Credit score


N

noreplysoccer

My wife and I started the application process for a new home.

Credit scores were 733 for me and 670 for her. Any place on web we can
go to and find out how good these scores are? Any suggestions on how
to "improve" a score of 733? My understanding is this is a good score.

In addition, this loan was with the lender recomended by our builder.
If we finance through them, we get $5000 in free options.

It is my opinion then the lender will recoup this $5000 and then some
in interest over the 30 years of the loan. so a reasonable mortgage
question is how many points is this $5000 in free options worth?
Meaning if I can find a loan for a .5% less from another lender, is
this a good deal?

House purchase price is $325,000 plus or minus.

We are at the point where we have a position hold for the next phase,
so we have about 1 month to secure financing. Recomendations for
finding competing mortgage loans welcome.

regards.
 
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R

Ram Samudrala

Credit scores were 733 for me and 670 for her. Any place on web we can
go to and find out how good these scores are? Any suggestions on how
to "improve" a score of 733? My understanding is this is a good
score.
Try www.myfico.com (a google search will also help).
It is my opinion then the lender will recoup this $5000 and then some
in interest over the 30 years of the loan. so a reasonable mortgage
question is how many points is this $5000 in free options worth?
Meaning if I can find a loan for a .5% less from another lender, is
this a good deal?
Try the different loans at www.e-loan.com - you can see what $5000
would get you for a $325,000 loan in terms of points.

--Ram
 
A

Andy

My wife and I started the application process for a new home.

Credit scores were 733 for me and 670 for her. Any place on web we can
go to and find out how good these scores are? Any suggestions on how
to "improve" a score of 733? My understanding is this is a good score.

In addition, this loan was with the lender recomended by our builder.
If we finance through them, we get $5000 in free options.

It is my opinion then the lender will recoup this $5000 and then some
in interest over the 30 years of the loan. so a reasonable mortgage
question is how many points is this $5000 in free options worth?
Meaning if I can find a loan for a .5% less from another lender, is
this a good deal?

House purchase price is $325,000 plus or minus.

We are at the point where we have a position hold for the next phase,
so we have about 1 month to secure financing. Recomendations for
finding competing mortgage loans welcome.
Clearly you need to shop around and get offers from a few competing
mortgage lenders before you make any decisions. As a starting point
you may want to go to bankrate.com to get a general idea of what
current interest rates are on mortgage loans. Then go to a couple
lenders and get written estimates which include all fees, points,
closing costs, etc., and go with the lender who offers the best deal.

A difference of 0.5% on a 30 year mortgage loan is substantial. The
total interest paid over the life of a 30 year loan for $300K will be
$34,000 higher on a 6% loan than on a 5.5% loan.

Andy
 
J

Joe Weinstein

My wife and I started the application process for a new home.

Credit scores were 733 for me and 670 for her. Any place on web we can
go to and find out how good these scores are? Any suggestions on how
to "improve" a score of 733? My understanding is this is a good score.
Beware that some websites will sell you cheaply or give you a 'credit score',
but unless it's the real FICO score, it won't be worth much. Lenders invariably
use the standard FICO score, which is typically lower than ulteriorly motivated
'credit scores'.
Joe
 
N

noreplysoccer

This was good advice as I already have two quotes in hand to compare
with what the builders lender gives me. Follow up question:

when comparing a 5/1 ARM to a 30 year fixed what would some of you
suggest we consider to choose one or the other? Goal is a 15 year
fixed which we were not approved for, so we know we want to refinance
to a 15 year fixed at some point.

For example, cost of 30 year fixed is $90 more than 5/1 going in, but
eventually we'll refinance to 15 year fixed, so should we take lower
payment (5/1) knowing that our refinance window is 5 years, or take 30
year fixed and refinance when "time is right".

What other factors, other than timing, P/I payments would people
suggest my wife and I consider? My wife biases her opinions to lowest
payment possible, I see long term more than she does...
 
J

Joe Weinstein

when comparing a 5/1 ARM to a 30 year fixed what would some of you
suggest we consider to choose one or the other? Goal is a 15 year
fixed which we were not approved for, so we know we want to refinance
to a 15 year fixed at some point.

For example, cost of 30 year fixed is $90 more than 5/1 going in, but
eventually we'll refinance to 15 year fixed, so should we take lower
payment (5/1) knowing that our refinance window is 5 years, or take 30
year fixed and refinance when "time is right".
The current rates are near their 40-year lows, so vendors will want
to sell you an adjustable rate, and you should want to lock in a
fixed rate, IMHO. You wanted a 15-year fixed. You can approximate this
with your 30-year fixed, by simply paying more principal when you can.
Save the refi costs.
Joe
 
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A

Andy

This was good advice as I already have two quotes in hand to compare
with what the builders lender gives me. Follow up question:

when comparing a 5/1 ARM to a 30 year fixed what would some of you
suggest we consider to choose one or the other? Goal is a 15 year
fixed which we were not approved for, so we know we want to refinance
to a 15 year fixed at some point.

