What's wrong with my credit?

This is from Realtor.com. Good information on keeping up with your credit, and improving it. If your credit is on the fence between acceptable and unacceptable, please let me put you in touch with a reputable mortgage professional who can possibly help you clean it up and get the bump you need to get a better rate.

By Patrick Ritchie | February 2009

Consumers see the ads in the newspaper and read the signs nailed to telephone poles: "Credit problems? We erase bad debt." It sounds so easy. Just call the phone number and pay a fee, and your credit woes will disappear.

The reality is that bad credit does not vanish by paying someone to remove it. Are there legitimate credit repair organizations out there? Sure, and they can help remove inaccurate information from credit reports. But even they can't get rid of correct information, however damaging it may be.

When it comes to outright mistakes on their credit report, though, it's imperative that consumers have them fixed—whether they hire an agency or do it themselves.

The first step in fixing credit report errors is to identify what's wrong. Consumers have to obtain a copy of their credit report (everyone is entitled to one free report per year from each of the three credit bureaus: Experian, Equifax, and TransUnion) and review it for accuracy. Look for:

• Late payments. There should be no late payments over seven years old on the report. This is important, as approximately 35 percent of a credit score is based on timely payments.

• Collections. The report shouldn't show any collections or charge-offs more than seven years old. It's a good idea for consumers to save copies of their credit report for seven years so they have proof of when an item was added.

• Payment records. All paid-in-full installment loans and all collections that have been paid in full or settled for less than the amount due should show a zero balance. Sometimes collections are not updated after they've been paid or settled.

• Mysterious accounts. Consumers should be able to recognize all accounts listed on the report. Incorrect accounts do sometimes appear, either by mistaken identity or by identity theft. Consumers should contact the creditor immediately to compare their name and Social Security number with the one shown for the incorrect amount. In the case of an incorrect collection, consumers may have to request a "validation of debt," or what is sometimes called a "media packet," which provides details on the account holder. If the account is a case of identity theft, the consumer should request a fraud affidavit from the creditor. It's also a smart idea to file a police report.

• Original dates. Length of credit history is 15 percent of a credit score, so consumers should be sure the original dates they opened their accounts are accurate. Original account dates could be reported inaccurately if a credit card company is acquired or merged, or if a credit card is reported lost or stolen.

• Available credit. Credit limits on the credit report should match up with credit card statements. It's best to keep balances under 50 percent of the available limit; less than 30 percent is even better. Debt accounts for 30 percent of your score.

• Types of accounts. Sometimes accounts are not categorized correctly. A home equity line of credit should be listed as a second mortgage, not just a line of credit. If the account type is not reflected properly, consumers should contact the creditor.

• Reason codes. Consumers should read what the credit bureau has to say about why their score is what it is. These so-called "reason codes" appear in the credit report to explain what factors played into the credit score and what actions can be taken to improve the score over time. One caveat: If a consumer already has a good credit score, ignore the reason codes, as making changes could actually result in a lower score.

One last word of advice for consumers: Think twice before closing that credit card, which shrinks the available credit listed on your report and hurts the credit utilization ratio.

The key to good credit is being proactive in reviewing credit reports regularly. If consumers find their credit score is a respectable 680 or higher, removing minor dings may not be worth the effort. Otherwise, finding and eliminating errors is one way to get the high credit rating they deserve.

What Should I Read? Home Cheap Home

I am crazy about this little book. Put together by the editors of the now defunct Budget Living Magazine, Home Cheap Home is a guide to inexpensive improvements to your home. How inexpensive? Well that depends on the project. Whether you need a new lampshade or a new kitchen, this book is full of ideas for how to do it with style for less.

They take a room-by-room approach - living rooms, kitchen and dining, bedrooms, bathrooms, home office, and outdoor living. For each room they do 30 - 40 pages of vignettes of clever spaces with details about the style, storage, design, and color that makes the space work. Some of these ideas are truly retro, maybe even bohemian, in style. Others have the feel of Pottery Barn or Restoration Hardware, so there's something for everyone.

One of my favorite ideas is on page 85 in the Kitchen and Dining section where they suggest making a shiny stainless colander into a pendant light fixture. Do I need a pendant light fixture in my kitchen? Not at all. But I want one like that anyway!

