There Is Only ONE WAY To Get A Truly Free Credit Report!

“It is incumbent upon every generation to pay its own debt as it goes. A principle which if acted on would save one-half the wars of the world.”

— Thomas Jefferson

There is an endless stream of “free” credit report offers that hit us from day to day online, on TV, and really everywhere you go for that matter.  The problem is, according to extensive research, every single one of them contains some sort of catch in order for you to obtain your report.  It’s not always money.  There is only one exception that I am aware of.  Well… actually two ;o)

First, let me tell you about some of those little hooks that are inevitably hidden among the hype.

• The infamous Credit Score bait

Revealing the coveted credit score is hands down the most popular hook for reeling you in. Right off the bat, know that the free credit report solicitation will probably require a credit card as soon as you make it known that you also want your score along withyour credit history. You should also know that there are numerous ‘models’ or algorithms that different credit agencies and industries use to come up with your score depending on the end use.  For example the popular website 'CreditKarma' will provide a score, but it is generally accepted that those scores are not used by lenders. So even if you do get a score, it may not reflect the one you’re inquiring about. How exactly these guys calculate your score is automated and incredibly complex. Your credit score reflects a snapshot in time and changes day to day, and perhaps even minute to minute. It remains an enigma to the world for the most part. Sure, we know generally how the game is played, but don’t count on ever patently figuring it out unless you’re a mad scientist. Even then, it’ll change as soon as you become enlightened.

• Credit Monitoring

Identity theft is huge and will always be a problem to some extent. There will always be thieves who are perpetually one step ahead. Credit reporting agencies of course know this and realize that everything today revolves around electronic purchases and info gathering in one way or another. Therefore, they have the means to intimately trackevery single one of your purchases and credit inquiries. Enter the credit monitoring fee. I’m in no way saying this is a bad thing and may be well worth the money. What I am saying is that this is one of the tradeoff ploys used in exchange for getting your free credit report. Rather than buying into a credit monitoring service, I recommend employing a reputable, dedicated identity protection company. They will not only monitor your credit, they will typically guarantee your protection by offering to pay for damages incurred should your identity be compromised. Way more bang for your buck! I do have a recommendation for identity theft protection so if you’d like to know, just hit me up (I have no affiliations with them).

• The ‘No Credit Card’ hook

This one’s probably the most tantalizing hook. But, in my opinion it’s downright sneaky. Kind of like one of those magic tricks where you can’t help but say “That’s simply impossible”!! Remember in my introduction when I said that it’s not always money they want. Yeah you guessed it! They want your name… and your social security number… and your phone number… and your address… and, and, and. Buried somewhere within the terms of service, you’ll eventually give your permission for them to sell your information to advertising agencies. What better scheme to allow them to craft an incredibly targeted advertising campaign for you and you alone?!?! They’ve got everything…. Where you buy, when you buy, what you buy, how much you pay… just think, maybe even what color and type of underwear you prefer! Companies pay TALL CASH to these guys to divulge your personal information and purchasing habits. And you willingly agreed via the fine print!

The One & Only Solution**

In 2003 congress passed FACTA (Fair and Accurate Credit Transactions Act), an amendment to the Fair Credit Reporting Act. This provision federally mandated that ‘The Big Three’, TransUnion, Equifax, and Experian offer ALL consumers access to their credit report truly for FREE, no strings attached, PERIOD.

AnnualCreditReport.com is the official and ONLY federally mandated and authorized source to obtain a free credit report. Once there, you will have the option of ordering from all three of the bureaus once per year just as the URL suggests. While you do have the option, I don’t recommend pulling all three at once. Rather, I would suggest that you order one report from each bureau every four months thereby covering yourself for the year. In essence you become your own credit monitor, FOR FREE. You won’t have to worry about the credit pull event dinging your score as it’s a ‘soft inquiry’ by law. It will not affect your score in any way. The only down side to this method is that you won’t get your scores with this service without paying for them. And again, even if you do pay they may not reflect the pertinent score for which you’re inquiring. However, if you’re intent upon getting your scores, you’ll be given an option to enter a credit card and this is the one place where I think it’s safe to pay for them.

**The One Other Exception

So I told you earlier there was one other exception. Of course, it involves you bringing your mortgage business our way. If you mention this post and close your loan with us, the credit report is free and you get a copy along with the scores used for home lending purposes. So there’s that… LOL!

Question:  Do you have a question regarding your credit?  If so, comment below and we'll do our best to answer your inquiry as best we can!

Disclosure:  The links provided herein are for informational purposes only.  I do not guarantee the validity of the link nor do I warranty their services, expressly or implied.

