• Let’s say you have good credit.  Every now and then you take a credit card offer at a department store to get a discount then after a few months, you cancel the card.  That will cost you about 30 points on your credit score.  Why?  Not sure but that’s what will happen if you close it out less than 12 months from opening it up.

• You have rate of 5.375% on a 30 year fixed rate and want to take advantage of the lower mortgage rates.  But you’ve lived in your house for 10 years, you’re over 40 years old, and you’re not planning on moving.  Do you take another 30 yr loan?  How about a 20 year loan or a 15 year loan?

The 30 yr loan will result in a lower rate and lower payments.  The 20 year loan will be the same rate as the 30 yr loan so no advantage there.  But lenders are offering much lower rates on a 15 year loan.  So let’s look at an example.  Your current 30 year loan has been in place for at least 5 years. Your principal and Interest payment is $1456/month.  Now you owe $240,000.

If you’re concerned about your monthly budget, you take another 30 yr fixed rate loan and take advantage of the lower rate and payments.  When you can you pay extra towards your principal balance.

If you want to save a lot of money and pay down or payoff your loan quicker, take a 15 year loan with little or no fees at 4.25%.  Your payments go to $1805/month but you’re saving over $2400/yr in interest.  In 10 years, you’ll owe $97,437.  If you keep your current loan at 5.375%, you’ll still owe $179,639.

• I was watching Jerry Rice being interviewed the other day.  He’s going into the Hall of Fame tomorrow (8/7/2010).  He is regarded as the greatest receiver of all time.  He said when he was in high school, he would walk around with his hands in his pockets all the time.  He was embarrassed by having such large hands and a thin body.  Those hands, his speed, and his work ethic made him the greatest wide receiver in the NFL.  Still embarrassed by something about you that you can’t change?  It might be your greatest asset.

With that in the backdrop, I’ve heard all the radio ads for mortgage loans I’d ever want to hear. You know how it is for you; If you’re in a certain profession and you read a news story or hear an ad, you know right away whether it’s accurate or vague or misleading. The claims of “we close most loans in 10 days” or “we make it simple” or “when banks compete, you win” are all designed for one thing…..to give them a call. They don’t have to be accurate or truthful or convey details. What most companies know is that if they are committed to a long term campaign and willing to spend a significant amount of money, and keep their message pretty much the same, over time, they’ll get enough people to respond and a certain percentage of them will end up closing loans with them and they’ll cover their advertising and operational costs.

Here’s what you should know: Banks are making most of the rules for mortgage loans, and the rules and hurdles to jump thru are formidable. Lenders should exercise caution when loaning out great sums of money over a long period of time, however, it’s not caution that’s ruling the day, it’s rules and in many cases, the lack of good business judgment. But we’re still getting loans approved in spite of the current environment.

The major lenders left that service loans are:

• Wells Fargo
• Chase
• Citi
• Bank of American
• GMAC

You would think it would be easy, if you’re looking to refinance, to go back thru them. They’re buried with new business, mortgage modifications, and foreclosures. They use relatively inexperience staff that are over worked and overwhelmed everyday. From people I talk to it’s a very long, long process and the communication is not good.

The non bank lenders who do the majority of radio and internet advertising are just selling the sizzle rather than the steak.

Mortgage rates are fantastically low. If you have good income, good credit, enough funds for a down payment or enough equity in your home you’ve just hit the jackpot. Take advantage of it.

Everyone I know likes Carol Paterson. She’s easy to like. She has an easy laugh, has a pretty bright outlook on life and treats people with respect. She is the youngest of 4 children and was raised in a small town in Nebraska. Those of us who used to be kids (that was just a test to see if you’re paying attention) or you have kids know that there are certain characteristics of the first born and the middle child syndrome and the last born and who knows what else. All I know is that she is a happy, nice person. She grew up in the Great Depression (we might become well acquainted with that!) in a small town in Nebraska with a father who fought in both World Wars and 3 older siblings. Life was pretty tough in the Midwest during the Depression, especially winters. They used a wood burning oven and made chicken soup from the chickens out in the yard. They moved to California for better job prospects and easier winters along with other relatives from Nebraska.

She is the mother of 4 children and I was the first one to come along. From what I hear, I used to be a happy little boy. I think that was likely due to my mom. 3 other sisters had the audacity to join our family and break up the 15 month monopoly I had on mom and dad. And it was not easy on them because money was scarce and there were medical bills they didn’t plan for and mom had to make the milk and crackers last as long as they could.

I could go on for a long time, maybe turn this into a mini-series but you’d get a little bored and mom would probably be embarrassed. So I’ll end by saying again, “Thanks mom”. Thanks for praying for me all the years and being a nice person, a great mother-in-law, and a wonderful grandmother.

