There’s no question that with today’s low mortgage interest rates, large selection of homes on the market, competitive prices, and other incentives such as the $8,000 first-time home buyer federal tax credit and the $5,000 Kentucky tax credit, now is a great time to buy a home. But what if you are planning to buy a year or two from now, and you want to make sure you’re ready when the time comes?

One of the most important things you can do is get your credit report in shape. Banks use your credit history to decide whether they want to lend you money and to set the interest rate, so having a good credit report is vital.

Equifax, Experian, and TransUnion are the three consumer credit reporting companies that provide information about your credit history to lenders. Under the Fair Credit Reporting Act, each of these companies is required to give you one free copy of your credit report every 12 months if you ask for it.

You can request your free reports online at www.annualcreditreport.com, or by calling 1-877-322-8228. Since you won’t know which company your lender is using, you should get a copy from all three.

Carefully review the information on the reports. If you find a mistake, contact the reporting company and provide them with an explanation and copies of any documentation you have proving the error.

If there is an item that is accurate but might be viewed negatively by a lender, such as a series of late payments, you may be able to have a comment included on your report to explain it. You need to have a credible reason, such as an illness or other extraordinary circumstance, and be able to back it up with proof.

What if your credit report could use some improvement?

Unfortunately, there isn’t any quick fix, despite what some companies may claim. However, there are things you can do to help make your credit report more attractive to lenders, although it will take time:

1. Always pay your bills before the due date.

2. Make a payment every month, whether it is the full balance, the minimum due, or some amount in between.

3. Don’t open new accounts. Lenders look at the total amount of debt you could run up, based on the limits on your cards, as well as how much you actually have.

4. Don’t close old accounts. A few longstanding relationships are better than a bunch of cards you’ve only had a year or two, unless you have an excessive number of inactive accounts.

5. Pay down your total debt as much as you can. Lending standards have gotten much stricter, and banks are reluctant to loan money to people who already owe a lot.

Lenders use your credit history to predict the likelihood you will pay them back on time. Since you can’t change the past, it is important to always carefully manage your debt, whether you plan to buy a house in the next six months or not until six years from now.

For more information on the $8,000 first-time home buyer federal tax credit, go to www.federalhousingtaxcredit.com and for more on the Kentucky$5,000 new home tax credit go to http://revenue.ky.gov/dyq.htm . Contact Mike Kegley at The B.O.L.D. Company to find out about homes in Northern Kentucky.

There are a number of free tools on the Internet to help you determine how much you could afford to spend on your home purchase. One of the best calculators is offered by the National Association of Realtors. Insert your numbers to see how much you might qualify for. Feel free to contact us at The B.O.L.D. Company if you need help or have questions.

Finding the right home can be a difficult decision, one that takes significant reflection and research. What area of town do you want to be in? Is it in the school district you want? What amenities are your “must haves”? Does it have the number of bedrooms you desire? What’s the neighborhood like?

Choosing the perfect home for you and your family can be one of the biggest decisions you make over your lifetime. An equally significant decision is how you pay for it. Before you jump at the first mortgage loan you’re offered, make sure to review the variety of options available to you.

First, the basics: a mortgage is a long-term loan that uses real estate as collateral and is used to purchase a home. Sometimes, a home can serve as collateral for more than one mortgage. When this is the case, the second mortgage, often called a home equity loan, is used to finance a home improvement project or other major purchase. Mortgages most often are described by their terms, such as the time frame for repayment and whether the interest rate is fixed or adjustable.

A potential home buyer who wants to be as ready as possible should consider checking their credit through one of the credit reporting services that offer one free report per year. The Federal Trade Commission offers the only authorized source to obtain your free report under federal law at www.ftc.gov/freereports. Credit records often contain mistakes and it would be best to clear these from your record before you apply for a loan. Also, while lenders’ credit requirements have tightened considerably, don’t abandon the hope of buying a home if your record shows a few blemishes. Some lenders still offer loan programs that can accommodate borrowers with less than perfect credit. It would also be a good idea to gather the records you’ll need for a mortgage application, such as earnings statements and rent receipts, before going to the builder’s model home.

Here are some of the most common mortgage options on the market today:

Fixed-Rate Mortgages

With a 30-year fixed-rate mortgage, the buyer pays off the principal and interest on the loan in 360 equal monthly payments. The monthly payment for principal and interest remains the same during the entire loan period.

