Five Tips to Improve Your Credit Score

If you're applying for a mortgage or any other kind of loan, it is important to have a solid credit score. If your credit score is low, you'll be offered a much higher interest rate. If it is extremely low, you might not qualify for a mortgage or other kind of loan at all. Millions of people in the United States have low credit scores, and unfortunately, few people are working to change that. If your credit score is low, do all that you can to begin that climb toward a perfect score. Here are five tips you can use to start on that journey to better credit:

Tip #1: Close old accounts.

When your credit score is figured out, one of the things they take into account is your debt potential. Sure, you might not have much debt today, but if you wanted to, how much debt could you accumulate over the next few hours? For example, if you have three credit cards, each with a limit of $10,000, your debt potential is $30,000. That's pretty high, even if you are only carrying balances on two of those cards and the total of those balances is under $500. So, if there are cards you are not using, close them. Don't forget that store credit cards, like the ones they get you to sign up for in order to get a percentage off of your purchase, also contribute to this debt. Make sure that you close the accounts if you don't want them - cutting up the card isn't enough.

Tip #2: Negotiate with lenders to pay old debts.

Are you having trouble paying an old credit card bill or other kind of loan? Maybe you have a $5000 doctor bill from five years ago before you had health insurance. Maybe you bought a car and still owe money on it, even though you crashed that car and it is now a pile of scrap metal. These kinds of debts are weighing you down, and it is tempting to pay other bills first and pay these only if you have some extra money lying around. Don't fall into that trap! Instead, call lenders and work out a payment plan that works for you. If you can't pay off the debt all at once, ask if they are willing to reduce the debt a bit if you pay it off more quickly. Or, if you can't afford that, as if they will accept lower monthly payments if you pay a higher interest rate over time. The goal here is to pay your debts on time every month, whatever that payment plan will be.

Tip #3: Check for mistakes.

You should be checking your credit score annually for mistakes. Yes, mistakes happen, even on such an important document as your credit history report. Because of basic human error, numbers get entered incorrectly quite easily. This means that you could be listed as having $100,000 worth of debt instead of $10,000 worth of debt! Even worse, if the person enters the social security number incorrectly, you could be listed as having debt when you don't have any at all. The errors can also come directly from your lenders, or they could be a result of identity theft. No matter how they happened, check your credit score annually to clear up the problems.

Tip #4: Ask for help.

A financial professional is your best bet for raising your credit score significantly. If you're just not good with money, it might be time to admit that and ask for help. A financial professional and recommend a budget plan that works for you, as well as help you negotiate your bills with lenders or, if it is in your best interest, consolidate your loans.

Tip #5: Avoid foreclosure.

Foreclosure wreaks havoc on your credit score, and that information remains on your credit history for seven years n most cases. Instead of allowing your home to be foreclosed, it is a much better option to try to sell it yourself. That isn't always possible, be f you foresee money problems in your future, do your best to get your home on the market and sell it in order to repay your own mortgage. It is better than the bank doing it for you!

Of all of the tips above, there is one financial tips that is even better - be proactive about your financial history. Although dealing with money can be difficult, if you are responsible from the start, you should be able to keep your credit score fairly high.

By: Stephanie Larkin

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Your First Mortgage - What to Expect

Are you applying for your first mortgage? Buying a home can be scary, and getting a mortgage can be confusing. If you are buying your first home, make sure that you understand the following facts about mortgages. Know what to expect going into the deal and you’ll be much more prepared to deal with costs and other issues.

First, when you apply for a mortgage, you’ll likely get pre-approved for a certain amount. This gives you a starting point. You’ll know your price range when you look at houses and you’ll have an idea of the closing costs and interest rate you’ll be paying. The mortgage lender will give you this information as a Good Faith Estimate. Those figures will be good for a limited amount of time, but when you really do find a home and apply for the mortgage, the rates shouldn’t change much.

After you get pre-approved for a mortgage, you should begin house hunting. During this time, you should be savings up for your down payment, as well as for closing costs. In most cases, a mortgage lender will want you to have about 20% of the total cost to put up as a down payment. If you have less than that, you will probably still be able to get a mortgage as long as you have decent credit. However, if you have less than 20% to put down, your mortgage lender may require you to purchase private mortgage insurance until you have the full 20% paid off. This is an extra expense for which you must be prepared.

Speaking of extra expenses, don’t forget to plan for closing costs. Most people don’t realize that the process of getting a mortgage can be extremely expensive. It is important that you are prepared to deal with all closing costs, which usually, in total, run about $3000 to $6000 depending on your mortgage situation and where you live. You can add these to the originally mortgage, but if you do so, you’ll have to pay more in interest, so it is always a good idea to try to pay them off right away. Included in closing costs are fees for appraisal, underwriting, long distance calling, traveling, document preparation, title insurance, title transfer, lawyers (if needed), survey, and more.

