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Posts tagged ‘Interest Rates’

Keep Your Closing Costs Low

Closing costs can surprise many homeowners if they aren’t prepared for them and can seriously deplete savings at a time when most people need money the most.  It seems that lenders are constantly finding new and creative ways to tack on a few dollars here, and a few dollars there to the tune of thousands.  However, by taking a few simple steps you can keep your closing costs low and know when to tell your lender that enough is enough!

First, you should always be a savvy consumer when it comes to title work.  You have the right to select any title company you want and not the one that the mortgage company wants to force upon you.  Of course, the mortgage company they want you to use always turns out to be one of the more expensive ones (because they are getting kickback fees).  Shop around for a title work company and you can often save 30% right off the bat, and if you are willing to really work at it, save upwards of 50%.  It’s not chump change either – a title company can easily charge $1,200 for basic title services.

Next, be on the lookout for junk fees.  Lenders love to pile on the document preparation fees, interest locking fees and anything else they can think of.  Often times they throw these fees onto mortgages that have no points attached to them.  Make sure that you ask your lender for a full disclosure of all the fees and then ask them about any that seem out of line.  If you aren’t happy with what they quote you, tell them you are looking around at other lenders.  The last thing a lender wants to do is lose 30 years worth of interest because of a $200 junk fee!

If you aren’t going to be in the house for more than a few years, ask the seller to pay the closing costs.  Sure, you’ll end up paying a higher interest rate, but if you plan on moving in a few years then the cost of the interest won’t match the closing costs you would have to pay up front.  Plus, you pay the extra interest off is small chunks each month rather than being out a lot of money up front. 

Watch out for lenders who try to sell you add-on products with your mortgage.  They love to try to get you to buy credit insurance (a total waste of money) and some lenders even try to sell you services such as “plumbing protection” or “whole house appliance protection”.  Just say no!

Remember, you have the power to say no thanks at any time before you sign on the dotted line.  If you don’t like the figures your lender is talking about for closing costs, shop around – in fact, you should around and get several mortgage offers before you even consider one.  Don’t be afraid to get up and walk away from the table.  After all, it’s your money – don’t let a greedy lender try to squeeze another $1000 out of you when you have enough stress taking place buying a home in the first place!

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Buyer Tips, Mortgages, Re - Financing, Real Estate News, Real Estate Tips, Seller Tips, SW Real Estate News

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What’s In Your FICO Score?

Obtaining copies of your credit reports from the three major credit reporting bureaus is a must for all American consumers. If you order your copies directly from each bureau, you can get yours for free [once per year per bureau]. That is the law. There is, however, one piece of information not included with your credit reports and that is your FICO score. Your FICO score can determine several things, including what interest rate mortgage lenders will charge you and the rate you will pay for your credit cards. For just a small fee you can order your FICO score and get a hold of a piece of information that is critical to you fully understanding and improving your credit rating.

FICO, or Fair Isaac Corporation, is a score that helps determine what interest rate creditors will charge you. The higher your score, the lower your interest rate will be resulting in lower mortgage payments and more money for you. Indeed, when you apply for a new cell phone account, purchase a car, or make just about any type of credit application, your FICO score is obtained by creditors. Unfortunately, you typically do not know what that score is unless you get the information yourself. Don’t count on creditors sharing that information with you!

Your FICO score is based on five determining factors. According to the Fair Isaac Corporation, these five factors are weighted differently and each one is assigned a percentage figure based on their importance. Specifically, they are:

1. Payment History – 35%

2. Outstanding Balances – 30%

3. Length of Credit History – 15%

4. New Credit – 10%

5. Types of Credit Used – 10%

Obviously, if you have made several late payments and owe a large amount of money to your creditors, your FICO score will be much lower than the person who pays what they owe on time, has a manageable level of debt, and possesses a solid credit history.

Coupled with your credit report, your FICO score can help you determine the plan of attack you need to take to improve your credit standing. This is very important step to take especially if you anticipate making any sort of credit application within the next year. If there are errors in your credit report than these will lower your FICO score. Make certain that the three credit reporting bureaus correct each error now and, once amended, run your FICO score again to determine if it has been adjusted upwards.

