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1. What are the steps to buying a house? Answer
2. What sets AFI Mortgage apart from the competition? Answer
3. What is the best way to buy a home that needs to be remodeled or have some renovation done to it? Answer
4. How long should it take to process the loan? Answer
5. What are the steps to buying a house and closing on it? Answer
6. What is the difference in prequalified and preapproved? Answer
7. Can I get pre-qualified for a home purchase loan before I find my property?

Answer
8. How can I prepare for a home purchase? Answer
9. Can I get pre-approved for a home purchase loan before I find my property?
Answer
10. What is a fico score? Answer
11. What is the importance of checking my credit bureau? Answer
12. How can I increase and protect my credit rating?

Answer
13. How does an adjustable-rate mortgage (ARM) work?

Answer
14. What are lenders looking for in a Credit Report?

Answer
15. What are the steps in building a house? Answer
16. Do I have to have PMI (private mortgage insurance) Answer
17. Finding and buying home that meets your wants and needs should be an enjoyable experience. Below are 9 mistakes that home buyers commonly make and advice on how to avoid them Answer
18. How do you know what rates will do? Answer
19. How do I keep my credit clean? Answer

Q : What are the steps to buying a house?
A :
Organize your documents

If you are buying or refinancing a home

  1. If you are salaried: provide two years W-2 and one month of paystubs OR if you are self-employed: provide two years tax returns and a YTD profit and loss statement.
  2. If you own rental property, please provide rental agreements and two years tax returns.
  3. If you wish to speed up the approval process, please also provide three months bank statements for each bank, stock and mutual fund account.
  4. Provide recent copies of any stock brokerage or IRA/401K accounts that you may have.
  5. If you are requesting a cash out refinance please provide a letter explaining what you plan to do with the proceeds.
  6. Provide a copy of divorce decree if applicable.
  7. If you are NOT a US citizen, provide us with a copy of your green card (front & back) or, if you are NOT a permanent resident provide us with your H-1 or L-1 Visa.

If you are applying for a home equity loan

  1. If you are salaried: provide two years W-2 and one month of paystubs OR if you are self-employed: provide two years tax returns and a YTD profit and loss statement.
  2. If you own rental property, please provide rental agreements and two years tax returns.
  3. Please provide a copy of the note on your first mortgage. This will normally be found in your closing loan documents.
  4. Please provide a signed letter explaining what you plan to do with the proceeds.
  5. Provide a copy of divorce decree if applicable.
  6. If you are NOT a US citizen, provide us with a copy of your green card (front & back) or, if you are NOT a permanent resident provide us with your H-1 or L-1 Visa.
 
Get Qualified

Getting qualified before you apply for a loan can help you understand how much you can borrow.

When buying a house, you may get pre-qualified or pre-approved. You can typically get pre-qualified over the phone or on the Internet in a few minutes. A pre-qualification is not as beneficial as a pre-approval where you have to go through a more rigorous process which includes verification of your credit, income, assets and liabilities. It is highly recommended that you get pre-approved before you start looking for a house. This will help you:

  1. Find out the maximum house you can buy, so you don't waste time looking for properties you cannot afford.
  2. Puts you in a stronger position when you are negotiating with the seller because the seller knows that your loan is already approved.
  3. Helps you close quickly, since your loan is already approved.
 
Shop loan programs and rates

To shop for a loan you will need to:

  1. Think about how long you plan to keep the loan. If you plan to sell the house in a few years you may want to consider an adjustable or balloon loan. On the other hand, if you plan to keep the house for a longer time, you may want to look at fixed loans.
  2. Understand the relationship between rates and points. Points are considered to be prepaid interest and are tax deductible. Each point is equal to one percent of the loan. So for example 1 point on a $150,000 loan is $1,500. The more points you pay, the lower the rate you will get.
  3. Compare different programs. Shopping for a loan can be difficult. With so many programs to choose from, each of which has different rates, points and fees, it's hard to figure out which program is best for you. That's where an experienced loan officer can help you make a decision that's best for you.
 
