GETTING A MORTGAGE IN TODAY’S MARKET

GETTING A MORTGAGE IN TODAY’S MARKET

There are 3 requirements to getting a mortgage:

1. Solid Credit. Prospective borrowers will need a FICO (Fair Isaac Corporation) score of roughly 720 or above to obtain the most favorable mortgage rates.

2. A Down Payment. Nearly all lenders will want borrowers to make some form of down payment to qualify for a loan. The size of the down payment will vary but will be at least 3.5 percent.

3. Income Documentation. Loan applicants will also be required in most cases to provide document verification of their income and their assets.

What can you do?
1. Shop Around. Because the credit crisis has affected different banks in different ways, the streams of credit available in today's market are extremely divergent.
Direct lenders have money to lend. They make the final decision on your application.
Brokers are intermediaries who, like you, have many lenders from which to choose. Lenders have a limited number of in-house loans available. Brokers can shop many lenders for each lenders' store of loans. If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need.
Mortgage brokers, however, are paid with a slice of the amount you borrow, some more than others some less. Internet brokers today perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.

2. Save for a Down Payment. Given the current credit environment, consumers will have to put their financial house in order before they buy a real house. That means if you don't have enough cash for a down payment, you'll have to start saving for one. Borrow the down payment from your retirement plan. Sell some of your investments. Borrow from your parents. Get a second job and save that income.

3. Check Your Credit Report. It's important to make sure that your credit report—which lenders will be using to determine whether or not to give you a loan—is accurate. If you see any mistakes, take care of those inaccuracies.

4. Pay Down Debts. If you want to get a mortgage but have substantial debts, consider paying them down. Lenders are always more willing to work with you the lower your debt load is against your income, because you are not overleveraged.

5. Been Late? Wait. If you have a recent delinquency on your credit report, you're probably better off waiting a couple of months before applying for a loan. If you have a recent blemish on your report, it maybe beneficial for you to wait a few months, maybe even six months or a year; to get that stuff further back in your credit history, this will increase your chances of qualifying for a better rate.

6. Get Someone to Get the Mortgage for You.
If your credit is so low that no one will agree to financing you, see if you can convince
someone with better credit -- perhaps a family member or spouse -- to take out a mortgage for you. Obviously, this can have serious consequences on any relationship, so be sure that the person you ask is someone very close to you -- someone whom you can trust to handle it.

Keeping Cool This Summer

1. Open Your Windows

When the outside air is cooler than the inside, it’s foolish to keep using electricity for something nature can do for you instead.

Nothing is more satisfying than getting a breeze of fresh air after having your home closed up all day.

2. Turn On the Ceiling Fans

While a ceiling fan won’t make your room cooler, it will definitely make it feel cooler by speeding sweat evaporation and fans cost far less to run than your air conditioner. Ceiling fans are relatively easy to install if you do not have them. Once your fans are in, make sure the fan is set to spin in the correct direction: You want the air blowing down in summer and up in winter.

3. Put In an Attic Fan

An attic fan gives you the combined benefits of moving air (like a ceiling fan) and pulling in the cooler air from outside. Of course you need to open your windows to pull in the cooler air so it is best to wait until after dusk to open your windows and then set the timer to run at least until after you’re deep asleep. It’s an investment that can easily pay for itself in a couple of years. Solar powered attic fans are also available.

4. Shut the Blinds

On hot summer days, the sun is your worst enemy. The last thing you want to do is have your air conditioner running full blast to offset the increase heat from the sunlight pouring in your windows. By closing the blinds, you’ll still let in enough light to see by, but you’ll reflect back the rest.

5. Run Your Furnace Fan

Many thermostats will allow you to tell the fan to run without initiating the furnace or air conditioner. By turning on your furnace fan, you cause the air to be circulated throughout the house, balancing out any cold or hot spots so that you whole house feels more comfortable. An added benefit is that it will trap any potential allergens that have been introduced by opening your windows - just make sure to regularly check the furnace filter and replace it when it’s dark enough to block light passing through.

6. Install a Programmable Thermostat

It doesn’t make much sense to cool your home while you’re gone, but it’s hard to remember to tweak your thermostat every day before you leave for work. Program your thermostat to go up by five degrees about 30 minutes or so before you leave and have it come back to your “normal” temperature a half-hour before you return. For added savings, program it to also raise the thermostat by two or three degrees through the night - you’re unlikely to notice the change in your sleep.

7. Turn Up The Thermostat A Degree Or Two

It’s recommended that you set your thermostat at 78 degrees during the summer if you have central air conditioning. It’s a pleasant temperature, but isn’t necessarily the cheapest setting. If you can handle it, raise your thermostat by one or two degrees and realize a savings of about six to seven percent for each degree above 78.

8. Close Unused Vents

If you’re not going to be in a particular room very much or very often, consider closing the vent in that room so you’re not cooling dead space. That will cause more air to come out of the other open vents, potentially allowing you to add some cooling to a room that wasn’t getting it otherwise.

9. Turn Off the Lights

The light filtering in through your closed blinds should be sufficient to get you around the house during the day. When night falls, turn on only the lights you need only when you need them. Not only will you save electricity, but you’ll also do your air conditioner a favor. All light bulbs generate heat as a byproduct of producing light. Use Compact Fluorescent Light bulbs (CFLs) inside. CFLs use 75% less energy and produce 75% less heat than incandescent light bulbs which saves on cooling costs.

10. Hold Off On Cooking

During the summer, do what you can to avoid turning on the stove and, if you must turn it on, turn it on in the late evening and after you’ve opened the windows for the night.

