6 Things to Do with Credit Card Debt

6 Things to Do if Credit Card Debt Sneaks Up

Your credit score has a significant meaning to your lifestyle. You may think everything is going smoothly but then you start having car issues, so time to trade it in. If you’re debt is high or your credit score is marred, you will pay much higher interest rates, if you get that car at all.

Intentions are Not Always Enough

Credit card debt can creep up on us, even if we have every intention of paying them off every month when we make that purchase. Our intentions are good, but not always feasible. So, your balances start creeping up and you’ve lost control over your finances. Don’t freak out, just breathe and fix it.

Here are 6 things you can do if that happens to you:

  1. Put your spending on a diet. Start by cutting out all unnecessary expenditures, while postponing essential purchases for as long as possible. Then, look for ways to save money on all your essential purchases. Eating out frequently can add up fast.
  2. Increase your monthly payments. One of the worst mistakes that you can make with your credit cards is to only pay the minimum balance. You should be paying as much as you can every month.
  3. Make your payments before the due date. Credit card interest is calculated based on your average daily balance, so you will save money by making your payments as soon as you can.
  4. Make a payment with every paycheck. When you do this, you will reduce your average daily balance with each payment, which will lower your interest charges.
  5. Use alternative ways to pay for essentials. Temporarily store your credit cards in a secure place and temporarily start using cash, checks or debt cards. Put your credit cards on a time out until the balances are down and you can easily pay the balance each month.
  6. Look at the 12-month interest-free offers. Consider transferring the balance on a card to a temporary interest-free card while you are paying it down, to decrease the amount you have to pay in interest.

Set a Goal and Keep Eye on the Prize

Getting a handle on your credit card debt before you need to can give you a piece of mind and may even prevent a crisis when you need credit. Set a goal as to what you want your credit score or FICO Score to be and work to get it there. Debt to Income Ratio (DTI) is an important part of qualifying for any type of loan, and can be a huge impact on the interest rate you get. Credit is king when it comes to living your life, so care for it like you do your family! Well that’s my tip for this week. Remember to stay on top of your debt, as you never know when you will need the credit! Buying a home is a great example! Folsom real estate is still affordable, along with the Sacramento Housing Market, so give me a call if I can help with a preapproval or refinance. Have a great day.

History of Mortgage Rates

The History of Mortgage Rates (1981 – 2016)

You may be inundated with lenders tooting their horns about the near record low mortgage rates we experienced all of 2016. You hear it so often that you’ve tuned out. Well, it’s hard to appreciate where we are today if we don’t look at the past.

So let’s take a quick look:

Mortgage_Rate_History

  • In July 2016 – rates hit the lowest since 2012 = 3.44% with a cost of ½% and in August went even lower to 3.36%.
  • Today – average rates are about 4.02%
  • In December 2012 – The lowest since FNMA has kept records, rates were 3.35%
  • 10 Years Ago, in 2006 – we had a 6.41% annual average rate
  • At the turn of the Century, 2000 – 8.05% was the annual average
  • 20 Years Ago, in 1996 – it was 7.81%
  • 30 Years Ago, 1986 – it was 10.19%
  • The All-Time High was in October 1981 – at 18.45% with 2.3 points. That was the month that President Reagan was shot, Pope John Paul was shot, and the stock market reacted.

So, to put this in perspective, if you bought a house in October 1981 at $200,000 with 20% Down, your payment would be $2,471.17 plus taxes & insurance. If you bought a $500,000 house with today’s rates, your payment would be about $1,824.21 plus taxes and insurance. The mortgage interest rates play a huge role in affordability, balancing out today’s home values. My point is that looking back into history may be the dose we need to really appreciate where we are today and help you understand why lenders keep shouting from the rooftops.

As we go into the next year, the bond market is uncertain, so rates may continue to climb modestly, per many of the industry analysts. Regardless, rates historically are still very affordable and now is a time to lock it in. Whether you are buying your first home, moving up into that forever home, downsizing into a luxury home, or refinancing your existing home, don’t procrastinate or hedge the market.

FHA Home Loan and VA Home Loan

For many first-time homebuyers, there are low down payment options such as the FHA Home Loan and VA Home Loan. There are also down payment assistant programs like the Sapphire Grant Program, CalHFA Plus with Zip, and several others. There are even programs that help pay for part or all your closing costs like the one for teachers called the CalHFA Extra Credit Teachers Program.

