Buying A Home: 5 Reasons to Buy Now

Buying a home is a big step in anyone’s life. Whether you are considering your first home, moving to a new place, or changing up your residence, purchasing a new home can be stressful and expensive. Picking the right time to take the leap can be a challenge. After all, what if a better home comes available next week or something changes in your personal life? However, sometimes the climate is particularly well-suited to buying a home – and that time is now.

Read on for our top reasons why you shouldn’t wait to buy a home in 2017.

Buying a Home

1. Interest Rates are on the Rise

The first thing you need to know is that interest rates are rising. In June, the Federal Reserve announced its third short-term interest rate hike in six months. USA Today interviewed three economists after the increase. The each said that they expect interest rates to increase by another quarter-point before the end of the year – making for a full percentage point increase in 12 months. Right now, 30-year fixed mortgage interest rates are close to a seven-month low – buoyed by weaker central banks abroad – but the low prices will not hold. “Fixed-rate mortgage rates are likely to gradually edge higher over the next six to 12 months,” explains CoreLogic chief economist Frank Nothaft, “Rates are likely to rise to 4.25 percent to 4.50 percent by the end of 2017” – and that is only the beginning. Chief economist for the Mortgage Bankers Association, Mike Fratantoni, is estimating that 30-year rates will be over 5 percent before the end of 2018.

Nothaft put the mortgage rate increases into perspective: “For example, with fixed-rate loan rates up by 0.5 [percentage point] since last summer, and house prices in national indexes up at least 5 percnet, the monthly principal and interest payment is more than 10 percent higher than it was last summer, adding to affordability challenges for first-time buyers.”

2. The Federal Reserve Takes Action

But wait. There’s more. The Federal Reserve is not only increasing interest rates. It is also divesting many of its mortgage-backed securities. “During the financial crisis, the Fed lowered short-term rates to zero. In an effort to further stimulate the economy by lowering long-term interest rates, such as mortgage rates, it began buying mortgage-backed securities. Higher demand raises bond prices, resulting in lower yields,” writes USA Today. “The Fed now holds more than $1.7 trillion in mortgage-backed securities, about one-third of all those outstanding.”

By selling off some of its portfolio, the Fed can get back to business as usual. This might streamline things for the Federal Reserve but it could spell trouble for home buyers. When the Fed adjusts its balance sheet like this, it puts pressure on mortgage rates. This action could push interest rates higher even if the Fed makes only minimal hikes going forward.

3. Home Inventories are Shrinking

There is also an issue with regard to home inventories. As of November 2016, there were almost 1.9 million homes for sale (1.85 to be exact). It might sound like a lot but that is almost 10 percent fewer homes than the year before. Moreover, the decrease in home inventories is not a blip. The number of homes for sale in the United States has been on a steady decline since the housing bubble burst so many years ago – and it looks as though the decrease will continue.

“Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that in most areas of the country, buyers have more homes to choose from today than they will next year. Or even next month” says Realtor. “Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.”

4. Home Prices are Increasing

This leads to the next issue – home prices are on the rise. “We are at a very, very unusual and historic time again… if you recall, we were in a historic time when prices were falling and rates were falling and we had a lot of inventory, and so buyers sort of had their pick of the litter, right?” says Chicago Association of Realtors president Matt Silver. “Now it’s the exact opposite.” With more competition for homes, it becomes a seller’s market. While it’s impossible to predict just how high home prices will go, Charles Nathanson of Kellogg School of Management says that when prices start to rise in a given year, they usually continue to rise the next year by an average of 70 percent or so of the amount they rose in the previous year.

5. Missed Opportunities

It costs money to buy a home. In addition to your new mortgage payment, you have closing costs, home insurance, maintenance and real estate taxes to consider – and that’s after the down payment – but the cost of postponing buying a home can be even steeper. Realtor economist Jonathan Smoke says that waiting just one year will cost you almost $19,000 between rising mortgage rates and increase in home prices. Over three years, that benefit is just under $55,000. Now, put this cost over 30 years and compound it and the financial benefit of buying a home today is over $217,000.

With the Federal Reserve’s current agenda, shrinking home inventories, and rising real estate prices, there is a huge cost of missed opportunities when you postpone buying a home. So, what are you waiting on? Ovation Credit Services can help make sure your credit report is mortgage ready. Contact us today for a free consultation.