Obtain Loan Approval

Once your loan application has been received we will start the loan approval process immediately. This involves verifying your:

  1. Credit history
  2. Employment history
  3. Assets including your bank accounts, stocks, mutual fund and retirement accounts
  4. Property value

Based on your specific situation, additional documents or verifications may be required. To improve your chances of getting a loan approval:

  1. Fill out the loan application completely.
  2. Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
  3. Do not make any major purchases. Do not buy a car, furniture or another house until your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current application.
  4. Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
  5. Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney to authorize another individual to sign on your behalf.
 
Close the Loan

After your loan is approved, you will be required to sign the final loan documents. This will normally take place in front of a notary public. Be prepared to:

  1. Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally not accepted.
  2. Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate.
  3. Sign the loan documents.

Your loan will normally close shortly after you have signed the loan documents. On refinance and home equity loan transactions federal law requires that you have 3 days to review the documents before your loan transaction can close.
 
Q : What sets AFI Mortgage apart from the competition?
A : The most important thing is service. Even though we are a mortgage company that has done over $500,000,000.00 in home loans, we still live in the community. This fact makes us work harder on every home loan that we look at doing, but day in and day out you will find that we have the Absolute Lowest Rate & the Absolute Lowest Closing Cost. And remember, we're locally owned so we live in the community with you.  
 
Q : What is the best way to buy a home that needs to be remodeled or have some renovation done to it?
A : At AFI Mortgage, we loan you the money to buy the house along with enough to make the improvements to the house. We do this by having the house appraised based what the house will be once it is completed. This way, you're able to buy the house and make the improvements all at once instead of doing one project at a time. Once the house is complete per the specification that was given to the appraiser, we can close the permanent loan usually with no money out of pocket.
 
Q : How long should it take to process the loan?
A : With technology that is available to us today, it should be only 10-12 days. Each situation is different, but we will surprise you when you see how fast we can get you into the new home.
 
Q : What are the steps to buying a house and closing on it?
A : The first and most important is to get with a Professional Realtor. You cannot imagine the list of thiings that they do for you. To begin to list the dozens of items that the Real Estate firms do would take another entire web site. We are fortunate in South West Louisiana to have professional Realtors we can work with. Once this is done, tell them what type of home you're looking for, and the neighborhood you would like to live in. Once that is done, PREQUALIFYING is the next step. This is something that can be done on this site! This will tell the Realtor and yourself what type of monthly payment you can afford. This also is a form that your Realtor will attach to any offers you make on properties. This shows the owners of the property that you can afford and have the means to purchase their property. Without having this type of information, most sellers or their Realtors are not anxious to take their property off of the market.
 
Q : What is the difference in prequalified and preapproved?
A : This is somewhat misleading and easy to confuse. Remember, until a Lender/Broker pulls your credit and then submits your loan to an underwriter, you're only prequalified. This simply means that using the income that you are stating and the monthly payments that you have informed the loan officer of, you qualify for the amount that you have requested. Once a credit report is obtained, then you can be Pre Approved. This carries much more weight with a seller than just prequalified. At AFI Mortgage, we are able to give you an approval when you walk in that very first day. This is because of our direct connection to Fannie Mae. Our volume give us this extra advantage.
 
Q : Can I get pre-qualified for a home purchase loan before I find my property?

A : Yes. In fact, we recommend you do this before you even start looking for a home. A loan pre-qualification will help you determine how much of a home you can afford. Just visit our pre-qualification page and answer a few easy questions.
 
Q : How can I prepare for a home purchase?
A : 1. Avoid making any large credit purchases -- the added debt could impact your ability to qualify for a loan.
2. Manage all outstanding accounts carefully and avoid missing any payments.
3. Contact creditors immediately if you have a concern about your ability to make payments on time.
4. Save money so you'll have a financial cushion in case of an emergency.
 
