If you’re thinking about becoming a first time home buyer, you might be anxious to try to take advantage of the deflating real estate bubble that’s being talked about so much these days. While it’s true that there are many opportunities for first time home buyers right now, there are some important factors that you really need to consider before you take the plunge into home ownership.

Here are some things for potential first time home buyers to think about:

You’ll probably need a more sizable down payment. The days of “Zero Down” and “No Cash to Close” are virtually gone.  The are still a few loan programs that allow Zero Down, like a Veteran’s VA loan or Rurual Development.  However, special qualifications are required for these programs.  In most cases you can expect to put at least 3.5% down with FHA financing or 10% with Conventional financing.  To further minimize needed cash to close, the purchase offer should be structured properly to help offset additional monies needed for closing costs, prepaid taxes and insurance, as well as escrows.

Mortgage Underwriters are also far more picky. This “credit crunch” everyone has been talking about is a reality. Lenders are looking closer than ever at things like employment history, proof of income, source of funds, credit history, and of course, the condition and value of the home itself.

Even though home prices may continue to slide, no one is sure when prices are going to stop falling.  The bottom is best seen once your well past it.  It’s possible you may find that the ten percent you put down on a new home may be eroded (in the short term) by a continued drop in home values, perhaps even leaving you owing more than what the home is worth.

Eventually, home prices will come back up, but you should still make sure that you’re interested in this home for the long haul.  Historically, first time home buyers tend to move on to another home rather quickly.  Just make sure the home you buy can support your family’s growth for at least a few years to come.

If you’re considering the purchase of a home, I encourage you to connect with my team and I do a brief pre-approval to help make sure your goals, timing, and financial affairs are all aligned.  Proper preperation and guidance early on in the home buying process can ultimately save you time, money and frustration.

While it doesn’t happen to everyone, it’s not entirely uncommon for a consumer to find that they have an error on their credit report. One recent survey suggests that around one in four consumers have an error on their credit report that is serious enough to impact whether they can get credit or not. In some cases, errors on your credit report are easily resolved. In other cases, you may have an uphill battle.

Here are some things to do in order to fix errors on your credit report:

• To start with, you need to prepare for the fact that you might wind up in court. Don’t start with a lawsuit, but be ready to gather information that could impress a judge or jury if it gets that far.
• You should also keep detailed and meticulous records in the process of trying to fix your credit report. Record keeping is your best weapon, especially if your case winds up in court. This means detailing phone calls, letters, etc.
• Professionalism is key, as well. Resist the urge to do anything unseemly when dealing with a credit reporting agency. Be courteous, and keep your emotions in check.
• Remember that a paper trail is easier to prove than a series of phone conversations. Whenever possible, use certified mail to communicate with the credit bureaus and creditors.
• Finally, there are some other things you can try in order to fix the problem. You can hire a credit repair company. You can contact the news media. You can try to contact executives or additional personnel at the credit bureau. If there’s wrongdoing by the credit reporting agency, you can also contact the Federal Trade Commission.

If you want to understand bankruptcy, you need to first understand that there are two types of bankruptcy available to consumers. The most common type of bankruptcy is Chapter 7, which wipes your debt slate clean but in addition requires you to liquidate major assets. Chapter 13 bankruptcy is a way for you to repay your debt over a period of three to five years, as supervised by a court. Chapter 13 is especially common for consumers that are facing foreclosure on their homes.

When you file Chapter 7 bankruptcy, almost all debts are discharged. This includes just about everything except for back taxes, child support and student loans. To qualify for Chapter 7, you need to earn less than the median income for a family of your size in your state.

The question of whether you should file bankruptcy or not is a highly individualized one. The process of filing bankruptcy is complicated, and you’ll come out on the other end with severely damaged credit. If you can avoid bankruptcy, you can make life easier in the long run. On the other hand if you’re drowning in debt that you’re not able to pay, then bankruptcy may be the best option for you.

Before you are allowed to file for bankruptcy, you’re required by law to consult with a consumer credit counseling service. In fact, working with a service like this is integral to determining whether or not you should file bankruptcy. The credit counseling service will help you to examine your income and your bills, and set a budget than allows you to repay your debt. The agency will also be able to negotiate with your creditors in order to reduce or avoid late fees, interest penalties, and lower your monthly payments in the process.  In many cases, this consumer credit counseling process can help avoid having to file for bankruptcy altogether.