And since the cheapest improvement involves using stuff you already have, Home Cheap Home spends a few pages on improving the flow of your home by re-arranging your existing furniture and re-purposing unused items. Cheap and green, what could be better?

I believe this little gem is out of print, but fear not! If you visit Amazon.com and enter Home Cheap Home in the search box, you'll see that there are many used copies available, some for as little as $4... a steal for so many good ideas.

Great Listing In Inman Park

What should I Read? Mrs. Dunwoody's Excellent Instuctions for Homekeeping

This handy little reference book was a wedding gift (Thanks, Ms. Dembrowski!). Written by Miriam Lukken of LaGrange Georgia, it is full of timeless wisdom for keeping a clean, comfortable, and hospitable home. Do I practice all the advice in the book? Please. I don't even have time to take my own advice. But, I recommend it for anyone living on their own for the first time, or anyone who's parents were domestically challenged and therefore didn't pass on any wisdom of their own.

The book is full of both poetry and the nitty-gritty details of managing a household. One one page you'll see a recipe for homemade rat poison, on the next a poem by Shakespeare on the importance of sleep. But isn't that the reality of homekeeping? I only have to think of my own family Christmas celebration to know that this is true. Just moments before I embraced my octogenarian grandparents with Christmas joy, I was on the floor of my kitchen trying to keep the turkey grease from staining the grout. Yes. I washed my hands.

My favorite parts of the book have to do with hospitality: Change the sheets on your guest bed the day that your guests arrive, as our sense of smell is heightened in new environments. When your guests depart, wave until they are out of sight.

But I also love the little gems of practical wisdom scattered throughout the book: keep a safety pin near the kitchen sink so that when you take of your jewelry to do dishes you can pin them to your clothes. How brilliant is that?

A word of warning to my feminist friends, you might find this a little antiquated in terms of gender roles. But keep in mind that Mrs. Dunwoody, our narrator, is writing from the summer of 1866, so think of it more as a case study in southern hospitality, if that helps you enjoy it. Don't let that stop you from sharing it with a young man moving into his first apartment or dorm room. If he only reads the chapter entitled, "Miss Sallie Anne's Splendid Directions for Laundry," it will have been worth it.

This hard-cover book is available on Amazon for about $15.

Can I still decorate if my house is on the market?

Yes. Just be strategic. Here's a great article from Re/Max times about that very topic. If you're not sure whether or not you've gone too far, I'd be happy to come take a look. It is better for me to tell you that your Christmas Tree is blocking the flow from the entry way, than for another agent to tell me that her buyer thought your house was too small!

Selling During the Holidays: Go Easy on Decorations

Are your clients hoping there will be a Sold sign in their yard this holiday season? RE/MAX Northern Illinois Regional Director Jim Merrion and several Associates from his region offer thoughts on how to advise sellers against going overboard with holiday decorations.

"Layering on lots of holiday decorations inside and outside the house is one way to attract attention, but not necessarily the best way," Merrion says. "When it comes to holiday decor, restraint is the best approach. It's not that sellers shouldn't decorate for the holidays, but you don't want the seasonal touches to obscure the intrinsic appeal of the home."

The flip side of too much holiday decor, according to Merrion, is the impulse among some sellers to take their home off the market during the holidays because buyers are less active.

"It's true that fewer buyers are active during the months of November, December and January than at other times of the year, but those buyers who are in the market are usually quite serious about finding a home quickly," Merrion says. "Otherwise they, too, would be doing other things at this time year. Just a handful of showings during the holiday season can be more productive than a dozen showings in spring. Remember, it may take only one showing to generate a sales contract."

So what advice can Associates give sellers to improve the chances of offers landing in their holiday stockings?

1. Select and place the Christmas tree carefully so that it doesn't overwhelm the room.

"A tree that's too big for the room it's in really creates problems by making the whole house look small in comparison," says Paul Wells, Broker/Owner of RE/MAX of Barrington in Barrington, Ill. "If it's my listing, we spend time talking about the tree. I urge my sellers to make sure their tree fits comfortably in the room. A tree can look relatively small out at the Christmas tree lot, but then look huge when it's in a house."

