CarolinaMortgageConnection.com

Posts Tagged ‘Credit Tips’

So you have saved at least a month’s worth of income. You are ready in case some quick emergency comes up. That is awesome! Now it’s time to attack!

It’s time to say goodbye to that debt!

While creating your savings, you found extra money somewhere. Its time to use that extra money to pay off the debt. But first you have to devise a plan of attack. Most “experts” agree that you should go after the highest rate card first. Again, I disagree with that. Don’t worry about the rate right now. I want you to focus on the amounts you owe.

Grab up all your bills. Sort them out…. let’s start with the revolving ones first. You know them best as credit cards. Today, we plan our attack on them. Right now I want you to list out the names and balances on a sheet of paper. Once you have done that, I want you to rank them in order starting with the SMALLEST BALANCE. That one will be #1. If you have 2 cards with the same amount, then focus on the one with the largest payment. That one would go before the other one.

Once you have numbered your order of attack, take the extra money you have been using to create your savings (not your savings itself!) and apply that money on top of your normal payment to work at paying off this first card. Once you have paid off that card, add the payment you had been making to that card and apply to card #2. Repeat until all are gone.

This is the best approach because it does 2 things. With every card you pay off, you feel a sense of accomplishment and hope that you will make it out. And, if something does come up that pauses your efforts, you will have less payments to make in a shorter period of time so you still feel like you are getting somewhere, even when you have to focus on savings again.

One note. When you pay off these cards, do not close the accounts. We will talk about what is next, but you will need them open. If you must put them up so you are not tempted to use them, that is fine. You can even cut the physical card, but do not call them to close any open accounts. You will see why soon.

I am excited for you in your plan of attack. Be patient. You did not get here overnight, and it will take time to dig out. But with a good plan of atack, you will get there faster than you think!

This is for the majority of us that live paycheck to paycheck, have little or no real savings and are in debt.

If you have a large IRA and major investments, you already know how to manage this thing we call money. If missing 2 weeks of work might cause your power bill to go out, you are not managing money well, even if you always make your payments. You are hanging on.

Many “experts” tell you to hurry up and pay down your debt now! I disagree. If you do not have a savings set up, paying off your debt first will become something that will defeat you long term. Consider this… You have $5000 on a credit card and bust your tail to pay if down. You finally get the balance paid down to only $2,500 and feeling great! Then the car needs repairs and since you have no savings, you need to use the credit card. Right back to $5000 and you feel defeated! All that work and you are right back to where you started!

If you had saved $5000 first, when the repairs were needed you would have had the cash to pay for them. Sure you may have had to put the debt reduction on hold until you rebuilt your savings, but knowing you only owe $2500 on that card still offers a mental reward. Add to that the fact that your minimum monthly payment on that credit card is half of what it once was, you can boost the saving up quicker and the go back to attcking your debt!

Let’s get real here. Buying a house is a big decision. But not necessarily a risky one. One of the largest concerns for most people is losing the house. What happens if something comes up and income goes away and we can’t make the payment? Don’t let this concern stop you from homeownership. Think about the situation here…

Scenario: You just lost your job, and don’t have enough income to make the payments. If you are renting, this becomes a major problem. Did you know that most rental companies will begin the eviction process if you are as little as 10 days late on your rent? If you can’t pay them, they figure they will kick you out and get someone in your place that can. Then you are forced to find a new place to live… but now we have a different problem. No job and no income and an eviction makes it hard to find another apartment. If you do find one, might need a large deposit… of course if you had that kind of money you would not have been evicted in the first place!

As a homeowner, things are different. You see, the mortgage company does not look to foreclose on a home right away. Actually, they are much more inclined to work with you. Why? Well, it comes from the fear of major financial loss. When a lender forecloses on a house, they no longer make money on interest, which is why they are in business. They have to turn around and sell the house, usually for far below market value… They don’t have time to wait for it to sell for profit! So if you owed $150,000 on the home and they sold it for $128,000, they have lost $22,000 plus real estate agent commissions. Their total loss would be over $29,000! With that in mind, lenders will work with you while you try to recover. Many lenders won’t start foreclosure proceedings until you are several months behind! And if you ultimately can’t get back on track, you can still sell your house and maybe even make a profit!

So you see, buying a house will give a tremendous amount of security where renting can’t. If you ended up 3 months behind, it may affect your credit, but you still have a place to live. And if you get evicted from an apartment, you better believe that will hurt your credit too!

Give yourself and your family something they can feel secure in.

So you are considering buying a home. Maybe you are already in the market for a home. You could be a first time home buyer or this could be your third home. Maybe this is your dream home, a starter home… or even an investment property. No matter what type of home you are buying, or your experience in the home buying market, getting pre-qualified before you shop is still your best move!

Getting pre-qualified puts you in the driver’s seat. You will know what you can afford to buy, how you plan to buy it, and give you the confidence you need to negotiate your offers. If you plan to use a Real Estate Agent (highly recommended!), most will want to know what you are qualified to buy before they take you out to show a home. Then again, if you are going it alone, you do not want to be guessing on this stuff as you could be taken advantage of.

To get pre-qualified, you need to find a mortgage professional you can trust. You can find a good professional in many ways… the internet, referral, or even the yellow pages. Make sure you find a live person to talk to… internet sites will be very limited in the support and help you can get. When you find a loan officer, ask them how long they have been in the business. You want someone with at least a couple years under their belt. Ask them if they broker loans (broker), or if they only write their own loans (bank). Brokers have access to more loan programs than any one typical bank can offer, and can usually get their mortgage rates below the average retail rate that most banks would charge (less overhead for a broker - no stadiums named after a mortgage broker that I know of!)

For a solid pre-qualification you can count on, your mortgage professional should ask for your current housing history, your employment history and ask questions about your credit. A professional mortgage specialist will do a credit check and even request paystubs and tax documents. They will go beyond asking how much you make and if you have a job. They will look for things that will normally trip a buyer up and cause a deal to die before it can close. A solid pre-qualification should take more than 10 mins. On average, it could take a day or two, depending on how quickly you can get the needed information to your loan officer.

You can always go shopping for a home without getting pre-qualified. But doing so is like going grocery shopping without a list or any idea how much money you can spend. And buying a home is much more important than a trip to the local Food Lion!

So before you start shopping for a home, find out how much you can buy. Unless you can pay cash for the entire home, you will need a mortgage anyway. Make that the right starting point and take control of your home search!

Best of luck,
Ed Nailor