If you’d like more information on any of these programs, for today’s mortgage rate, or to get preapproved, give us a call today to get started. We get it. We love to help you meet your homeownership goals.

Are You Terrified to Buy a House?

Are You Terrified to Buy a House? Of the Mortgage Process?

Are you waking up at 3am because you can’t shut your mind off? You may be feeling anxious and can’t fall back asleep… but what is it that keeps tiptoeing around in your brain? Ah ha!… it’s the local real estate listings! It’s that house in your dream neighborhood you keep thinking about!

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You’d love to feel the freedom of owning your own home, but the whole process seems daunting and unattainable. You are afraid to even try. Well, we get it. It is work to get all your paperwork together and then you get your hopes up. And then… rejection. The purchase of a home is a life-changing event, and you’re scared of failure.

You know, your fears are common among first time homebuyers. But they just may be figments of your imagination. You’ll never know unless you try. So, take this journey with me and let’s tackle some of the most common fears that paralyze first time homebuyers.

Fear No. 1

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‘I’m afraid I can’t afford the home of my dreams’- you start with the curiosity as to what kind of homes are selling in the price you think you can afford in your dream neighborhood. So, you start going through the Folsom real estate listings… and you get discouraged. So, you up your price range and search again. It’s easy to think, “what’s another $25,000! STOP! Before you even start looking, do yourself a favor and call a lender. Just rip off the Band-Aid and get started on the home loan preapproval process. It’s more painless than you think. And the result is worth it and the peace of mind you will achieve. You will know exactly how much you can afford, if you can qualify. With the FHA Home Loan 3.5% down program, and the Down Payment Assistant programs such as the Sapphire Grant, CalHFA programs, GSFA Platinum, you just may be surprised at how little cash on hand you need to get into a home without going broke.

Fear No. 2

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‘What if I buy a money pit?’ – Your life isn’t a Tom Hanks movie… most houses aren’t money pits. There are safeguards built into the system, because, guess what? The bank doesn’t want to lend money on a home below value either! That’s why they require home inspections, pest inspections, home warranty insurance and appraisals. A home inspector will advise you on potential repair costs and, whether, the home is up to the building codes. If there are repairs, or the appraisal comes in lower, this can provide leverage for you to go back to the sellers and either get a lower purchase price or negotiate the work be done by the sellers.

Fear No. 3

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‘I’m worried I’ll overspend’ – This is a common theme, as first time homebuyers want all the bells and whistles in their first home and are not willing to compromise. But, most good agents know the price points of the areas you’re interested in living, know how much you are approved for, know what your personal budget is, and will show you homes in that range. If you find a home that you just love and it has a higher asking price, your agent should be able to advise you as to what the market value is, and if it can be negotiated down. They have access to what the current home value is and if it is lower than the asking price, they can back that up with historical data and comps. The bottom line is, if you are looking at El Dorado Hills real estate but your budget is below the median home value, you may have to be willing to compromise. The Cameron Park real estate and surrounding areas may be more affordable. If you are set on looking only at Folsom real estate to be close to work, you may need to look at the Fair Oaks housing market that is more affordable.

Fear No. 4

Thearrow with choose buy or rent written on the blackboard with chalk

‘It’s just safer to rent’ – Well, sure, we’ve all heard that excuse, that if something breaks I can just call my landlord, and it will be fixed. Right. In the meantime, they raise your rent every year, you are committed to a lease, they can tell you if you can paint a room or not, and you are making their mortgage payment for them. Not to mention, you aren’t building wealth, just making someone else richer. If in doubt, use a rent vs. buy calculator to crunch the numbers and see whether it’s renting or buying that wins out in your area. Also, ask your lender or agent for the “break even” numbers for the areas you are interested in. Some areas such as the Folsom Housing Market, when you add up your closing costs, down payment, and monthly mortgage, you break even in 2 years. Which means it can be “cheaper” to buy then to rent.

If you are truly dreaming of owning your own home, get out of your head and take the plunge. We get it. And we’ll help you navigate the process. It’s a journey that can have great rewards. Give us a call to get the preapproval process started today!