Q : Can I get pre-approved for a home purchase loan before I find my property?
A : Yes. A loan pre-approval takes the pre-qualification process several steps further. A few more questions will need to be answered on your application. You may be required to provide documentation of your income and assets. This documentation may include, but is not limited to, your current paycheck stubs and bank statements. A credit report is also required for a loan pre-approval.

 
Q : What is a fico score?
A : A FICO score is a credit score developed by Fair, Isaac and Co. Credit scoring is a method of determining the probability that credit users will meet their obligations. Fair, Isaac began its pioneering work with credit scoring in the late 1950s, and since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation.

A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac and Co. and the credit bureaus do not reveal how these scores are computed. Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information that best predict future credit performance. Developing these models involves studying how millions of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit-bureau reports.

Credit scores analyze a borrower's credit history considering numerous factors such as:
Late payments
The amount of time credit that has been established
The amount of credit used versus the amount of credit available
Length of time at present residence
Employment history
Negative credit information such as bankruptcies, charge-offs, collections, etc.
FICO scores are computed by data provided by each of the three credit bureaus: Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score.




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Q : What is the importance of checking my credit bureau?
A : If you have never seen a copy of your credit report, you should definitely order a 3-in-1 credit report, which includes your credit report from TransUnion, Equifax and Experian. The three national credit bureaus don't communicate with each other, so you have three credit histories on file. It is your total responsibility to make sure your credit histories are accurate. For peace of mind, order a 3-in-1 credit report today.

Do you actually know who has had previous access to your credit report information? Do you know if the information that they saw was accurate? According to a previous study, 70% of all credit reports have errors of some kind and 29% of those reports contained serious errors like false delinquencies and judgements that didn't even belong to that individual.

Before you start shopping for a home loan, you should take a look at your credit reports before the mortgage companies do. If there are errors on any of your credit reports, your loan request may not get approved. All errors, if any, need to be corrected before you actually submit an application for any type of home loan.
 
Q : How can I increase and protect my credit rating?

A : Here are a few general tips to assist you in raising and maintaining your score:
Maintain two to three revolving charge accounts such as Visa or MasterCard in good standing.
Have a couple of other credit card accounts such as department stores or gas cards in good standing.
Avoid too many credit inquiries; they can lower your credit score.
Don't max out your credit cards-the ratio of available credit to your total credit balances is very important.
Pay your bills on time or within 30 days from the date they are due.
Don't apply for multiple credit lines; it triggers an inquiry of your credit, which lowers your credit score.
 
Q : How does an adjustable-rate mortgage (ARM) work?

A : The interest rate on an ARM is tied to a market index and is fixed for a specific period of time. Once that period of time is over, the interest rate is adjusted periodically (every 6 to 12 months) following the changes in the interest rate of index that is associated with the loan. Examples of market indexes include, but are not limited to, LIBOR, Constant Maturity Treasury, and 11th District Cost of Funds. If you are interested in an adjustable-rate mortgage, it is important to discuss all of the features and options of an ARM with your MornNext.com home loan advisor so they can help you make an assessment of the best ARM to meet your specific needs.
Generally speaking, an ARM enables borrowers to secure a loan at an initially lower interest than a fixed-rate loan. This means a borrower has lower monthly payments for a specific period of time when compared to other loan options. Lower monthly payments may allow you to qualify for a higher loan amount.


 
Q : What are lenders looking for in a Credit Report?
A : In many cases, a lender extending you credit may never actually meet you. Most of the time, they won't have an opportunity to learn what type of a person you are or to discover for themselves if you are a trustworthy, capable individual. Often, all they have to make a judgment about your ability to pay is by looking at your credit history, which is an accounting of your ability to repay debt.

