Buy Within Your Means to Avoid Mortgage Nightmares

This article is a lesson in responsible home buying. Why do you need to be a responsible home buyer? Because nobody else will look out for you during a real estate transaction. Behold...

• The mortgage lender wants to make money off you by (A) granting you the loan if at all possible and (B) charging the highest interest rate possible without scaring you away. It's just business.
• The seller wants to make as much money off you as possible, because that is what sellers do.
• Your real estate agent is probably not a mortgage professional, and therefore cannot give you advice on how much you can afford.

So who does that leave? It leaves you! You are the only person who will be looking out for your financial best interests during the home buying process.

And I'm reminding you of this fact because a lot of home buyers seem to forget it. Just look at the mortgage mess we have experienced over the last two years. Many of the foreclosures we have seen were the result of home buyers who (A) did not conduct the proper research; (B) did not determine a realistic home-buying budget for themselves; and (C) relied on other people, such as mortgage lenders, to look out for their financial interests.

These are critical mistakes that you must avoid when you buy a home of your own. And here's how to go about it.

Determine How Much You Can Afford

Before you even begin the house-hunting process, you should find out how much of a mortgage loan you can comfortably afford. In this context, "comfortably" means the amount you can pay toward a mortgage each month while still having money left over for living expenses, savings, and quality-of-life items, etc.

The last thing you want is a mortgage payment that forces you to "squeak by" each month, or one that puts you into a foreclosure situation.

Using Mortgage Calculators

A mortgage calculator can help you determine how much of a home you can afford, because it will reduce the hypothetical sale price of a home into monthly payments (factoring interest and the down payment into the equation as well).

Of course, the monthly payment will partly be determined by the interest rate you get on the loan, which will be determined by your credit history and other factors. But this will give you a good idea of where you stand.

Beware of the ARM Loan

An adjustable rate mortgage (ARM) loan can be tempting, because it usually offers a lower introductory rate than a traditional fixed mortgage. But "introductory" is the key word there -- an ARM loan will adjust or "reset" after a few years, and this usually means an increase in the interest rate.

ARM loans are not evil. There are certain scenarios where it makes perfect sense to obtain such a loan, if for example you will only be living in the home for a few years. The key is to understand (A) how this and other types of mortgage loans work and (B) how it affects you as a borrower.

It can sometimes be tempting to "buy above our heads" when it comes to real estate. Nearly every homebuyer has felt the temptation to buy that beautiful house that's just a bit above the budget. But you must exercise caution and responsibility in such moments. You must ask yourself the hard questions about your finances ... you must do your homework and consider the long term ... you must rely only on yourself. These are the keys to avoiding mortgage nightmares in today's economy.

Brandon Cornett is a real estate writer who covers Austin home buying issues, as well as national trends. He is a contributor to many consumer-oriented websites such as http://www.myagentsam.com

Buying a Home at a Real Estate Auction

The concept of buying a home at auction has become increasingly popular in recent months. The reason for this popularity is clear. There are simply more foreclosure homes on the market today than there have been in the past.

For home buyers / real estate investors, the attraction of buying a home at auction is the fact that you can often purchase a home for less than market value through an auction.

Of course, it's not always that simple. Some foreclosure homes, for example, never even make it to auction and are sold through a real estate short sale process instead. And the homes that do make it to auction are often price-inflated by inexperience bidders who drive the price up (which sort of defeats the purpose of buying a home at auction altogether).

We have recently posted a new article on the subject of real estate auctions. If you think you might be buying a foreclosed home through auction in the near future, you'll find this new article helpful.

Read it here:
Real Estate Auctions 101

P.S. -- You'll find more articles on this subject, and plenty of other helpful resources, by visiting Foreclosure City.

Credit Repair Scams - Tips for Home Buyers

Credit sure has been in the news a lot lately. These days, as a result of the mortgage meltdown fueled by the subprime lenders, home buyers need to have better credit in order to qualify for a mortgage loan (and get a good rate on the loan).

So everyone's talking about credit scores. You've probably heard a commercial on the radio recently, or seen one on TV, about these credit report websites.

But as with anything else in life, there are those would take advantage of this heightened concern at the expense of consumers.