2017 Housing Market Forecast

The California Association of Realtors has released their 2017 Housing Market Forecast. Why is that important? Well, if you plan to sell your current home to buy that forever home, to downsize, or even get into the market for your first home, knowing what the housing market is forecast to do over the next year is important. Instead of having you read the whole forecast, I went through the informative 133 pages and broke it down into factors affecting the forecast, what that forecast means for us locally and what the experts are saying.

Why is the Housing Forcast Important to Understand?

Important Factors Affecting the Forecast

Now, the first big news is that the Sacramento area is still 15.7% under the peak median home price of $394,450 in August of ’05 at today’s median price of $332,580. Secondly, rates remain attractive. A 30-year fixed is still in the low to mid 3’s. The economic outlook is good despite some uncertainty such as:

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  • the effect of Brexit
  • the Presidential election
  • the weak global production and exports
  • and the unexpected decline in oil

Here are a few more important takeaways:

  • California jobs are back, losing 1.3M during the recession but gaining 2.2M since January ‘08
  • Unemployment rates at an 8 year low of 5.5%
  • Consumer spending has been robust in 2016
  • Consumer confidence at a 9-year high

So, where is the inventory? Supply is remaining tight, or at least below the norm. Statewide we are at 3.4 months, and 2.9 months locally. Also, long-time homeowners are not moving, staying an average of 10 years, up from 5 years in 2009 citing the main reasons:

  • Low rate on current mortgage
  • Low property taxes
  • Capital gains hit
  • Where can I afford to go?
  • Could not qualify for a mortgage today

The last little statistic I thought was notable is, when asked what super power would you like to have…

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  • the #1 answer at 29% was to make traffic disappear,
  • #2 at 26% was the ability to fly,
  • but the third top answer at 21% was to have Instant Mortgage Approval!

That’s a great sign that consumers are seeing the value in homeownership.

Demographics at Play in the Housing Market

First, 64% of the baby boomers say they do not plan to sell their home when they retire, yet, 92% have equity in their home. This makes a huge difference in the inventory level, as they contribute inventory when they sell and buy. So why are they not moving?

  • 44% say Their $1M+ in equity isn’t enough to retire in style.
  • 13% say They plan to be buried in the back yard and leave their home to their kids
  • 2% say They want to see all their children living under the same roof again.
  • 41% say All the above!

Maybe if they knew about props 60 and 90, they’d take the plunge! So, let’s check in with the Millennials now

  • When asked how important is the American Dream: 90% of Millennials say it is Moderately to Very Important to them.
  • When asked what part of the American Dream is most important:
    • 18% said owning a home
    • 18% cited a fulfilling job
    • 16% thought a family is most important
    • 14% put education as number 1 and so on.
  • When asked if they thought buying a home was a good investment, 82% agreed.
  • When asked if they knew they could qualify for a mortgage with a lower down payment would they purchase a home:
    • 69% said they would start looking today
    • Only 19% knew about the FHA program, meaning 81% are unaware they can put down as little as 3.5%!

The last demographic I found compelling was Renters. Nearly half of the renters’ plan to purchase a home within the next 5 years. 55% of them have already prepared to buy a home by either speaking to a realtor, searched for homes, gotten preapproved, etc.

These demographics are positioned to impact the market in 2017. Baby boomers are staying put, which can keep the inventory low, millennials will jump in as they learn about their options, and renters are tired of paying higher and higher rents.

What the Experts are Telling Us

Nationally:

  • The GDP will increase 2.1%, compared to 1.5% in 2016
  • Unemployment should drop to 4.7%
  • The Consumer Price Index should increase 2.1%, compared to the 1.4% for 2016
  • The 30 Year Fixed Rate may increase to the 4% range

In California, unemployment should drop to 5.3%, with a 1% population growth, and real disposable income is expected to increase from 2.9% in 2016 to 3.5% in 2017. Now, 62% of the expert economics say that the housing market will increase in volume and price in 2017.

  • Volume in sales will increase 1.4%
  • Median home price will increase slightly at 4/3%
  • Affordability statewide will decrease to 29%
  • And the 30 Year Fixed Rate will go up to 4%

The lack of affordability will be our biggest challenge. Although locally, we are positioned well with affordability around 47%. The low affordability in the coastal regions should drive more homebuyers inland. So, the 2017 Forecast is positive for our area as volume is expected to increase and values up slightly.

