NoSoup

Alrighty Denim-

If I were in your shoes, I would probably move into a cheaper apartment, and forgo the house at this point.

A condominium may be an option, but historically, they are the slowest to increase in value and fastest to decrease. They are generally difficult to turn around for a profit, and usually a pain to find a buyer for.

If you do move into a cheaper apartment save the additional money for a downpayment of a house. 1/3 of your income on just your mortgage, taxes, insurance, and PMI is a little high. The higher the downpayment, the lower your overall payment will be.

However, some people that are very good with their money have no problems with 1/3 of their income being tied up in their housing.

Here is what I would suggest:

Move into the cheaper apartment, and begin to "practice" your mortgage payments. Simply take the amount your mortgage would have been (ie $1200) and pay your rent from it, putting the rest in an account for the downpayment of a home. If you really want to try and experience what home-ownership would be like, if your rent includes utilities, take the average of your utility bills, multiply them by 1.5 or 2 (depending on the size of your apartment) and put that into the "down payment account" as well. You can also "practice" the repairs of the home, which average 2.1% of the home's value per year. for a 150k home, that comes out to $3150 a year, or an extra $262.50 a month. Granted, this figure will vary depending on the shape of your home when you purchase it, but it should give you some idea.

If you find this "practice" to be comfortable to you, I would then go ahead and make your home purchase. If not, after a while you should have a substantial downpayment to purchase a home similar to the one you are "practicing" on, and yet have a much lower payment.

As far as using IRA funds to purchase a home, I wouldn't, although some situations may warrant it. From my understanding, there are certain exemptions when you utilize those funds without being the required age, and a first time home purchase generally does qualify.

Finally, on 80/10/10 mortgages, I don't really see any reason not to do them, unless the 3rd mortgage rate is very high. Personally, I would check around to find an institution that offers 2nd Mortgages up to 100% and doesn't require PMI to compare rates. Also, be very wary of closing costs and prepayment penalties.

If at any time you (or anyone else reading this) are looking into a loan and feel uncertain about the terms or just want to make sure that you aren't being cheated, I'd be more than happy to take a look at the documents. Simply send me a PM, and I can give you a fax number, you can delete all the personal information (last name, social security number, address, ect.) and you can either fax it or scan/email it to me. I must warn you, however, that I do live/work in Wisconsin, and I may not be aware of some of the laws that exist in your state.

Also, if you are wondering if a certain combination (80/10/10, 80/20, ect) will save you more money, just send me a PM with the interest rates/terms of the loan and I'll work it up and let you know what the better deal is.

If you need anything else, just let me know!

NoSoup

Lol, Indeed, I am - and Thanks!

Bring on the questions, I'd be more than happy to help

denim

That's too sane.

Thanks!! And I'll be back when the situation changes.

NoSoup

Lol, sounds good - ironic that it only takes someone suggesting you do something to help you decide what you really want to do...

If you need anything else, let me know

denim

Yeah. How come others with similar income can buy a house and I can't? It's got to be possible. In a year, I'll have maybe saved up more money, but the house prices may have gone up much more. I'm feeling kinda damned either way.

Astrocloud

I have a question.

fyi I'm a stubborn bastard.

There was a time when I lived on the west coast and I moved east.

The electric company sent me my final bill which was 3 or 4 times what it should have been. I'm guessing that either someone jacked my power when I wasn't at the empty house OR the electric company made a mistake (which they had done previously) and misread my power meter.

After dealing with a very rude and obnoxious electric company billing agent who refused to do anything -I vowed never to pay them. It's now 6 yeas later and because I am cleaning up my credit -I finally paid -just to get it off the books.

I still feel like I shouldn't have. The question is -Even though I paid this bill how does it effect my credit? If it's paid late EVEN THOUGH I FEEL LIKE I WAS CHEATED is there anyway to put "my side of it" in the records?

Note that I still have some of the old bills that anyone can compare what the bill should've been.

Also for future reference -what should I do when someone overcharges and I'm feeling cheated. I still have the "don't pay" mentality and it doesn't do a thing for me.

Cynthetiq

Great Idea about the practicing the mortgage payments. Had I done that earlier I would have bought a place YEARS ago.

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iccky

I'm a college student thinking of buying a used car soon (somewhere in the 4-5k price range). My parents have always told me to buy cars with cash, and have always done so themselves. I could pay cash, but that would eat up most of my bank account. Is it a better idea to get a car loan and invest the money or should I pay cash?

iccky

Oh, and just a thought, but maybe this thread could get stickied. It seems to be fairly popular, though intermitantly so, and stickying it might save nosoup the trouble of bumping it constantly. I think it would be great to recognize the wonderful contribution NoSoup is making here.

denim

Just "subscribe" to the thread, and you'll see all updates to it.