Save a Nickel, Spend a Dime??™

“Do not save what is left after spending, but spend what is left after saving”

— Warren Buffet

Knowing when is the right time to do something life-changing can be a daunting challenge. Especially when it comes to decisions that can have a profound financial impact on you and your family for many years to come. For most of us, I think it’s fair to say that we wish to leave a legacy of sound fiscal stewardship and monetary blessing for our children or other loved ones who follow.

I’m also quite certain that we’d all like to feel as though we did the wise thing in terms of ‘buying right’ when purchasing a home. There are so many variables, so many questions when faced with this decision.

In today’s post, I’d like to clearly address one of the more common buyer dilemmas that is particularly applicable in today’s home-buying environment.

"I know mortgage rates are low right now, but I've heard we're in another housing bubble...  Maybe we should wait for prices to come down."

Let’s look at some real numbers within several different scenarios. I believe these illustrations will help in making a prudent decision as to whether buying now or waiting makes sense. In order to be realistic, we’re going to use real-time prevailing rates as of the time of this writing and average prices based upon my local real estate market which happens to be Riverside County in Southern California.

Following will be the baseline for our scenarios:

• Loan type - Conforming Fannie Mae Conventional Loan • Down Payment - 5% Down • Loan Term - 30 Year Fixed Rate • Mortgage Insurance - Yes

Let’s set the stage for Scenario #1:

SCENARIO_1

As noted below, over the full term of the loan, Scenario #1 would result in the total of principal and interest payments of $504,729 and change…

TIL_scenario_1

Now, let’s set the stage for Scenario #2. We’re going to assume that the decision was made to wait out the ‘bubble’ for 6 months and hallelujah!  indeed prices went down over 8% to $275,000.00 (unlikely in a recovering housing market). Nevertheless, we saved $25,000 in purchase price, but alas!  interest rates went up by one full percentage point in just a couple of months! If you don’t think this is likely to happen, it just did. From May to August 2013, interest rates went up at least 1.0%. So here’s what Scenario #2 looks like:

SCENARIO_2

Over the full term of the loan, Scenario #2 would result in the total of principal and interest payments of $519,348 and change. Can you see we have a problem here??

TIL_scenario_2

Let’s take it one step further with Scenario #3, our final scenario. While it is unlikely, it is certainly feasible. Here, we’re going to assume that instead of prices coming down only 8%, they went down a full 10%. So we’re saving $30,000.00 in purchase price rather than $25,000.00 but we waited out the ‘bubble’ for 10 months instead of 6 months and mortgage rates spiked by 2.0% rather than just 1.0%. As I said, perhaps unlikely but feasible in such uncertain times as these. Here’s what Scenario #3 looks like:

SCENARIO_3

This time, over the full term of the loan, Scenario #3 would result in the total of principal and interest payments of $568,556 and change. Now we have a big problem! We “Saved a nickel and spent a dime!”

TIL_scenario_3

To sum things up, I want to mention one final note. We talked about total principal and interest payments over the life of the loan, but I purposely didn’t mention anything about the difference in total interest alone. I saved that little nugget of information for last (for drama of course :o). Take a look below at the difference of actual interest paid between Scenarios 1 through 3:

TIL_scenario_1_interest

TIL_scenario_2_interest

TIL_scenario_3_interest

There you have it… The difference in interest paid between Scenarios 1 and 2 is $38,369 and $92,327 between Scenarios 1 and 3!!  Furthermore, the difference in monthly payment is nearly $200.00 more per month in Scenario #3 even though we're borrowing less money!

They say that good things come to those who wait. I would say that’s probably true most of the time. But sometimes it’s a bit of a gamble to say the least. I guess the question then is “Do you feel lucky… Well, do ya?”

How To Be A Mortgage Interest Rate Nostradamus

“He who asks fortune-tellers the future unwittingly forfeits an inner intimation of coming events that is a thousand times more exact than anything they may say”

— Walter Benjamin

Before I get started with this post, I must forewarn you… Nostradamus wasn’t always right. In fact, contrary to popular belief scholars say that his prophecies proved true only 5.73% of the time. But for his part, he certainly turned out to be quite the character. Indeed he has gone down in history as one of the most notable so-called “prophets” the world has ever known.

So in light of today’s topic, while it’s true that I’m going to show you how to generally “predict” what mortgage rates will likely do on a short-term/day-to-day basis, the technique is not exact and should not be exclusively relied upon.

If you’re in the middle of a real estate purchase or refinance and applying for a mortgage, you should heed the advice of your loan officer. The mortgage market is turbulent (especially these days) and doesn’t always follow a rule of thumb. A loan officer who is in the trenches every day and worth their keep will ultimately guide you in the decision of when you should lock in your interest rate. I’ll give my own present-day rate lock advice at the end of this post.