2. Outside the house, use restrained yet festive exterior decorations to welcome visitors. An elegant wreath hung on the front door may be preferable to an inflatable snowman.

3. If you have traditional holiday decorations you want to display inside your home, think about putting away some of your non-holiday things so that rooms don't look cluttered. In the room where the tree is placed, consider removing some furniture rather than just rearranging it.

"It's really a matter of moving ahead and using your home as you normally would," said Louise Clark, Broker/Owner of RE/MAX Property Associates in Morrison, Ill. "Buyers understand that families live in the homes they visit - they make allowances for that - so sellers can have presents under the tree and lights in the yard. Still, the house needs to look neat, and you don't want the decorations to be a barrier that makes it difficult for buyers to get a good look at things, such as room dimensions, traffic patterns, window views and other important factors."

4. Use holiday decor to draw attention to the strongest features of the home. If there's a beautiful mantelpiece, use one or two eye-catching decorations to highlight it, but don't hide it under a layer of garland. Instead, use the garland to frame windows that offer an attractive view of the yard or the skyline.

5. Winter tends to be a dark time of year, so keep plenty of lights on inside the house when buyers are coming. Also, leave the drapes or blinds open, especially during daylight hours, so that the home seems as bright as possible.

6. Sharing a little holiday hospitality with buyers can be a good strategy, especially during an open house in December.

Michele Rossi of RE/MAX Accord in Bloomingdale, Ill., reports that at holiday open houses, "we roast almonds with a sugar cinnamon coating. The smell is intoxicating, not to mention that it tastes wonderful, too. We wrap the almonds in cheesecloth tied with a festive ribbon to give to buyers who stop in. We also offer a cup of hot wassail made with a great old recipe."

A final thought for sellers at this time of year, Merrion says, is to avoid making buyers feel like they're intruding.

"Even though the sellers are celebrating the holiday season, they need to convey the impression that they're serious about selling their home," he says. "They need to keep the front walk clear of ice and snow, and make sure the kitchen and baths look their best for showings. They probably won't see that many buyers this time of year, but those they do see are great prospects, so they must do their best to impress them."

What's Up With Mortgage Rates?

This came from David Osborne with Ashford Funding. I have worked with David before and can recommend him highly. Clearly he is staying ahead of the curve with the latest in the mortgage industry.

Fed Moves to Encourage Banks to Lend at 4.5% Interest Rates

Several news sources and the front page of the Wall Street journal today discussed the Treasury’s plan to spur the housing market byOffering low interest mortgages, possibly as low as 4.5% interest. Before we all go out and spread BAD information, here is what is known now:

• The proposal is still being discussed, and nothing has been finalized.
• The Wall St journal suggested, that even if this does happen, it probably won’t be until after Bush leaves office…Jan, Feb or later.
• The Wall St journal article said that the 4.5% rate would be for PURCHASES ONLY, not REFINANCES; the intent of the program is to spur NEW home sales.
• These loans would not be indexed with the 10 yr bond, but would be a special TBill offered to banks at a low rate, e.g. 3% in order to allow them to fund at 4.5%.
• I recommend to start shopping now, prequal them withtoday’s interest rates, and work with a lender that could float them down before closing if this does occur.

So, I know that my buyers are thinking, "I'm going to wait for this to happen to buy so that I can get a phenomenally low rate." But, keep in mind that if/when this happens, lots of like-minded buyers are going to come out of the woodwork. At that time the balance of power could shift to the bold home owners who are braving the market. It's never been more important to talk to a mortgage professional who has your file ready to go when you find the right home.

Let me know if you have any questions about this. If I can't answer your question, I'll put you in touch with one of my preferred lenders who are extemely knowledgeable of the market and offer excellent service.

Should I try to buy a foreclosure property?

This is the best Q and A I've seen on the highs and lows of buying bank-owned properties. This article appeared in The Georgia Real Estate Report, November 2008.