The credit repair "industry" is a prime example of this. Many companies who refer to themselves as credit repair experts use deceptive marketing and hollow practices to make money from ill-informed consumers. So allow me to inform you with the following points:

• No company can improve your credit score for you. You have to do that by adopting better financial habits.
• When most companies refer to "credit repair" they are actually talking about correcting your credit report.
• You can correct your credit report yourself, without paying somebody thousands of dollars to do it for you.

Would you like to learn more about this subject? Check out our brand-new consumer guide: Credit Repair for Home Buyers

Guide to Buying Foreclosed Homes

Buying homes in foreclosure continues to be a popular strategy for home buyers and real estate investors alike. But you need the right tools and knowledge to do it successfully, which is why we have added even more info to our guide to buying foreclosed homes ... check it out here.



In our foreclosure buying guide you will find a variety of helpful articles to help you understand the process of buying foreclosed homes in your area. You also get access to helpful tools and foreclosure tracking services, such as the one shown above!

Remember, when entering the world of investing, you need to prepare yourself by doing careful research and planning. This is true whether you're buying foreclosure homes or mutual funds. It's just good practice to "look before you leap," and we feel our guide to buying foreclosed homes will give you much of the information you need.

Go there now:
Guide to Buying Foreclosed Homes

Related article: The Basics of Buying Foreclosure

Credit Score for Home Buying - What Score Do I Need?

Article summary: An explanation of the connection between credit scores and home buying success. A must-read for any first-time home buyer.

Credit is a popular topic among home buyers these days. A person's credit score has always been important for home buying purposes, but today this is even more true.

After the mortgage crisis that began last year, federal regulators began to crank down on mortgage lenders. And as a result of this, the lenders pay closer attention to a borrower's credit score and financial history.

So what credit score is needed for home buying in today's economy? Well, this will still depend on the individual mortgage lender involved and their particular lending practices. But suffice to say that a better credit score will certainly make your home buying process a lot easier. Not only will you have an easier time qualifying for a mortgage loan, but you'll also qualify for a better interest rate if your score is high.

The average credit score in the United States falls between 650 and 700, depending on who you ask. Higher is better. The higher your score the easier time you'll have buying a home and getting a mortgage.

According to leading experts, a credit score of 720 or higher is ideal for home buying purposes. A score in this range will ensure that you get qualified for a mortgage loan and that you get a good interest rate on the loan (which translates into a lower mortgage payment each month).

Improving Your Credit Score for Buying a Home

So now you know what the average score is in this country, and what is considered to be a good credit score for home buying purposes. The next you want to do is request copies of your credit reports and scores so you'll know where you stand.

If you request your score and find that it's low, you will want to work on improving it before buying a home or applying for a mortgage loan. On this website, you'll find plenty of tips for improving your score.

So Let's Recap

What credit score is needed for home buying success? It depends on the lender. But most experts agree that a score of 720 or above is needed to get the best interest rate on your mortgage loan. You might get approved for a loan with a lower score than that, but you certainly won't get the best interest rate.

So the key is to (A) know what your score is in the first place, and (B) work hard to improve your credit score for home buying purposes if necessary. This has also been an important step for home buyers, but it's even more important today as a result of the mortgage crisis that began in 2007. Mortgage lenders will pay closer attention to your credit history and score, so you should do the same!

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Learn more about this subject:
The Home Buyer's Guide to Credit
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Best Mortgage Rates Online - Tips for Home Buyers

Article Summary: Today I would like to talk about online mortgage loans and how home buyers can use them to secure a good interest rate. Specifically, I'll explain how to find the best mortgage rates online when buying a home.

For most people, buying a home also means taking out a home mortgage loan to pay for it. After all, the "average" person cannot afford to buy a home out of pocket, so a mortgage loan must be used to bridge the financial gap.

The interest rate is a key component of the mortgage loan, because it's one of the variables that will determine how much you pay each month (see mortgage glossary). This explains why home buyers often seek the best mortgage rates when taking out a loan, because the savings can really add up over time!

Now let's introduce another piece of the puzzle, the online mortgage loan. Over the last few years, many mortgage lenders have begun to use the Internet as a way of reaching a larger customer base while also lowering their operating costs. Some lenders have adopted the online model entirely, to the point that they don't even have any walk-in "bricks and mortar" offices.

