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Mortgages: Mortgages — How to Get a Rock-Bottom Rate

December 30, 2011 by Leave a Comment

“Rates are very much at the bottom,” Mr. Nothaft said. But, he added, they may start inching up in the second half of the year. “If you’re planning to refinance, do it sooner rather than later.”

In order to cash in fully on some of the lowest interest rates ever recorded, buyers and owners need to start taking steps now, experts say. Rather than look for a house you really want, they suggest first finding out how much money you can afford to borrow, and what you can do in the next three to six months to improve your creditworthiness.

“Sometimes it takes a few extra months to get your ducks in a row,” particularly if there are mistakes or blemishes on your credit report, said Gene Tricozzi, the president of Northern Funding Corporation, a mortgage brokerage in Clifton Park, N.Y. If your score is below 700, your mortgage interest rate could be a quarter to a half percentage point higher than for those with stronger scores, experts say.

Start by ordering copies of your credit reports and reviewing them for inaccuracies or disputes. Tracy Becker, the president of North Shore Advisory Inc., a credit restoration company in Tarrytown, N.Y., suggests doing this a year in advance, if possible, to give yourself ample time to fix any issues, like an inadvertently missed payment or an address error.

Do not close any credit accounts now; doing so can reduce your score by as much as 60 points, she said, adding that banks like to see two to four accounts in the applicant’s name.

Once your credit score is established, identify two or three mortgage bankers or brokers whom you may want to work with. Ask friends, people in your religious or social circles, or your accountant for recommendations. Then do the due diligence on each candidate and meet with them to see who is the best fit.

Determine what your down payment and other out-of-pocket costs will be as you figure out what you can afford to buy. Use a mortgage calculator, or ask the mortgage officers to give you a range that would be comfortable.

Closing costs may be more difficult to estimate because they usually include prepaid real estate taxes and various fees for title insurance, mortgage taxes and more. Total closing costs in 2010 on a $200,000 mortgage were $3,843 in Connecticut and $6,183 in New York state, according to research by Bankrate.com in June.

Those figures exclude association fees, prepaid items and state taxes, which in New York City and a few other places can run 1.9 percent of the loan value for the mortgage recording tax.

It is a good idea to discuss your plan to buy a home with a financial planner or accountant. Your tax adviser may be able to guide you on tax deductions and decisions for your 2011 return. Some mortgages, including those offered by the Federal Housing Administration and those made to self-employed individuals, require two years of tax returns.

In those cases, taxpayers may want to be “a little less aggressive” with deductions so the income figure looks stronger, said Matt Hackett, the underwriting manager of Equity Now, a direct mortgage lender based in New York..

Finally, keep an eye on those interest rates. Mr. Nothaft expects the 30-year fixed mortgage rate to end the year “well below 5 percent” — which could still mean a 0.75-point increase a year from now.

Article source: http://feeds.nytimes.com/click.phdo?i=9361a54e719b6e3d0549a1b989b6e960

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Economix Blog: Rating the Credit Raters

December 1, 2011 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

My colleagues Julie Creswell and Graham Bowley had an article on the front page of The New York Times on Wednesday about how credit ratings agencies “missed or badly misread signs of trouble” in Greece.

Receiving an unrealistic credit rating is hardly unique to Greece, though.

As we’ve noted before, ratings agencies are tasked with judging how financially sound borrowers are, but they have historically been poor predictors of sovereign debt defaults and (especially) currency crises.

According to a 2002 study by Carmen Reinhart, a leading economic historian, the ratings agencies have frequently focused on the wrong variables when rating a country’s creditworthiness.

“Little weight is attached to indicators of liquidity, currency misalignments, and asset price behavior,” which research has found to be predictive of debt and currency crises, she wrote.

Article source: http://feeds.nytimes.com/click.phdo?i=d76249441fb586458b9f500876600cf5

Filed Under: Economy News Tagged With: , ,

Geithner Confident on Debt Limit

April 18, 2011 by Leave a Comment

In a pair of appearances on Sunday talk shows, Mr. Geithner said the Republican leaders made it clear to President Obama in a White House meeting last Wednesday that they would go along with the administration’s efforts to raise the debt ceiling to avoid a financial crisis.

“Congress is going to have to raise the debt limit,” Mr. Geithner said on the NBC program “Meet the Press.” “They understand that. That’s absolutely essential to preserve the creditworthiness of the United States of America.”

He went on: “You know, we’re a country that meets its obligations, and we have to meet our obligations, and they recognize that. In fact, I heard the leadership tell the president that again on Wednesday.”

Republican leaders responded rather indirectly to Mr. Geithner later on Sunday, focusing on their demands for greater spending cuts in next year’s budget in exchange for a vote to raise the debt ceiling, rather than on whether they actually planned to vote for the increase.

In a statement, Michael Steel, a spokesman for Speaker John A. Boehner of Ohio, said Mr. Boehner had made it plain to the president at the White House meeting that more spending cuts would be the price for a debt ceiling deal.

“Boehner has been very clear: the American people demand that any increase in the debt ceiling be accompanied by spending cuts, and real reforms so we can keep cutting,” Mr. Steel said.

Representative Paul D. Ryan of Wisconsin, chairman of the House Budget Committee, gave a similar response to Mr. Geithner’s assertions on the CBS program “Face the Nation.”