Your 2017 opportunities are to:

  • Educate first-time home buyers – talk to their parents
  • Become well versed on down payment assistance programs, debt management and improving credit to turn renters into buyers.
  • Don’t give up on international buyers

The big message in this forecast is to stay involved & stay current as the housing market should be better in 2017 than it was in 2016.

The bottom line is that 2017 promises to be a great housing market environment. Sellers will continue to have a slight advantage with fewer than the normal number of homes on the market. Buyers can take advantage of the continuing low rates, as well as the low down payment options such as the FHA program. And as rents continue to rise faster than home values, there isn’t any reason to delay buying your own home.

Truth or Myth About You Credit Scores

Is It Truth or Myth About You Credit Scores?

If you are looking for Credit Score Repair in Folsom & Greater Sacramento, read this!

The dreaded FICO score. It’s that number that’s associated with every credit report. We all know about it—most people have one—but what does the credit score really mean?

We met up with Jeff Sipes, Owner of Blue Water Credit in Roseville, CA to dispel some myths about your credit score and expose the truths.

One aspect you may not know is that 30% of your Credit Score has to do with your credit card balance. That’s relation to the credit limit. You want to try to have no more than 10% charged on your credit card about 30 to 45 days before you apply for your loan.

“I pay my bills on time, so my credit score is going to be high.” But, only 35% of your score is your payment history. This includes late payments, collections, and even bankruptcies and tax liens. Each type of account will stay on your credit report a specified period of time and each type of derogatory will hurt your score differently. 30% of your score is credit card balances. So, paying down those balances will maximize your credit score.

“If you pay off your collections, it’s going to disappear.” But, paying off a collection can actually lower your score. Before you pay off all your collections, talk to an expert!

“Every time your credit is pulled, it hurts your score.” If you pull your credit from a website, there’s no impact and if multiple lenders pull credit it only effects the score one time (as long as you’re within the shopping period.) FICO states for a mortgage inquiry, there’s 30 days to rate shop and it effects the score one time and the impact is 1 to 5 points. It is important to note than when searching for a home you are allowed unlimited inquiries over a 15-30 day period since it is assumed you are rate shopping. Inquiries made by yourself or for unsolicited offers do not count against your score, but are shown on your report.

Credit Scores can be a bit confusing and overwhelming, but if you want more information on credit don’t hesitate to call! We are more than happy to help!

10 Ways to Improve your Credit

Getting Pre-Approved? Check Your Credit:

If you’ve been thinking of getting pre-approved to buy a home, now is the ideal time to review your credit.

According to the Federal Trade Commission, over 20% of credit reports are wrong and it is important to check your credit early so you have time to do something about it.

Lenders consider Four Key Things when prequalifying you for a mortgage and ultimately giving you access to financing:

  • Credit – Intent to pay and the commitment to handling credit responsibly
  • Income – This shows the ability to repay the loan
  • Assets – Larger down payments show more skin and commitment in the game
  • Employment History – Consistency indicates strength and continued income

If you know how, you can improve your credit. This helps in getting approved, obtaining better programs and accessing a less costly loan. It also expedites the process due to fewer obstacles to overcome.

Credit Scores Matter:

Most people don’t realize how much a good credit score can impact their lives.

Whether you are applying for a mortgage, purchasing auto insurance, getting a cell phone, opening a checking account or applying for a job, most likely your credit report will be considered.

If your credit score is low due to poor payment practices or incorrect information on your report, you may pay the price when you least want to. Even if you aren’t declined while applying, you will most likely pay much more for the credit or services you purchase.

Below are 10 things you can do to improve your credit score:

Erase the Dings: Contest entries that are incorrect or a result of identity confusion. Contact the creditor if you notice any errors. If they say no then you can go directly to the credit bureau reporting it. You can go on-line, pay for their report and contest the error. Sample Dispute Letter

Increase Your Credit Lines: Higher credit lines will improve your credit utilization ratio. This is the balance on the account divided by the high limit. Lenders like to see utilization under 50% and even lower. This should help improve your score significantly.

Pay Debt Off: Lower the total balance owed on each account. This is another way to lower your credit utilization ratio. Most bureaus like to see 30% ratios, but there are increasing benefits and score improvement the lower the ratios are:  50%, 30%, 10% and 0%.