Remember, the higher your FICO score, the lower your monthly payments will be on virtually everything you finance through a creditor. Order your free credit report today and pay a little extra to obtain your FICO score.

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Buyer Tips, Helpful Tips, Interesting, Mortgages, Real Estate News, Real Estate Tips

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What You Should Know About Interest Rates

For all people shop around for the best rate, there are few who have taken the time to sit down and add it all up. After all, why would you bother? The answer is that understanding just how interest rates work can help you see how important small differences in rates and payment amounts can be.

Interest Rates are Compound.

It is important to remember that what you owe is compounded – that means you pay interest on the interest you owe from the month before. That means that if you’re paying 2% per month in interest, you’re not paying 24% per year – you’re actually paying 26.82%. Charging interest monthly instead of yearly is a trick to make it feel like you are paying a very low price for your borrowing.

A Thought Experiment.

Here’s a question: would you rather have $1 million, or $10,000 in a savings account earning 20% per year in compound interest?

Well, let’s see how that $10,000 would grow. After 10 years: $61,917. 20 years: $383,375. 30 years: $2,373,763. 40 years: $91,004,381. 50 years: $563,475,143.

So after fifty years, you’d have over $500 million?! Well, not so fast. Of course, you have to take inflation into account – if we say inflation is 5%, then that money would have the buying power that $10,732,859 does today. Still, that’s not a bad return on your investment of $10,000, is it?

That’s the power of compound interest, and the way the credit card companies make their money (it’s also the way pensions work, and the reason the prices of things seem to rise massively as you get older). Be very, very afraid of compound interest. Or, of course, you could start saving, and be very glad of it…

Compound Interest Adds Up.

Let’s work through an example on a more real kind of scale. Let’s say you have an average unpaid balance of $1,000 on a card at 15% APR.

You will owe $150 in interest for the first year you borrow. However, this amount is then added onto the balance, and interest is charged on that. The second year, you’d owe another $172.50, for a total of $1322.50. It goes on, with totals like this: $1,520.88, $1,749, $2,011.35.

After just five years at 15%, you’d owe double what you borrowed. And after 10 years, you’d owe four times what you borrowed! Bet you weren’t expecting that. If you let something like that carry on for long enough, you’ll end up paying back that credit card for years afterwards, paying back what you borrowed many times over and still not clearing the debt. Most people don’t work this out, and feel that the payments must simply be their fault for spending too much money to begin with.

One Percent of Difference.

One more thing. You might think there’s not that much difference between a card that charges 15% APR and one that charges 12% APR. Let’s see the difference the lower rate would make to that $1,000 borrowed for five years. Remember, after five years at 15%, you owed $2,011.35.

At 12%: $1120, $1254.40, $1404.93, $1573.52… $1762.34 after five years. So you’ve saved $249.01 from that 3% difference in APR – in other words, you’ve paid almost 25% less interest.

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Buyer Tips, Mortgages, Re - Financing, Real Estate Tips

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Finding a Bargain on a New Vehicle

We have all heard that depressing statement that a new vehicle depreciates in value the second you pull away from the dealership. I used to think that was an exaggeration until my friend got into a wreck in her Dodge Durango a week after she purchased it. The insurance wouldn’t give her enough to cover buying a new one even though she was not at fault in the accident. She had to get an attorney and eventually she was able to get a new vehicle to replace it, but not without quite a circus taking place around the issue for a couple of months.

Buying a new vehicle is one expense that you have to consider very carefully. Those monthly payments can sure take a chunk out of your disposable income. You also have to consider the cost of license plates, insurance, gas, and regular maintenance on the vehicle. To help you find the very best bargains on the new vehicle of your choice you will want to conduct some research before you start negotiations with the salesman.

There are a variety of ways to find out the book value on a particular vehicle. You can go to www.NADA.com or www.KellyBlueBook.com. You can get a very detailed price by listing the make of the vehicle, the various accessories it offers, and the mileage. This information will help you find the lowest price you can expect to purchase that vehicle for.