“We want cuts in spending accompanying a raising of the debt ceiling, and that is what I believe they told the president,” Mr. Ryan said, referring to Republican leaders. He added that “nobody wants to play around with the country’s credit rating.”

“Nobody wants to see defaults happening,” he said, “but we also think it’s important to get a handle on future borrowing as we deal with raising the debt limit.”

The administration says the legal debt limit, now just over $14 trillion, will be reached next month. Many economists have warned that if the ceiling is not raised, the United States will soon begin to default on its debt, and that could set off an international financial crisis.

The vote over raising the debt ceiling is the second major showdown over budgetary and financial matters between the White House and the Republican-controlled House in recent weeks. A government shutdown was narrowly averted when negotiators worked out a deal that included billions of dollars in spending cuts for the remainder of the 2011 fiscal year. Mr. Obama signed that legislation on Friday, just in time for the next battle.

Republicans, prompted by Tea Party supporters who helped fuel their electoral victory in the 2010 midterm elections, have been pushing for greater leverage to cut spending further, and the debt ceiling vote has been looming for months as one of their most potent weapons.

Yet it is not clear how much of an appetite there is among Republicans for a showdown on the debt ceiling. Senator Rand Paul, a Kentucky Republican elected last year as a Tea Party favorite, said Sunday that he was not necessarily opposed to raising the debt ceiling. When asked on the CNN program “State of the Union” whether he would vote on a bill to raise the limit, even without other provisions attached to the legislation, Mr. Paul answered indirectly.

“I don’t think it should be an either-or situation, you know,” he said. “There is another alternative, and that is that we send the message to the president through legislation that says: ‘You know what, Mr. President? Don’t default, but pay the interest out of the revenue.’ ”

Mr. Obama acknowledged Friday in an interview with The Associated Press that he would have to agree to Republican demands for more spending cuts to win their backing for a higher debt limit.

On Sunday, Mr. Geithner gave a slightly more detailed answer, saying it would be difficult to try to push both the spending cuts and the debt ceiling through Congress simultaneously.

“I think you can do these things in parallel,” he said on “Meet the Press.” “But if by the time we need to raise the debt limit, we haven’t worked all that out, Congress still has to raise the debt limit. And again, leadership realized that.”

Article source: http://feeds.nytimes.com/click.phdo?i=39f5b022b77c0647d6f82a4d22b86d58

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Bucks: Bad Loan Terms? Some Clues Why

April 15, 2011 by Leave a Comment

Did you apply for a loan but receive a higher interest rate than you think you deserve? You’re now entitled to receive a few clues about how the lender arrived at its decision.

A federal law that went into effect at the beginning of the year requires lenders to make certain disclosures to consumers when they receive less favorable credit terms than those given to borrowers with more pristine credit histories. That may come in the form of a higher interest rate, or a smaller line of credit.

Lenders can comply with the new law, which is essentially an update to the Fair Credit Reporting Act, by sending you one of two notices, said Careen Foster, director of scores product management at FICO, the company that developed the FICO credit score, the measure used most frequently by traditional lenders to determine creditworthiness.

In one of those notices, the lender must disclose which credit report it used to judge you — most lenders use the reports created by the three major credit bureaus, Experian, Equifax and TransUnion. The lender also must provide information on how to get a free copy of the report. Before the new rule, only individuals who were denied credit were entitled to a free copy. You must request the copy within 60 days of receiving the letter — known as a “risk-based pricing notice” — though it won’t include a copy of your credit score.

Alternatively, lenders can choose to send all consumers who are approved for credit another notice — known as the credit score disclosure notice — that will include their credit score. In most cases, the score will be one of your three FICO scores.

The goal of the new rule is to help consumers more broadly understand how their credit reports are used, and encourage them to identify any errors and request to have them fixed, Ms. Foster said. “By getting consumers engaged in the process, we will help everyone make better decisions,” she added.

But starting July 21, anyone who is denied credit or who receives less favorable terms than other borrowers must receive a free credit score (if a credit score was used in the lender’s decision). The new rules sprang from the financial regulation overhaul last year.

“All of the disclosure notices will start to look pretty similar” at that point, Ms. Foster said. “This is good for consumers because they will get the credit score the lender uses, which is going to be the FICO score more often,” she added. It will also include “the factors as to why their score wasn’t higher and what they can do to improve their score or get better terms next time.”

Technically speaking, the July law requires the so-called risk-based pricing notices to include a score, in addition to information about where to get the credit report the lender used in the decision.

Lenders are already required to send a letter to consumers who are denied credit or whose existing terms were changed for the worse. The notice must outline their reasons and provide information on how to get a copy of their credit report. In July, those letters must include scores too, said Manas Mohapatra, an attorney in the division of privacy and identity protection at the Federal Trade Commission.

Some lenders, however, will continue to comply with the law by sending notices – with scores — to all borrowers who receive credit. FICO has a Web site, ScoreInfo.org, which provides more information for consumers about the changes.

Have you received one of these notices in the mail? If so, was it helpful in clarifying why you received the terms you did?

Article source: http://feeds.nytimes.com/click.phdo?i=fc5d3e62ec63a65d130cdaf0b1fa4abf

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