NoSoup

Sorry about the wait, I have been gone for a few days...

First of all, it is best to dispute it with the company and once (if) you get an answer, go from there. If you were terribly cheated/ there was a large error in their favor, and they refuse to acknowledge it, I would contact an attorney.

Unfortunately, however, in most cases it may save you much more of a headache and potentially money in the long run just to pay the bill. As I am sure you have found out, that bill has probably hurt your credit for many years now, and every loan/credit card you have taken out may have had a higher interest rate as a result.

As far as putting your side of the story on the credit bureau, it certainly is possible, although it usually isn't utilized in cases like this. Basically, all you have to do is contact the Credit Reporting agencies and say you would like to make a consumer statement on your credit bureau. They should mail you out a form, you fill it in, and mail it back. From that point forward, your bureau should have that statement attached. Most of the time this is used in cases of identity theft and/or fraud, but as far as I know you can put whatever you would like into the statement.

As far as the "don't pay" mentality, it probably feels the best at the time, but it will probably hurt you in the long run. If an account is in dispute, they shouldn't report it as delinquent to your bureau, nor send it to a collection agency. If there is anything else I can do for you, just ask!

NoSoup

Thanks - Many people I have suggested this to that have tried it have either quickly decided that they could easily purchase a home or realized that they are not yet ready for home ownership. Either way, they have a bit more cash in the bank to use for whatever is necessary - always a good thing

NoSoup

Well, as I am not aware of your current credit situation, I'll do the best I can with the information you provided...

Generally speaking, it certainly is a good idea to purchase vehicles with cash, as they are one of the "worst" assest you will ever have. The reasoning behind this is that they generally depreciate very quickly, and paying interest on a depreciating asset is always a good situation to avoid if possible.

Since you certainly would be paying interest on the vehicle, I would suggest that you invest that money only if you are guaranteed a higher return. If you put it into the stock market (although I believe the average return is 12% per year) you may potentially lose a good portion of those funds, and you would be in a much better position to have a free-and-clear car. However, if you can find a Certificate of Deposit or some type of Government Bond that will pay you a higher rate that the intererest rate on your loan would be, I don't see any issues with investing it and taking out a loan on the car. One thing to consider, though, is that you will have to eventually pay income tax on any money you make, and so the rate of the investment should be substantially higher than the loan.

A couple of other points -
If you are looking to build your credit, a vehicle loan would be a fine place to do so. However, you can also do a "deposit secured loan" and use your cash as collateral. This may be your best bet, as I am not sure that you would want to carry full coverage on the car, and with no lien on the vehicle, you wouldn't be required to do so. At the end of the loan, you would still have that money in whatever savings vehicle that you had chosen to keep it in (Money Market, Certificate of Deposit, ect.) as well as any interest that had accrued on it.

I hope this answers your question(s), if not, post again!

__________________
I have an aura of reliability and good judgement.

Just in case you were wondering...

NoSoup

Well, I originally started this thread long before there was a finance forum, so I don't necessarily need to bump it anymore. You guys can do it for me with any questions you may have

However, if any of the moderators agree with you, I would have no objection with stickying it.

And I really enjoy doing this thread, I look forward to seeing if anyone has posted. In my opinion, If I can help anyone with my expertise in the field, the pleasure of doing so far outweighs the "cost" of my time...

billclinton

I have been slowly rebuilding my credit over the past 2 years. I applied for a home loan, and was approved, right at 2 years ago. My credit score at that time was about 560 and I had several derogatory issues on my report, such as late payments and collections. In the past two years I have had perfect credit activity....paying bills on time, no collections, etc. My score only increased about 30 points. Last month, I had a 30 day late sent in to the credit agencies (I have disputed it because the payment was sent two weeks prior to 30 days late, but the company didnt process until it was EXACTLY 30 days late), my score dropped 62 points from 592 to 530!!!! My credit score is now lower after 2 years of perfect credit than it was when I first began my credit improvement journey.

Any advice on how to deal with this "one step forward, two steps back" journey?

Thanks!

__________________
No Comment....

billclinton

One more thing...
Do I have any recourse with the FICO on my credit scoring? I have asked for an explanation on why my credit score is lower now after 2 years of good activity than it was when I didn't pay my bills at all and all they have said is "that is how the computer scores you". I feel like that the score should be easily explainable and not so esoteric.

I AM VERY FRUSTRATED AND CAN'T SEEM TO GET AN ANSWER!!!