After negotiating with a seller over the price of the house, it is time for you to get approved for the mortgage. During this time, you deal with be in escrow, with an escrow company holding your down payment. The mortgage company with which you apply will look at all of your information, including your debt to income ratio and your credit score, and offer you an interest rate on the mortgage loan that you’d need to purchase the house. They’ll also go over additional costs with you (like the closing costs), as well as fees you’ll be required to pay if you do things like miss payments or pay off the mortgage extremely early. On top of that, you and your mortgage lender will have to talk about the mortgage term - the length of time it will take you to repay the mortgage. In general, a longer term means lower monthly payments, but a short term means a lower interest rate.

You’ll also be able to talk to your mortgage lender about paying for points. Points are set amounts of money you can pay to lower your interest rate by one percent. There may be a limit as to how many points you can purchase, but in most cases, you’ll want to pay for one or two points at least, if you have the money.

With your mortgage, you’ll also become aware that not all mortgage rates are created equally. In most cases, you’ll be offered and adjustable interest rate, with caps as to how high it can jump in a year and over the life of the loan. As the national rate changes, so will your interest rate. However, on the other hand, you might also opt for a fixed interest rate. This might not be offered right away, but if you refinance your mortgage, you can often get the fixed interest rate.

Getting your first mortgage is tough. The process is long, and it is easy to get confused if you’ve never done it before. However, with a good real estate agent and mortgage lenders on your side, you should be able to figure out the best mortgage option for you. Make sure you do your research, and you’ll be able to get a mortgage that makes sense for your situation.

By: Brian Jenkins

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How to Time the Mortgage Market to Get the Best Rate

When you get a mortgage, one of your top priorities should be shopping around for the company that has the best interest rate offer. What you’ll be offered from one company to the next will vary, depending on your specific circumstances. However, you can also find the best interest rates just by studying the mortgage market. You can use the following tips to time it so that you’re getting the lowest interest rate possible.

Tip #1: Study the market in terms of cycles.

When it comes to real estate, everything about property moves in cycles. The prices of real estate and the mortgage interest rate cycles are not always in sync, simply because they are not 100% dependant on one another, but the concept is the same - what goes up must come down. The opposite is true as well. If interest rates are sky-high right now, it is only a matter of time before the federal rate is cut to decrease foreclosures and entire people to buy homes. If interest rates are really low right now, it is only a matter of time before that bar is set a bit higher so that banks can make more money.

Study the cycles in the past ten years. You should see a regular up and down wave and by using that graph, you can figure out where in the cycle you are currently. Try to time your real estate purchase so that you are buying when the interest rates are still very low.

Tip #2: Pay attention to politics.

Whenever there is a new political leader, he or she makes promises regarding money and interest rates. While some never follow through on these promises, others do. If you want to time the market so that you get the bet mortgage rate possible, be aware of these interest rate proposals and when the election will be held. If they’re proposing to cut the rate (or do things that will make it naturally lower), you might want to hold off on your purchase until after they re elected. This is always a gamble, but it might be one worth taking.

Tip #3: Make market work for you no matter what.

One of the great things about the real estate mortgage market is that you can make it work for you, even if rates are high right now. If you can’t wait to make a purchase, go with the higher interest rate, but choose a balloon mortgage option or choose an option that has you paying out over the course of a long, long time. That way, you’ll pay as little as possible right now but when the rates are lower, you can refinance.

Refinancing isn’t cheap, so you don’t want to do it often. In fact, it is a good idea to wait until interest rates go very low and then refinance just once during the life on your loan. Try to lock in that low, fixed interest rate when you can, making sure that the option to refinance is available to your when you first sign the agreement for the mortgage.

Tip #4: Work with a mortgage professional.

A third party can help you figure out everything having to do with mortgages. Although this is an added expense when you’re applying for a mortgage, by working with a mortgage professional, you really can find the best options for you. A mortgage professional, after all, is dealing with interest rates and other issues every single day. Find someone who is good at his or her job and you’ll be able to find the best rate for you at the best time for you.

Remember, even though it is important to do your homework and watch the mortgage market, the very best way to get a good rate on your mortgage is to be an excellent mortgage candidate. That starts with making sure that you have a clean credit history. Pay off all of your past debts and make sure that your credit history is free from all errors. In addition, take some time to figure out your debt to income ratio. If that is too high, you won’t be approved for a loan no matter how good your credit score may be.

Basically, a mortgage lender offers you a lower rate if he or she can be more certain that you’ll repay your debt. Yes, the mortgage market has something to do with it, but by following the tips above and making sure that your credit history and income is on par, you can be sure to get a great interest rate.

By: Stephanie Larkin

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How Your Credit Score Affects Your Mortgage Rate

Mortgages can help you purchase a home, even when you don't have $100,000 or more saved up to do so out of pocket. However, mortgages aren't free. In order to get a mortgage, you have to agree to pay the mortgage lenders a fee in the form of interest. However, interest isn't a fee that is set in stone. Depending on a number of factors, you might be offered a higher or lower interest rate. One of these factors is your credit score.

Your credit history is a compilation of all of your financial records over the past seven years. This information is reported on a credit history report, which is compiled by three major companies - Experian, Equifax, and TransUnion. Creditors - including mortgage lenders - can order your credit history report from any of these major credit-reporting bureaus. Using this credit history report, these lenders will decide what interest rate to offer you on your mortgage.

