Friday, February 26, 2010

Hoboken Weekly Market Statistics

Use the weekly statistics to track the market. Bid on your new home with confidence!

See the price per square foot by neighborhood, by the number of bedrooms. What have units sold for? What are they listed for today?

Weekly Stats Public 2009

The Offer: There's More to It Than Price

•Sellers who decide that a specific dollar figure will buy their home and won’t budge from that bottom line may sell themselves short.

•Buyers who drop out of a transaction for a property they love because the seller’s counter-offer shocks them may be quitting before they have really started negotiating.

When a buyer makes an offer to purchase a house, condominium unit or commercial property, the purchase price is a prime consideration, but it represents only part of the total value offered to the seller. Problems may arise for both sides of the transaction when this fact is forgotten.

Citi offers cash for keys

Mortgage lenders are trying to arrange smoother departures for distressed homeowners who can’t be saved by loan modifications–and discourage them from trashing the homes on their way out.

CitiMortgage, a unit of Citigroup Inc. (C), announced Wednesday a pilot project that will let some delinquent borrowers remain in their homes without making mortgage payments for six months if they voluntarily transfer ownership to the bank.

Over the past two years, millions of foreclosures have been delayed by state and federal programs requiring lenders to try to keep borrowers in their homes by easing their monthly payments. But the moment of truth is approaching for hundreds of thousands of households that sought help under the Obama administration’s Home Affordable Modification Program, or HAMP, launched a year ago, as well as borrowers who have sought help through other programs.

New Jersey Mortgage Refinance

In the Green world of New Jersey, your New Jersey home is your biggest asset and biggest liability, if you’re thinking of mortgage refinancing, New Jersey is the place to be. With rates fluctuating and New Jersey home prices, the popularity of mortgage refinancing in New Jersey has exploded.

New Jersey has options. Do your homework and consult one of the New Jersey’s mortgage refinance brokers. First question to answer prior to a New Jersey mortgage refinance is how long do you anticipate staying in your current New Jersey home?

Assistance Programs for First Time Homebuyers

Although many people can afford a mortgage payment and associated costs to owning their own home, the thought of coming up with a substantial down payment often stops them from taking the plunge. Charity organizations and federal institutions are available to these buyers to assist with this problem. We will discuss what can be done to assist the home buyer in need of financial assistance in this article.
What Are Assistance Programs?

Determining the Listing Price

Pricing your home is an art -- not a science.
Achieving the optimal price is the result of both objective research into similar properties and instinct in determining how much a buyer will be willing to pay for your home. The right price will attract showings, which will generate offers.
The unfortunate fact is that price is the number one factor that most homebuyers use to determine which homes they want to view. It’s also important to remember that although you and your Realtor set the asking price, the selling price is determined by the buyer.

Your Escrow and You

Escrow: What is it?
Very simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. The California Escrow Law : Section 17003 of the Financial Code : provides the legal definition.

Use the weekly statistics to track the market. Bid on your new home with confidence!

Weekly Stats Public 2009

Thursday, February 25, 2010

Owning a Home -- What’s Deductible?

Your Biggest Deduction – Interest
If you have a mortgage on your home, the loan is probably "fully amortized." This means a portion of your monthly payment actually repays the debt and another portion pays the interest. After a scheduled period of time your mortgage is paid off.
If you itemize deductions using a Schedule A, the interest portion of your mortgage payment is usually tax deductible.
There are conditions.

Wednesday, February 24, 2010

New Map for Open houses for week of 3/03/2010-3/09/2010

Hoboken Real Estate Monitor's Open House Map Open houses are picking up again as the weather warms and the real estate season opens. The Map is a great tool for starting the real estate purchase process. Walk around Hoboken on a Saturday or Sunday afternoon, looking at real estate. Get an idea of what your dollar can buy, in what part of town, with what amenity level. The map is refreshed through Thursday afternoon so be sure to stop by again before your weekend search. Sort by price, number of bedrooms or day of week! By subscribing, you will be able to not only get the basics - price, number of bedrooms, and street location but will get the unit number, and the full Multiple Listing Service listing with photos, square footage and more. . . .

Tuesday, February 23, 2010

Home Equity v. Mortgage Loan: Risks and Rewards

When choosing between a home equity or mortgage loan, weigh the risks and rewards of each against your specific needs for borrowing funds, your ability to repay and your personal spending habits. A home equity and mortgage loan both have pros and cons depending on your circumstances.

How a Home Equity and Mortgage Loan Work
For most, a home is the largest asset owned and the best source of securing debt to borrow for specific needs. Most homes have equity in them, which is the difference between the home’s current market value and the amount owed on the home. For example, if you pay $200,000 for your home and have a $160,000 mortgage, you have $40,000 in equity. Equity increases if the market value of your home rises and as you pay down your mortgage.

Effective Tips on How to Repair your Credit after Bankruptcy

Bankruptcy can stay in your records for as long as 7 years. However, that does not limit your from trying to apply for home mortgages again. The very first step you need to make is fixing your credit. This may take quite a long time but it is all worth it giving you another chance to fulfill your dreams.

You might be thinking, what is the essence of fixing your credit after getting bankrupt. Well, one thing is for sure, you can not deny the fact that you will still need financial assistance in the future and one of the main requirements is your credit score. This is the basis of all lending companies if you deserve to get the loan or not. Your credit standing says about your payment histories, the kind of credit that you got in the past years, the time duration that you have paid off all your dues and the credit limit that you are allowed to have. Since bankruptcy stays in your record for quite some time, thus this can greatly affect your credit rating. Apart from that, you can expect that some of your credits will be affected. If you fail to have long-term credits with good mode of payment, then fixing your credit score is definitely very hard to do.

Home Refinancing Tips

If you have observed the behavior of many borrowers, they tend to refinance when the interest rate is low. Many want to refinance their loan today because the interest rates are very low. However, you have to bear in mind several things before deciding to refinance your loan. They do this to reduce the monthly mortgage they are paying. Others want to refinance their loan because they want to shorten the period of their mortgage loan.

Before you decide, you need to be familiar with the different types of mortgage loan. This will make you aware of the options available to you. There are various types of mortgage. The FHA loans, the adjustable rate mortgage, the interest only mortgage and the reverse mortgage loan are just some of them. Once you know your option, it will be easier to decide.

What is a refinance anyway? A refinance happens when a borrower acquires a new loan to pay off his existing loan. As mentioned earlier, he does this to have better mortgage terms like lower interest rates as well as shorter mortgage period. Although this is what most borrowers want, the opposite happens if they are not careful when making decisions.

In order to make the right choice, keep these points in mind:

How to prepare your property for rent.

A landlord has a lot of responsibilities. That is why you have to decide carefully if you wish to have your property rented. Among the most important roles you have to do is to prepare your property. You have to see to it that it is comfortable for your tenants. It has to be safe. Most importantly, it should provide a suitable living space for its occupants.

As mentioned earlier, there are several preparations you have to do. You have to check your property, deal with the repairs and protect it from different threats.

Checking the property:

Inspection should be done before you open your home for occupants. You can do this yourself. However, a professional would help you in identifying the features that you need to pay attention to. Among the most important things you need to check are the different systems in the house. Check the electrical system. Make sure that the wires and the entire system are in good condition. Check the plumbing as well. See if there are leaks. If there are, deal with them right away. You should also make sure that the heating system is working properly.

In addition to above mentioned systems, you need to check damages of the different portions of the property. Check the fixtures, storage and the flooring. Take note of these things even if you do not intend to repair them. This will prevent you from charging the tenants for the damages they did not cause.

Green Building and Renovating

Whether building from scratch or renovating parts of an existing home many home owners and buyers are looking for greener options in their living spaces than ever before. While most home owners are well aware of the benefits of buying energy efficient appliances, there are some interesting other ways that you can build or renovate with a green focus that you might not have thought of.

Steel framing a home is one way to make your residence greener that many people don’t think about because the studs in your walls are hidden from view. Steel framing is ecologically friendly because steel is such a recyclable material; most of the steel used to make steel framing is recycled from old cars. Steel framework is safe against rotting, pests, earthquakes, and won’t twist, warp or crack like wood framing can.