Thanks for any help.

__________________
No Comment....

nazz

This is a great thread and very generous of NoSoup to spend so much time giving excellent advice.

Here's my delimna.

I own a $136,000 home with $106,000 debt in my mortgage.

I have foolishy maxed out two credit cards with about $10K on each. In my defense, a large portion of that was medical expenses that I wanted to avoid collection on.

The interest rates on the two cards are not terrible at 12.9% and 9.9%.

The problem is that with all of our bills I'm barely able to make the various payments every month and the two credit card payments are just killing me. It's over $400/month just to make minimum payments.

I already refinaced my home about a year ago and I know it would not be well received at that bank if I returned so soon.

I feel like I'm drowning in debt and broke all of the time even though I make 50K/year.

What should I do?

__________________
"Take my advice ... don't listen to me."

NoSoup

Ah, welcome to the wonderful world of your FICO score - Hey, Everyone enjoys being scored on rules they don't understand, right?

I know it can be extremely frustrating, and the exact calculations of the score are surrounded in mystery. Basically, the score is based on a variety of factors, including payment history, late payments, judgements, collections, length of credit history, amound of secured/unsecured debt, spending habits, how often you apply for credit, and even how long you are employed at the same job.

Here's the good news - derogitory marks on your bureau hurt less and less as time goes on. The best way to improve your score is to make payments on time, carry low balances on credit cards, only have a few open lines of credit, try to avoid applying for credit, and let time pass.

You didn't mention how many open lines of credit you have, nor how much you owe according to the limits, but try to keep your credit card/unsecured balances under 50% of the limit. Try and pay down all your debt, starting with high interest/close to limit credit cards, before any secured (ie vehicle) loans and finally the mortgage. As you experienced, the better your score, the more a single derogitory mark affects you. Another thing I would consider doing is closing any credit cards/unsecured loans until you are down to 2, maybe 3 open lines of credit. Also, when using credit cards in the future, it looks much better on your bureau to have to $5000.00 limit cards with balances of $2500.00 than a single card maxed out. Unfortunately, that's pretty much all the advice I can give you...

If you have any more questions, just ask!

NoSoup

Well, working from the information you have given me, I would suggest possibly getting a 2nd mortgage to consolidate your Credit Card debt. Because it is paid back over a longer term, your payments should be significantly lower. However, simply because you have a lower payment doesn't mean that you should make less of a payment on the balances that you owe. Hopefully, though, it will give you more spendable cash and make your debt seem less mountainous.

If this wouldn't work for you, please explain your situation with a little more detail and I'll see what I can do

nazz

Thanks for the quick reply!

I was thinking about doing exactly that.

If you don't mind my asking, I was wondering about the following.

What type of company should I go through to request a 2nd mortgage? I was considering online to make it easier but don't know which would be the best one.

What interest rate should I expect in the current market?

What fees and closing costs should I expect on a loan of about 30K?

What things should I avoid or be cautious of?

Thanks again, very much.

__________________
"Take my advice ... don't listen to me."

NoSoup

You can check online, but online companies generally have higher closing costs than brick and morter institutions. I would avoid brokers altogether, and see if you can find a bank or credit union to do it for you, as they generally charge much less in fees.

As far as the interest rate goes, it depends on your credit as well as how long you are going to have the term for. You should be able to check online for todays rate, or just give your local bank/credit union a call. Another option you may have is to obtain a "home equity line of credit," depeding on your specific situation. Without examining your finances, I unfortanately am unable to suggest a specific action for you.

As far as the fees/closing costs you should expect, I would try for under $500.00 including an appraisal. However, depending on where you live, that may seem kinda low. Try to avoid institutions that charge bogus fees (ie application fees, processing fees, broker fees, etc.)

You should definately avoid having a pre-payment penalty, as well as "bogus" fees mentioned above. Some home equity lines of credit have annual fees, and on occasion that is alright, if it is the best product to suit your needs.

I copied and pasted this from a different post, just to remind you -
"If at any time you (or anyone else reading this) are looking into a loan and feel uncertain about the terms or just want to make sure that you aren't being cheated, I'd be more than happy to take a look at the documents. Simply send me a PM, and I can give you a fax number, you can delete all the personal information (last name, social security number, address, ect.) and you can either fax it or scan/email it to me. I must warn you, however, that I do live/work in Wisconsin, and I may not be aware of some of the laws that exist in your state."

If there is anything else I can do for you, just let me know!

nazz

One last question that I forgot to ask.

Will they take the closing costs, appraisal fee,etc from the proceeds of the loan or do I need it up front?

