Refinance Mortgage Rate

Credit 101: How to calculate and improve it

Fri, 25 Sep 2009 01:09:49 +0000

Lenders use credit ratings in deciding whether or not to give loans or credit to individuals. Presently, TransUnion, Equifax, and Experian are the three main credit bureaus. The agencies use the Fair Issac Credit Organization (FICO) scoring method to determine one’s credit rating. FICO scores range from 300 (high risk) to 900 (no risk). These scores are calculated by the number delinquent payments, the size of previous lines of credit, the kinds of credit lines, how long the consumer has had lines of open credit, and the percentage of total credit that is currently being utilized. Many lenders refuse to extend lines of credit at 500, and even if they do, there are potentially high interest rates and difficult terms. Credit ratings over 850 will grant the consumer small down payments and low interest rates. A credit rating of 650 is generally good enough for the consumer to receive favorable terms though most consider ratings in the mid 700s to be optimal.

Good credit ratings come from amounts of bad debt, amounts of good debt, proven credit history, and the current debt to income ratio. Those with excellent credit ratings can qualify for loans with lower than prime interest rates, whereas people with good credit ratings can qualify for prime rates in loans. A good credit rating is somewhat ambiguous, as some feel that a score must be at least a 720, whereas others state that scores above 690 are all that are needed to require good loan rates. Because some banks and lenders are not always impressed by scores in the 600s, then it benefits people to learn what each lender considers a good credit rating before deciding where to apply for credit. In order to improve one’s credit rating, one should pay off credit cards, reduce the debt to income ratio, avoid accumulating more bad debt, and make payments on time.

Improve Credit Ratings
When a person attempts to get a loan or acquire additional credit, his credit is reviewed; thus, it is essential a person use various techniques to improve his credit rating when possible. First, it is important that everyone knows what their credit ratings are, as careful credit monitoring can protect people from identity theft. Federal law entitles everyone to receive a free credit report once a year from TransUnion, Equifax, and Experian. Reviewing these reports can make a difference for one’s score.

A person should limit his credit card charges to no more than 30% of the card’s limit because the credit reporting agency may be unaware of the limits and mistakenly believe the person routinely maxes out the card.

Cleaning up previous mistakes can improve one’s credit store. For example, if someone had made a late payment on a loan in the past year but was a good customer otherwise, the lender may erase the late payment from the person’s record, which in turn will make a person’s credit look better. Also, having numerous credit cards at one time may appear harmless but in fact can be misleading, as it may appear the consumer is preparing to live beyond his means.

For more information on credit ratings and CD rates visit www.cdrates.org

Refinancing Your Mortgage Tips

Tue, 08 Sep 2009 12:57:42 +0000

It can actually be quite challenging to know when the time is right to refinance mortgage loans. It is a timing thing more than anything else. Get it right and you lock in very favorable interest rates which will save you thousands of dollars over the life of the loan. Get it wrong and you’re going to pay a lot more money than you need to.

To add to our financial stress we also have to deal with the fact that many lenders have greatly curtailed their activity due to the stressed economy. This is in fact the worst economic crisis we as a nation have faced since the Great Depression ended in the 1930s. Credit lines are much more difficult to come by now as compared to just a few years ago when it seemed as if anyone with a pulse could get a mortgage.

When considering mortgage loans it is vital that you take into account how much longer you plan on owning that property. All loan originations have fees that the lender charges. After all, they are in it to make money. Examples of these fees include attorney fees and appraisal fees. There can be more depending upon the lender.

The reason why this is so important is that even if you do manage to get a more favorable interest rate which will lower your monthly payments, that savings could be wiped out because of all the fees that you have to pay. With that said if you are planning to own the property you seek a mortgage on for 10 years or more then it is probably a wise decision, generally speaking, to go ahead and refinance.

If however you are planning to own the property for less than 10 years then it may not be worth refinancing. Even though the interest rates will be lower, the fees to get the mortgage will have pretty much negated your savings. That is why it is so important to carefully plan these things out and seek your best options.

It is advisable that you use an online mortgage calculator which will allow you to run different scenarios as far as interest rates and duration in years of the loans go. You can even plug in the fees to get an idea of how your over all payments will compare to see if in fact it is in your best interest to refinance mortgage loans.

There are, of course, two types of mortgages. There is the fixed rate mortgage that locks in your interest rate for the life of the loan which is usually 15 years or 30 years. And there is the adjustable rate mortgage (ARM) that typically begins with a very low interest rate but adjusts as the Federal Reserve Board of the United States resets rates.

If you are going to be selling your property in the not too distant future then perhaps an adjustable rate mortgage would be best. I must warn you to be careful. Many people are enticed by the low interest rates at the beginning of an adjustable rate mortgage but soon find that they can no more afford the payments as interest rates move higher.

Once again, do your homework and account for all possible scenarios before you refinance mortgage loans. Whether you are planning to own the property you are mortgaging for just a few years or for many, many years to come, you want to put yourself in the very best position possible to save money.