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Credit_reportYou just found out your mortgage interest rate from your lender and it’s much higher than advertised rates. You know your credit is better than that so why is it costing you more than it should to buy a home?

Before you lock in your rate, do some quick investigating.

You could have an error on your credit report that is affecting your credit scores, which in turn, affects your interest rate.

According to a study by the Federal Trade Commission (FTC), approximately one in four U.S. consumers have an error on at least one or more credit reports that could be serious enough to lead to higher rates on loan products. Worse, only one in five consumers were able to obtain a modification to their report.

The three credit reporting bureaus, Experian, Transunion and Equifax, collect data independently – which increases the margins for error. Your lender has no way to know if your report is correct, so it’s up to you to get copies of each of your credit reports and check for errors.

Once a year you are entitled to see a free copy of your credit report. You can go to http://www.annualcreditreport.com and order the reports separately. This is important because banks typically run one report to help set your interest rate. They also check credit reports again just before your loan closing, so you want to make sure that all three credit reports are correct.

If you find an error, you must report it in writing to the appropriate credit reporting agency. Include your name, social security number, date of birth, a copy of the report with the error circled; and copies, not originals, of documents such as social security cards, final payments, release of lien, court orders, or whatever you need to get the report changed.

Make sure your lender has copies of everything so you can prove the credit bureau is in error, not you.

The work you put in is well worth it. According to the FTC, consumers were largely successful at disputing erroneous data.

  • 25% of consumers said the error was corrected by credit reporting agency
  • 80% of consumers said some modification was made to their credit report
  • Over 10% saw their credit scores changed after filing disputes
  • Credit scores changed up to 25 points for 5% of consumers
  • One in 250 consumers saw their scores rise 100 points or more

Once you’ve been able to get each report corrected, you’ll be able to get a better loan rate.

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loansComparing mortgage loans is one of the most important things you can do when you’re buying a home. The decisions you make will determine the size of your monthly payments, how much you pay upfront, and how much interest you’ll pay over the life of the loan.

You might find it simpler to compare loans if you ask each lender a series of questions, including:

  • What is the loan’s interest rate?
  • Will I be charged points?
  • What are the closing costs and all other fees?
  • What is the annual percentage rate, or APR – the rate you’ll pay per year for all the costs associated with the loan?
  • Is there a pre-payment penalty?
  • How is the loan amortized, meaning how quickly is the principal paid off?

Find out the answers to these questions no matter what type of loan you’re considering. Each can affect the overall cost of your loan.

If you are considering an adjustable-rate mortgage, or ARM, you can compare loans by asking:

  • When does the rate adjust?
  • How often does the rate adjust?
  • Is there a cap limiting the amount by which the rate can adjust? What would my monthly payments be if my interest rate hit that cap?
  • What is the index and margin that will determine my rate? How has the index changed over time?

ARMs are inherently more risky than fixed-rate mortgages because you’re gambling on whether interest rates will go up or go down before your rate adjusts. Understanding the best- and worst-case scenarios can help you weigh the pros and cons as you compare loans.

But there’s one other big question to consider before you get an ARM:

  • How does the discount introductory rate compare with rates for 30-year fixed-rate loans?

If there’s not much difference when you compare the two, the fixed-rate loan might be a safer bet. You won’t save much in the short-term, and could save a lot over the long term. Plus, you reduce your risk if interest rates shoot up and you can’t refinance before the rate adjustment.

Finally, to truly compare loans, you have to ask yourself some questions:

  • How long do I expect to stay in my home?
  • Are my job and income secure over the long term?
  • Will I be able to afford higher payments in the future?
  • How comfortable am I with risk?

In the end, the best loan is the one that works for your needs.

Written by Lending Tree on Monday, 07 October 2013 13:30

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short-sale-see-sawWhat does “SHORT SALE”  mean?

Short Sale  means the lender has to accept LESS than what is owed on the mortgage – or the house can’t be sold.