In many cases, the best mortgage rates online will be lower than the best rates offered by a traditional lending institution ... mainly because the operating costs are lower for the online lenders so they charge a lower rate and still profit. With that being said, there are a few things to keep in mind when looking for the best home mortgage rates online, so let's go over a few ground rules.

Finding the Best Rate Online

First of all, you should realize that there are fewer options for online mortgage loans these days, as a result of the subprime mortgage crisis that started in 2007. Many of the companies who specialized in online lending also specialized in subprime mortgages, and as a result of the foreclosure crisis many of those companies are now defunct. So when shopping for the best mortgage rates online you will have fewer options from which to choose.

The second thing to realize is that the interest rate you are offered (by the online mortgage lender) will partly be determined by your credit score and financial history. In other words, the best home mortgage rates online are usually reserved for those home buyers with the best credit scores.

What does this mean to you when buying a home and applying for a mortgage loan? It means that your credit score will often dictate the type of interest rate you are offered. So if you have a bad credit history, and your score illustrates this to the lender, then there's little chance you'll be getting the best mortgage rates online ... or offline for that matter. If this is the case, you should focus on improving your credit score before you go shopping for a mortgage online.

The type of mortgage you choose will also affect the interest rate on the loan. So in order to obtain the best mortgage rate you have to understand this concept as well. For example, an adjustable rate mortgage (ARM) usually comes with a lower interest rate than a fixed-rate loan ... at least for the first few years. Of course, the rate on an ARM loan will also adjust or "reset" at some point in the future, so it won't remain the best mortgage rate for long.

There is one last thing I want to stress, and that is the importance of shopping around when looking for the best mortgage rates from an online lender. Shopping for a loan is just like shopping for anything else -- you have to compare multiple lenders in order to find one that offers the best rates and terms on the loan.

So let's recap what we have learned in this article. When shopping for the best home mortgage rates online keep the following in mind:

• As a result of the subprime mortgage crisis, there are fewer online mortgage lenders today than there were five years ago. So finding the best mortgage rate online requires a bit more "hunting" these days.
• Your credit score directly affects the interest rate that you will qualify for. So if you truly want the best rate on a home mortgage loan, you should (A) know what your credit score is and (B) work to improve your score if necessary.
• The type of mortgage you choose will also affect the interest rate. Generally speaking, ARM loans have lower rates (during the first few years) than fixed-rate loans.
• You need to shop around to compare online mortgage lenders -- not only for the interest rates they offer, but also to compare their terms, closing costs, etc.

I hope you've enjoyed this guide to finding the best mortgage rates online and I hope it serves you well in the future. Good luck with your home buying process!

Bad Credit Report Repair

Summary: If you've recently obtained copies of your credit reports and feel you may be in need of bad credit report repair ... this informative article is for you!

Hi Folks. Captain Credit here. Today I'm going to talk to you about the concept of bad credit report repair and what it means to home buyers in particular.

Did you know that credit repair is one of the most popular topics within the realm of consumer finance? It's true. I frequently review Internet search data to see what topics people are researching online and the phrase bad credit report repair comes up a lot.

What does this mean? It means that a lot of Americans -- and I mean a lot -- feel that they have bad credit and are looking for ways to repair it.

In many cases, these people are about to enter the home buying process, which means they'll be applying for a mortgage loan as well. And this is the particular audience I'm speaking to ... people reviewing their credit reports in advance of buying a home.

Let's start with some clarification of the terminology being used here.

Credit Repair Versus Correction

The first thing I'd like to clarify is the difference between repairing a bad credit score and correcting an erroneous credit report. And in doing so, we will be clarifying something else as well -- your credit report and score are two different things. And in fact, you have three of each, because there are three credit-reporting companies (Equifax, Experian and TransUnion).

So the first thing to understand is that your credit reports are different from your credit score. It's important to understand this distinction because it has a lot to do with the difference between credit "repair" versus "correction."

I have given this article the title of "Bad Credit Report Repair" because that's an exact phrase I see people searching frequently online, through Google, Yahoo, etc. But in a certain sense, the phrase is misleading. Generally speaking, you would correct a credit report and repair a bad credit score. Let me clarify further:

• If you request copies of your free credit reports from all three reporting agencies, and you find an error on one of those reports, then you will need to "correct" the erroneous data.
• If you order your credit score through a website like MyFICO.com only to find out that your score is low, you will want to "repair" or improve your credit score.

