Why you need Credit now and how to begin building it for the Future

I wanted to write a blog about Credit, why everyone needs it and how to take control of your financial future.

I recently had a client tell me he didn't have Credit Cards because he thought paying 20% on his own Money was a ripoff. At face value this Gentleman has produced a good argument, why pay a high percentage, even if it is for convenience.

What my client does not understand is how Credit works. Your Credit Score, actually your FICO Score, is a number between 350 and 850 that represents your Credit-Worthiness to any given company. Your Score goes up and down based on your Card Balances, Payment History, Length of open Tradelines and number of Accounts.

The Interest Rate you recieve when you Finance a Car, House or Credit Card is always based off of your Credit Score. The more Credit you have, and use responsibly, the higher your Score is. The higher your Score is the lower Risk you represent to a company and the better your Interest Rate or Price. Enter my Client.

The Gentlemen does not want to pay for Credit at a store such as JC Penny or Best Buy. However, let's say he were to get a store Charge at JC Penny with a beginning limit of $200. He buys 3 sweaters @ $20 each for a total of $60, which he pays off over a one year period at the burden of less than $10 monthly. With a 20% Finance Charge, he pays $72 for his sweaters over the next year.

In the above example my Client does end up "Losing" $12. However, over that year he has built Positive Payment History, Balance, Opened a lengthened Tradeline and added a Positive Account to his Credit Report. His Credit Score increases 40 Points in one year.

Here's what I am getting at. 40 Points on this Gentlemens Score would qualify him for a 1% Lower Interest Rate on his Home Loan. On a $100,000 loan, a small House by Madisons standards, the difference between 7% and 8% (That One Percent) is $68.40 a month. By increasing his Credit Score 40 Points, he will save $24,624.00 over the next 30 years on his House Payment! And that is a small House. On a $200,000 home he would save $137/Mo or $49,300 over 30 years!

If everyone were to practice responsible, educated use of Credit, a lot of people would save a lot of $$$$$. Get Credit where you can, Kwik Trip or American TV will give Credit to anyone, and use it very responsibly. Never charge more than 50% of you Cards Balance, this will hurt your Credit. If you ever have to miss a payment your Car Payment affects your Credit more than your Credit Cards do.

In conclusion, $12 now for $49,000 over 30 years seems like a no brainer to me. The best part, you can all save more than this! Start building your credit now. Work hard, read about responsible use of credit and when in doubt, ask me! Buy something you want now, pay for it very slow and that Luxury now will become a necessity for later...Thanks.....

100% Financing First Time Home Buyers Can Afford

Fannie Mae is now offering MyCommunity, a loan that will finance 100% of a home. It is a first time homebuyers program aimed at people with lower credit scores and higher debt ratios. This program loves assets and dislikes derogatory accounts.

It is primarily for purchases. To give you an idea of the efficacy of this program you really only need a 600 score to qualify for 100% financing between 6.75-7.5%. Now is the perfect time to buy!

Take these smokin hot rates and combine them with the hundreds of cheap houses on the market right now and you've got yourself one hell of a buyers market.

Call me! Seriously, look into this! You have nothing to lose and everything to gain. Like always I've still got your free credit report and rate quote waiting for you!

Thanks for reading and please only call if you feel you are ready for home ownership, you are interested in finding out more about purchasing a home or about what to expect from the home purchase process.

An article about Title policies and my thoughts...

I was at a closing a little early last week and I read an article in Forbes while I was waiting for my clients to arrive and I have just been thinking about it ever since. The article was about Title companies and how they sell a largely outdated product for an inflated price and consumers are required to use them. It further went on to say that the largest offender (FA) who's market share is about $8 Billion Yearly gives away an exasperating amount of illegal kickbacks to Lenders and Realtors on a monthly basis.

The average Title policy in America, according to the article, costs consumers around $1400. Only $70 of this money goes to pay actual claims. The rest of the money pays for the overhead and sales people and generates a massive profit for these companies on a yearly basis.

The article argues that since Titles and Liens are all well documented by computers the chances of finding an error on Title have dwindled significantly and Title policies have in effect become outdated. The states could provide this service at a much cheaper rate to consumers and create the same amount of jobs. The only benefit from having Title companies, the article suggests, is the plethora of kickbacks it generates for the Real Estate Industry and for the profit of shareholders.

The article was compelling at worst and the more I think about it the more I agree. Anybody else out there feeling this way?

Cultivating Referals from Existing Relationships

Cultivating Referrals from Existing Realtionships

The other day I was having my hair cut and talking to my hair dresser when the topics of growing our businesses through referrals arose. The woman who has cut my hair for years has already helped me by displaying flyers of mine in her lobby. Today was different though. As the topic of referrals was fresh on her mind, she immediately began asking customers around the room not only how their mortgage situations were but also about those of their friends and family....
I was being advertised, in a powerful way because these customers trust this woman as much as I do, and she is touting my abilities and character! Obviously this woman knows the type of person I am and has her trust in me but....bringing up the topic of referrals served as a catalyst for what then became the best type of advertisement I can recieve.
So the moment was made possible because of our trust in eachother, but it only took place because our discussion of the power of referrals lit the fire...Remember to cultivate those relationships where the trust is already established, you may be overlooking a valuable resource you've already worked hard to develop!
Cultivating Referrals from Existing Realtionships is as simple as thinking of all of your friends and family that are pillars in their communities and have created a reputation for themselves of being trustworhty and reliable people. Teach these people how to sell you and do a good job for everyone they send you, they do it for you!
Thanks, Joe

Status of the Dane County Housing Market

Status of the Dane County Housing Market

I live in a fantastic town called Madison where the summers are gorgeous and the winters are brutal. We are a cultural Mecca in the state and pride ourselves on our Political efficacy and our presence as an emerging Bio-Tech leader. We also have the best College Footbal team, period! (IMHO)
Here in Madison we have an abundance of homes on the market right now from the 180-280k range, some that have been sitting for 6 months. The reason these "mid-range" homes have and will continue to have their values suffer is simple. The move up buyers from 2004 and 2005 that bought a ton of house because the money was almost free can simply not afford to drop the price; they have not yet established equity and they have not yet paid down their principal balances.
Thanks to both the constant stream of new professionals and the fantastic community lending programs available from Fannie Mae, the 120-160k range is moving along very nicely. The reason, there are always First Time Home Buyers! New Homeowners simply do not buy $250,000 homes around here. The builders keep building them and the flippers keep listing them but until the market stabilizes, the "mid-range" inventory shall sit.
Now of course there are move up buyers, someone has to be selling these $150,000 homes. These borrowers are going to be much more careful how they spend their money as there new loan is 1% higher than their last and the inventory is plentiful. Move up buyers will be looking for better deals and incentives. Now more than ever the seller that will pay his/her buyers closing costs, team up with a good Mortgage Broker to offer Strategic Financing and do extensive advertising and research will be the victors!
Mid Range Sellers need to take advantage of professional marketing assistance offered by companies such as ours and do their research, learn what move up buyers are looking for and cater to their needs. There will always be the Jones and there will always be the First Timers.
If anyone is interested in learning more about Strategic Financing or how they can promote their mid range listings without breaking the bank I am happy to help. Thank you for reading and have a great summer!