Hire a Reputable Credit Repair Company: A good Credit Repair Company understands the Federal Credit Reporting Act, and knows how to use this bill of rights to fight for and protect consumers. Items may often be removed due to improper reporting.

Consolidate Debt: If you have multiple credit cards, consider consolidating cards with higher utilization ratios to cards with lower utilization ratios. There is often one card with a very high balance while another might be low. Get each card under at least 50%.

Check Your Credit Report Annually: Review for errors. The Federal Trade Commission found at least 20% wrong and consumers wrongfully paying higher interest rates. Incorrect addresses, spelling of name, and negative marks not yours may be disputed and removed.

On-Time Payments: Making on-time payments monthly is important to a high score. Pay a few days late and you might pay a fee, but pay 30 + days late and it will hurt your credit. 35% of the Credit Score is due to on-time payments. A little carelessness can cost big.

Be Patient: If you’ve had a major event, such as a bankruptcy or foreclosure, time is your friend. While these events should not hold you back after 7 years, it takes 10 years to fall off the report. Typically a collection takes 7 years and 180 days to fall off from initial late.

Protect Your Identity: Credit can be ruined quickly when your information is stolen. Accounts are opened in your name, negative activity occurs, and it is difficult to reverse. Review statements carefully and be cautious where you share your private info.

Start Building Credit in Your Own Name Early: A great way to start is as an Authorized User or a Joint Guarantor on a parent’s account. Be careful that it is not a card that regularly keeps a balance as the payment will need to go into your monthly debt responsibility.

Wondering where to start?

If this all seems overwhelming, or a little scary, just give us a call. The only way to know what your mortgage credit score looks like is to run a Mortgage Credit Report.

Free Online Reports are valuable in pointing out what is negatively hitting your credit, but they use different criteria then a mortgage report. If you’d like to know what rates are or what your score looks like, give us a call.

4 Key Home Value Indicators

4 Key Home Value Indicators

As we move into Fall 2015, traditionally the slow time of the year, there’s been a lot of talk about where home prices are going. One thing most Real Estate professionals can agree upon is that the Sacramento Tri-County market is having another banner year. This has continued the winning streak with increasing values since 2011 for all three counties, Placer, El Dorado and Sacramento Counties.

If you’ve been wondering what’s happening with your home’s value, we’ve put together 4 Key Home Value Indicators to help you better understand what to look at to determine if your home’s value has increased.

New Building Activity is Up in Your Neighborhood – Supply follows demand. If you’re seeing building going on around you, it’s most likely that you’re in a high-demand area. With a considerably limited amount of inventory, prices has been strongest in high-demand areas. There is little chance of overbuilding at this point, so prices will continue to increase until supply meets demand.

Neighborhoods Near You Have Gotten Spendy! – If you’re questioning how the heck your neighbors just got that much for their home, take a look! Pay attention to what comparable homes are going for in the area. The main tool that appraisers use for valuing homes is the Substitution Method. If other’s homes have gone up, most likely yours has too. The best indicators are homes that are most like yours. Look at things such as square footage, functional age, updating and improvements, lot size, pool versus no pool, quality of construction, and number of rooms.

Inventory and Time on the Market:  Low inventory drives home values. Six months of inventory is considered a balanced market with less than 6 months a seller’s market. If the inventory of available homes is in short supply, then there will be high demand. The amount of time that a home will stay on the market is reduced and the price is driven higher. If you’ve ever seen a bidding war, potential buyers keep offering more for the property, this is usually due to high demand. If a home is priced right and in high demand, it can still sell within a matter of days with multiple offers.

Real Estate Agents are Bullish – Good agents typically have a solid grasp on the local market. They watch time on the market, inventory levels, what is happening with the neighborhood, and will usually have a good idea of what the good and bad points were of properties that sold. This in-depth knowledge make them a great resource to determine where you home value might be. Not all Realtors are professionals, but the good ones are valuable. Ask a trusted Realtor what they’re seeing. They should be able to give a good idea, and even run a Comparative Market Analysis, CMA, to give you a feel for what your home is worth.

We’ve included some additional links and resources for you to get a better sense of how the market’s performing in your neighborhood. If you think you might have equity, read our next blog post and watch the video to determine what to do with it.

Resources:

Look at an example CMA
Real Estate Market data from Trendgraphix

If you have any questions or need help in meeting a good Realtor, please feel free to call or email. We’d be happy to make an introduction.