When determining if they should extend credit to you or not, lenders may order one of two different types of credit reports in order to examine your credit history:
This is a basic credit report, showing information from one, two or all three national bureaus. The basic report provides information on your debtors, past and present, and on what type of payment history you have.
Residential Mortgage Credit Report (RMCR) - A lender will usually require this report if you are buying a home, and as such, applying for a large loan amount. The lender will pull reports from at least two, and usually all three bureaus. In addition, your current employment may be verified and public records searched for bankruptcies or liens.

Lenders are primarily looking for three things when they pull your credit file. The first thing lenders want to know is whether or not you are someone who acts responsibly, takes their debts seriously and pays their bills on time.

Secondly, a lender will look at your capacity to pay your bills on time. This is based upon your income, or the joint income of you and your spouse, and how that corresponds to your total debt. Finally, a lender will take a look at the possessions you currently have, or your collateral. You might have a car, valued at $10,000, that is already paid off. The fact that you were able to pay off this loan demonstrates that you had the ability to eliminate this debt and it further provides the lender with a possession that can be used as security against repaying the new loan.

All three factors help provide lenders with needed information which is then used to determine whether or not they think you are creditworthy.
 
Q : What are the steps in building a house?
A : Before you start, I am assuming the following. You have found a piece of land to build on. You have found a home plan that you would like to have the builder give you prices on.

1. First and formost, you are to find a contractor that you are very comfortable with and have inquired about through friends, coworkers and other people you come into contact with daily. Once this is done, you need to call the local Better Business Bureau and inquire about them as well. You will find a link to the Better Business Bureau on our site under Resources

2. Once you have interviewed them along with several others, you should ask them for the names of addresses of the last 5 houses that they have built. If they are not willing to do this, I would move on to the next builder on your list.

3. Once you are comfortable with the bid the builder has given you, then you should start your search for a permanent lender. I suggest this because this is where the interim lender is going to send you anyway. If you go directly to the long term lender (AFI Mortgage) this is going to save you time. In our case, we have relationships with several banks in the area which discount their fees substantially since we bring them a completed package with our approval and commitment letter attached. This guarantees the interim lender that once the house is complete, we will pay them off in full. Banks do not want to be in the long term business.

4. The next thing AFI will do is have your home plans appraised along with the land that you have picked out. Once this is done, we are ready to bring the package to the interim/Construction lender. We meet with them one time and then schedule a closing with the Real Estate attorney of your choice and are ready to start building.

It seems easy and it is !!! Let AFI Mortgage show you how quick and easy it can be!
 
Q : Do I have to have PMI (private mortgage insurance)
A : At AFI we have several types of loans that do not require PMI.  Call one of our loan officers and let them show you how to eliminate PMI from your loan. 
 
Q : Finding and buying home that meets your wants and needs should be an enjoyable experience. Below are 9 mistakes that home buyers commonly make and advice on how to avoid them
A :

Finding and buying a home that meets your wants and needs should be an enjoyable experience. Below are nine mistakes that home buyers commonly make and advice on how to avoid them.

1. Looking at homes before pre-qualifying or getting pre-approved for a home loan
Many people enter the housing market without first pre-qualifying for a home loan. They spend countless hours looking at properties, only to find that a lender will not approve them for a loan on a property they want to buy. You can avoid this frustration by getting pre-qualified or pre-approved for a loan before you begin looking at houses. This is the only strategy I recommend to home buyers.
Your real estate agent can help you determine how much you can afford. You also need to meet with a mortgage broker and get pre-approved for a loan. With pre-approval, the mortgage broker lets you know how much money they will lend to you. In addition, they also agree to lend you the money once you find a house. Then, when you find a house you like, you can present your letter of approval with the sales contract. This lets the seller know that you will be able to afford the home. It can sometimes also help you negotiate a better price.

