Advice

Creating a rainy day fund

Creating a rainy day fund can be a challenge, but you’ll be glad you have the cash you need on-hand should a crisis arise. How much? Traditionally a fund of this type would be enough to cover household expenses for up to six months. If you’re able to save more, all the better.

2017-09-15T10:04:11+00:00 April 5th, 2016|Categories: Advice, Financial|0 Comments

Are You Ready for Home Ownership

Posted 04/22/2014 by admin
Getting Ready for Home Ownership

Sign #1: You stick to a budget

When you rent, you generally do not have to worry about incidental expenses, such as replacing an air conditioning unit or spending half your paycheck on a new water heater. As a renter, your landlord took care of these unexpected emergencies. With a house, however, you are on your own. If something breaks, it is your job to fix it or replace it. Without a solid budget in place, you might feel like you are forever putting out fires with your hard-earned cash. Budgeting allows you to manage your incoming and outgoing cash, so you know exactly how much house you can really afford.

Sign #2: You have saved money for a down payment and closing costs

If you are going with a traditional mortgage, you will need to put down 20 percent cash toward the purchase of your home. For example, if you are buying a $150,000 house, you will need a down payment of $30,000. If this is out of your reach, there are other financing options available, such as an FHA loan. Guaranteed by the federal government, these loans allow buyers to purchase homes for as little as 3.5 percent down. If you go this route, however, you will end up with a higher monthly payment. You will also most likely have to pay mortgage insurance, which protects your lender if you default on your loan.

You must also factor in closing costs, which generally make up between 3 and 6 percent of the home's purchase price. In many home sales, however, sellers agree to bear these costs.

Sign #3: You have a stable career

Taking out a mortgage is a huge commitment. If you default, the damage to your personal credit can stop you from making other significant purchases for years to come. Foreclosure can also cost you thousands of dollars, bad credit, and a damaged reputation. If your lender obtains a court judgment against you, it can even garnish your wages. Before you purchase, consider whether you have the job stability to maintain a consistent cash flow. If your paycheck is unreliable, it is not a good time to buy.

Sign #4: You have a healthy emergency fund

Life always throws curveballs. An unexpected health crisis, a new baby, or a divorce can leave you reeling emotionally as well as financially. If you need to take time off work for an extendedperiod, make sure you have the reserve funds to continue paying your mortgage on time.

Sign #5: You are not burdened by debt

When you apply for a mortgage, lenders take a hard look at your debt-to-income ratio. This figure shows how much money you are bringing home versus how much you are paying out. According to generally accepted industry standards, your total debts, including your mortgage, should not consume more than 36 percent of your monthly income. If you have a bunch of credit cards siphoning away your income each month, consider paying them down before you apply for a mortgage.

If one or two signs are missing from your checklist, all is not lost. If you truly want to own your own home, you can always find a way to realize your dream. Whether you create a detailed budget or pay off some old debt, your path to home ownership might be shorter than you think.

2014-04-22T08:00:33+00:00 April 22nd, 2014|Categories: Advice, Home|0 Comments

Buying a Foreclosed Home

Posted 04/08/2014 by admin

Pros
On the plus side, the pre-foreclosure stage is generally a good time to buy. Because the loan has only been in default a short time, the owners are probably still maintaining the home in good condition.

Because default notices generally give the owner a few months to bring the loan up to date, this gives prospective buyers time to do their homework on the house. This includes gathering data on the home's fair market value, which can be done by accessing county auditor information and sales of comparable houses in the neighborhood. If youare working directly with the owner, you can also hire a home inspector to perform a comprehensive inspection of the property.

Finally, if the home is not yet listed on the market, you do not have to worry about competing with other buyers. This can lead to a better price.

Cons
Before you fall in love with a pre-foreclosure, be wary of potential problems. If the owners can't pay their mortgage, they have probably been in serious financial trouble for several months. As a result, the house might need extensive maintenance. The majority of pre-foreclosures are sold "as is", which means buyers are on the hook for repairs.

Additionally, check the home's title to determine whether or not it is encumbered by judgment lines or a home equity line of credit.