For example, cost of 30 year fixed is $90 more than 5/1 going in, but
eventually we'll refinance to 15 year fixed, so should we take lower
payment (5/1) knowing that our refinance window is 5 years, or take 30
year fixed and refinance when "time is right".

What other factors, other than timing, P/I payments would people
suggest my wife and I consider? My wife biases her opinions to lowest
payment possible, I see long term more than she does...
I agree with Joe W's advice: lock in a fixed rate now. Rates will
almost certainly go up in the next few years, and if you do an ARM now
you will almost certainly end up paying a higher rate of interest if
you refinance later. Paying a higher rate of interest over the rest of
the loan will increase the total you pay in interest by tens of
thousands of dollars.

If you do a 30 year fixed don't worry about refinancing later to a 15
year, just pay an extra each month and pay down the 30 year at a rate
where its paid off in 15 years. Its each to figure out how much extra
you need to pay to do this using a spreadsheet. The advantage of this
is that it saves the refinancing costs and gives you the flexibility to
drop back to the lower 30 year payment in tough times.

If you take the ARM because the monthly payments are $90 a month less
than a 30 year fixed you could very easily end up paying 5 times the
money you "save" in extra interest when and if you have to refinance at
a higher interest rate.

Andy
 
N

noreplysoccer

problem with "paying more" is my wife will want to keep payment low and
spend the extra money. Not necessarily a bad thing to keep the wife
happy, but the financial side of me tell me to force our account to pay
the 15 year payoff. I am leaning towards the 30 yr fixed myself (good
fallback plan if we lose jobs or stop working) and trying to convince
my wife I know what I'm doing.

I've heard a couple of theories on the 15 year payoff:

one is to add "next months principle" on ammortization schedule and
send that. Will this pay off in an even 15 years?
one is to figure out 15 year fixed payment and send that each month.
Will this pay off in an even 15 years?
another is to send one extra payment each year. This shortens period
of payment how much?

What I'd like to do is find an amount to pay extra, say $300 each
month, and reduce this by $25 each year and have loan pay off in 15
years. Reason for this is to reward my wife with more money in budget
each month to spend on herself as mortgage is paid down.

On a seperate note:

it turns out a couple of points on credit score make a HUGE deal. If
my wife score was 680 we would have qualified for an interest rate
which is a .25 point lower. maybe .5 point depending on another ratio
below...

In addition the bank's computers are hard programmed to drop loans
which will be paid off in 10 months. We will close on house in
November or late October and in December I will make my last student
loan payment. That 11th month also affected loans and PMI being added
in.

How soon would I need to pay down that student loan to get it in the 10
month window and have the pay down appear on a credit report?
 
R

Ram Samudrala

when comparing a 5/1 ARM to a 30 year fixed what would some of you
suggest we consider to choose one or the other? Goal is a 15 year
fixed which we were not approved for, so we know we want to refinance
to a 15 year fixed at some point.
Why bother? But if you really do want to pay it off in 15 years, you
easily can.
For example, cost of 30 year fixed is $90 more than 5/1 going in,
but eventually we'll refinance to 15 year fixed, so should we take
lower payment (5/1) knowing that our refinance window is 5 years, or
take 30 year fixed and refinance when "time is right".
Interest rates will probably end up higher.
What other factors, other than timing, P/I payments would people
suggest my wife and I consider? My wife biases her opinions to
lowest payment possible, I see long term more than she does...
I have nothing against lowest payments but you should do it for a good
reason. The advantage of lower payments is that you get to have more
disposable income for now. However, I'd do this based on an analysis
of your future income. If your income is going to go up steadily
beyond the rate of inflation, and you have a steady profession, then
it might be worth it.

--Ram
 
R

Ram Samudrala

it turns out a couple of points on credit score make a HUGE deal.
If my wife score was 680 we would have qualified for an interest
rate which is a .25 point lower. maybe .5 point depending on
another ratio below...
My advice in this regard is to approach a broker -- they can easily
quote you a deal also and it's not so dependent on credit scores.

--Ram
 
A

Andy

problem with "paying more" is my wife will want to keep payment low and
spend the extra money. Not necessarily a bad thing to keep the wife
happy, but the financial side of me tell me to force our account to pay
the 15 year payoff. I am leaning towards the 30 yr fixed myself (good
fallback plan if we lose jobs or stop working) and trying to convince
my wife I know what I'm doing.

I've heard a couple of theories on the 15 year payoff:

one is to add "next months principle" on ammortization schedule and
send that. Will this pay off in an even 15 years?
one is to figure out 15 year fixed payment and send that each month.
Will this pay off in an even 15 years?
another is to send one extra payment each year. This shortens period
of payment how much?

What I'd like to do is find an amount to pay extra, say $300 each
month, and reduce this by $25 each year and have loan pay off in 15
years. Reason for this is to reward my wife with more money in budget
each month to spend on herself as mortgage is paid down.
If your wife's idea of financial planning is to empty out the bank
account every month, then you are always going to have financial
problems.

As far as how to know how much to pay every month to pay a loan off in
15 years, just make the same payment as you would for a 15 year
mortgage with the same interest rate. If you want to get fancier than
that, learn how to use the amortization functions in Excel, and create
a spreadsheet which shows you the exact impact on payoff time of any
extra payment. It will be a very educational process, and by the end
of it you will have a much better grasp of how loans work.