Mortgage Rates and other Key Rates

Monday, February 22, 2010

Make the Most of Natural Lighting in Your Home and Save on Energy Bills

If you are looking to save on energy bills and make the most of the natural lighting in your home, then there are several factors that you need to consider. For example, the orientation of your home is of the utmost importance, but there is nothing you can do about it if you have already bought the place.

Orientation plays the most important role because it dictates how much natural light your home is going to receive, setting aside all other factors, of course. North-to-south or south-to-north-oriented house receive the most sunlight since the United States is on the northern hemisphere.

The southern part of your home receives the most sunlight, with the east receiving sunlight in the morning and the west receiving sunlight in the afternoon. Consider these factors when you are looking to allow natural light into your home, and look to see if there are any obstructions which are limiting these areas from receiving all the sunlight that they should.

Friday, February 19, 2010

Current Mortgage Rates

Hiring a Buyer's Agent

There are many reasons why you need to hire a buyer’s agent if you wish to purchase a house. First, he knows what to do. Second, he will share with you what he knows. And finally, you will be able to make better decisions and choices with his help. You can be certain that your agent will disclose vital information to you. This is due to his fiduciary duties. It is his duty to be honest to you and help you make better decisions.

The buyer’s agent agreement:

If you want to hire an agent, expect to sign one of this. However, you should read the agreement carefully before you affix your signature. One of the things you need to check is the end date of the contract. In addition to that, you need to look for reasonable clauses. One is that the agent will not get a commission if you were able to purchase a property, which is sold by the owner. You should also reserve the right to cancel the contract if you are unable to work with the agent.

There are also two types of agreement, the exclusive and the non-exclusive. An exclusive agreement entails that the agent will be paid even if you purchase a property that he did not introduce. A non-exclusive agreement would entail that the agent only gets paid if you bought a house that he showed you.

The role of the buyer’s agent:

Aside from finding your ideal home, the agent has other roles as well. He should help you find the right lender. He should also help you get a loan preapproval letter. The letter will give you an idea of the price range of the property you should purchase. He should also have a list of the properties that fit your criteria and most importantly, he has to set up meetings with the sellers of the property you wish to check.

How to choose an agent:

Not all agents are competent. This is why you need to be careful when choosing an agent. How long has he been in the industry? What do his previous clients say about him? You can find them online, you can also find one through referrals or through open houses. However, before you hire anyone, conduct a background check first.

Choose an agent that can represent you. This means that he knows the industry well. If you encounter problems with a certain property, he should be able to give you viable options. He should also provide you with relevant information about the property you are interested in. It could be about liens, mortgage issues and title problems. The information will surely influence your decision.

Your agent should also listen to you. In order to find your ideal home, you need to provide information to your agent. He needs to know your price range, the type of home you like and the location where you want to live. If the houses he presents to you do not meet your requirements, then he may not help you find the home you want.

An agent will help you make a home purchase. Just see to it that he is competent enough to find your ideal home

Follow Some Tips for Qualifying for the Best Mortgage Rates

If you are looking for a mortgage for your home, the first tip you should follow is to stop immediately. Do not go talk to any lenders until you have gotten a copy of your credit report and you know exactly what is in it. Yes, your mortgage lender is going to go through your credit history and credit report, so you may think there is no need for you to get one.

But nothing could be further from the truth, and you do not want to wait until you are in front of your lender to find out that you have negative marks in your credit report which are really hurting your credit score. You need your credit report so you can know what is in it, and you need to know your credit score.

Scores above 720 generally do not have anything to worry about because they will get the best mortgage loan terms. You can try to raise your credit score if you want, but it will not really make any difference on the terms you are offered. From 621 to 719, you may end up paying a premium of 2% or more on the loan the lower you are. You might not get the best rates if you are at 695, but you might only pay half a percentage point more than someone at 720. If you are at 620 or below, you will have rates that are adjusted to reflect the higher risk, perhaps 3% or more than someone with excellent credit.

Now you can begin to see why it is essential get your credit report, and to try to correct any errors or inaccuracies. It may mean about a 3% difference in the rates that you will be charged on your mortgage loan. Over the life of a thirty-year mortgage, the difference can run into the hundreds of thousands of dollars, depending on the size of the loan.

Another great tip to qualify for a good loan is to get your credit and spending under control. The less money you owe, the lower your debt-to-income ratio will be, and the more favorably that your mortgage lender will look at your loan application. And getting your credit and spending under control also means not requesting any new loans or credit cards because each inquiry on your credit report can lower your score by as much as 12 points.

If you want to qualify for the best terms available, you will have to become conservative with your finances, learn to save, pay your bills on time (being late just one time before applying will really seen unfavorably by your lender) and show that you are not a risk of defaulting on a mortgage loan. What the mortgage lender will do with you is assess the risk it is taking by loaning you the money. If you present too much of a risk, you will not get the most favorable terms if you are offered any terms at all.

Is Today Still a Buyer's Market?

Before you determine if today can still be considered a buyer’s market, it is important to comprehend the term and what it implies. This is important to be able to identify if today’s real estate market is a good time to buy a house. A buyer’s market is a state wherein homebuyers influence the home prices. This condition occurs when there are more supply of homes for sale than the demand to purchase. This has been the situation in the real estate market for the last several months. There are many for sale homes and very few buyers. These benefits buyers since they will be able to purchase a property at a lower cost, thus the terms buyer’s market came about.

It is good to check out the present economic situation in a community. Try to find out how long the homes enlisted stay unsold in the market and the reasons why they remain unsold. If this is the case, there may be limited homebuyers in the market and plenty of homes listed for sale. However, it is also helpful to check out the enlisted homes because a property may not be selling because it is overpriced or infested. As soon as you have determined the answers, you can then figure out if now is the right time to buy a house.

The plunging home prices along with the historically lower interest rates have convinced seventy-one percent of Americans that now is the right time to purchase a property. The fact that most Americans realize that today is the perfect time to buy a house is good news to home sellers, realtors, home builder and everyone else involved in housing, including the average home owner. Determining that there are plenty of good deals in the housing market play a major in the decision to buy.

According to real estate experts and analysts, today is still a wonderful time to acquire new homes since there are many excellent home buying deals. Additionally, they stated that if you want to know who has the upper hand in the real estate market today, it seems that it is still the homebuyers. The median home price decrease was 6.5 percent off its original listing price.

You can easily determine if it is a buyer’s market when you noticed a difficulty in selling a home. If there are more sellers than buyers, it would be hard to make a sale due to the stiff competition. You can also check out the rate of unemployment in the area. If you observed that it is still declining, there is a bigger chance that there are fewer people who are wiling to spend a huge amount of money to home purchase. This also determines that very few people can afford to buy a house.

Your landlord got foreclosed. Do you have to go?

Renting a home that is going through foreclosure? If so, don't be fooled: Lenders can't kick you out; they have to honor the terms of your lease.

Of course, that doesn't mean that some lenders' representatives aren't trying to scare people away.

Sandra Pearson has lived in her rented townhouse in Santa Maria, Calif., since July 2007. But last October, the single mom -- whose 17-year-old son suffers from epilepsy and autism -- was served with a vacate notice.

The owner of the home had lost it to foreclosure and the servicer, First Federal Bank, wanted Pearson out. She showed them her lease, which runs through June 2010, and proof of on-time payments and thought everything was cleared up.

But in December, First Federal failed, and OneWest Bank took over its assets -- including the Santa Maria townhouse. When Pearson went to pay her rent, the agency managing the property for OneWest refused to accept the check. They threatened her with court action and claimed her lease was not legitimate.

"They scare the wits out of you," Pearson said.

OneWest eventually agreed to allow her to finish her lease; however, a bank spokeswoman said they still believe there were problems with the documents.

Under the Protecting Tenants at Foreclosure Act, which Congress passed last May, tenants like Pearson are usually eligible to stay after the property has been foreclosed as long as they have a valid lease and are paying their rent regularly. Even renters on a month-to-month lease get 90 days to leave.

But tenant advocacy groups charge that lender representatives, including some unscrupulous real estate agents, have been preying on tenants' ignorance. They pressure renters by sending them misleading letters that drive some out.

One letter sent out by a Texas law firm stated, "This letter constitutes formal and final demand that you vacate the premises within three days [emphasis ours] of the date this letter is delivered."