With that in mind let me give you a link that can help explain that.  This is well written and won’t take long to get a little better educated.  I’ve seen credit scores drop over 70 points with just one late payment over 30 days on one credit card.

All of us need to exercise vigilance about paying our bills on time, being careful of tempting offers to take out another credit card, shredding certain statements and receipts before they are thrown away, and considering if you should transfer the balance on one card to another.

http://www.myfico.com/CreditEducation/ is one of many good sites.  Click on this link and then click on Credit Missteps.  There are other pages on this site you might find interesting but the graphic display is very helpful.

Also, if you’ve seen your score go way up or way down, please share that with me.  I’m sure most of us want to know what is working well and what pitfalls to avoid and your experience might be very helpful.  Send me a quick email about what happened and I’ll send out a Starbucks gift card for taking the time to do that.

I think you know how your credit score can effect the interest rate you get or the amount you can borrow on a mortgage or car loan.  Share this with your teenagers and young adults as well

A decline of nearly ½% in fixed rate mortgages was realized albeit for only a few days at the height of worries about debt in Europe along with benign US economic growth and worries of inflation being abated for the time being.

Some of our customers got 4 ¼% to 4 ½% 15 year fixed rate loans with Zero points.  That was not thought of much of a possibility even in March of this year.  The federal government was to stop buying mortgage loans and in effect reduce their support of the residential housing mortgage market.  The forecast was that we would gradually see a rise in mortgage rates.

But as I’ve said for many, many years, there are just too many factors that end up determining what mortgage rates settle at.  Any economist worth their salt has been humbled and had to eat their forecasts for breakfast, lunch, and dinner when their best thought out forecasts were blown out of the water.

The other development in the mortgage has been for seniors who look into a Reverse Mortgage.  In April, the major investors that make those loans started offering 5.50% fixed rate loans with no monthly service fees and dramatically lower fees.  For loan amounts above $300,000 it was normal to see total fees of $17,000 to $21,000.  Now we’re seeing those fees between $3,000 and $8500.  Quite a drop!  Some people are still better off using a Variable Rate option for a Reverse Mortgage but that’s why I ask a lot of questions.  Before making a final decision, a lot of factors must be considered.

Some areas of housing in California have seen a modest increase in price per square foot.  Areas with high unemployment and a large supply of houses listed for sale, particularly lender owned or short sale houses are still seeing some declines or at best a stabilization.  Areas in the Silicon Valley towns are seeing robust activity for buying and increases in the price per square foot.  It can be generally said that the valley region (Redding to Bakersfield) and the Inland Empire region will see homes for sale that are the result of foreclosure for at least 2-3 years.  Areas with little new home building over the last 4 years and with decent employment will continue to see some price appreciation.

There are many firsts in our lives;  your first crush or first car or first real job.  The birth of your first child ranks right up there.  With that in mind, we watched Stephanie walk across the stage to receive her diploma and graduate cum laude.  There was a sense of relief and pride and joy all rolled into one on that Saturday afternoon.  Interestingly, there was a lot more emotion the day I said good-bye to her when I dropped her off at Point Loma in August of 2008 as a transfer student.

She’s has been and is a hard worker.  Her professors were impressed with her work and her GPA confirmed that.  Accounting isn’t the easiest of majors and I think she’ll do well no matter what company or field she goes into.  One of our goals was for both our kids to graduate with a 4 year degree and no debt.  That goal has been achieved for Stephanie and likely for Kelsey in 2 more years.

No doubt there will be many other firsts in our lives.  First daughter to get married or first grandchild.  I keep mementos of good memories in my office.  I haven’t come up with an appropriate memento yet but I’m looking forward to finding it and then placing it somewhere that I can look at it occasionally.

Much of life is uncertain.  This month of May could be the poster child of uncertainty…cool, rainy weather, stock market EKG’s, the job market, interest rates, and political changes.  Amidst the uncertainty and inevitable change,  it’s good to share the times of our life when we can mark them with relief or celebration.

Many of you are more than simply clients; you’ve become friends that care about.  I look forward to hearing from you about the joys of your life.

Recently, I worked with two different clients.  In both cases, they had seen a decline in their investments over the last 2 years.  Those investments produced an income and they were viewed as seeing them thru to the rest of their lives.  Medical costs for both sets of clients had risen and with the decline in their investments, they decided to get a Reverse Mortgage so they could eliminate their mortgage payments and have some cash for the future.

If you’re in your 40’s or 50’s, you want not give much thought to a reverse mortgage for yourself, but your parents may be considering that option.  They may feel some guilt about taking out a loan on their home and that it will affect the inheritance for you or siblings.  That’s understandable.

However, as all of us look down the road and try and evaluate the realities of income and expenses,  a reverse mortgage is one of the ways to be able for seniors to stay in their home, meet their expenses, and not have to rely upon outside (financial) assistance from their children.