2. Not meeting with a real estate agent before looking for homes
Experienced professional real estate agents almost always insist on scheduling personal meetings with buyers before beginning a house search. There are several reasons for this. First, it allows the agent to establish a relationship and rapport with clients. Second, it lets the agent get to know you personally, which can help them better understand your wants and needs. And finally, it allows you to get to know the agent, which allows you to decide if you want to work with them or not.
Inexperienced and unprofessional real estate agents, on the other hand, often claim they can help you over the phone. Dealing with a real estate agent over the phone can lead to one of three problems. First, the agent may only try to sell you a property that you called about without first understanding your needs. Second, they may gather the information they need to search for a home for you, yet never follow up. And lastly, they may recommend properties that don’t meet your criteria.
To avoid these problems, always meet with your agent before starting your search for the perfect home. If after the meeting you decide to work together, the agent will most likely ask you to enter into an exclusive buyer agency agreement.

 

3. Working with the wrong real estate agent
How do you choose the “right” real estate agent? Here are some tips to keep in mind when meeting with agents. They will help you make the right choice.

 

  • Good real estate agents work for you. They don’t try to sell you a home that doesn’t meet your needs. Instead, they provide the professional expertise you need to successfully navigate the sometimes complex home-buying process. This includes educating you on proper home-buying procedures, listening to your needs and wants, answering your questions and providing unbiased advice, and above all, always providing truthful information.

  • A good real estate agent will meet with you before you begin to look at properties. During this initial consultation, the agent will gather the information he or she needs to find the right home for you. This includes asking questions about your lifestyle, family, leisure activities, priorities, your home-buying experience, your likes and dislikes, and much more. A good real estate agent will also help you get pre-approved for a loan before searching for homes.

  • Once the agent gathers the necessary information and you enter into a buyer’s agency agreement, the agent will take you around to different neighborhoods. This helps you and the agent better pinpoint just the right properties to look at. Only then will the agent begin showing you individual properties.

  • Good real estate agents know the housing market and housing prices. They also work with the experts and specialists that are necessary to take care of the many facets involved with buying a home, from signing the purchase agreement to the closing process. A good agent will also be responsive to your phone calls, provide timely answers to your questions and will work to keep you fully inform

It’s not uncommon for good real estate agents to remain in contact with their clients even after a property has been purchase. Your agent can be a great source of information on service providers and businesses to help you make your new house your home.

4. Not acting quickly when you find a home you like
For some items it’s OK, even recommended, that you take time to think it over before making a purchase. This is not true when buying the right home, however. Why? In most cases, homes are one-of-a-kind items. Your chances of finding another home that offers the same combination of style, location, pricing, terms, availability and other criteria are very slim. That means that when you find a home you like that fits your wants, needs and budget, you need to act quickly and decisively.
It is not uncommon for a real estate agent to suggest that you immediately submit a purchase agreement if you find the right house. If you like the house, chances are someone else does, too. In fact, it’s not uncommon for sellers to accept more than one contract for a property. This is especially true if the property is in a popular neighborhood or is attractively priced. If you have concerns about the property, insert any necessary clauses into the purchase agreement. But act quickly! You may never find another home like it again.

5. Submitting a low first offer
Make your first offer your best offer. Don’t submit a low first offer (an offer that is less than the asking price) and expect to haggle over the price with the seller. This approach may work when buying a car, but it can work against you when buying a house. When buying a car, if you don’t get the one you want at one dealership, chances are you can find another identical car at another dealer. Houses are different. As mentioned earlier, each house, with its combination of location, style, and price, is unique.
A low offer may offend a seller and they may not present a counter offer at all, which prevents you from offering a better price. If they are willing to counter offer, you will then find yourself in a game of offer – counter offer, which can be time consuming and stressful. And while you are playing this game, the seller may get and accept a contract from another buyer that is equal to or better than yours. Remember, the seller does not have to sell to you. They can choose who to sell the house to.
I advise my clients to make the first offer their best offer. You may even consider offering more than the asking price. In some cases, such as with a new listing or when other people are looking at the same house, this may be the best strategy to get a home that you really want. Unless you are buying the home with cash, your lender will require that the home be inspected by an appraiser. The appraisal will let you and your lender know what the property is worth and will keep you from paying too much for a home.
To further protect your interests, be sure to work with only one real estate agent under an exclusive buyer’s agent agreement. Your agent can provide you with important information on the property, the market and the seller’s motivation. Your agent can also let you know if the circumstances surrounding a particular property would allow you to make a low offer.