Worse, the message threatens legal costs if tenants don't comply. With that facing them, many fold their tents.

"The average person wouldn't know the law has changed," said Robert Doggett, an attorney for Texas RioGrande Legal Aid. "People assume they have to leave."

There is no official data identifying the number of people who have received such letters, but advocates think it could be quite high considering the number of properties bought for investment and rented out during the boom years.

The attorney general of Connecticut, Richard Blumenthal, has fielded numerous complaints. "Potentially, it could be affecting thousands of tenants," he said. "We're warning banks and real estate interests: foreclosure is not excuse for illegal eviction."

Early in February, he sent out cease-and-desist letters to 15 lenders, including such big names as Wells Fargo, HSBC and Citibank, nine law firms and six real estate companies, urging them to comply with the act.

The banks all denied any intentional wrongdoing. Some did say they have absorbed huge volumes of foreclosed properties with little, if any, infrastructure in place to handle the extraordinary number of repossessions.

In fact, many often contract with outside companies -- law firms and real estate brokers -- to handle the workload. And in some cases it may be those contractors who are overstepping the bounds, without the banks' knowledge, according to Gabe Treves, program director at California advocacy group Tenants Together.

"The realtors see tenants as a roadblock to their commission," he said, "so they bully and mislead them into signing away their rights to say in their homes."

That almost happened to taxi driver Owen Casper, who found a note on his door from a real estate agent telling him he had 30 days to get out of his San Diego home.

"It gave me two options," he said. "Continue in the home on a month-to-month lease or take keys for cash. But the agent told me because I was already month-to-month, my only option was to move."

The agent represented Fannie Mae, the government sponsored mortgage giant, which has a strict policy of protecting tenants. But, apparently, the agent hadn't gotten that message.

Casper is thankful he called Tenants Together and fought the eviction. They advised him to speak directly to the mortgage company since the bank might not be aware of the agent's bad behavior.

After Casper contacted Fannie Mae, it arranged for him to talk over his situation with a new agent. "She made it very easy for me to stay in my home," he said. "I got a year lease at very affordable rent."

To Blumenthal, whether or not it's policy or rogue representatives is not particularly relevant. "One way or the other, the outside contractors act as the lenders' agents and so [the lenders] are legally responsible," he said

Is the mortgage market starting to heal?

The mortgage market may have begun to turn: Fewer borrowers fell behind on their payments during the last three months of 2009.

A seasonally adjusted 9.47% of all mortgage loans were late during the fourth quarter, down from 9.64% at the end of September, according to the National Delinquency Survey, which is produced by the Mortgage Bankers Association and is considered the bible of the industry.

This figure is significant because it shows a reduction -- even if just slight -- in the volume of loans heading toward the foreclosure process. This has not happened since 2006.

"We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs," said Jay Brinkmann, the MBA's chief economist.

Of course, delinquency rates were still 1.59% higher than they were in the last quarter of 2008.

Brinkmann's main reason for optimism was a drop in the percentage of borrowers who had missed one mortgage payment. That rate fell quarter-over-quarter to 3.63% from 3.79%.

"The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight," he said. "We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors."

Landlord foreclosed. Do you have to go?
Another positive sign is a drop in the percentage of borrowers whose lenders had initiated foreclosures, the first step in the process of taking homes away from borrowers. That may be only temporary, though: Lenders have been holding back and the number of seriously delinquent loans not in foreclosure has ballooned.

As a result, loans 90-days late or more now account for half of all delinquencies calculated by the MBA, a record high and twice the category's share of delinquencies two years ago.

But the high number of borrowers in that category is somewhat of a statistical glitch. Loans are remaining there much longer than they did in past years because of government and lender attempts at mortgage modifications.

Of all the delinquency hot spots, Florida is the worst hit with 26% of all mortgages in some kind of trouble.

The worst performing category of loans was subprime adjustable rate mortgages, with more than 42% being 90 days late or in foreclosure. That is nearly four times the rate of default during early 2007, when the mortgage meltdown was heating up

Wednesday, February 17, 2010

Open house map for week of 02/17-02/23

Hoboken Real Estate Monitor's Open House Map Open houses are picking up again as the weather warms and the real estate season opens. The Map is a great tool for starting the real estate purchase process. Walk around Hoboken on a Saturday or Sunday afternoon, looking at real estate. Get an idea of what your dollar can buy, in what part of town, with what amenity level. The map is refreshed through Thursday afternoon so be sure to stop by again before your weekend search. Sort by price, number of bedrooms or day of week! By subscribing, you will be able to not only get the basics - price, number of bedrooms, and street location but will get the unit number, and the full Multiple Listing Service listing with photos, square footage and more. . . .

Friday, February 12, 2010

Market Conditions

Pending home sales have leveled from a market swing driven by response to the home buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in December, increased 1.0 percent to 96.6 from 95.6 in November, and remains 10.9 percent above December 2008 when it was 87.1. In November, the monthly index had fallen by 16.4 percent from surging activity in preceding months

Lawrence Yun, NAR chief economist, said it’s important to recognize how the tax credit is skewing market data. "There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded," he said. "These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth highest monthly tally in two years."

Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.

The PHSI in the Northeast rose 2.3 percent to 76.1 in December and is 14.9 percent higher than December 2008. In the Midwest the index increased 5.2 percent to 86.9 and is 8.7 percent above a year ago.

Pending home sales in the South rose 2.2 percent to an index of 98.4, and are 5.5 percent higher than December 2008. In the West the index fell 3.8 percent to 119.9 but is 18.6 percent above a year ago.

Yun projects the extended and expanded tax credit will encourage 2.4 million households to take the credit in 2010. "While new-home sales will remain low due to a lack of construction, existing-home sales are projected to rise to around 5.6 million in 2010," Yun said. Last year there were 5.16 million existing-home sales.

He added that one of the greatest benefits of rising sales will be firming home prices. "For several months now we’ve been seeing stabilization in all of the home price measures as inventory is pulled down," Yun said. "As a result, the housing wealth for many middle class families has begun to stabilize."

The Basics of Foreclosure

Foreclosure is the legal process of the mortgage holder taking the collateral for a promissory note in default. The process is slightly different from state to state, but there are basically two types of foreclosure, judicial and non-judicial. In mortgage states, judicial foreclosure is used, whereas in deed of trust states, non-judicial foreclosure is used. Most states permit both types of proceedings, but it is common practice in most states to use exclusively one method or the other.

Judicial Foreclosure
Judicial foreclosure is a lawsuit that the lender ("mortgagee") brings against the borrower ("mortgagor") to get the property. About half of the states use judicial foreclosure. Like all lawsuits, it starts with a summons and complaint served upon the borrower and any other parties with inferior rights in the property (remember, all junior liens, including tenancies, are wiped out by the foreclosure).

If the borrower does not file an answer to the lawsuit, the lender gets a judgment by default. A referee is then appointed by the court to compute the total amount (including interest and attorney's fees) that is due. The lender then must advertise a notice of sale in the newspaper for four to six weeks. If the total amount due is not paid, a public sale is conducted by the referee on the courthouse steps. The entire process can take as little as three months and as much as twelve months depending on the volume of court cases in your county.

The sale is conducted like an auction, the property going to the highest bidder. Unless there is significant equity in the property, the only bidder at the sale will be a representative of the lender. The lender can bid up to the amount it is owed, without having to actually come out of pocket to purchase the property.

If the proceeds from the sale are insufficient to satisfy the amount owed to the lender, the lender may be entitled to a deficiency judgment against the borrower and anyone else who guaranteed the loan. Some states prohibit a lender from obtaining a deficiency judgment against a borrower (See, e.g., Alaska Statutes §34.20.100, Washington Revised Code §61.24.010, California Code of Civil Procedure §580b)

Non-Judicial Foreclosure
Most states permit a lender to foreclose without a lawsuit, using what is commonly called a "power of sale." Rather than a mortgage, the borrower ("grantor") gives a "deed of trust" to a trustee to hold for the lender ("beneficiary"). Upon default, the lender simply files a notice of default and a notice of sale, which is published in the newspaper. The entire process usually takes about 90 days. The borrower usually has a right of redemption after the sale (see below).