Having shared my little disclaimer with you that this post is purely educational, let’s talk about how you can get an idea of what mortgage rates will do short term or day-to-day. I believe it’s important for folks to know a little bit about this area of concern when using financing to purchase real estate.

Among innumerable other factors, you should know that mortgage rates get their marching orders from two main market forces:

1. The stock market’s Dow Jones Industrial Average (DJIA)

and

2. The U.S. government’s 10-Year Bond Yield

For simplicity, we’ll just call them the “DOW” and “10-Year Bond” from here on out. Generally speaking, these two markets are in competition with one another. Now as technical as this stuff sounds, we’re going to keep it super simple. We won’t really get into the ‘why’ of the matter; I’m just going to show you quickly where to look and how to decipher what rates will likely do based on what’s happening with these two market forces on a given day.

Let’s talk about where to look first. Each morning the first website I visit is MarketWatch. Here’s a screenshot of the website:

No doubt, I’m sure there are thousands of websites that display this information, but I’ve found that Yahoo does a nice job of making it easy to look at while offering global articles pertinent to what I’m interested in. As I mentioned previously, for now we’re only going to look at two things on this website.

The DOW is not really directly tied to mortgage rates.  The relationship is actually rather loose. However, the daily ups and downs do play a role. In a normal market if the DOW is down, it’s a good thing for mortgage rates. All you really need to remember is DOW down, RATES down and vice versa… DOW up, RATES up.  It’s really quite ironic in that on one hand, we root for bad economic news because it bodes well for rates, but on the other hand it’s a bummer for the economy outside of the housing market. It is important to note that we usually need to see significant movement up or down for there to be any noticeable impact on mortgage rates.  I consider significant movement to be anything more than 100 points in either direction. In the illustration above, you’ll see that the DOW is down -170.33 points.  So all other factors aside, in this scenario it’s a bad day for stocks and a good day for rates.

Unlike the DOW, the 10-year bond IS tied directly to mortgage interest rates. This is the indicator we really need to pay attention to. In a normal market, rates will follow it up or down. As with the DOW, there's typically a threshold by which this indicator must move in either direction before we see any movement worth noting. It has been my experience that all other factors aside, movement must be more than 0.05 points up or down to have any real impact on interest rates and/or **pricing. Historically, I consider anything above +0.08or below -0.08to be fairly dramatic and anything above +0.15or below -0.15to be very dramatic. These scenarios will most likely cause rates and/or **pricing to move up or down during the day. You’ll notice in the illustration above that the yield on the 10-year bond was down -0.084 points on the day this particular screen shot was taken and as expected, we did in fact see downward activity in rates or **pricing because the movement was fairly significant.  It was another good day for rates.  (see definition of 'pricing' below)

** Pricingrefers to the credits or ‘points’ associated with securing the desired interest rate. For example, it may cost a half-point (0.50%) to secure a rate at a certain time of day, but if the DOW and/or 10-year bond moves up significantly during the day the cost may go up or the rate may become unavailable altogether. Of course, this applies vice versa if the market improves.

In conclusion, the market influences that really drive interest rates and the lengths at which 'analysts' go to predict them are ridiculously complex (just ask the guys that use the Japanese Candlestick Technique). However, I do hope the concepts laid out here will at least provide you with a basic understanding of how mortgage rates can be affected day to day. I want to stress again how important it is to rely upon your loan officer to help you determine the right time to lock in your interest rate. Just remember that at the end of the day, it’s nothing more than an educated guess. So have some grace if he or she gets it ‘wrong’. We are in uncharted territory and have seen unprecedented government intervention in recent years. No one has a crystal ball.

I told you earlier that I’d give you my rate lock advice as of the date of this writing (September 6, 2013)….  If you are in agreement with the rate and fees quoted,  LOCK ASAP!!! Rates have been artificially so low for so long, there just doesn't seem to be anywhere for them to go but up given all the factors that are pressing in today’s economic atmosphere.... 'just sayin'...  I wonder what Nostradamus would say ;o)

Here We Go!

“Leap! And the net will appear”

— John Burroughs

Welcome to our new blog!  My name is Paul Williams and ultimately my goal is to help you in your quest to purchase, sell, and finance your real estate endeavors.  But often, I will also throw in some of my own musings and two cents on life experiences that I hope will somehow make your life a little brighter.  I'm in the beginning stages of building this platform, so patience is much appreciated!  Please do check back once in a while. Ultimately, my goal will be to post something meaningful and useful to you at least once a month.  I don’t intend this to be a monologue but rather a dialogue.  I would love for you to give me your feedback in the comments section.

If you have a topic you would like me to address, please leave a comment below.  Looking forward to connecting with you!