6. Failing to conduct a home inspection before buying a house
Buying a house is a big investment, so it’s important to have any property you are considering to purchase thoroughly inspected before you commit to buying it. The only time a home inspection may not be necessary is if you are buying a new house that comes with a warranty that covers any construction defects. Otherwise, have the house inspected by a professional.
A good home inspection will uncover any problems that the house might have, such as structural damage, a leaky roof or bad plumbing. This is a crucial step in the home-buying process and can save you heartache and frustration down the road. Unless you are a building contractor or have considerable experience with house design and construction, it’s advised that you hire a professional home inspector. A professional home inspector will find any potential problems a house might have and will give you an unbiased report of anything he or she finds.
To protect your interests, be sure to include a home inspection contingency in the purchase agreement. This contingency will give you time to have the home properly inspected. If the inspection is not satisfactory, you have the right to cancel the purchase agreement and to receive a full refund of your deposit. This is a common practice that not only protects your interests, it also takes the home off of the market while you have it inspected. Your real estate agent can offer you advice and guidance to ensure your interests are protected. Your agent can also recommend a professional home inspector.

7. Buying a new or resale home without a home warranty
Just about anything you buy today, whether it’s a new car or a new appliance, comes with some sort of a warranty. The same is true for new homes, as most builders offer warranties on newly constructed houses. You can get warranties for resale homes as well. These warranties offer buyers an added level of protection in the event that something in the home, such as the furnace, hot water heater or stove, stops working for a predetermined time after the purchase. Whether a warranty is necessary or appropriate depends on the age and condition of the home’s components.
Sellers will sometimes offer a warranty, which they pay for, when they put the home on the market. In other cases, you can request that the seller offer a warranty when you write a purchase agreement. If the seller refuses, you have the option of purchasing a warranty yourself. Your real estate agent can provide you with information on home warranties.

8. Offering a small deposit
Most people would prefer to put down the smallest deposit possible on a home they are interested in buying. From they buyer’s perspective, this keeps them from tying up a lot of money and, if they change their minds on the property, a small deposit minimizes their risk. This strategy, however, can actually work against you.
From the seller’s perspective, a small deposit can signal that you are not very serious about the property because you’ll have little to lose if you back out of the contract. To protect their interests, the seller may counter offer your contract and demand a larger deposit. A small deposit might also put you out of the running for the property is the seller receives multiple contracts that offer larger deposits. And, the seller might also reject your offer outright.
If you find a home you want, put down a large deposit. A large deposit shows that you are serious and, at least in the mind of the seller, minimizes the chances that you will back out of the contract later. Your real estate agent can provide you with guidance about the amount of a deposit you should offer based on the price range of the property.

9. Waiting to buy
The best time to buy a house is now! Unfortunately, people put off buying homes for a number of reasons. It’s understandable, because purchasing a house is a big decision. However, people who wait and stay out of the market tend to lose in the long run. Here are some of the reasons why waiting to buy can work against you.
Many people wait to buy a house because they want to put more money aside in the bank, thinking this will save them money. This strategy rarely works. While they put away money into their savings accounts, the prices of homes are rising by thousands of dollars. It’s not uncommon for housing prices to rise by two-to-five times the rate of their savings. The result? They end up paying much more for a house.


Another common strategy is to wait for interest rates to come down. So these people wait, looking for the best financing deal. Yet while they wait, the prices of houses continue to climb. In the end, this strategy often leads to higher monthly payments because the increased cost of the house more than offsets the lower interest rate. Other people put off buying until they can afford their dream home. My advice to these people is to buy something, anything, now and use the property as a stepping stone to their dream house. Most people work their way through three to six properties before they reach the house of their dreams. If you want to live in a dream home, buy something now and start to build equity. Then, use the potential appreciation of the property to work for you. For most people, this is the fastest and sometimes the only way to eventually purchase the house of their dreams.