BUYING BANK-OWNED PROPERTIES PAINFULLY SLOW BUT POSSIBLY REWARDING

By John Adams

Last week we talked about the flood of bank-owned homes that have clogged up the residential resale market both nationally and locally. These "post-foreclosure" houses are the harvest of the exotic financing instruments and the loose lending guidelines of recent years.In many cases, the buyers intended to make the payments, but were overwhelmed by dramatic jumps in interest rates as their adjustable loans reset. Unable to pay the required sums monthly, these owners may have tried to sell. But with little or no equity in the homes, their efforts were to be in vain.

After a meaningless foreclosure auction where no investors even attended, these homes were deeded back to the lenders, who list them with local real estate professionals for sale. Banks call these houses REO properties, which stands for "real estate owned."

Yes, the savvy real estate buyer can pick up a bargain, but it's important to be cautious when shopping for these "bank-owned" homes.Here are some questions I am often asked:

Q: What's the difference between making an offer on a "bank-owned" house as opposed to a typical resale home? A: The primary difference involves recognizing the challenges of dealing with an institutional seller.For starters, a traditional seller would first get their house in clean, ready to sell condition. Only then would they open the doors to the public. Further more, most sellers expect a buyer to request a comprehensive inspection, and are not surprised when a buyer requests compensation for needed repairs.In contrast, banks expect to sell their REO properties "as-is," and they almost never agree to make repairs or put the property in any condition other than the way it is. The bank will likely grant your request for an inspection, but will almost certainly decline any request for improvements.

Q: Are all these REO houses in extremely poor condition? A: Some are in almost perfect condition, while others are completely unfit for human habitation.In addition to being poor sellers of real estate, banks have a bad habit of being poor property managers during their period of ownership.Because the house is vacant, it attracts vagrants and homeless people who move in and semi-occupy the house. In cold weather, these occupants may build fires in the fireplace to keep warm, and they sometimes break up kitchen cabinets to use as firewood.In addition, as time goes by, these homes often sink into much worse condition. Thieves steal copper pipes and copper wiring to sell for recycling, and air conditioning compressors disappear overnight. Even so, the banks hope to sell these homes "as-is."

Q: How do I go about making an offer on one of these houses? A: Here is the next hurdle. When looking at a typical resale house, you can expect the seller to respond to your written offer in hours. They may counter, but today's seller takes every offer seriously, hoping for an eventual meeting of the minds.Banks do things differently.When you submit a written offer to a bank, they frequently demand proof from your bank that you have sufficient funds on hand to close the transaction. This must be submitted before the bank will even look at your offer.Another frequent requirement is acceptance of multi-page addendums freeing the bank from any liability for the condition of the property involved.Even after all that, my experience is that most banks have trouble finding anyone with the actual authority to make a decision on selling the house. While some lenders are better than others, it is not unusual for offers to sit on the table for a week or more before someone at the bank gets around to responding.

Q: Any other pitfalls to watch out for when buying from lenders? A: First, know that this seller is unwilling to give you a General Warranty Deed for the property when you buy. They will insist on delivering title by Limited Warranty Deed, thus preventing you from involving the bank in future title problems. To remedy this shortcoming, it is especially important that you purchase the optional Owners Title Insurance policy from the closing attorney. Also, when selling REO houses, most lenders insist that you pay for settlement costs, and further require that the closing take place in the office of the seller's attorney. If you want legal representation (and you do), you will have to pay for your own attorney to review all your documents and advise you directly. In my opinion, that is money well spent.

Q: It would seem that the banks would be anxious to sell these properties, and would want to streamline the process, making it easy for buyers. Why all the roadblocks? A: Banks and lending institutions are heavily regulated, and have internal rules and regulations that must be followed. In addition, its part of a corporate culture permeating the world of banking. Banks just aren't set up to sell real estate. They protect our savings and process our checks and loan us the money we need most of the time, but marketing real estate is just not one of their strengths.

Q: What about buying government-owned houses from HUD? Is that any easier? A: Unfortunately, it's worse. The government has its own procedure for selling, involving a prioritized bid period during which only owner-occupants may bid. And even if you intend to live in the house, you must accept it in as-is condition.The bottom line in buying any foreclosed property is to make sure you protect yourself at every step, and have your attorney review all documents with you carefully before you sign anything.