Next, take a close look at your credit report so you know exactly what interest rate you can expect on a new vehicle. This way you don’t waste your time haggling with the sales. See what they offer you for a price and financing before you bring your information into play. If they match or beat it then great. If they want to give you higher price or interest rate, present your researched information. If they won’t sell you the vehicle for that price with that interest rate then go somewhere else.

October is a very good time of year to start considering the purchase of a new vehicle. This is because they want to start clearing out vehicles on the lot to make room for the next year’s models that will soon be arriving. Since many vehicle dealerships don’t see much in the way of sales over winter due to the cold and the holiday season, they are more likely to present you with the deal of the century to make the sale.

If you see other sales around the holidays they may be a good time to save money as well. The key to making sure it is a bargain is to make sure the cost hasn’t been inflated or your interest rated jacked up a percent or two to cover the promotional cost of the vehicle. Too many people get caught up in what they see on the windshield of a vehicle rather than looking at the big picture.

New vehicles often end up with a scratch or a dent on them soon after you buy them. While this can be very upsetting you really can’t do much about it. Someone leaving their shopping cart in the parking lot of the store can result in the wind running it into your vehicle. You can find great deals of new vehicles that have some body damage such as small scratches and even hail damage from a recent storm. In most cases you will save several times what it costs you to repair the damage.

To motivate customers to make a purchase of a new vehicle instead of just looking many dealerships offer incentives like 0% financing and cash back. Make sure you find out all the details of such promotions as they may be a good way to save money or they may cost you more in the long run. Take the time to calculate all the possible scenarios so that you get the bargain you were after with your new vehicle purchase.

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Bargain Hunters

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Does It Pay to Re-Finance?

This is a question many homeowners may have when they are considering re-financing their home. Unfortunately the answer to this question is a rather complex one and the answer is not always the same. There are some standard situations where a homeowner might investigate the possibility of re-financing. These situations include when interest rates drop, when the homeowner’s credit score improves and when the homeowner has a significant change in their financial situation. While a re-finance may not necessarily be warranted in all of these situations, it is certainly worth at least investigating.

Drops in the Interest Rate

Drops in interest rates often send homeowners scrambling to re-finance. However the homeowner should carefully consider the rate drop before making the decision to re-finance. It is important to note that a homeowner pays closing costs each time they re-finance. The closing costs may include application fees, origination fees, appraisal fees and a variety of other costs and may add up quite quickly. Due to this fee, each homeowner should carefully evaluate their financial situation to determine whether or not the re-financing will be worthwhile. In general the closing fees should not exceed the overall savings and the amount of time the homeowner is required to retain the property to recoup these costs should not be longer than the homeowner plans to retain the property.

Credit Score Improvements

When the homeowner’s credit scores improve, considering re-financing is warranted. Lenders are in the business of making money and are more likely to offer favorable rates to those with good credit than they are to offer these rates to those with poor credit. As a result those with poor credit are likely to be offered terms such as high interest rates or adjustable rate mortgages. Homeowners who are dealing with these circumstances may investigate re-financing as their credit improves. The good thing about credit scores is mistakes and blemishes are eventually erased from the record. As a result, homeowners who make an honest effort to repair their credit by making payments in a timely fashion may find themselves in a position of improved credit in the future.

When credit scores are higher, lenders are willing to offer lower interest rates. For this reason homeowners should consider the option or re-financing when their credit score begins to show marked improvement. During this process the homeowner can determine whether or not re-financing under these conditions is worthwhile.

Changed Financial Situations

Homeowners should also consider re-financing when there is a considerable change in their financial situation. This may include a large raise as well as the loss of a job or a change in careers resulting in a considerable loss of pay. In either case, re-financing may be a viable solution. Homeowners who are making considerably more money might consider re-financing to pay off their debts earlier. Conversely, those who find themselves unable to fulfill their monthly financial obligations might turn to re-financing as a way of extending the debt which will lower the monthly payments. This may result in the homeowner paying more money in the long run because they are stretching their debt over a longer pay period but it might be necessary in times of need. In these cases a lower monthly payment may be worth paying more in the long run.

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Re - Financing

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