Buyers - There is Still Money Out There for a Loan - Financing Options

With all of the focus on how tight credit is, you may believe that there is no money out there for a home loan. If that is the case, you are believing wrong. There is still a lot of money available and a lot of lenders who will make that loan. There are even some 100% loans available.

Here is a list of the main types of loans that you can get today:

• FHA - the majority of today's mortgages are being written, or underwritten, by FHA. The requirements are a bit stiffer than they used to be, and the you will need to come up with at least 3.5% of the loan amount to qualify.
• FHA Renovation Loan - there are two types, standard and streamlined. They allow the buyer to renovate a home prior to moving into it. This type of loan can make purchasing distressed or foreclosed properties enticing.
• VA - this is a 100% loan available to honorably discharged U.S. veterans. It can be used more than once, the veteran will just have to get a certificate of eligibility each time he/she wants to use it. All previous VA loans have to be paid off.
• USDA- rural development loan for properties in specific designated zones. This is another 100% loan program. Athens-Clarke County is not eligible but much of Jackson, Madison, Oglethorpe, Oconee, Barrow and Walton County are eligible.
• Reverse Purchase Mortgage - this is a program specifically for seniors over age 62 who can purchase a home for a down payment and have no payments for the rest of their lives.
  
• Conventional - available from mortgage brokers, banks, lenders, etc. Different institutions will have different types of loan programs.
• Owner Financing - sometimes the seller will finance all or part of the purchase price. This may be good for someone with special circumstances who cannot qualify for a loan for some reason but is able to make the payments. A person who is self-employed but with less than 2 years of history might be a candidate for this.

For all loan types (except owner financing) speak with knowledge-able lenders. Not all lenders will be knowledge-able about each loan type. They might not even offer all loan types. And, even if they offer the same loan type, such as FHA Renovation, the programs may be very different. You may want to interview and deal with several lenders and make detailed comparisons before selecting one. And don't forget to get a pre-approval, not pre-qualified, letter. It puts you in a better position to get the home that you want.

For more information on loan types, or, about buying or selling a home or land in Athens and the surrounding counties, call me at 706-207-5290.

Get Ready for Your Credit Score to Decline - New FICO Formula Kicks in This Month

FAIR ISAAC is changing the playing field again, implementing it's latest version of credit scoring FICO 2008. And it doesn't appear that the change will be leveling it. The three major credit reporting agencies will be rolling out the new scoring system this year, with Transunion deploying it in January, Equifax in late spring and Experian at some later date.

The new FICO is touted to better predict the likelihood of a default on the part of the borrower. However, many of the changes appear to be designed to lower credit scores. FICO 2008 will place more emphasis on available credit, not just balances. So, even if you are not carrying a balance, if your credit line is reduced, your FICO score could be lowered. It appears, under the new scoring system, the more available credit you have, the better your score would be. (I remember having been rejected for an airline credit card in the early 90's because I had too much available credit even though most of it was unused). You will also have your credit score reduced by having only a few open and active credit accounts.

Supposedly, there are three changes that will benefit credit consumers.

• It will ignore debts gone into collection if original debt is less than $100
• It will not punish single credit set-backs, such as write offs or repossessions as long as all other accounts are in good standing
• It will continue to use some "authorized-user" information (although this is only a change from the fact that they were going to discard it entirely).
  

What will this do to the real estate and mortgage industry? I don't see anything good, at least for the first few months of implementation, especially since at any one time the credit agencies may be using different versions of FICO. That can only lead to confusion. Perhaps, in the long run it will lead to fewer defaults, but until it has rolled out completely, the only change that I can see is some tightening.

Personally, I know that my current FICO score is around 800. I am expecting it to drop just a bit since I am using my cards less and my only installment loan will be paid off in April.

Do you know what your score is? You can get an estimated range here.

Click here to read the complete article about the new FICO 2008 scoring system and how you can take steps to mitigate any lowering of your credit score.

Avoiding Credit Theft - You Can Do It

Ok, I really thought that my first blog would be about Real Estate, however, I was listening to the radio today and heard that the guv has signed into law, the Credit Freeze act for Georgia. (That's my name for it, I am sure that there is some bill number official title for it). It went into effect today. What a great thing to for you, it protects you, and, doesn't raise your taxes.

You may have heard or seen ads for companies that charge you $10 (or thereabouts) to protect your credit. What they are, in effect, doing is freezing your credit. Something that you can now do yourself, because of this new law, very easily, and, for a lot less money (in the long run). The new Georgia law allows you to freeze your credit for $3.00. Ok, $3.00 to each of the major credit reporting agencies. Since there are only 3, that's a total of $9.00! Less than one month's fee to have someone else do it for you.

What is "freezing your credit"? Well, it is nothing more than not allowing anyone to access your credit files, with the 3 major credit reporting companies. When this is done, nobody can open up an account in your name using your social security number, address, etc. It denies access to your credit information. (It doesn't keep someone for using your social security number for some other reason, but, they can't ruin your credit by opening accounts in your name and charging up 10's of thousands of dollars). Your credit is safe (well, except from you).

There is on drawback. Anytime that you want to apply for something where they check you credit report (i.e. - a credit card, a job, insurance, etc) you will have to unfreeze your credit. No big deal. Just ask which of the 3 major companies is used, by whom you are applying to, and do a temporary "thaw" of your credit at that company. When you originally freeze your credit, you will get an access code that allows you to thaw it. Yes, it costs your $3.00 to thaw your credit with that company, and, $3.00 to re-freeze it (unlike hamburger or fish, credit keeps it's freshness after repeated freezing and thawing).

As a side benefit, you also end up getting fewer (almost none) unwanted offers of credit, etc. Ok, some people may like to get them). Just think of the trees you could help save by not getting all that paper in the mail.

Not to mention your credit score! (And all for a lot less than $120 a year).