Andy
 
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B

Brent D. Gardner, ChFC

Andy said:
If your wife's idea of financial planning is to empty out the bank
account every month, then you are always going to have financial
problems.
This ailment is MUCH MORE COMMON than anyone reading this might imagine, and
the disease of spending is not new, either. People have been spending
everything they make since the dawn of the unit of exchange. Even peasants
and serfs borrowed from their landlord, furthering insuring their servitude.

One of the many jobs a financial advisor does is curbing the bad behavior.
This isn't the most pleasant of activities, but people need, and WANT, to be
brow beaten. Just listen to Dr. Laura on the radio, or Dr. Phil on TV.
Adults seek out leadership, guidance, and the occassional size elevens
planted swiftly on their backside. Good advice ain't enough. The net is FULL
of it (matched by an equal part of poor, BAD, and plenty of
darn-near-criminal advice), yet the financial ailments aren't going away.

In fact, they may be getting worse. More than 10% of Americans are UNbanked
(meaning they have NO bank relationship, no savings, no checking, no credit
or debit card, not even a pre-paid charge card). That's one out of ten! I'm
not alone in predicting that the new Check 21 law is going to force those
numbers higher.

Financial planning is merely one facet of the craft of advice. There's also
financial counseling, and I don't see enough of that being done.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://www.brentdgardner.com/
http://www.gardnerfinancialgroup.com/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.
 
N

noreplysoccer

Not sure what the new "check 21 law" is, but would be willing to see a
discussion on it.

As for spending habits, I agree with Brent. It's a tough habit to
break. My way of teaching my wife this was to pay cash for everything.
Low and behold, our checking account raised its babalce to about $700
within 10 months. We took out the cash in our budget ($240 every 15
days) and used this for grocery, gas and hair appointments. Also
didn't use a debit card or credit card and my wife has an appreciation
for "financial planning".

Teaching people discipline is difficult. Discipline is something you
have or you don't and is one of the most difficult skills to develop,
hone and become good at...
 
B

Brent D. Gardner, ChFC

Not sure what the new "check 21 law" is, but would be willing to see a
discussion on it.
It's been in the news since October, when the law went into effect. It's
another direct result of 9/11, because the biggest risk to the country in
the days following the attack was the fact that money wasn't moving. Most
people don't know how paper checks move through our banking system, and
without boring everyone with the details, our economic system came VERY
close to a VERY REAL meltdown unlike nothing we've ever experienced. Talking
heads on TV will tell you that banks could have met the shortfall, but any
honest banker will tell you that's not true.

We're still at risk, but this new law is a great improvement in our national
security, and it's a pretty good benefit to the banks that were prepared
(some weren't, some still aren't compliant). The two most apparent changes
for consumers is that you're not likely to ever see a paper check again once
you give it to a merchant, because the truncating bank (aka "bank of first
deposit") is going to convert the paper to an electronic item and then
destroy the original, and checks are going to clear a little faster (some
bankers tell me that they are seeing checks clear in only TWO HOURS from the
moment of deposit).

People who live paycheck to paycheck are going to bounce more checks because
of Check 21, which means more fees for banks, and probably higher costs in
certain distribution channels (i.e., convenience stores, grocery stores,
fuel distributors), and most likely an increase in the unbanked population
due to the power of ChexSystems negative item database that tracks DDA
deficiencies and habitual NSF checkwriters (they make the three credit
bureaus look like nice people, in comparison).
Teaching people discipline is difficult. Discipline is something you
have or you don't and is one of the most difficult skills to develop,
hone and become good at...
If people had natural discipline, at least regarding money and personal
finance, the craft of financial advice would be all but nonexistent.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://www.brentdgardner.com/
http://www.gardnerfinancialgroup.com/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.
 
A

Andy

This ailment is MUCH MORE COMMON than anyone reading this might imagine, and
the disease of spending is not new, either. People have been spending
everything they make since the dawn of the unit of exchange. Even peasants
and serfs borrowed from their landlord, furthering insuring their
servitude.

I once talked to someone who spent a year living in an indian village
in the jungles of Panama. She said that people who were living in dirt
floor palm frond huts would spend what little money they got their
hands on on stuff like soda pop and candy.

As far as the importance of financial discipline, the NY Times (or was
it the Wall Street Journal?) had an article some time in the last month
about how some professor did some computer modeling and found that
impact of proper asset allocation (or lack thereof) on a person's
ultimate net worth was miniscule compared to the impact of increasing
monthly savings by some relatively small percentage. The moral of the
story was that just saving a bit more is more important than balancing
your portfolio properly.

Andy
 
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R

Ram Samudrala

Suppose you can reasonably ensure a constant income stream for the
rest of your life (either through retirement planning and/or engaging
in a activity that you can keep doing until you die :), have good
insurance for a variety of things (including medical and disability),
and on a monthly basis, can pay all your bills whittling away any debt
you have or acquire, then I think it is okay to spend all the rest of
the disposable income you are left with.

--Ram
 
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