Strict Foreclosure
A few states permit "strict" foreclosure, which does not require a sale. When the proceeding is started, the borrower has a certain amount of time to pay what is owed. Once the date has passed, title reverts to the lender. Many California and Oregon cases, in which the seller has sought forfeiture under a land contract, the court has ordered strict foreclosure. See, e.g., Peterson v. Hartell, 707 P.2d 232 (1985), Zimmerman v. Estate of Cook, 855 P.2d 193 (Oregon 1993).

Reinstating the Loan
Many states permit a borrower to "cure" the loan before the date of sale. This simply requires paying the amount in arrears, plus interest and attorney's fees. It is certainly more desirable for a defaulting borrower to reinstate a loan rather than pay off the entire principal balance.

Virtually all states have specific laws requiring a reasonable notice to the defaulting borrower before the lender can accelerate the debt. If you are a lender, make sure you review the default notice with your attorney to ensure compliance with state law. If your attorney or other party sends the notice, be sure he complies with the Federal Fair Debt Collection Practices Act (See, Romea v. Heiberger & Associates, 97 Civ. 4681 (S.D.N.Y. 1998); Law firm held liable for violation of F.D.P.C.A. by signing 3-day demand for rent).

Redemption Rights
Some states give a borrower the right to "redeem" the amount owed and get title to the property back after the sale. The length of the redemption period changes from state to state. The highest right of redemption is from the owner, borrower or guarantor on note. Behind him come the junior lien holders who are in danger of being wiped out by the foreclosing senior lien holder.

In states where there is a long redemption period, investors often buy the junior liens on the property to have the right to redeem the property from foreclosure. The holder of the most junior lien has the last right to redeem the property by paying off all underlying liens. The owner, of course, has the highest right. Obtaining a quitclaim deed from the owner gives you the right to redeem the property yourself.

Zero In On Motivated Sellers

When investing in real estate, you want to focus your efforts on motivated sellers. This is true especially if you are just starting out. and dealing with motivated sellers makes the process go even faster, which means cash in your pocket sooner rather than later.

Motivated sellers are people who MUST sell their homes. So...what motivates a seller to have to sell his home? Financial distress for one. Maybe he is behind on payments. Maybe he is facing foreclosure. Maybe even bankruptcy. Maybe he is facing a huge medical bill. Or a divorce settlement is looming on the horizon.

Positive reasons can force the need for a quick sale. A job relocation and not wanting to deal with a vacant house, let alone rent it out and have the value plunge. Getting married and having no need for two houses.

You may think you are taking advantage of these homeowners. Actually, you are doing them a favor. Think what happens if the homeowner does not make the sale. He could be foreclosed upon, or worse, forced into bankruptcy. Or an empty house could be destroyed by vandals. Renters could wreak havoc on the value of the house.

It's easy to see, then, that these sellers need you. You are, in fact, a savior of sorts.

O.K., now how do you find these motivated sellers? Some tips:

1. Build a website, or have one built for you, announcing that you buy houses. Not a techie? Then have someone from build one for you.

2. Run classified ads in your local newspaper. Place your classifieds in dailies, weeklies, even free newspapers. Hint: advertorials(looks like editorial copy; reads like an ad; purports to educate but is really an ad)

3. Set up bandit signs, those little signs on stakes and phone poles, announcing that you buy houses for cash, fast. Warning: Don't get carried away creating these until you find out they are legal in your area. If they are not, you can always place them after 5P.M. Friday evening through Sunday evening, because the sign police are not out and about then.

4. Put signs on your car. You are now a rolling billboard. You'd be surprised how many people will approach you when you are parked somewhere.

5. A bit more expensive, but take out a Yellow Pages ad. Hint: Use the advertorial approach to stand out from competitors.

6. On line, go to classified ad sites, especially free ones, like

7. Once you get going, and can afford it, going the direct mail route can be quite profitable. Mail to people within a zip code (shotgun marketing) or get a list of particular people, such as those in foreclosure (targeted marketing).

The bottom line is you can't sit around waiting for deals to come to you, you must go out and find them and/or do things to get people to call you. 90% of sellers are not motivated, so be patient and be willing to weed through a lot of unmotivated sellers before you get that one that is dying to sell his home for cheap.

How to Keep a Positive Perspective

“Whether you think you can or you think you can’t, you are right” – Henry Ford

I am sure you’ve heard the expression, “Attitude is everything.” This is very true. Right now, it’s simply your attitude and mentality that will give you the edge over others who are trying to invest in this highly violatile market. You’ve undoubtedly heard the importance of thinking positive and having the right attitude. Most people are intelligent enough to know that this statement is true. Some people reading this will argue that a positive attitude doesn't always work. Well, maybe not, but I know one thing for sure - negative thinking and a negative attitude NEVER works! So your only choice and your only chance for success in this market are to pick the positive things in life and maintain a positive attitude at all times.

I once read a fortune cookie that said, “An optimist is someone who tells you to cheer up when things are going his way”. I know that if you are reading this article, times may be difficult and you need serious answers to your burning questions such as, “How I profit in a slow market”? There are many answers to this question, but first I need to impart to you some relative perspective.

A History Lesson on Real Estate Cycles

About every ten to twelve years, as an average, real estate values tend to double in most major metropolitan areas. For example, in the 1920’s, the original colonial homes sold for just under $2,500 in Long Island, New York. Since then, real estate prices have doubled almost eight times over the last 80 years. That averages out to a 100% increase approximately every ten years. An interesting note to this is that about every ten to twelve years, real estate values must correct before they enter their next “doubling cycle”.

It’s Not a Matter of If, It’s a Matter of When

The evolutionary process is three steps forward and one step backwards. For example, imagine a 100% increase occurring in three steps of one-third parts each. The last market cycle of the 1980’s was one in which real estate values doubled, followed by a correction of the early 1990’s, which equated to a 20-30% decrease over a three to five year period. This cycle was then followed by the post-millennium cycle boom of 100% from the last high point of the previous cycle. We are now in the naturally-occurring phase of a correction in the cycle. This essential and beneficial adjustment gives the market pause to reflect and re-gather momentum and strength for the next doubling cycle. This has occurred time and time again because the long-term demand for housing is growing an exponential rate based on population growth to almost double in the United States by 2050. This will continue to drive prices higher as it has for the last 100 years.

Since we now know based on history that nearly all real estate prices will double again, it’s not a matter of if, it’s a matter of when your existing houses will sell. Sharing these facts with your prospective buyers will put them in the right frame of mind to buy now versus next year if they plan on staying in the home more than five years. If a buyer is apprehensive about being the right time to invest, ask him if he’d like to buy his parent’s home for the price they paid for it – the answer will be obviously “yes”.

Maintain a Positive Attitude Assuming a Negative Result

In “Winning Through Intimidation” author Robert Ringer talks of the importance of maintaining a positive attitude through the assumption of a negative result. In other words, Ringer suggests that you be prepared for the worst case scenario while at the same time putting your best foot forward to get the best possible result. This will take the mental pressure off of you and allow you to focus on getting the job done. This approach, I believe, allows you to be positive and realistic in your mental assessment buying and selling houses.

If it Bleeds, it Leads

There’s an old expression in the media business, “If it bleeds, it leads.” In other words, the media loves to cover negative news more than positive because it sells better. When the real estate market is in turmoil, the media loves to run these negative headlines to keep reminding people how bad things are. When buyers hear the bad news, it affects demand because the negative news drives fear, which makes buyers worry about whether the time is right to buy a home.

Is the media simply reporting the news or does the media actually affect the news in this regard? The answer is obviously both. The media reporting negative news alone can’t shape a real estate market. However, since perception is often reality, when buyers are spooked, they may shy away from buying. This affects lenders, builders, real estate agents and other professionals who rely on the real estate business for their income. It becomes almost a self-fulfilling prophecy because things get worse and the media again reminds us how bad things are.

But, are things really as bad as the media reports? At the time of this article (October 2008) the numbers certainly do reflect falling home prices and rising foreclosures. When you hear that foreclosures have doubled or even tripled in a particular area, this may sound catastrophic at first until you realize that the vast majority of homes (97-99%, depending on the local market) are NOT in foreclosure. Despite the doom and gloom, there’s always a buyer for a well-kept home offered at the right price and terms. In short, don’t read the paper if you want to keep a positive attitude and sell your homes fast!