Perhaps the greatest reason people put off buying is fear. They’re afraid they’ll make the wrong decision or buy something they can’t afford. A good real estate agent will help you find the right property, a property you can afford, and can help prevent you from making a bad decision. Most people feel some fear when they buy a house, but they move ahead with the purchase anyway. The only wrong decision is to not get into the housing market today. Chances are that in a few years you’ll regret not getting into the market sooner and possibly not moving up into another house sooner.
 
Q : How do you know what rates will do?
A : Explaining the day-to-day and long-term ups and downs of mortgage interest rates is probably an impossible task. What we have found is just when you think you know what is going to happen, the opposite occurs (why is that still a surprise at our age?)...with that in mind, here goes:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><?xml:namespace prefix = o />

BASIC CONCEPTS: 

Supply and Demand: The more demand for something, the higher its price; the greater availability (supply), the lower its price.

Prices and Rates Move in Opposite Directions: Without going into the economics of it, just know that if bond prices go up, the rate (or, "yield") MUST go down. And vice versa. 

Flight to Safety: If there is uncertainty about future economic events, investors tend to avoid the volatility of the stock market and, instead, move their monies over to the relatively safer world of bonds.

Good Economic News is BAD for Interest Rates: This is a contrarian industry. Any news that might improve the economic outlook (lower unemployment, wage increases, increased worker production, etc.) raises fears of future inflation, which increases the chances the Federal Reserve will have to increase interest rates as a tool to fight inflation. So, when "the market" hears good news, it is a pretty safe bet that rates will move up.

EXAMPLE: In early 2003, there was uncertainty surrounding war with <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" /><?xml:namespace prefix = st1 />Iraq. Investors moved significant sums out of stocks and into bonds (Flight to Safety). This increased the demand for bonds, which drove their prices up (Supply and Demand) and the yield, or interest rates, down (Prices and Rates Move in Opposite Directions).

OPPOSITE EXAMPLE: The Employment figures that came out today (10/3/03) showed an INCREASE in Non-farm jobs of 57,000 for the month of September versus an expected decrease of 30,000. GOOD NEWS, but not for interest rates (stock market up by 85; opposite of Flight to Safety--people feel good about future economics so put money into stock market). The price of 10-Year Treasuries went DOWN by 1 22/32 (a HUGE one-day move!!), raising the yield/rate from 3.99% to 4.20% (see "HUGE") (Prices and Rates move in Opposite Directions). We got "Worsening Rates" bulletins from all lenders today...

Any questions?   :)

Some of the Influences:

FEDERAL RESERVE: Probably the most visible event to the general public is when the Federal Reserve meets every 6 weeks or so and announces what they are going to do. Many people ASSUME (and we know what that means) what the Fed does is what mortgage rates will do. The funny thing is, the Fed ONLY deals with short-term rates, such as what the banks charge each other for overnight deposits, etc.. However, their comments and decisions are seen as a harbinger of things to come.

What we have concluded is it is the difference between what "the Market" (bond traders, etc.) expects and what actually happens that really determines what rates will do following a Fed announcement. If the Market expects no change, but gets a .25% decrease by the Fed, chances are rates will eventually drop. And vice versa. A great example of this happened in June 2003. Many were predicting a .5% drop by the Feds on Wednesday, June 25, but only got a .25% decrease. By Friday, June 27, rates had GONE UP by .25%-.375%; NOT DOWN AS MANY PEOPLE ASSUMED, EVEN AFTER THE ANNOUNCEMENT. 

INFINITE OTHER INFLUENCES: Besides the Fed actions, just about anything else that occurs in the world has an impact on mortgage rates: unemployment, geo-political uncertainty (war or not, terrorist attacks, etc., etc.), Consumer Confidence Index (consumers account for 2/3's of the economy; if we feel good, we will spend more; if we spend more, inflation is a threat; the Fed will raise rates to slow it down.), ETC., ETC.