Homes purchased at the TOP of the MARKET (often with a minimal downpayment and/or with a hefty mortgage) can be tough to sell in this market … simply because the expected SALES PRICE is below what the owner needs to repay on the loan.

Given the current real estate environment  (and significant drop in real estate values)   mortgages can be higher than a home’s market value, what it’s worth or what it will likely sell for.  That can make a house virtually unsellable unless the current owner can cough up the difference and  pay-off his or her mortgage  …OR  convince the bank to accept a reduced pay-off.

What constitutes a SHORT SALE:

1) IT’S  NOT A SHORT SALE if the owner can come to  the closing table with sufficient funds to pay off the loan.

2) IT IS A SHORT SALE IF THE BANK  AGREES TO (even if just in theory!) A SHORT PAY-OFF (ie. less than the amount due on the loan).

The difference between Approved & Unapproved Short Sales:

1) With an APPROVED SHORT SALE  the lender has already agreed to the SALES PRICE.

2) With an UN-APPROVED SHORT SALE  the  lender is aware of the predicament the seller is in (having to sell in a market where the value of the property is less than what’s owed on the loan).  An unapproved short sale  means that the lender  has theoretically agreed to the idea of entertaining an offer on the property (for less than the amount owed on the mortgage).  But the lender’s commitment is rather nebulous.  An official commitment  from the bank won’t come until well after the contract offer-to-purchase has been accepted by the seller,  then presented to and reviewed by the lender (AND IT’S THE LENDER WHO HAS THE FINAL WORD!).  The lender is free to entertain the offer in any fashion they please: counter, accept, or reject it outright … Typically an un-approved short sale is a long and drawn-out process (3-8 months).

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For_sale_by_owner_signs_1_4533110Selling your home independently and taking the “For Sale By Owner” route is a well-intentioned concept. The most common reason people do it is to save money on commission — the sales fee that is split between real estate agents and brokers.

That’s certainly something we can all understand. After all, who doesn’t want to save money? But the reality of realty is that a For Sale By Owner (FSBO) seller often ends up losing money — and going through a great deal of hassle and stress along the way.

A home is the biggest financial investment that most people experience in their lifetime. Selling a home is a multifaceted process — a lot more than putting a “For Sale” sign in your yard and listing it online. Even if you or your trusted advisers have personal experience in real estate, you’ll probably be selling yourself short in the sale of your home without the use of a licensed, experienced agent. Let’s examine some of the ways how.

Exposure. It’s a seller’s market. Houston is a thriving city, and it’s not uncommon for realtors to get multiple offers on a properly priced home shortly after it goes on the market. But that demand is created through exposure — exposure that leads to more potential buyers becoming aware of the availability of your home for sale. FSBO severely limits that exposure. A realtor has the ability to market your home on avenues such as MLS (multiple listing services) and third party affiliations like Christie’s that only licensed real estate agents are permitted to use.

Pricing. A real estate agent knows how to price the market using reliable, real-time data. Some FSBO homes are underpriced because the seller doesn’t realize the true market value. Most FSBO homes are overpriced — sellers might get greedy or unrealistic because they love their home for sentimental reasons or they have read too much in the press. A real estate agent takes emotion out of the equation and strives to get you the best price for your home based on current data and market conditions.

Negotiations. First, there’s the complicated issue of agreeing on a sale price or of handling multiple offers. And would you believe that’s actually the easy part? Navigating and troubleshooting the many steps that result in a successful closing is where a realtor’s expertise is vital. The most difficult part of a real estate transaction is from the contract to the close — a place where deals can become very contentious, sometimes litigious, and easily fall apart. Once you agree on price, the next negotiation is repairs. A qualified real estate agent has a wealth of experience of inspections and negotiations under his or her belt. The average seller may have only been through this process once or twice.

Time. Think about the hours a real estate agent spends showing a property, doing research for pricing, marketing, negotiating and communicating with buyers and buyers’ agents. Time is money, isn’t it?

Expertise. There’s a saying in the court of law: “The person who represents himself has a fool for a client.” To put it another way, if you had a cavity, would you try to fill your own tooth? Of course not.