Ready Fire, Aim, Fire

Well done is better than well said – you have to take a whole lot of action to get your houses sold in s slow market. In a good real estate market, people can sell a house fast, so when things slow down, they figure, “Oh well, there’s nothing I can do.” Nothing could be further from the truth. Not only is there something you can do, but there’s a lot you MUST do to get your house sold. However, it’s not just about working hard, it’s about working SMART. You need to do things in the right order and in the right way to get the proper results.

However, don’t focus too much on perfection before you take action. You’re probably familiar with the phenomenon of the “C” student who outperforms the “A” student in real life. This is because the “C” student is often satisfied with doing a mediocre job at something, but just getting it done. The “A” student mentality often leads to paralysis of analysis and inaction. In other words, the bottom line is getting your house exposed to as many buyers as possible, not necessarily getting it done perfectly. For example, many sellers want to show their house only when it’s convenient for them and the house is in perfect shape to be shown, instead of when a buyer is ready. While showing a house in its best condition is a priority, it doesn’t make sense to put off a ready, willing and able buyer for too long.


Many people reading this are prone to inaction because of fear of doing it incorrectly. Remember, it’s not a matter of doing it perfectly, but putting forth your best effort. As I discussed earlier, a lot of effort at a “C” level beats doing less things at an “A” level.

Lack of knowledge certainly makes it difficult to sell a house fast in a slow market, and in fact is probably the single biggest drawback for the average person. Most people only have the opportunity to sell a few houses in their lifetime and often rely on professionals to do the work. Thus, the average home seller does not have enough practice to get really good at the job. In fact, most real estate agents who sell houses for a living are hardly good at it. The top 5% of agents in any market do the vast majority of the business.

Taking the time to learn what to do is a very important part of the success in selling a house. In the classic book “Think & Grow Rich”, Napoleon Hill writes about the importance of learning the right things. He distinguishes between general knowledge and specialized knowledge. Certainly, there’s a lot of general real estate knowledge in bookstores and floating around the Internet, but this book is unique because it offers the very specialized knowledge of how to sell a house … QUICKLY! Our experience in selling thousands of homes will reveal the very specialized knowledge you’ll need to get your house sold fast and at the highest price you can get for your market.

Should You Disclose on Short Sale Flips?

Short sale flips - the process of shorting a property then reselling it for a cash profit in a simultaneous closing has been taking heat lately from title companies and real estate brokers. Realtor blogs are filled with drivel about how these transactions are illegal or unethical. What's the real truth?

The Basic Process

The process of the short sale flip works as follows.

Step 1: Investor signs a contract to buy a house from a seller who is behind in payments.

Step 2: Investor contacts seller's lender to negotiate short sale

Step 3: Investor gets lender to approve short sale

Step 4: Investor lines up backend buyer

Step 5: Investor closes with seller, paying off lender, then resells to backend buyer in simultaneous closing for a profit.

In essence, this is no different than a regular wholesale flip except instead of paying off seller's lender in full, investor pays off seller's lender at a discount.

The Hoopla

Some Realtors and title companies think there should be full disclosure to the lender and seller about the resale of the property, otherwise the bank and seller are being "defrauded". In order to be defrauded, someone must be owed a legal duty of disclosure.

As far as disclosure to the seller, I see no issue because the seller is not getting any money out of the deal either way. His lender will not agree to a short sale while the seller walks away with money. So any profit made by the investor is fair game. As far as disclosing to the lender that you plan on reselling the property for a profit, of course you are going to do that. That's what investors do - they make a profit. If you planned on keeping the property as a killer rental instead of flipping it, there would be no issue. If you fixed the property up and sold it 3 months later, there would be no issue. For some reason everyone gets upset because you are flipping it an hour later for a profit. In order words, what exactly triggers a duty to disclose to the lender that you intend to make a profit?


Chances are this will end up in court someday and a jury will have to be convinced that failing to tell people you are reselling your property for a profit is somehow a fraud upon the lender or the seller. Nobody wants to be the test case, so I think that to be on the safe side, your contract with the seller should clearly disclose that you intend to resell the property for a profit.

"Buyer may resell the property in a simultaneous closing for a higher price and make a profit."

This covers the seller, but what about the lender? Well, the lender gets a copy of the contract in the short sale package the investor submits to the lender. This puts the bank on notice (We all know that the package is 100 pages long and the bank's loss mitigator is probably not going to read the contract in detail, but who's fault is that?). Should you further disclose in your cover letter to the lender that you have a buyer lined up to resell the property to at a higher price? Maybe. Maybe not.

How to Get a Hard Money Loan

So, you just got that great bank-owned property under contract and now you need a loan to buy, fix and flip. You went to three hard money lenders and they turned you down. Why? Because you STINK at selling your deal. That's right, you need to learn how to SELL your deal to a lender.

Start by getting a binder from Office Depot, with a set of tabs you can print on. Mark the tabs into these sections:

Here's what you need in each section:

About Me. This section should contain a FNMA 1003 loan application, a copy of your credit report, a copy of your driver's license and a brief resume of your experience. If you have no experience, then at least put a list of books and seminars you've been through. A list of references would help, too.

Purchase Contract. A copy of the purchase contract with addendums should go here.

Appraisal. Ideally an appraisal, but at least a real estate broker BPO (broker's price opinion) should go here.

Insurance Binder. A copy of a commitment to insure from your insurance provider goes here.

Title Commitment. A copy of the title commitment should go here.

Photos. Detailed photos in and outside of the property, IN COLOR.

Inspection. Have a professional inspection done of the property and put his report here.

Repair estimate. A repair estimate from a LICENSED general contract (copy of his license, too) should go here.

Numbers. Insert a spreadsheet of the breakdown of the numbers. Your purchase costs, closing costs, holding costs, repairs, realtor fees, etc.

Timeline. A diagram of the outline of your construction project should go here.
Now, you've got a product you can SELL. Go out and approach your hard money lender and see if your results are different!

Friday, February 5, 2010

Ten Questions to Ask Your Lender

The answer to these queries will help you find the best mortgage
Here are the 10 key questions to ask at application time to help you find the best overall mortgage loan. If you have already selected a lender and are ready to apply, make sure you have the answers to these questions first.

1. What is the interest rate on this mortgage?
2. How many discount and origination points will I pay?
3. What are the closing costs?
4. When can I lock the interest rate and what will it cost me to do so?
5. Is there a prepayment penalty on this loan?
6. What is the minimum down payment required for this loan?
7. What are the qualifying guidelines for this loan?
8. What documents will I have to provide?
9. How long will it take to process my loan application?
10. What might delay approval of my loan?

Once you've narrowed the lender field to a short list of finalists, it's time to compare their offers.

1. What is the interest rate on this mortgage?
To determine exactly what you'll pay over the term of the loan, you need to know the rate. Rates change quickly, and if your credit is less than perfect, you may not be offered the lender's lowest figure.
To effectively compare different lenders' programs, ask for the annual percentage rate (APR) of the mortgage interest, which is generally higher than the initial quoted rate because it includes some fees. But beware: the APR found in advertisements can be misleading. Mortgage lenders don't always include all the fees they charge in the calculation that determines APR, so customers who use that figure to shop rather than an itemized breakdown of rates, points and fees may end up comparing apples to oranges.

2. How many discount and origination points will I pay?
Lenders may charge prepaid mortgage interest points to lower your interest rate or other points that have no benefit to you at all. Find out how many you'll be expected to pay and which kind of points they will be.

3. What are the closing costs?
Mortgages come with fees for services provided by lenders and other parties involved in the transaction. You want to know what those fees will be as early as possible. Lenders are required to provide a written good faith estimate of closing costs within three days of receiving a loan application.

4. When can I lock the interest rate and what will it cost me to do so?
Your interest rate might fluctuate between the time you apply and closing. To prevent it from going up, you may want to lock the rate, and even points, for a specified period. Ask your lender if lock fees apply. Also, find out what the experts are expecting rates to do, read Rate Trend Index.

5. Is there a prepayment penalty on this loan?
There may be a prepayment penalty on your loan. Some penalties are 1 percent of the loan amount, others are equal to six months' interest, some apply only when you refinance or reduce the principal balance by more than 20 percent, and some kick in if you sell your home. Find out the duration of any penalty period and how the penalty is calculated. Some lenders offer lower interest rates to buyers who accept prepayment penalties.