11. Leave Laundry Until Nighttime

Your clothes dryer puts out a decent amount of heat. Much of that heat will be vented outside, but some will still leak into your house. The later you wait to turn it on, the better chance you have of not working against your air conditioner as much. If you live somewhere that has time-based metering of electricity, try to wait until the lower evening rate kicks in.

Of course, nothing beats line-drying in terms of electricity usage, but if your subdivision bans outdoor clothes lines, running your dryer at night is the next best option.

12. Use Your Lowest Level

If you have a basement, don’t hesitate to take advantage of its stable temperatures all year – The higher you go in your house the higher the temperature.

13. Unplug/Switch Off Unused Electronics

Not only are unused electronics eating electricity when they’re not in use, they’re also converting some of that power into heat. By unplugging everything you can and putting the rest on switchable surge protectors, you can potentially save yourself a lot of money and unnecessary heat.

Water Conservation At Home

Saving Water In Your Yard

Pools, sprinklers, hoses — there are many ways to use water outdoors in the summertime, and there are also countless and easy ways to conserve it.

Most people in North America use 50 to 70 gallons of water indoors each day and about the same amount outdoors, depending on the season.

• Indoors, 3/4 of all water is used in the bathroom.
• Outdoors, lawn and garden watering and car washing account for most of the water used.
• Running a sprinkler for two hours can use up to 500 gallons.
• As much as 150 gallons of water can be saved when washing a car by turning the hose off between rinses.
• Washing a sidewalk or driveway with a hose uses about 50 gallons of water every 5 minutes.

Check out the following tips for developing good H2O habits:

• Water your lawn only when necessary; if you leave footprints when you walk across it, it’s time to water (usually once every three days).
• Minimize evaporation by watering your lawn during the early morning hours, when temperatures are cooler and winds are lighter.
• Raise the blade on your lawn mower. Closely cropped grass requires more water.
• Divide your watering cycle into shorter periods to reduce runoff and allow for better absorption.
• Periodically check your pool for leaks if you have an automatic refilling device.
• Weed your lawn and garden regularly; weeds compete with other plants for nutrients, light and water.
• Put a layer of mulch around your plants. Mulching helps to retain moisture and prevents evaporation. A generous amount of 3 to 5 inches is best.
• When the kids want to cool off, use the sprinkler in an area where your lawn needs it most.
• Use sprinklers that throw big drops of water close to the ground.
• Water your garden during the coolest part of the day. Do not water on windy days.
• Use a hose nozzle and turn off the water while you wash your car — you’ll save more than 100 gallons.
• Use a screwdriver as a probe to test soil moisture; if it goes in easily, don’t water.
• Use a grease pencil to mark the water level of your pool, and check the mark 24 hours later; your pool should lose no more than 1/4 inch each day.
• Check your sprinkler system frequently and adjust sprinklers so that only the lawn (not the house, sidewalk or street) is watered.

Newsletter

Read the entire April newsletter: April 2008 Newsletter

Mortgage Information

A mortgage is a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home you're looking to buy. There are two categories of mortgages, conventional and governmental. Conventional loans are through a bank or credit union; these are not insured nor guaranteed by the government. Governmental mortgages are FHA, VA or RHS loans.

FHA - Federal Housing Administration FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans have a limit which varies from one area of the country to another.
VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.
The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no downpayment.

Within these two categories there are two types of mortgages, and they differ in terms of how their interest rate is determined: fixed-rate mortgages and adjustable-rate mortgages.
• With a fixed-rate mortgage, your monthly mortgage payment amount does not change. No surprises, no uncertainty.
• Adjustable-rate mortgages (ARMs for short) have an interest rate that varies. The interest rate on an ARM stays low for a short period of time and then adjusts, which could be as frequently as every month.

With fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate offered; of course the monthly payment is higher. Interest rates also vary based on an individual’s credit score. The rate on a FRM is usually higher than that of an adjustable mortgage.

Most ARMs have an interest rate caps to protect you from enormous increases in monthly payments. A lifetime cap limits the interest rate increase over the life of the loan. A periodic or adjustment cap limits how much your interest rate can rise at one time. With most ARMs, the interest rate can adjust every month, every three or six months, once a year, every three years, or every five years. The adjusted rates are determined by a preset formula. Most ARMs offer an initial lower interest rate during the initial period of the loan, which could be one month or a year or more. It is also known as teaser rate.
The right type of mortgage chiefly depends on how long you plan on staying in the house and the amount of monthly payment you can comfortably afford.
If you don't plan to stay in your house for at least 5 to 7 years, it will be reasonable to consider something other than a fixed rate mortgage. ARMs traditionally offer lower interest rates during the early years of the loan than fixed-rate loans. Two other types of mortgages to consider if you do not plan to stay in your home for more than 5-7 years are the Two-Step Mortgage or the Balloon Mortgage. A Two-Step Mortgage will give you a lower interest rate than a 30-year mortgage for the first five or seven years and then a different rate beyond that time period. A Balloon Mortgage offers lower interest rates for shorter term financing, usually five or seven years; after that time you need to either pay off the loan or refinance. Because of a lower interest rate it is easier to qualify for these types of mortgages. However don't go with the ARM unless you can afford the maximum possible monthly payment. Generally, you can start to consider 15 or 30 year fixed rate mortgages if you plan to stay in your home for more than seven years.
Another expense to keep in mind when considering your mortgage is points. Points are up-front interest, and they cost you money. Lenders charge points as a way of being paid for the work and expense of processing and approving your mortgage. Each point represents 1% of the mortgage amount. Typically, the more points you pay the lower your mortgage rate.
When you buy a home, the points are tax-deductible -- you get to claim them as an itemized expense on Schedule A of your IRS Form 1040.