__________________
"Take my advice ... don't listen to me."

NoSoup

It Depends. Providing you have the equity, the institution should be able to wrap up all the closing costs into the loan. I would imagine that you should easily be able to find somewhere that would be willing to do so.

billclinton

Thanks for the response NoSoup. Very informative information.

__________________
No Comment....

Cynthetiq

NoSoup,

I had gone thru a broker to get my mortgage. I got a better rate than via going to the bank directly. I paid no points upfront and I paid no fee to the broker, they took a commission from the bank. In fact because I was buying a coop in NYC, it was fortuitous because she helped us secure the best loans because we needed 20% down.

I also got a rebate from the broker because of a deal with my employer which I did not know about before I signed on with her.

The first broker I saw wanted us to fill out the paperwork which we all know is MASSIVE. This one interviewed us over the phone and sent us the finished documentation to sign.

I think that it's at least worth the investigation, especially if you don't have to put out any cash.

NoSoup

Very True, Cynthetiq - Very occasionally you can and will find deals like this. Very seldom have I seen them, and when I have the mortgage amounts have generally been a rather large amount. As a general rule, People with larger mortgages generally pay less closing fees per thousand than people will smaller needs. As he had mentioned that he had needed only about 30k, I didn't really consider this an option, although I should have at least mentioned it. My apologies, and excellent point

iccky

NoSoup-

This may have been answered before but I couldn't find it using the search function. I know that when you apply for credit the dredit rating agency records that your credit report was requested and that this is bad for your dcredit rating. How long does this record of having your report requested stay on you credit report?

NoSoup

I believe that it stays on the bureau for 3 years, however, the most significant time is the year following the inquiry. You will be docked points if there are too many inquiries withing 3 months, 6 months, and 1 year. You will be docked more points the shorter the time frame. Hope this answers your question, if not, just ask!

iccky

Awesome, thanks!

veruca

no soup-
thank-you in advance, for this wonderful thread, and i do have a question.
my husband and i just recently, paid off all of our debt, he has been steadily paying for 2 years, through debt consolidation. we had credit cards, and a repo. we havn't missed or been late on a payment, on our new car, credit cards, or anything else for that matter. we went to see about getting a car loan, for him, because all he has wanted is a newer car (he drives a '78 firebird, i think it's time). and our credit was scores were 612, and 613, and we were turned down. how long does it usually take for your score to get better? my original score was horrible, so this is way up for me, but for him, even before consolidation, he never missed a payment. i am also curious, if consolidating hurt him, more than benefited. when we went to purchase my car, we were informed , that the consolidation, was worse than bankruptcy, or even my repo. we r also wanting to buy a house soon, will the situation above effect that as well?

__________________
How you turned my world, you precious thing
You starve and near exhaust me
Everything I've done, I've done for you
I move the stars for no one

NoSoup

No Problem - That's what I'm here for

NoSoup

This is a very tough question - I'll do my best to answer it simply...

Basically, lenders see debt consolidation companies as a "red flag" that indicates that you may potentially have issues paying back debt that you owe. Ironically, it can have lasting effects similar to a bankruptcy, however, once all the debt is paid and the credit consolidation company stops reporting that they are paying your bills, your scores should increase relatively quickly (as opposed to an actual bankruptcy) It certainly may affect your ability to purchase a home, but I would imagine that within a year or so your credit scores should rapidly increase, providing that you continue on your excellent payment history, keep you debt minimalized, and stop working with the debt consolidation company.

Congrats on being debt free, it's an excellent place to be. In the meantime, I would suggest taking your "payments" that you were making and continue making them into a savings account, starting to accumulate money for a downpayment. Your goal should be to put as much as you can down, hopefully 20%, as that way you can avoid paying PMI (private mortgage insurance) providing that the guidelines in your state are similar to the guidelines here in Wisconsin.

The money will add up quickly, and it shouldn't really have an impact on your standard of living, as you are used to making those payments already.

Another thing you may want to consider, providing that your vehicle would make it, is to wait until you purchase a house to purchase a vehicle. If you put 20% down on a 100k house, you would have 20k in equity that you may be able to get a Home Equity Line of Credit for. If you utilize these funds to purchase your new vehicle, as it is a mortgage on your home, it is generally tax deductable.

I hope this answered your questions, if not, please feel free to post again!

veruca

thank-you! it really gives me hope that things will get better soon!

__________________
How you turned my world, you precious thing
You starve and near exhaust me
Everything I've done, I've done for you
I move the stars for no one

NoSoup

Lol, Hey - In the world of credit, time is just about the only thing that you have on your side.