6. What is the minimum down payment required for this loan?
The rate and terms of your loan will be based on a down payment figure, typically 3 to 20 percent of the buy price. If you can put more money down, you may be able to lower your rate and improve your terms; if you come up short, you may be required to get private mortgage insurance (PMI).

7. What are the qualifying guidelines for this loan?
These requirements relate to your income, employment, assets, liabilities and credit history. First-time home buyer programs, VA loans and other government-sponsored mortgage programs typically offer easier qualifying guidelines than conventional loans.

8. What documents will I have to provide?
Most lenders will require proof of income and assets before approving your loan, and may require other documents as well. Buyers with excellent credit may qualify for a no-documentation or "no-doc" loan, but they can expect to pay a hefty down payment and higher interest rate.

9. How long will it take to process my loan application?
The answer will depend on several variables. When the loan business is brisk, underwriters get backed up, verification takes longer, appraisals move slower and other bottlenecks develop along the loan pipeline. Lenders may say two weeks, but 45 to 60 days is probably more realistic in most cases. You'll need their best guess to determine how long to lock in your loan.

10. What might delay approval of my loan?
If you provide the lender with complete, accurate information, the loan process should run smoothly. If the underwriter discovers credit problems, there could be delays. Make sure you notify your lender if you change jobs, increase or decrease your salary, incur additional debt or change marital status between the time you submit an application and the time the loan is funded.

Put these 10 questions to your leading candidates and compare their answers. The results should lead you toward the mortgage lender that is right for you.

Four great Uses for Home Equity Loans

Home equity loans can put you well into the black, financially speaking, provided you don't use the lending strategy as a stepping stone to even more debt.
Home equity money is yours to use as you wish, but most home owners focus on several economic priorities when they cash in on home equity loans.

1. Transform many bills into one
Debt consolidation is by far how most home owners use home equity loans. It can also be the riskiest way to use the home equity loans.
If you've racked up bank credit card debt, retail credit debt and other debts, home equity loans can pay them all off leaving you with one monthly bill that's likely smaller than the others combined. It's also a good chance the interest rate will be half what you were paying on just one credit card. The rate on home equity loans is cheaper because, unlike credit cards, the debt is secured by your home. Additional debt-cost savings are available because with the consolidation you'll likely pay off your debt sooner. Along the way you'll get to deduct the interest, up to the legal limits allowed for home equity loans.
Aside from the savings of home equity loans, a single monthly bill can also improve your cash flow, leaving you with more disposable income to save or invest. And over time, the single monthly payment also improves your credit profile, revealing to lenders that you are a less risky borrower who isn't over burdened by debt.
However, the need for home equity loans could indicate a credit habit the home equity fix might only exacerbate. Homeowners should consider how to prevent themselves from scoring more credit before securing home equity loans.
Don't just pay off your old debts, cut up all but one card for emergencies and consider debt counseling to learn how to budget your income.
Be sure to write a letter to your creditors telling them to close your accounts so you can't get at them and your credit report doesn't show you've got unused credit you can still tap.
If there's a difference between what you were paying each month on all your debts and the home equity loan's payment, save it and learn to use cash where possible.
Do not take on additional debt while the home equity loan is still outstanding.

2. Put the home equity money back
Almost as common as debt consolidations are home equity loans used for home improvements. With carefully planned and professionally completed work, homeowners effectively put home equity loans back into the home by adding more square footage, by bringing the home up to current building codes and by upgrading to contemporary home design and features.
Problems here stem not so much from using home equity loans for home improvements, but the decisions you make about the improvements.
The best improvements from home equity loans increase the fair market value of your house. Remodeled rooms, notably kitchens and bathrooms, add the most value. Additions are fine too as long as you don't over improve. Additions should blend in both with your home's existing style and the design of the homes in your neighborhood. Interior painting, carpeting and the like probably won't add much value, but those cosmetic touches will improve the salability of your home.
Keep in mind, however, that lenders aware that your home is on the market may not give you an home equity loan, without additional costs. And if you have an equity loan when you sell your home you have to gross enough to pay off both the first mortgage and any outstanding home equity loans.

3. Invest home equity funds in your kids
Using home equity loans for education is another popular choice, what with the skyrocketing costs of post-secondary education and higher incomes that don't qualify for special grants and government-backed loans.
Home equity loans used to pay for education are investments of sorts too. An educated son or daughter is more likely to be financially independent sooner and building his or her own wealth rather than draining yours.
Unfortunately, college for your kids comes just about that time when you are nearing retirement and may consider home equity loans to offset your reduced income. Don't over look special educational loans, tax writeoffs and scholarships to meet your children's educational needs.

4. Disposable goods and services
No matter what you do with your home equity money you can deduct the interest and that's a compelling reason to use the home equity loans to buy those big-ticket items you've always wanted, a new car, boat, recreational vehicle. Home equity loans are also a godsend if you are hit with big medical bills or some other emergency.
Don't forget, when the car is ready for a trade-in, the recreational vehicle is up on blocks and you are fit and healthy again, you may still have equity loan payments to make. Your home is on the line.

Credit Report Guide

Step 1: Get a copy of your credit report
Errors in credit reports are often difficult and time-consuming to correct, even when they're not your fault. That's why it's wise to review your credit report every year as well as several months before you begin shopping for a house or a mortgage.
Your credit reports are maintained by three different companies, often called credit "repositories" or "bureaus," which collect and store information supplied by the department stores, credit card companies and others with whom you have accounts. Not all creditors report to all three repositories, though, so each of your credit reports could be different.
Under the Fair Credit Reporting Act, you are entitled to a free credit reports if you have been denied credit within the previous 60 days or are a resident of Colorado, Georgia, Massachusetts, Maryland, New Jersey and Vermont. Simply follow the instructions in your rejection notice. Otherwise, you can obtain your credit reports from each of the three companies for a fee of $8.50 or less.
The three major agencies to contact for your credit reports are:
Equifax Credit Information Services
PO Box 740256
Atlanta, GA 30374-0256
Experian National Consumer Assistance Center
PO Box 949
Allen, TX 75013-0949
Trans Union National Disclosure Center
PO Box 390
Springfield, PA 19064

