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November, 2001 Newsletter

+++++++++++ November 1, 2001 +++++++++++++++++++

Introduction: Home Sales Soften
Mortgage Rate Update: Rates Remain Low
Recent Site Updates: Qualifying Chart
This Month's Tip: Credit and Home Buying

Welcome to the November edition of the Home Buyer's
Information Newsletter.
As expected, home sales generally declined throughout
the U.S. in the month of September. Sales of existing
homes dropped 11.7%, the largest decline since 1995.
Sales of new homes declined a more modest 1.3% in
September, but since the new home process takes longer
than purchasing an existing home, the true effect there
may not be felt until later.
The good availability (at low rates) of mortgage funds
may mitigate further declines and should help to bring
a quicker recovery. As is always the case with supply
and demand issues, the best time to buy is when there
are fewer buyers in the market. Less buyers almost
always equates to lower prices.

Mortgage Rate Update:
Mortgage rates continued a slow decline through
the month of October, reaching levels not seen
since 1998. As of October 25th, mortgage company
Freddie Mac reports that the average 30-year
fixed rate was 6.61% while the average 15-year
fixed rate averaged 6.09%.
For current average mortgage rates, see:
Mortgage Rates
For more information on mortgages, visit the Mortgage
Section at:
Mortgage Information

Recent Site Updates:
Qualifying Chart
An important component of a mortgage application is
the qualifying process. The lender will determine
the ratio between your income and your debt to develop
"qualifying ratios" to establish your ability to pay
the proposed mortgage payment. You can find a sample
qualifying chart on the site at:
Mortgage Qualifying Chart

Get a Copy of Your Credit Report

IPlace.com, the largest supplier of credit reports
on the Internet, has a number of options to quickly
get a copy of your report. You can get a single
report, your credit score, a full 3-bureau report or
even a free copy of your credit report, quickly and
easily. See more information at:
Sources of Credit Reports
This Month's Tip: Credit and Home Buying

Along with mortgage qualifying (which is an assessment
of your ability to pay), a credit report (a record of
HOW you pay) is one of the first steps on the way to
mortgage loan approval. After it has been determined
that your income and debt ratio fits the lender's
parameters, your credit history will have a big influence
on whether or not you will be able to secure a mortgage
and if you are able, on what terms and at what interest
rate. (It is simply a fact of financial life that those
with the best credit histories get the best mortgage
plans). In addition, those with good credit will have
a much wider range of available mortgage offers, meaning
a better likelihood of finding a program that most closely
matches their needs.

Knowing how important their credit is to the entire
process, how can a home buyer take advantage of the

When the mortgage lender takes a look at your credit
report, you'll want to have your best foot forward. First,
you'll want to make certain that there are no errors on the
report. These can always be corrected, but may take a
good bit of time, delaying the application or forcing
you to get documentation correcting the error. Next,
you'll want to be certain that all positive accounts
appear on your report. If a car loan or credit card
account that you paid as agreed is missing from your
report, it could negatively impact the application,
especially if you have few or no other accounts.

In short, you'll want to be certain that your credit
report accurately and completely represents your
actual credit history.

Taking a proactive approach--reviewing your credit
report prior to a mortgage lender seeing it--is
always a good approach. Not only can you fix any
minor mistakes you find, you can also be well on your
way to correcting any inaccuracies that may take a bit
longer to handle. Having things in order makes the
job of the mortgage lender much easier.

If you do find mistakes or omissions, your first task
is to contact the creditor and have them make the
change with the credit bureau. It is important here
to get WRITTEN verification not only of the change
in the credit account but also that the creditor will
be forwarding this updated information to the credit
bureaus. Not only will the change be more likely to
actually happen this way, you will have documentation
to share with the mortgage lender if the question
arises (and it probably will).

With your credit report in hand, you'll also want to
make changes to your debt and account structure that
can help you with the mortgage approval process. For
example, say you have a credit card with a $7500 limit
that you haven't used in the last 3 years. If you feel
reasonably sure that you'll not be using it in the
future, it makes good sense to close the account. Even
though the account may have a $0 balance, a mortgage
lender may look at the account as a source of potential
additional debt (you could run up a $7500 balance very
quickly). With the account closed, you'll still get
credit for your past payment history, but remove the
ability--in the lender's eyes--of adding to your debt

If you have several accounts that you are using that
have small balances, try to pay them off. Current
accounts with $0 balances will always look better than
several with balances, even if they are small, since
they will likely have minimum monthly payments attached
to them. This will also help ease the qualifying process,
since those minimum payments will add to your total
monthly debt.

Credit Scores

An additional indicator of your credit condition can be
found in your credit score. This is a fairly recent
development where a number of components of your credit
report are analyzed and "scored" and a credit score
number is generated. According to Fair, Isaacs and
Company (the largest developer of credit scoring systems)
the following factors are used to develop your score:

* Your payment history (your track record)
* Amounts owed (how much is too much?)
* Length of credit history (how established?)
* New credit (are you taking on more debt?)
* Types of credit used (Is it a "healthy" mix?)

There are no "right" scores nor "wrong" scores.
Different loan programs may require different
minimum credit scores, so if the scoring is not
high enough for a particular program, there may
be another available with lower requirements. Your
scoring will only be one factor in the credit decision,
along with the actual credit report itself, your
employment history, your income, your debt-to-income
ratios and the appraisal of the home you want to buy.

Getting a copy of your credit report (even a copy
of your credit score) is a much easier
process than it has been in the past. Consumer
protection laws, for example, dictate that if your
have recently been denied credit, you are entitled
to a copy of the report from the credit bureau that
provided the information to the creditor that turned
you down. There are also online resources that are
available that allow you to download a copy of your
credit report, instantly and securely.

For a number of the options for getting a copy
of your credit report and how to use it see the page
on the site at:
Credit Report Resources

Next months topic: Winning at Negotiation

As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
access our feedback page at:
HomeBuyers Information Center Feedback

A special thanks to all those who have written to let us know
that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great month of November and good luck in your home buying

The Team at the Home Buyer's Information Center

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