Sources

Bundrick, Hal, “What the Latest Fed Rate Hike Means for Mortgage Rates,” USA Today, June 14, 2017. [Accessed: https://www.usatoday.com/story/money/personalfinance/2017/06/14/nerdwallet-mortgage-rates-fed-rate-hike-home-buyers-sellers/397475001/]

Gordon, Lisa, “3 Crucial Reasons You Should Buy a Home Before 2017 Ends,” Realtor, January 23, 2017. [Accessed: http://www.realtor.com/advice/buy/reasons-buy-a-home-2017/]

McGuire, Nneka, “Should You Buy a Home in 2017? Here’s What 3 Experts Say,” Chicago Tribune, May 24, 2017. [Accessed: http://www.chicagotribune.com/classified/realestate/ct-re-0528-experts-say-buy-now-20170525-story.html]

Stults, Rachel, “$217,726: That’s What You’ll Save (Give or Take) If You Buy a Home Now,” Realtor, May 28, 2015. [Accessed: http://www.realtor.com/news/trends/financial-benefit-buying-a-home-now/]

Investment in Credit Repair: Why Should I?

Credit repair may seem pricey but when you step back and look at the return, its a no brainer the investment is worth it! Credit repair service helps you to get inaccurate and dubious entries removed from your credit report. Therein, fixing your report to accurately reflect your credit history, which in return recalculates your FICO score. In turn, you will find yourself saving a lot of money and qualifying for many more financing opportunities.

Investment Credit Repair

Understand the Value of Strong Credit

There is an immense value that comes out of having great credit.

You are suddenly eligible for incentive-rich credit cards, personal loans, mortgages and even small business loans. You have funds available if there’s ever an emergency — plus your debt comes at a lower price, as having good credit means you qualify for better interest rates.

The ability to save on interest costs is the silver lining here. For instance, look at how your credit score impacts your overall mortgage costs. With a FICO score in the 620-639 range, you will pay more than $115,000 above what a borrower with a 760-850 score pays in a 30-year amortization period. So even though an FHA home loan gets you into a new place with a 580 score (and sometimes lower), it still makes sense to repair your credit first.

This example was provided in our post here, which showcases the high cost of a low credit score in a major financing situation. It’s based on a $400,000 purchase price. While the actual savings will vary, it’s true that the interest rate discount is massive for homebuyers with strong credit scores. This factor makes it crucial for soon-to-be home buyers to maximize their credit score right before buying a home.

Credit Strength Provides Incalculable Benefits

The financial benefits that come with a strong credit score are not always foreseeable. Sometimes you only realize what you could have saved once it’s too late, and in hindsight you find yourself wishing you did something about your bad credit sooner.

The home buying scenario is a great example. Imagine if you buy a place with your spouse and they move out. The only way to remove one of you from the financing documents is to refinance. You will be eligible for that new loan if your credit is strong enough to qualify you.

In that scenario, having good credit can save you from being forced into a mortgage default and foreclosure. Suddenly, you prevent your family from going homeless or having to sell your property. This example alone should show you why you want your credit score to always be high.

How Repair Services Boost Your Credit

A credit repair agency will get rid of any inappropriate entries on your report. These instances are typically negative items that hold down your FICO score. By removing them, you could see a shift of anywhere from five to 100 points or more.

The actual adjustment in your credit rating comes down to the type of item that gets taken off. For example, a wrongly reported late payment or defaulted debt could give you a huge boost. The best way to calculate the score difference is by looking at how much your FICO score can drop from each action. Learn more on how to read your credit report to get an idea of how your score might change based on particular negative items.

Another benefit comes from having credit repair specialists work against debt collectors to void your debt. For instance, you might have an older debt in collections that was re-sold a couple times. During this process, if the debt amount was changed, it’s grounds for removal. It is common for debt collectors to add their own fees or report slightly different numbers — so this might be an easy way to get your credit score lifted a bit.

Is the Investment in Credit Repair Worth the Cost?

By law, a credit repair agency is required to provide their service before accepting payment for their work. You receive a written contract to fill out detailing the services they will perform. Unless specified as longer, you are legally entitled to a three-day grace period where you can request a refund.

There are many service providers that claim to offer credit repair help. Some market their services as credit-score boosters. While you can improve your credit score this way, you also have the right to dispute anything on your credit report on your own, but this could be very tedious and time consuming.

The part that makes a professional credit repair service so beneficial is the fact that they have years of experience(s). They know the ins and outs of error reporting and how to deal with everyone from the debt collectors to the credit bureaus. In short, you have a much better chance of getting negative items removed if you do source the work to a professional credit repair firm.

Conclusion

Free yourself of bad credit in every way possible. Sometimes the battle starts with improving your borrowing behavior. Yet, for anyone with removable/inaccurate items, it definitely does not end there. A credit repair service will help you get the hindrances removed from your credit report.

If you are unsure if you have errors on your credit report, why not get a complimentary credit consultation with one of our professional credit analysts to see how we can help you. Call 866-639-3426 and press option 3, they will review your credit report to see if there are any inaccuracies that could be affecting your credit.

The investment is well worth it because in the end, you may be able to achieve a much higher credit rating once these changes to your credit report are recalculated into your FICO score. A better score means a better interest rate which in return can save you thousands especially when you think about a 30 year mortgage!

