Timing (debt) is everything

Credit cards. It’s a love/hate relationship with them.  In this ever-changing regulatory financial climate, managing debt and timing debt are everything when it comes to buying a home.

 As borrowers, debt is important for establishing good credit in order to earn a high FICO score. Credit card companies love us when we use their cards so they can profit from the merchant fees and interest. They really love us when we use their card frequently.

 When we don’t use them, as more and more people are doing these days, issuers can reduce credit limits or close out an account completely. Too much debt and/or closed accounts by the card company can be damaging to credit ratings and therefore jeopardize chances for getting a loan.

 With new credit card procedures effecting so many, Fannie Mae now wants to tighten control on the quality of loans that they purchase. Part of the new initiative would include running a credit report the day before escrow closes. If there is any new debt or the debt-ratio to credit limit increases, the loan can go back to underwriting.

 For a home buyer, and especially first-timers with already limited credit, greater vigilance and discipline of debt is needed to achieve today’s homebuying goals. Keep credit card companies happy by using open accounts sparingly with monthly payoffs to demonstrate fiscal responsibility and consistency.

 If timing is everything, it’s especially important to watch spending during the escrow process. This can be very challenging given there are expenses associated with a move.  The good news is that our credit counseling service can help you with a game plan to get you through the process. Let us know.

So much for forecasting

When I flipped the calendar to June, I did it ever so slowly. I didn’t want to acknowledge that we’ve raced through half of 2010 so quickly. In addition to wondering where time went, I also reflected about all those New Year predictions of impending rising interest rates.

 Here we are approaching the end of the second quarter and interest rates are instead dropping to historic lows. I confess that I’m one of the many bloggers who wrote about signs pointing to a rate increase. With corporate America posting rosy first-quarter earnings and real estate activity picking up, the positive news was sure to spur a hike in rates.

 The good news is not without merit, however. The federal tax credit motivated many buyers into taking advantage of the affordability, low rates and tax break. It improved the overall health of the housing market, and the strong sales most likely supported the market from falling any further.

 Locally, home sales in our county are up from a year ago, and home prices are averaging a mere 1% higher from last year.  While the federal tax credit has ended, California began a state credit on May 1. Moreover, there are new financing programs that have been implemented since January that opens lending to investors and move-up buyers.

 It’s hard to know where our housing market would be if the forecasters were correct in their predictions. I do believe, however, that the attractive, all-time low interest rates are here for a while longer, and are sure to keep the buyer’s market humming along right through the holiday season – only six months away. Oh my!