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How
Much can you afford?
Calculate
your payment
How's
your credit?
Cendant
Mortgage
Why buy a home . . .
The first question to ask is: why
buy a home? I live in a beautiful Victorian home in San Francisco
that was built in 1880. It's solid redwood, it's cool. Shortly
after I moved in in 1970 I stood in the dining room and threw a
rubber ball against the wall and caught it. I did this 20-25
times. (I made 20-25 spots.) But it felt great. When I was a kid I
couldn't do this. But now I owned a house and I was going to throw
My ball against the wall of MY house and make MY spots and that
was it.
I think that that little kid in all
of us who doesn't want his or her parents or anyone else telling
us where we can put our feet and what color we can't paint our
walls is the real reason we buy houses. It gives us a sense of
freedom that we could never have at someone else's house.
But What About the Money?
For most people buying is more
expensive than renting but the tax deductibility of our mortgage
expense makes the prospect of owning a bit more practical. In
essence, our Uncle Sam is making about a third of our mortgage
payment.
Once you have made the leap and
decided that you are going to buy a home you have to find out what
you can afford. That is where we come in.
Prequalifying
Prequalifying is a process whereby
a loan officer takes information about you, either over the
telephone or face-to-face and indicates how big a loan of a
particular type you will qualify for. The lender would then give
you a "prequalifying letter" which is of considerable
value in dealing with a Realtor or a potential seller. Realtors
and sellers are interested in dealing with people whom they know
to be able to get the loan necessary to close the deal.
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How
credit reports work
Your credit can
determine what type of car you drive, what you can buy, and even
where you can live. It is important to maintain the best credit
report possible. Each consumer should check his or her credit
report and make sure it is correct.
To understand the credit process
you first need to understand what information is contained in a
credit report. Although the style, format and coding may be
different depending on which credit reporting bureau is used, the
typical consumer's credit report includes four following types of
information:
- Identifying information:
includes your name, nicknames, current and previous addresses,
Social Security number, date of birth, and current and
previous employers. This information comes from any credit
application you have completed, and its accuracy depends on
your filling out forms clearly, completely and consistently
each time you apply for credit.
- Credit information:
includes specific information about each account including the
date opened, credit limit or loan amount, balance, monthly
payment and payment pattern during the past several years. The
report also states whether anyone else besides you (i.e. a
spouse or cosigner) is responsible for paying the account.
This information comes from companies that do business with
you.
- Public record information:
includes federal district bankruptcy records; state and county
court records, tax liens and monetary judgments; and, in some
states, overdue child support payments. This information comes
from public records.
- Inquiries: includes the
names of those who have obtained a copy of your credit report
for any reason. This information comes from the credit
reporting agency, and it remains available for as long as two
years, as per federal law.
How is this information
used?
A credit bureau score is one type of credit score. It is
calculated from the information on your credit bureau file at the
time that the information was requested. Consequently, a credit
score is like a snapshot: It sums up, at one given point in time,
what your past and current credit usage say about your future
credit performance.
Credit scoring helps lenders apply
one set of rules to everybody. The sophistication of today's
models allow for certain behavior patterns. As a result, a
20-year-old's credit history would not be compared to
45-year-old's credit history. One reason these scoring models are
so widely used is because they can differentiate between the
credit patterns of individuals.
Scoring models and other tools
analyze data only -- using this data to predict future credit
performance. A scoring model contains a list of questions and
answers, with points given for each answer. Information proven to
be predictive of future credit performance is used in a model.
Here are a few examples of what a typical model will (and will
not) consider:
Information from your credit
application such as: how long you've lived at your address, what
is your job or profession, how much you owe. It will also consider
information pulled from your credit bureau report, such as the
number of late payments, the amount of outstanding credit, the
amount of credit being used, the amount of time credit has been
established. Credit scoring systems do not consider race,
religion, gender, marital status, birthplace, or current address.
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