell YOU what you can afford.

BEFORE…you get pre-approved for a mortgage, you need to:

• Evaluate your monthly expenses
  
• Save for emergencies and other unexpected expenses
• And know what payment feels comfortable to you.
  

There is nothing more depressing than not being able to go on vacation, because your “dream home” has just eaten up your entire budget and there’s no money left for fun.  It may be your dream home, and you may love it, but the “new” wears off quickly when you can’t afford to do anything else, and that can be very tough on relationships.

The secret to all this lies in having a budget and making logical, unemotional decisions.  Don’t let that incredible gourmet kitchen or jetted spa, make the decision for you that you may regret later!

There are 3 parts to documenting your spending habits to know what’s available for housing.

• Income
• Expenses
• Savings

Track your expenses for 2 or 3 months, I can guarantee you that most people have no idea what they spend and where.  It can be a shocking experience!

If you are like most people, you will need to reduce your spending habits to allow for the increased expenses incurred with home ownership, this is especially true for first-time home buyers.  Where you make cuts is a personal choice, but here are some ways that can help.

• Eliminating consumer debt
• Minimize luxury spending
• Buy in bulk
  
• Do some research and price comparison for before buying. 

Obtaining a mortgage is a decision that affects all of your financial goals and I want to make sure that your new home fits comfortably into all areas of your financial and personal life.  I understand that it's not just a house, it's your home and one of the biggest purchases that you'll make throughout your lifetime.

I had a dream last night that I won $13,500 in the lottery and I was trying to decide what to do with the winning funds.  I never really thought about why I would specifically dream of winning $13,500.00 instead of millions until this morning, but then I realized... 

I have had some unexpected repairs and expenses these past few months, and $13,500 is the exact shortage in my emergency fund due to the recent unplanned expenses.  I’m sure I’m like everyone else out there with a preconceived comfort level…emotionally, spiritually, and financially, and what stresses me out!

How that relates to our health, stress level, and overall financial well being is important, especially if you are a new or “soon to be” new home owner. 

Buying a home is usually one of the biggest dreams that we have as adults, but signing on the dotted line and obtaining a mortgage is just the beginning of home ownership responsibilities.  There are always maintenance and repair issues popping up even on new homes, and those unexpected personal surprises that can blind side you, if you are not prepared.  Items such as:

• A loss of job or cut backs
  
• A sudden illness or family emergency
  
• Change in family or relationship status
• You break a tooth eating a pork chop and need a crown
• A beloved pet is ill and your hit with unexpected vet bills
• You slide your car into a tree on a icy road, and you have a $500 deductible.

Yeah…you know what I mean!  The list goes on and on, but you get the idea!  These type of things happen to everyone and can spell financial disaster if you don’t have a back-up plan.  Today, with the economy in turmoil, it’s even harder to have an emergency account and a lot of individuals are surviving pay check to pay check. 

Though saving is not always fun, having an emergency fund will give you the confidence that you can handle anything that comes your way. 

The best idea is to work toward establishing a monthly budget which includes establishing three to six months of living expenses in a separate account that is only touched for emergencies. 

Clients ask me all the time, “How much should I be saving?” 

There really is no cut and dry answer, because it depends on your overall financial goals, but a good rule of thumb is 10% of your gross (before tax) income.  It is also important to pay yourself first, that way you are more likely to save on a regular basis.  Treat saving as any other bill…a requirement!

If you are like most people, you will need to reduce your spending habits to allow for the increased expenses incurred with home ownership and establishing a savings plan.  Where you decide to make those cuts is a personal choice, but here are some ideas that will help.

• Reduce non-essential spending and luxury items.  Ask yourself, "Do I really need this?" before you buy.
  
• Eliminate consumer debt.  Interest rates on consumer debt are high, which makes it very difficult to payoff, especially, if you are only making the minimum required payment.
  
• Buy items that you use every day in bulk.
• Research products before buying to eliminate waste.  Shop around and make sure you are getting a good value before you buy, especially on electronics and gadgets.  Check on extended warranties, to help relieve repair costs down the road.

By planning ahead, you will be more successful at protecting your overall financial health, you will be able to maintain the health and safety of your home, and live a healthier, happier, less-stressed life style.

For more information about budgeting, saving, calculating how much house payment you can afford, click here.

Have a great day!

copyright (c) 2012, It's Your Life, LLC, all rights reserved.

Over the past few years, "The Housing Bubble", "The Mortgage Credit Crisis", and the collapse of the "Sub-prime Market" has had a tremendous impact on our overall economy.

Foreclosures are at levels never before seen in our industry.  Thousands of families are struggling to keep their homes amidst rising unemployment, soft markets, deflated property values, and the excessive tightening of mortgage guidelines making it almost impossible for some individuals to sell, purchase, or refinance.

How did it happen?

There's a lot of speculation and finger pointing going on, but its primarily,  because
the  Housing Industry got greedy.

Banks encouraged mass originating of residential home loans from many different distribution channels, because most of the loans that were made were sold and packaged into Mortgage Back Securities and traded on the secondary market (Wall Street.)  This method, allowed the Banks limited risk, because the potential risk was passed on to investors.  Guidelines began to loosen, resulting in casual underwriting, less concern for risk, along with aggressive financing products.  It was all about supply and demand...and there were both!

The various political sectors would have the public believe that ALL of the fault lies with greedy independent mortgage brokers putting people into specialty loan products that provided the broker with the highest commission, despite the affect the loans had on the consumer.  Now I'm sure some mortgage brokers acted irresponsibly, but for the most part, that's just not true!

"The Housing Bubble"  burst, the slump hit and consumers couldn't sell their properties, because they owed more than the current appraised value, which spelled disaster for everyone involved.

So...what happened next?

   Change, change, and more change!  Changes that were actually a reversion back to original guidelines from the past and new disclosures designed to protect us from ourselves, but that don't really address the real issue, but only continue to muddy the water.

Mortgage Money Today

As we move forward, good credit, complete documentation, and planning will be a requirement
when obtaining a home loan.

My mission is to give the consumer, an advocate and the education they need to make good, sound financial choices, and still enjoy the emotional element involved when making such a life changing decision.

YOU ARE ABOUT TO DISCOVER WHAT MOST PEOPLE WILL NEVER KNOW ABOUT HAVING THE ULTIMATE MORTGAGE EXPERIENCE!

So Stay Tuned!

copyright (c) 2012 - It's Your Life, LLC - all rights reserved.