I know these are nitpicky semantic details, but I feel it will eliminate a lot of confusion to keep these things straight.

So let's talk about each of these things in more detail:

Correcting a Credit Report

If you request copies of your reports from TransUnion, Experian and Equifax and find that one or more of the reports contains errors, you will need to correct those errors as soon as possible. To do this, you will want to submit a dispute with the company that produced the erroneous report. It's important to do this as soon as possible, because the process takes time. You can find some specific instructions on disputing credit report errors in our Home Buyer's Guide to Credit.

Improving a Credit Score

In this scenario, let's say that you request your credit score from a website like MyFICO.com, and you find that your score is pretty low (lower than the national average). You know that a good credit score will help you get a good interest rate on a mortgage, so you want to improve your bad credit. This is different from correcting an erroneous report. For instructions on improving your credit score, check out our Home Buyer's Guide to Credit.

I hope this article helps clear up some of the confusion about bad credit report repair and similar topics. Remember, your credit scores and reports are two different thing. You will want to correct any errors you find on your reports ... and you'll want to repair a bad credit score if you find out you have one. They are two different things, but both are important topics for home buyers.

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Learn more about this subject:
The Home Buyer's Guide to Credit
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Your Totally Free Credit Report Online

I've been seeing, hearing and reading a lot of advertisement for free credit report services lately. They all use the "free" word, but then some of them also offer paid services above and beyond the credit report request.

So what's the deal with totally free credit reports ... is there such a thing?

The answer is a resounding yes! There are actually several ways you can get your credit report online free of charge. To help you understand your options for obtaining your totally free report, we should take a quick look at where your credit reports come from in the first place.

You actually have three reports, though most people don't realize it. There are three companies that collect credit information about U.S. consumers. Those companies are TransUnion, Experian and Equifax, and each one compiles a credit report about you.

It's important to note that, currently, these are the only sources of credit reports in the United States. So when a mortgage lender (for example) pulls your credit, it's pulling information from these three companies.

So you might ask: "Well why are there so many websites offering totally free credit reports if there's only three companies that actually provide them."

Here's the main reason...

Some websites offer combined services that include your credit reports (among other things). For example, some services will help you gain access to all three of your reports and scores, while also providing some form of credit monitoring to help thwart credit fraud / identity theft. So while they partner with Experian, Equifax and TransUnion to provide your totally free credit report information, they also offer additional services on top of those reports.

By law, you are allowed to order your credit report for free once per year. You can do it by (A) visiting the websites of the reporting companies mentioned above, (B) by using the combined website at AnnualCreditReport.com, or (C) by using a combined service that also provides credit monitoring and other features.

I hope this helps you make sense of totally free credit reports online, and I wish you all the best in your financial and real estate endeavors.

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Learn more about this subject:
The Home Buyer's Guide to Credit
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Identity Theft Protection - The Best Protection Against ID Theft

When buying a home, you will reveal a lot of information about yourself, and to a lot of different people. From your initial credit report to the final closing process, your social security number will be plastered on so many documents it will make your head spin.

This makes identity theft protection extremely important during the home buying process. After all, what could be worse than buying a new home only to find out a few months later that somebody stole your identity from some loan document that wasn't properly disposed of?



It happens every day in the United States, and it often happens as a direct result of buying a home and applying for a mortgage loan. A high number of identity theft cases are traced back to real estate / home buying transactions.

So when buying a new home, put ID theft protection near the top of your priority list. The first step is to use common sense

• Don't send personal information through unsecured media like email.
• If you fill out a mortgage quote request online, make sure you are on a secure website (check to see if the web address starts with "https://www" instead of just "http://www" ... notice the 's' that signifies a secure website.
• Shred documents with private information on them, instead of just throwing them away.

These are just a few ways to protect yourself from identification theft and all the heartache it brings. But there are other forms of ID theft protection as well. In fact, there are several companies today who specialize in preventing identity theft. LifeLock is one of them, and that's why I'm writing this blog post ... to tell you about their service.

ID Theft Protection Services

I first heard of LifeLock while reading an issue of Broker Agent News (a real estate trade magazine). There was an advertisement that showed a man holding up his Social Security card for all to see. In the headline, the man stated his name and his Social Security Number ... his actual SSN.