An experienced professional realtor will guide the seller through the home selling process and avoid the countless pitfalls and liabilities that can catch a homeowner by surprise. These problems could include legal, logistical and even ethical issues that homeowners can fall victim to. Real estate agents have been educated, trained and certified to handle all of these issues.

If these factors don’t daunt you, then perhaps For Sale By Owner is the route for you. If they do, then I’d say you just might want to consider hiring a licensed real estate agent.

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If you practice fence etiquette and bone up on local zoning regs, you can avoid neighbor disputes.

Must-dos

Observe boundaries: Don’t risk having to tear down that fence by going even one inch over your property line. Study your house line drawing or plat or order a new survey ($500 to $1,000) from a land surveyor to be sure of boundaries. Fefence3nce companies usually install a foot inside the line, to be on the safe side.

Respect limits: Fencing companies obtain permits and must know local zoning regulations for height, setbacks, and other restrictions. Height limits typically are 6 feet for side and back yards; 4 feet for front yards. More restrictive rules often apply to corner lots, where blind curves can limit driving visibility. To avoid disputes, review restrictions with your fence company before choosing a fence.

Follow HOA rules: Fencing companies are not responsible for knowing home owners association dos and don’ts; that’s your job. Unless you want to suffer committee wrath, and engage in a dispute, follow HOA guidelines. HOAs can dictate style, height, and maintenance. If your HOA wants all structures to match, you won’t have much wiggle room.

Nice-to-dos

Share your plans: No one likes surprises. Before installing, save yourself a fence dispute and have a conversation with neighbors. If property line issues exist, resolve them before installation. No need to show neighbors the design–that’s just inviting trouble. They have to live with your choice unless it lowers property values or is dangerous.

Put the best face outward: It’s common practice to put the more finished side of your fence facing the street and your neighbor’s yard.

Maintain and improve: It’s your responsibility to clean and maintain both sides. If an aging section starts to lean, shore it or replace it.

Good-to-knows

  • The term “fence” includes trees or hedges that create barriers.
  • If you have a valid reason for wanting an extra high structure, to block a nasty view or noisy street, apply to your zoning board for a variance. Neighbors can comment on your request during the variance hearing.
  • If your neighbors are damaging your fence, take photos and try to work it out with them first. If they don’t agree to repair it, take your fence dispute to small claims court. Award limits vary by state: $1,500 in Kentucky to $15,000 in Tennessee.

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2nd HomeDo you ever find yourself considering the possibility of purchasing a second home?  Many consumers purchase second homes to use as vacation homes, rental properties, for tax purposes, or as a future retirement home according to the National Association of Realtors.  In fact, the report revealed that second homes, which include vacation homes and rental investment properties, accounted for 36 percent of all homes sold during the reporting period.

Pros for buying a second home:

  • A second home can grow in value over the years, making it a wise investment
  • Low interest rates.  Increases the affordability by lowering the monthly repayment
  • In some cases the interest & taxes are deductible for a second home, an added tax benefit

As with any major purchase, it’s important to do your homework before you buy.  Then, while you’re reaping the rewards of owning a second home, you’ll have the peace of mind that you’ve made a smart investment into your future!

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1031_ExchangeMisconception #5: I don’t need a qualified intermediary.  My attorney or accountant can hold the sale proceeds until the replacement property is purchased. A qualified intermediary is not necessary.

A qualified intermediary is essential to completing a valid delayed exchange.  Basically, the IRS disqualifies any person or entity from acting as an intermediary if that individual has had an existing business relationship with the taxpayer within the past two years.

Although that statement is somewhat broad, some parties who may be considered disqualified parties are the taxpayer’s relatives, attorney, accountant and real estate broker.  The IRS provides that neither the taxpayer nor any disqualified person or entity can come into receipt of the exchange funds during the exchange without the exchange being voided.  Using a well-established, qualified intermediary enables a taxpayer to avoid situations that might void an otherwise valid exchange.  It is also a good practice, obviously, to research the expertise and security of the qualified intermediary.

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