What to do
To obtain your credit report, call, write or e-mail each company. Your request must include the following information:
Your full and complete name, including such appellations as Jr., Sr. and III.
Your current address.
Your previous addresses, if any, for the past two years.
Your Social Security Number.
Your date-of-birth.
Your phone number.
Step 2: Review your credit report
Credit reports are often difficult to decipher, so you might want to ask your real estate agent or loan officer to go over yours with you. Local non-profit organizations also provide this service at no cost, as do credit-counseling agencies.
Typically, your record will show the date you opened an account or took out a loan, your credit limits or loan amounts, current balances and monthly payments. It will also show late payments, missed payments, accounts that have been turned over to collection agencies and repossessions, all taken from information provided by the companies with which you do business.
In addition, the report will contain data from public records, including bankruptcies, foreclosures, tax liens, monetary court judgments and, in some places, even overdue child-support payments. The report will also list the names of those companies that have obtained a copy of your credit report and how often you have applied for credit over the last two years.
What to look for: For starters, make sure the information in your report is up-to-date. Many companies don't report to the three credit bureaus as frequently as they should. So if you've recently straightened out a beef with a creditor, it may not have been reported yet. Also, some companies only report when you're late and don't bother reporting that you pay on time. You want to make sure your record reflects the good as well as the not-so-good.
Next, scour your report for information that is old and out-of-date and no longer reflects how you use credit. By law, for example, bankruptcies are supposed to be expunged from your records after 10 years. More important, though, the more recent the problem, the more significant it is to the lender. Thus, a 30-day payment that was late three years ago isn't as important as one that was late three months ago. Lenders are more concerned with how you are dealing with credit now as opposed to how you handled it in the past.
Now hunt for mistakes. You may be surprised by how many factual errors you find. For instance, your adult child's credit problems may be reported as yours, especially if he is a "Jr." Or the difficulties of someone who's totally unrelated to you but has a similar name may be in your file as well.
Also look for misdated account closings, particularly when you have had to ask repeatedly to terminate your account. Often, when companies are notified that they have failed to close accounts as previously requested, they close the account on the date of the most recent request instead of the original one. And that can lead to problems because recent account closures are often taken as a sign of financial difficulties.
What is your credit score?To speed the process and cut costs, lenders are relying heavily on automation to underwrite their loans. And to help them judge your credit, they use statistical modeling to come up with a credit score, which is nothing more than a computer-generated number based on the data in your credit file.
The score takes into account the same things human underwriters do:
The number and frequency of late payments
The number of credit cards you have
Whether you consistently live at your credit limits
Whether you have savings
The frequency with which inquiries are made about your credit
But the computer is much faster because it can make recommendations in a matter of minutes. And because it is blind to your race, religion, gender, national origin, marital status and income, it's more objective, too. Furthermore, applicants who don't score high enough with the computer aren't rejected. Rather, they are referred to a human who may be able to take "compensating factors" into account.
It's also important to note that besides your credit score, automated underwriting looks at several other factors that have a bearing on your loan application. These include:
Whether you are buying or refinancing
Whether occupancy is full or part-time
The amount you have for a downpayment
The type of loan and its duration
The type of property
Your employment
How much money you will have in reserve after you close the loan
Step 3: Correcting your credit report
If you find any factual mistakes or out-of-date information in any of your credit reports, you should contact the particular credit bureau immediately, in writing, using certified mail with a return receipt requested to show when you sent the letter and when it was received. Under the Fair Credit Reporting Act, the credit bureau must investigate your dispute within 30 days. Once the agency receives your inquiry, it will check with the creditor whose information you are questioning. You should receive a written notice telling you the results of the examination within five days of its completion, as well as a copy of your corrected credit report if it has been changed because of your complaint. If you win your case, the creditor is required to notify the other credit agencies so they can correct their records.
How to fix errors: Your credit report should include information about how to go about rectifying mistakes. Each agency is different, though, so follow their instructions.
Sometimes a simple phone call will suffice. But more often than not, you'll have to prove your claim by providing documentation. If additional information is necessary, you'll be told what to send. You might need to provide canceled checks, for example, or other payment information. But never send original documents. Send copies, and make copies of all your correspondence with the credit bureau in question. When communicating by phone, make sure you write down the name of the person with whom you speak, the day and time of your conversation, and - if possible - their direct phone number. Good records are invaluable.
If no error is found but you still believe the information in your file is erroneous, you have the right to contact the creditor directly to try to straighten out the problem. If you are successful, make sure the creditor sends a correction to the other agencies. Even if you can't persuade the creditor to see the light, you are allowed to have your side of the story inserted into the credit report. If you never received the merchandise, for example, or if you didn't get a bill, you can explain that in up to a 100-word statement. The disputed item will still show up in your credit record, but at least your version will be there, too.
Finally, if you can prove there is an error in your record, some lenders will agree to turn off the computer and underwrite your application manually.

How to make good credit great credit: Believe it or not, you may have good credit and still be considered a poor risk, especially when your application is being evaluated electronically. For example, the number of credit cards in your name is held to be highly predictive. The ideal number is four to six. You will be penalized for more or less; more because you have the potential for too much credit and less because it is an indication you are unable to obtain credit. The number of sizable outstanding balances also predicts danger, as does the size of the balance to your total credit limit.
To improve your score, close out the accounts you don't use, pay down to $100 or so those you use only occasionally, and pay down the ones you use regularly. Your goal is to bring your outstanding credit-card bills to no more than 50 percent of your potential credit balances. If you can get them down to 35 percent, your score will improve dramatically. By the way, cutting up your credit card doesn't close your account. You should send a written request and ask for a written confirmation.
Another negative is the type of account. A credit card from a finance company is scored lower than a bank, travel or oil company card, or even an auto loan, because it is seen as an indicator of your inability to obtain credit from less-expensive sources. Also, if you are about to apply for a mortgage, avoid opening new accounts; the computer reads short-lived accounts as more risky, too.
What about bankruptcy and credit counseling? Declaring bankruptcy is certainly one way to wipe your credit slate clean and start over again. But it will stand as a black mark against you and the consequences could be dire. You will have trouble re-establishing credit for some time, and buying a house will be out of the question under most loan programs for at least a year or two, if not longer.
Before considering this step, you first should consult a credit counselor, who might be able to save your credit by working out payment plans with your creditors, perhaps allowing you to pay as little as 50 cents on the dollar. This will be on your credit report, too. But at least future creditors will see that you made an honest attempt at living up to your obligations and didn't walk away from them entirely.
In choosing a credit counselor, consider your local community-based housing agency or other non-profit organization. They obtain their funding from donations, the government or sometimes even creditors themselves, so they are able to provide this service at little or no cost. Local colleges and universities, military bases, credit unions and banks also sometimes provide this service.
Stay away from private "credit repair" companies that promise to erase your bad credit record or give you a brand new social security number. Bad credit can't be expunged, at least not all at once. It takes time and effort. And obtaining another social security number to hide your poor credit history is illegal.
Step 4: How to establish credit
You may not realize it, but if you have recurring bills such as rent and utilities, you already have a credit history. If they are paid in a timely manner, rent, car insurance, medical, cable television and telephone bills are all indications that you are a good risk. Keep copies of the bills and your canceled checks, and ask your landlord, insurer and power company to write letters on your behalf stating how long you've been a customer -- two years or more is best -- and that you pay on time.
If you don't have checking and savings accounts, your next step is to open them and make sure you follow the rules by keeping adequate minimum balances. Then apply for a few credit cards. All you need is a bank card, one from a local department store or a national chain and a third from an oil company for gasoline charges.
Search for the cards with the lowest fees and rates, and use them wisely to establish a record on timely payments. Don't charge more than you can afford, and make more than the minimum payment every month to maintain low balances. If possible, pay each bill in full every month.
Where to obtain credit and loans: Practically every business is willing to grant credit to its customers, often with few requirements. In fact, the overabundance of credit gets people into trouble almost as much as its misuse. Consequently, it is up to you find the best rates and terms so you can live within your means.
Most newspapers and consumer finance magazines as well as many financial web sites list the lowest interest rates currently available on unpaid balances. Don't be tempted by introductory low-rate offers; they invariable mean you'll be paying much higher rates in just a few months. And skip those cards that offer a free gift or a discount on today's purchases. They usually aren't very good deals, either.
If you need a loan, start with your credit union. They usually have the best rates and terms and offer the best service. Next, try your bank or savings institution. They know you and want to keep your business. You can always get a loan from your car dealer or furniture store, but at what price?
How to protect your credit: Obviously, the best way to protect your credit is to pay your bills on time. Put yourself on a strict budget and stick to it. If you have more money going out than coming in, look for ways to trim your expenses, like joining your utilities' budget plans which spread out your payments over an extended period. Remind yourself to pay by marking your calendar when bills are due. Take advantage of a creditor's automatic bill paying programs in which your payments are deducted on a prearranged date every month (but make sure to keep track of the payments in your checkbook). And ask your bank about overdraft protection just in case you don't.
If you find yourself a little short one month, or if you are having trouble paying your bills, don't hide from your creditors--call them. Perhaps they'll be willing to wave a late fee or two and agree not to report your tardiness to the credit bureaus. Or maybe they'll agree to restructure your debt to make it easier for you to handle your payments.
Finally, protect yourself by reviewing your credit history on an annual basis with all three credit-reporting companies. You never know when the ideal home buying opportunity will present itself, but you'll want to be prepared when it does.

Keeping Warm for Less

If you feel a shiver each time you open your utility bill, your house may be too cold. More likely, however, you're paying more than you should to heat it. In either case, you can make changes now that will make your home more comfortable and save you money.

These aren't big projects like adding attic insulation or replacing your windows — save those for later. They're easy-to-do and inexpensive techniques. The most complicated will take a weekend afternoon, and many take little time and don't even require the purchase of materials, only changing a habit or two. Others can be done for as little as $10. We'll take a look first at the obvious stuff and then at more specialized — but still simple — energy-saving techniques.