One of the first things we do each day is to get onto the Internet and hook up with a service that shows the movement of the stock market and bonds, as well as has a running commentary on what is influencing the bond market that day, what economic reports and events are scheduled for the week ahead and their possible impact, etc. Again, while this gives us some indication of what might occur, on far too many occasions some other, un-expected event negates what we and the pundits thought. BOTTOM LINE: If you like the interest rate as it is, chances are pretty good you should grab it. As a good friend likes to say about tax avoidance ideas: "Remember, pigs get fat; hogs get slaughtered".

"How we do admire the wisdom of those who come to us for advise."
 
Q : How do I keep my credit clean?
A : Many homebuyers frequently wonder, "If I am shopping for a home loan will my credit be affected each time a credit report inquiry is made?" It's a logical and intelligent question to ask; the answer is: not significantly, if the credit checks are done in a short period of time. When a credit check is made by a potential lender it is called a hard inquiry. When a hard inquiry occurs it does have an impact on your credit score. However, when you're shopping for a mortgage or a car loan, credit bureaus typically cluster the hard inquiries together because the credit reporting bureaus understand that the consumer is shopping for the best loan. "So for example, if you're shopping for a new mortgage and three potential lenders pull your credit score within three weeks, that is looked at as one inquiry for that purpose," says Steven Katz a spokesperson for TransUnion's TrueCredit.com. Keeping your credit clean is critical. Katz offers the following advice to help ensure healthy credit. One card you should not carry: Leave your Social Security card at home. "There is basically no reason that you need to carry that with you," says Katz. Most people have their Social Security card number memorized. If you're not one of those people, then only carry your card with you when you know you need the information on it. Your Social Security card number contains personal information that if it gets into the wrong hands, can cause major credit dilemmas. Lock it up: Apartment complexes and condominiums typically have locking mailboxes, but these types of secure mailboxes aren't as common in residential, single-family neighborhoods. "If at all possible, people should have a locking mailbox," says Katz. Katz says mailboxes with locking devices are becoming more popular at hardware stores because identity theft is spreading. Taking precaution to protect your personal information can save you months of agony. Shred your documents: Katz says if you don't shred your personal documents and criminals access the information, the result can be devastating to your credit. Criminals will often attempt to open new accounts using your name and information. If they're successful, they will use the new account and divert the account information to the criminals' address or post office box. "So, you'll never even know that the account was established. They'll be receiving the bills and then just throwing them out. It's ruining your credit." explains Katz. Keep an eye on your credit card: Katz says while it is difficult, people should not let their credit card out of their sight or else they run the risk of becoming a victim of skimming. Skimming has become prevalent at some restaurants and gas stations where a clerk might have a small device that scans the consumer's credit card. "It's a very small scanner that captures all the information that is on the magnetic strip, and then the card's information can be cloned," explains Katz. Of course, keeping your credit card visible at all times is nearly impossible. Katz says, "If you're going to go to a restaurant in an area that you're a little uncertain of -- that's in a fringe area or you're in a foreign country and you're not too certain about where you're dining -- attempt to use cash." Also, when using credit cards be sure that the receipt you leave with the merchant does not have your credit card number exposed. Most merchants have credit card systems that only print out the last four digits of a consumer's credit card; however, some still show the entire account number on the print out. If your full credit card account number appears on the receipt, scratch it out with a pen. Additionally, in rare cases where carbon copies are used, ask for the carbon. Check your credit history Consumers can check their credit history for free once a year at http://annualcreditreport.com. Katz says that the free reports will not contain an actual credit score, but you can get the scores for a fee. Another good credit-checking resource is found at http://truecredit.com. The website offers access to tools to manage a consumer's credit health by receiving credit reports, credit scores, credit monitoring, and informational materials. Written by Phoebe Chongchua
 


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