Foreclosure Auctions
If the owner fails to pay the outstanding mortgage, the lender will most likely move on to the auction stage of foreclosure. Each state has its own rules regarding real estate auctions, but there is usually plenty of public notice regarding these sales. House hunters can obtain auction information by checking local newspapers and websites that specialize in posting foreclosure auction information.

Pros
Most mortgage lenders do not want to be in the business of owning real estate. This means that lenders are highly motivated to auction off foreclosures quickly. Buyers can take advantage of this fact to get a great price.

Cons
By the time a property goes to auction, the owners have probably known for several months that they are losing their home. It is not uncommon for disgruntled owners to intentionally inflict damage before they vacate a property. You might walk into a house to find filthy carpets, damaged walls, and a myriad of other problems.

You might also have to buy the home sight unseen. Unless you viewed the home in the pre-foreclosure stage, you will not have an opportunity to inspect it before the auction. Furthermore, you must have the financial means to pay cash for the property if you make the winning bid.

Real Estate Owned Properties
When a house fails to sale at auction, the lender ends up repossessing it. In other words, the bank becomes the new owner. These properties are known as "real estate owned" or REO.

Pros
If you are patient and willing to wait for the right property, you can get a good deal on a bank-owned home. REO properties cost lenders money. The bank must pay for maintenance, upkeep, and any liens on the property. If you have solid financing in place, the lender might accept your offer even if it is below fair market value.

Cons
Because you are dealing with a big corporation instead of a typical seller, you will probably have to wait a long time for the bank to respond to your offer. REO properties typically take a very long time to close. This can be frustrating to house hunters who need to move quickly due to a job relocation or children starting school.

Get an Expert Opinion
If you are serious about buying a foreclosed home, it is worthwhile to seek the advice of a real estate agent who specializes in foreclosures and REO properties. These agents are usually aware of the foreclosures in the area and, in most cases, know which properties need major renovations. A good agent can also give you tips on how to handle yourself at an auction.

2014-04-08T17:12:33+00:00 April 8th, 2014|Categories: Advice|0 Comments

Prescreen, Valid Offers and What They Trigger

Posted 01/03/2013 by Anonymous
If you receive a mortgage loan offer through the mail chances are the offer is the result of a prescreening process. Lenders prescreen “raw” data made available by the credit bureaus. Without viewing personal information, Lenders are able to identify potential customers who may qualify to receive loan offers based on their credit report. Based on this prescreen, the lender will then purchase the names and addresses of those customers who they wish to offer a mortgage loan. Lenders are required by law to make a valid offer to those customers whose information they have purchased. This prescreen is considered a “soft” credit check or an inquiry, and as such will have no impact on your credit score.While this valid offer may say preapproved it does not mean you are guaranteed a loan, as the amount and terms are based on a full review of your credit report. When you respond to an offer the lender will ask for permission to view your actual credit report. This is necessary step in order to check your current credit score, view any outstanding debt and view your payment history. All of which are critical to qualify you for a mortgage. What Happens Next – Trigger Leads When you apply for a mortgage and a credit check is run, your account is flagged and packaged by the major credit bureaus and sold to lenders who are willing to pay anywhere from $25 to more than $100. These “trigger leads,” as they are often referred, since running your credit report triggers them, include your name, credit history, your FICO range, as well as your address and phone number. They result in unwanted phone calls and mail offers that are in no way related to your realtor or the lender you may be working with to secure a mortgage. Unfortunately as a trigger lead, you as the consumer are at the mercy of these too-good-to-be-true offers that reflect badly on honest mortgage professionals who respect your privacy and your personal data. It’s important to have a trustworthy and professional mortgage specialist on your side when making one of the biggest financial decisions you will ever make,. Don’t be lured by the rate alone. Where you find the lowest rate advertised, you’re likely to find the highest fees. Always, look for with a lender that has your best interests at heart. For more information call me today at Embrace Home Loans. 

2013-01-03T17:00:33+00:00 January 3rd, 2013|Categories: Advice|0 Comments

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