Why would a man do something so crazy? Because he wasn't crazy -- we was the president of LifeLock, the identity theft protection company I mentioned above. And the ad went on to state how comfortable he was in sharing his private information, because he had LifeLock (his company's service) protecting him from ID theft issues.

This was one of the most effective advertising strategies I've seen in some time. Imagine, a man so confident in the ID theft protection services of his company that he would reveal his actual SSN in a national magazine ad!

I was so intrigued by the advertisement that I began researching the companies services, and how they go about protecting their customers identity.

When Buying a Home, Think Security

We offer a lot of advice through this website on all aspects of buying a home. We offer tips for improving your credit score, choosing a type of mortgage loan, house hunting and more. But in the past, I've never really touched on the subject of identity theft protection for home buyers. At least, I haven't covered the topic until now!

Remember, you'll be filling out a lot of paperwork when buying a home, and most of that paperwork (if not all of it) will have your social security number plastered all over it. That's a lot of personal information floating around, and it's a prime opportunity for somebody to steal your identity and bring you a world of grief. All it takes is one unscrupulous employee, or one piece of paper that somebody "forgot" to shred.

Don't wait until you've already become a victim of identity theft. Start protecting yourself from ID theft today. Take a look at some of the protection services like the ones I've mentioned in this article. Be proactive about protecting your identity!

What Is My Credit Score - By Captain Credit

What is my credit score and what do the numbers mean to me and to mortgage lenders?

This is a common question among consumers in general and home buyers in particular. In fact, anyone can benefit from asking the question what is my credit score -- whether or not a person is buying a home. It's just a good piece of information to know, so we are going to examine it in more detail here in this article.

Hi folks. I'm Captain Credit, the resident expert here at Home Buying Institute for all things related to credit scores and reports.

If you are planning to buy a home in the near future, and you have been asking the question "what is my credit score" ... then you've picked a good article to read.

Let's kick off our discussion by explaining why credit is important for home buyers. You see, when you go to apply for a mortgage loan in order to pay for that new home, mortgage lenders are going to examine several aspects of your financial background.

The lender will look at your debt-to-income ratio (a comparison between how much money you make and how much you owe) and, of course, they will look at your credit scores.

Perhaps you noticed that I said "scores" in the plural sense. That's because you actually have three credit scores -- one for each of the major credit-reporting companies (TransUnion, Equifax and Experian). So, the question of what is my credit score should really be what are my scores ... plural, for the three scores.

Here's the good news. There are several websites where you can obtain all of this information at once, which is definitely the super easy way to go. And as a superhero, I like super easy!

For example: Click here for your complete credit history

Components of a Credit Score

To continue answering the question "what is my credit score" we need to talk about the components that make up this score.

Your history of payments on things like credit cards and car loans is a major part of your credit score, accounting for somewhere around 35% of the total number. It only makes sense why this history would be important to mortgage lenders, but it shows how you've done over the years in terms of paying back loans.

Your total amount of debt is another big component of your credit score. For example, if you have a lot of debt (perhaps more than you can afford to pay off), then your credit score will reflect this. And it won't help your cause any when applying for a mortgage loan.

What is my credit score and how does it all add up? Well, we've tackled this question. Now you know that your score is reported by three organizations (not just one), and you know that your score is derived from your financial actions in the past. And on top of that, I've provided a link to a trustworthy website where you can answer the "what is my credit score question" once and for all.

Here it is again: Click here for your complete credit history

Now we must answer another important question for home buyers (or anyone seeking a loan, for that matter):

What is a Good Credit Score Anyway?

Once you've determined your own score, it doesn't tell you much until you learn what is considered to be a good score in the U.S. Once you have this final piece of the puzzle, you can not only answer the question what is my own credit score -- you can compare yourself to the national average as well. In this way, you'll know if you fall into the average, above-average or below-average category.

Here's an article to help you understand what constitutes a good credit score in the U.S.

That wraps up today's lesson. I hope this has helped you understand the world of home buying in general, and credit scores in particular. More importantly, I hope you are able to take this knowledge and not only use it for yourself, but share it with others as well. So that the next time you hear somebody ask: What is my credit score .... you'll be able to help them out.