Sources:

https://www.forbes.com/sites/marcwebertobias/2015/05/06/credit-repair-companies-how-to-avoid-being-scammed

https://www.credit.com/credit-repair/

Bankruptcy Lingo: 12 Terms You Need to Know

Going through bankruptcy is tough. It takes the advice of a good lawyer or a finance expert to make sure that you do everything right and well. On top of it all, the intricate nature of the process and the emotional impact of the proceedings can make the entire bankruptcy feel more complicated than it is. Do yourself a favor and make sure that you learn the bankruptcy lingo and terms before you begin the filing procedures.

Bankruptcy Lingo

Learning Bankruptcy Lingo:

1. Chapter 7 Bankruptcy

Chapter 7 is what most people think of when they think of bankruptcy. It involves liquidating your assets and discharging unsecured debt. In some cases, you will be forced to sell assets to satisfy your creditors if you do not pass a means test, but you will usually be able to keep most, if not all, of what you own. It takes around four months to complete the process.

2. Chapter 13 Bankruptcy

You also have the option to reorganize your debts with a Chapter 13 bankruptcy as long as you have a regular income. This type of bankruptcy forces your creditors to allow you to repay what you owe on a payment plan. Sometimes amounts are reduced, sometimes not. Sometimes you get big savings on interest, sometimes it’s just about giving you extra time to pay everything off. It’s called reorganization. The process may take a few years, but you’ll be able to keep everything.

3. Chapter 11 Bankruptcy

If you have a business and your debts stem from running that enterprise, you could qualify for a Chapter 11 bankruptcy. This is like a Chapter 13 bankruptcy for your business. Through the help of the bankruptcy courts, you will reorganize your debt, keep your business open if you like and pay back your company debts over time.

4. Automatic Stay

In either case, when you file a bankruptcy petition, all collection activity is required to stop. Foreclosures, collection phone calls, penalty rates — all this stops as soon as you file for bankruptcy and let your creditors know about your situation.

5. Creditor

Anyone to whom you owe money or claims to be owed money by you is referred to as a creditor. This could be a person or a company. Bankruptcy filings are public, so sometimes a creditor will contact the bankruptcy court if they have been left off of your petition. Try not to let this happen. It is important that you list all your creditors in your bankruptcy petition or else it could derail the proceedings.

6. Claim

The formal acknowledgment that you owe a creditor is called a claim. These claims are an important part of your bankruptcy filing.

7. Lien

When a creditor has a legal right to take your property or sell it to satisfy your debt, this is called a lien.

8. Discharge

After you complete your bankruptcy proceedings and you are successful, eligible debts will be discharged. This means that your creditors cannot pursue further action against you. Your debt with them is over and satisfied. It is important to note that while many debts can be discharged, some cannot. If you owe alimony, are behind on your child support or have back taxes, you cannot discharge that debt, and there are many other similar types of debt. Your situation also matters. Sometimes, the court decides whether it is appropriate for you to discharge a debt.

9. Non-dischargeable Debt

Debts that cannot be discharged are referred to as non-dischargeable.

10. Dismissal

If you are unsuccessful in your bankruptcy filing, it may be dismissed. This means that the bankruptcy court has decided to throw out your petition. Your creditors will be free to pursue collection or litigation (aka sue you) in order to get a court to force you to repay your debts.

11. Exemptions

When you file for any type of bankruptcy, you will need to list out all your assets and debts. The court then determines if an asset should be liquidated to help pay for a specific debt. However, there are some assets that exempt. These are called exemptions or exempt property. For instance, there is a homestead exemption that could allow you to keep your home. Also, bankruptcy petitioners are often permitted to keep their “tools of trade” — such as your computer if you are a graphic designer or your tools if you are a mechanic.

12. Means Test

The Means Test is bankruptcy lingo used in Chapter 7 bankruptcies to determine whether the person filing for bankruptcy is abusing the system. “Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $12,850, or (ii) 25% of the debtor’s non-priority unsecured debt, as long as that amount is at least $7,700,” explains U.S. Courts. “The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.”

Understanding the Bankruptcy Lingo saves you time!

Bankruptcy can be a stressful time. Don’t make it harder than it needs to be by not understanding the bankruptcy lingo being used. Spending time differentiating between key concepts will make understanding your bankruptcy options easier and take some of the strain out of the process.

Sources:

Chapter 13 Info, “Dismissal vs. Discharge.” [Accessed: http://www.chapter13info.com/dismissalvsdischarge.html]

Smith, Carrie, “Seven Things to Know When Filing for Bankruptcy,” The Simple Dollar, December 1, 2016. [Accessed: http://www.thesimpledollar.com/what-to-expect-when-filing-for-bankruptcy/]

US Courts, “Bankruptcy Basics Glossary.” [Accessed: http://www.uscourts.gov/educational-resources/educational-activities/bankruptcy-basics-glossary]