It's difficult to score well when the average consumer doesn't even know what the "rules" are...

Averett

Hey guys, more questions

I'm being killed by my credit card debt. I know it's my own fault for getting myself into this spot, but I have got to get out of this hole. I'm trying my hardest to do this, but interest rates are killing me.

Recently I've opened up 3 new accounts so I could transfer balances over to those from higher APR accounts. But I still have a card with a $6,000 balance and 15.99% APR. This card is killing me.

I'm considering getting a $13,000 loan from my bank, with a rate of 8.99%. This is what they have listed on their website, so that may be a generic rate. I purchased my FICO score about a week ago so I could see where I stand. My score is 635. Apparently this isn't bad, but it's not good either.

My question is this. Do you think I would be approved for a loan with this FICO score?

Here's a bit more indepth info. My credit card info:

MBNA: $6,000 balance at 15.99% APR
Chase: $2,700 balance at 12.99% APR
Capital One: $3,000 balance at 8.90% APR
Bank of America: $1,200 at 0% APR until November, then it will go up to 8.99%

I also have a First USA card with a balance of $4,700 and an APR at 11%. I'm paying this card through AmeriDebt.

Oh, my car loan will be paid next May, so I'll have another $250 to put towards debt repayment.

I'm just trying to figure out what I can do

__________________
Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

NoSoup

Well, it is difficult to say whether or not you would be approved or not without going very in-depth with your finances. Most likely, the most simple way to find out would be to apply. You said that your vehicle will be paid off shortly...

What kind of vehicle do you drive? Do you know the approximate value of it? Also, is it in decent running condition, or more specifically, do you think that it will last you 4-5 more years?
And when you said it would be paid in May, is that next month May or a year from now?

As far as the credit card with Ameridebt goes, what have they offered you vs what they charge? Did they reduce the interest rate, back off late fees, or are they just basically making the payments for you?

Just want to get some more info before recommending a course of action...

Averett

I have a 2001 Honda Civic. I plan on having it until it no longer runs (or can afford to buy something nicer), and Hondas are pretty good cars. 5 more years at least. I'm not sure what the value would be now.

It will be paid off next May (2005). Possibly before, I have made extra payments.

With Ameridebt they lowered the interest rate on the card from 15% to 11%. The amount gets deducted from my checking acount to Ameridebt and they pay off the CC company.

I'm worried about applying for the loan and not getting it. Because from what I understand that may lower my FICO score as well.

__________________
Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

NoSoup

Well, applying for a loan and not qualifying for it won't damage your score, it is the actual application process that will (when they pull it)

I bluebooked a mid 2001 Honda Civic, and if you are confident that you will keep it for another 5 years, one option you may have is to do a consolidation loan using that as collateral. You will have a better chance to qualify than an unsecured loan, as well as most likely have a lower interest rate. I would consolidate the "worst" cards that you have (i.e. highest rates, annual fees, ect.) After doing that, take your remaining cards that you have and choose the "worst" card that you have out of those. Pay your minimum car payment, the minimum payments on all other cards, and put every dime you can afford toward the credit card that you chose to pay off. Once it is paid in full, choose your next card using the same criteria, and then attack it. As you pay off more cards completely, your monthly payments will decrease, allowing you to put all the additional funds towards principle on your debts. After all your credit cards are paid off, concentrate on your vehicle loan.

You should be able to consolidate your MBNA card, and hopefully your Chase card as well. Once paid, close the accounts until you only have 2-3 open lines of credit.

Secured credit, such as a vehicle loan, looks better to future lenders than unsecured debt, such as credit cards. By doing this, you should substantially improve your score and hopefully will qualify for Credit Cards and/or other loans with better terms in the future.

Another thing you may want to consider is dropping Ameridebt, as they probably are taking a fee with each payment, and it reflects poorly on your bureau.

I know that it may seem like a helluva long tunnel, but I promise that there is light on the other side.

If you have any more questions, just ask!

Averett

Well, I applied for a loan through my bank online yesterday and just got a call back. Wasn't approved. Oh well. Back to square one! Just need to buckle down and pay my debts.

Ameridebt doesn't take any fees. That was one thing I made sure of. I pay $79 each month, and $79 gets paid on the credit card. They do ask for a donation, to which I said no thanks...

I'm going to call up MBNA to see if they'll lower my interst rate.

__________________
Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

NoSoup

If you are comfortable using your vehicle as collateral, providing that you had applied for a signature loan, call your bank back and see if they'll approve you for that. Usually the requirements for a collateralized loan are much less stringent that an unsecured loan.