When talking about your credit history, you'll often hear people talk about your credit score. A credit score is simply a number that reflects an overview of your credit history. In most cases, your credit score will serve as a way for mortgage lenders to qualify you or deny your approval for the loan. Having a lower credit score is not the end of the world, but it may make mortgage lenders determine that you should be in a higher interest rate bracket.

How does this work, exactly? Well, when you start out in the financial world, you don't have any credit. As a result, your credit score is moderately low, but not horribly bad. Every time you pay a bill on time or otherwise show that you are financially responsible, your credit score rises a bit. Every time you miss a payment or do something else financially irresponsibly, your credit score drops a bit.

When a mortgage lender is looking at dozens or maybe even hundreds of applications for mortgages, he or she doesn't have time to go through every single one right off the bat, especially since many of the people pre-approved may never actually decide to take a mortgage. So, mortgage lending companies instead set certain limits. For example, your credit score might have to be over 600 to qualify for any kind of credit. Every mortgage lender has a different magic number, and sometimes these numbers can be very specific (ie, you need to be above a 589). Therefore, work to increase your credit score point by point - every little bit matters!

After your credit score qualifies, you may be divided into even more groups. These brackets will determine the credit rate you are offered. Of course, lenders will look at people who are on the fence between brackets. It is at this point that your credit history means a lot. If your credit score is lower because of mistakes you made over 5 years ago and since then you've cleaned up your act, you might get bumped down to a lower interest rate. It is never too late to start improving your credit.

Are credit scores the final say when it comes to your mortgage's interest rate? Not at all. There are many other things that also affect a lender's decision about the rate you'll be offered. If your debt to income ratio is higher, you'll have a higher interest rate, for example. You can also expect a higher interest rate if the home is not your primary residence, if you include closing costs in with the mortgage premium, and if your total real estate price tag is extremely high. Mortgage lenders consider your credit score as just a part of the equation.

So, that means that you need to do all that you can to improve your credit score if you are going to be applying to mortgage lenders anytime soon. Some of the best ways to improve your credit are to use the following tips:



* Close any credit card accounts that you don't open. The higher your overall credit limit, the lower your score will be.

* Correct any mistakes you might see on your credit history report.

* Pay your bills on time.

* If you have past bills that have fallen to the wayside, talk to a debt consolidation company or negotiate a new payment plan with the lender so that everyone is happy.

* Don't carry huge balances on your credit cards. Just because you only have to pay the minimum doesn't mean that you shouldn't try to pay more if possible.


Remember - your credit score is the key to your interest rate, so do your best to keep it as high as possible!

By: Stephanie Larkin

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Questions That You Should Ask Your Reverse Mortgage Lender

Chances are you'll have never met a reverse mortgage lender before but you'll be placing your home and your future happiness in their hands. Even before you go and visit them you should have done your research and have a list of questions to put to them. A lack of preparation or forethought on your part could jeopardize your retirement plans, your wealth and your happiness.

A reverse mortgage can be a great way for seniors to unlock the wealth stored as equity in their homes, giving them extra income or funds to use in any way they want. However, this type of mortgage is a complex financial product and needs to be fully understood in order to select the program that'll work best. Therefore, don't be reticent about asking questions, and don't make any decision to proceed until you're entirely satisfied that you know what you're about to undertake.

Assuming you qualify, here are some of the more important questions you should ask your reverse mortgage lender.

1. Why are they selling you one particular program and not another? Remember, there are three main types available; HECM (government insured), Home Keeper (FannieMae administered) and proprietary (often called jumbo because there is no limit on the amount that can be borrowed). Each has advantages and disadvantages. It's important that you get the right program. Some, lenders might be 'upselling' a product over another one simply because they make more money on the deal and not because it's in your best interests.

2. Ask exactly how much you can borrow, the start up and closing costs (these can be considerable), how much equity will be left in your home after 5, 10, 15, 20 years etc (the originator - the broker - should be able to give you these figures. What are the annual set-aside charges?

3. Are there any penalties or charges for early repayment of the loan? Also, ask about refinancing and what charges would be incurred if you decide to borrow more in say 5 or 10 years time, assuming your home's value increases over this period.

4. If there is more than one borrower, ask about what happens when one dies; will the loan be immediately payable. Does it matter if the borrowers are married or not? What happens if one of the borrowers moves out?

5. What happens if the borrower has to go to a nursing home? Will the loan become payable because the borrower is not living in the home?

6. What obligations does the borrower have after getting the loan? Ask about house insurance, maintenance etc. and how these might invalidate the loan agreement.

7. What professional body does the lender belong to? Do they belong to the National Reverse Mortgage Lenders Association (NRMLA) or a state governed organization?

8. How can you receive the money: monthly payments, line of credit lump sum or a mixture of these? And, are there any charges if you decide to switch payment type?

The above are some of the more salient points; however, you should try to draw up a list of as many detailed questions as possible. By submitting detailed questions, and by receiving detailed answers, can you feel comfortable with the program being offered by your reverse mortgage lender and, more importantly, that you get the best program for your specific requirements.

By: Robin OBrien

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