1. Install a Programmable Thermostat

A programmable thermostat allows you to preset temperatures for different times of the day because you don't need to keep your home at 68 degrees around the clock. Although one shouldn't be used with heat pumps, a programmable thermostat is a real money-saver with air-conditioning as well as with heat. Choose a setting on the low end when you're sleeping or are away and go with a higher setting at other times (see table bellow) for savings of between 10 and 20 percent of your bill. Some units can store up to four temperature settings each day — e.g., morning, day, evening, night. All have a manual override switch.

Models from Hunter Fan are typical. The Set & Save 5+2 lets you program one five-day stretch and a two-day period. With the Set & Save 5+1+1, you program one five-day stretch and two other separate days. The Set & Save 7-Day and 7-Day Energy Star models provide the most flexibility, with individual programs for all seven days. The units use AA batteries to maintain the display if the power goes off and to hold settings.

You can easily install a new thermostat yourself. Always follow manufacturer's instructions, but typically you remove the old thermostat and unscrew the wire leads attached to the terminals on the back. Reattach those wires to the new thermostat's terminals, after inserting mounting screws in the wall, if necessary. (If you have separate heating and A/C units that use the same thermostat, you may find four leads, two for each unit.)

6 a.m. to 9 a.m. = 68 degrees
9 a.m. to 5:30 p.m. = 60 degrees
5:30 to 11 p.m. = 68 degrees
11 p.m. to 6 a.m. = 60 degrees

6 a.m. to 9 a.m. = 75 degrees
9 a.m. to 5:30 p.m. = 80 degrees
5:30 p.m. to 11 p.m. = 75 degrees
11 p.m. to 6 a.m. = 80 degrees
2. It's Closed-Flue Season, so Minimize Those Romantic Fires

An open fireplace damper lets the same amount of heated air escape up the chimney as a wide-open 48-inch window lets out. Make sure your flu is closed when you don't have a fire going. In fact, it is a good idea to reduce the number of times you use your fireplace. A roaring fire exhausts over 20,000 cubic feet of heated air per hour to the outside. Sure it feels warm by the fire, but every Btu that goes up the chimney is replaced by cold air pulled into the house elsewhere. And all that cold air has to be heated, a costly prospect. Can't resist a fire every few nights? Install a set of glass fireplace doors ($400 to $600). Closing these doors when you go to bed prevents large volumes of heated air in the living space from escaping after the fire has gone out.

Cost: $0

3. The Spin on Ceiling Fans

Ceiling fans are everywhere in warm-weather climates. Spinning counterclockwise, they move air around the room. Not all energy experts feel it's a good idea to use them in the heating season (doubters says they cool the air too much), but the fans do help bring heated air down to earth in rooms with cathedral or high-sloped ceilings. However, that's only if you slide the reversing switch on the side of the motor housing to the winter (clockwise) position. Then run the fan at its lowest speed. If you can't reverse the blade rotation or if you think the fan is cooling off the room too much, leave it off.

Cost: $0

Move Furniture Away From Vents, Registers, and Radiators

This sounds like a no-brainer, but many times a couch, chair, or bed moved during the summer stays there in winter, blocking the flow of heat into the room. This wastes money and leads to cold rooms. With a forced-air system, blocking a supply or return vent can cause a house-wide pressure imbalance that disrupts the heat flow in the whole system.

Cost: $0
4. Stop the Draft, Close the Door

Light a match and the rising hot air will draw nearby cooler air into the match flame. Heat a building, and the rising hot air will pull cold air from outside into the house. It's a physical principle called "stack effect." To defeat it, cut down on spaces cold air can enter your house, like under a door to the outside. Seal this gap with a "door snake," a long thin cloth sack, like a bean bag. Fill it with dried peas or rice, something to make it heavy enough to stay in place. You can sew one using scrap fabrics.

You can also keep the heat where it's needed by making sure some interior doors, such as those leading to hallways or near stairways, are kept shut. This closes off natural air passageways so they can't act as chimneys, allowing warm air to escape up through the house.

Cost: Under $5

5. Install a Door Sweep

If you feel cold air seeping beneath a door leading outside and find that using a door snake is inconvenient (see item #6), install a draft-defeating nylon door sweep. This long, thin broomlike vinyl-and-pile attachment gets installed along the inside bottom edge of the door. Cut the sweep to fit with a hacksaw and keep it in place with four or five wood screws.

If you heat the garage, check to see if cold air is infiltrating along the bottom edge of the door. Rubber garage-door gaskets, nailed in place with 1 in. galvanized roofing nails, can stop that cold air cold.

Cost: $8 each for a door-bottom sweep and a garage-door gasket

6. Quick-Seal Windows

Dead air is a very effective insulator, and you can create a pocket of it by installing clear plastic film across the inside of your windows. Available in kits that contain plastic film and double-sided tape, the plastic becomes nearly invisible when you heat it with a blow-dryer. If you find it unsightly, place the film on windows and patio doors selectively or only in unused rooms.

Measure your window before buying; kits vary in size, and they work only with wood, aluminum and vinyl-clad molding. Payback is fast on this inexpensive technique, because heat lost through windows accounts for 10 to 25 percent of your overall heating bill.

If you can rattle your windows, they're letting a lot of heat escape around the frames. Seal the open spaces with puttylike rope caulk before shrink wrapping. Press-in-place rope caulk ($5 per window) is mess-free and easy to use, and removing it in the spring is a cinch. But be sure to do a thorough window-sealing and caulking job before next heating season rolls around.

Cost: $4 to $6 per window, $15 for a patio door

7. Work the Drapes

Got drapes or curtains that block sunlight? Open them during the day to get free solar heat (make sure windows are clean). And then close the curtains just before sunset. Also, consider insulating curtains (around $100 per window). As a general rule, each square foot of window that you insulate at night saves about 1 gal. of oil or nearly 1.5 cubic feet of gas a year, which means that insulating curtains pay for themselves in around seven years, to say nothing of the added comfort.

Cost: $0

8. Change Your Furnace Filter

If you have a forced-air system, changing the furnace filter can save you some energy (up to 5 percent) and keep dust down in the house. The system will last longer and be less likely to break down. The most popular 16 X 20-inch duct filter costs around 50 cents when bought by the box. Change them monthly during heating season. Measure your air filter before shopping; they range in size from 12 X 12 inches to 30 X 30 inches. An alternative to swapping out the replacement filter is to use washable filters (around $20 each). With care, they can last five years.

Cost: Under $15 per year

9. Adjust Your Water Heater

You use more hot water in winter. Lower the water heater temperature from 140 degrees to 120 degrees. And take showers, not baths. According to the U.S. Department of Energy, the average bath consumes up to 25 gallons of hot water, while a five-minute shower uses up much less — only around 10 gallons. Equipping your showers with low-flow showerheads also dramatically reduces the consumption of water, both hot and cold.

Cost: $0
10. Defeat Rapid Cycling
Rapid cycling — when a heating system fires on and off — wastes money. It occurs because of a heat-anticipation feature on thermostats that maintains a near-constant room temperature. Most electronic setback thermostats are programmed to act when they sense a 1 degree to 1.5 degree drop. If the thermostat is misprogrammed to less than 1 degree, the heater may go into rapid cycle, firing every three minutes or less to maintain temperature. To stop rapid cycling, make sure the "cycle-rate adjustment" in the thermostat setup mode reads from 1 degree to 1.5 degree. If you change it, move it higher.

On most mechanical thermostats, the amperage scale is set from 0.1 to 1.2 amps. To defeat rapid cycling, set the arrow one notch higher. Let it cycle for 24 hours before adjusting it again.

Rapid cycling is common in the relatively warm early and late winter, when you're using a unit capable of heating on the coldest days. Detect rapid cycling in midwinter, when the heater should fire 5 minutes on, 5 minutes off.

Cost: $0

11. Lower the Thermostat

Each degree you lower the thermostat on your heating system decreases your fuel bill by 3 percent. Going from 72 degrees down to 68 degrees doesn't matter much in terms of comfort, but it can save up to 12 percent on your heating bill. (All temperatures in this article are in degrees Fahrenheit.)

If you're using a coil-type thermostat, you'll get more accurate readings if you clean it. Pop off the thermostat cover and blow or gently swipe away the dust.

Cost: $0

12. Get Free Energy-Saving Info
Need more guidance on saving energy? The U.S. Department of Energy's website provides tons of easy and practical energy-saving tips for your home.