After you file for bankruptcy, you have to complete a debtor-education course, which will help to teach you how to budget your money and how to carefully use your credit. The course must be approved by the Justice department. The same holds true for the credit counseling service that you must see before filing bankruptcy.

If you’re looking into bankruptcy, you need to talk to an attorney. Filing bankruptcy is a complex process, and you should choose an attorney who specializes in bankruptcy.  If you’d like a confidential recommendation or two, please don’t hesistate to ask.

If you’re in debt and having trouble paying your bills, you may find help and support through consumer credit counseling. Credit counseling is a way for people to get needed financial education and guidance during tough, financial periods. A professional counselor can help you develop a plan to get you back on your feet and through these often stressful periods. With consumer debt levels at record highs, it’s not surprising that many consumers are turning to credit counseling and educational services.

A consumer credit counseling service can do several things for their clients. An initial step is to help to set up a budget and determine how much you can devote each month to paying your bills. They can help to facilitate lower interest rates and monthly payments with lenders and credit card companies as well as make the payments directly to the creditors on behalf of their clients. In addition, credit counseling services may be able to get creditors to forgive or reduce fees and penalties.

Fees for various credit counseling services vary. I found a good, reputable firm that provides a great deal of its counseling and educational services for FREE. GreenPath Debt Solutions is a non-profit organization that has been helping millions of families since 1961. Although there’s no charge for many of their services, they do charge some nominal fees when providing bankruptcy counseling or debt management services. In my interview with Jennie, in Business Development, GreenPath does receive government subsidies. And, instead of the consumer having to pay higher fees for debt management services, the creditors often compensate GreenPath a portion of the payments they receive for their counseling and assistance. It’s important to recognize the difference between a true credit counseling service and someone who is trying to take advantage of people who are going through a rough time.

Bankruptcy law requires you to use consumer credit counseling services before you can actually file. GreenPath is approved by the Federal government to provide this type of prerequisite credit counseling whereas many credit counseling agencies are not. Consumer credit counseling services can be effective at helping you get caught up. Statistics from the National Foundation for Credit Counseling suggest that around half of people in credit counseling debt repayment plans are able to successfully complete the plan. Of those that aren’t, a good portion file for bankruptcy.

One of the most important factors in determining whether you qualify for a new mortgage is the current strength of your credit. Your credit report, along with your asset statements, proof of income and job history are the primary data that lenders use to decide whether they’ll approve you for a mortgage, how much that mortgage will be, what kind of an interest rate you’ll get, and how much your loan fees are likely to be.  Looking at your credit report before you actually need to apply for a mortgage loan can sometimes give you the time and insight you’ll need to help clear up problems (should they exist), and prepare you for what kinds of challenges that may arise during the loan process.

There are several ways you can get a copy of your credit report. The three major credit monitoring services, Equifax, Experian and TransUnion, are required to offer you a copy of your credit report for free once a year. If you have received a copy of your credit report already in the last 12 months, you can get another copy at a cost.

One simple way to get your credit report is to visit the site AnnualCreditReport.com. This is the authorized site that allows consumers to get their credit report from all three services for free. This site will require you to verify your identity, and then provide you with access to your credit report.

Alternatively, you can call the Annual Credit Report phone line at 877-322-8228 and receive a copy of your credit reports via mail.

A key item not included with your free annual credit report is a credit score, which is a must for mortgage underwriting.  You can get a credit score, as well as other services related to your credit report directly from the major bureaus, or from a third party site that provides paid access to these services.  However, scoring algorithms between lender requested mortgage reports and consumer requested reports have seemed to differ in the past.  Meaning, the scores you pay to get may actually differ from the scores a lender gets when requesting a 3 bureau credit report for a mortgage loan.

During the mortgage pre-approval process for clients contemplating a new home purchase or refinance, I often obtian a 3 bureau credit report, review it with my clients, and provide them with their credit scores free of charge.

Would you like to be kept abreast of various Real Estate Investment opportunities?

In today’s beaten-down real estate market, I’m seeing great investment opportunities on a regular basis.  Perhaps it makes sense to diversify your total asset portfolio into asset classes other than stocks and bonds.  Sometimes we’re seeing “quick-flip” opportunities as well as “buy-and-hold” rental homes.

I’ll be posting more explicit information in the coming weeks.  Meanwhile, if you’re someone who might be interested in learning more, please just send me an email to Richard@TeamWitter.com or give me a call.

Richard Witter
Real Estate & Mortgage Consultant