The 15-year fixed-rate mortgage is paid off in 180 equal monthly payments over a 15-year period. A 15-year mortgage typically requires larger monthly payments than a 30-year loan and allows an individual to pay off a mortgage in half the time as well as substantially save on interest payments.

Hybrid Adjustable Rate Mortgages (ARMs) and Other ARM Choices

With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. But with an ARM, the interest rate changes periodically, usually in relation to a specific index such as the national average mortgage rate or the Treasury Bill rate.

Hybrid ARMs have become increasing popular among home buyers as an alternative to fixed-rate and straight ARM loans. A hybrid ARM has an initial fixed-rate period of five, seven or 10 years, after which the loan becomes an ARM with annual adjustments. The initial interest rates for hybrid ARMs are generally lower than 30-year fixed-rate loans, but higher than one or three year ARMs.

Lenders generally charge lower initial interest rates for ARMs than for fixed-rate loans. This makes the ARM easier on your pocketbook at first; it also means that you might qualify for a larger loan because lenders sometimes make this decision on the basis of your current income and the first year’s payments.

Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It’s a trade-off: you get a lower rate with an ARM in exchange for assuming more risk.

Conventional Mortgages

A conventional mortgage is a loan that is not insured or subsidized by the government. Lenders typically require a downpayment of at least 20 percent on a conventional loan, although you can get a loan with a downpayment as low as five percent if you are willing to pay private mortgage insurance (PMI). PMI protects the lender if the home owner defaults on the loan.

Conventional mortgage loans are typically fully amortizing, meaning that the regular principal and interest payment will pay off the loan in the number of payments stipulated on the note. Most conventional mortgages have time frames of 15-to-30 years and may be either fixed-rate or adjustable. While most mortgages require monthly payments of principal and interest, some lenders also offer interest only and bi-weekly payment options.

FHA-Insured Mortgages

The Federal Housing Administration (FHA) operates several low-downpayment mortgage insurance programs that buyers can use to purchase a home with a minimum downpayment of 3.5 percent. The most frequently used FHA program is the 203(b) program, which provides for low- downpayment mortgages on one- to four-family residences.

FHA-insured loans are available from most of the same lenders who offer conventional loans. Your lender can provide more details about FHA-insured mortgages and the maximum loan amount in your area.

VA-Guaranteed Mortgages

If you are a veteran, active duty military personnel or in the reserves, you may be able to obtain a loan guaranteed by the Department of Veterans Affairs (VA). VA-guaranteed loans require no downpayment, but may require the borrower to pay a funding fee.

Rural Housing Service (RHS) Guaranteed and Direct Loans

The Rural Housing Service, which is part of the U.S. Department of Agriculture (USDA), offers guaranteed loans to moderate and low-income home buyers who live in rural areas. RHS guaranteed loans are offered through approved lenders, while the direct loans are available through USDA’s network of state Rural Development offices.

State Housing Finance Agencies

These state agencies, such as Kentucky Housing Corporation, often offer loans with favorable terms to first-time home buyers. Local lenders usually know if housing finance agency funds are available for these programs, or you may contact your state housing finance agency directly.

Where Do I Go From Here?

Based on our vast experience, The B.O.L.D. Company can help home buyers find lenders who can help navigate the confusing financing process.

For more information, contact The B.O.L.D. Company or visit www.nahb.org/forconsumers .

Thirty-year, fixed-rate mortgages moved closer to the all-time low of 4.82 percent reached in May, falling to 4.87 percent this week from 4.94 percent a week ago, according to Freddie Mac.

Home owners who refinance have an opportunity to reduce their payment on a 30-year, fixed-rate loan for $200,000 by nearly $134 a month from a year ago, when long-term rates averaged 5.94 percent.

Other mortgage averages were as follows:

15-year loans fell to 4.33 percent.

Five-year adjustable-rate mortgages dropped to 4.35 percent.

One-year ARMs rose to 4.53 percent.

Source: Chicago Sun-Times, Francine Knowles (10/09/09)
© Copyright 2009 Information Inc

Local mortgage rate update from Third Federal. These interest rates are accurate as of Oct 9, 2009.

30 Year Fixed Rate

· 4.65% with 0.0 discount points – 4.751% APR

15 Year Fixed Rate

· 4.15% with 0.0 discount points – 4.323% APR

Visit http://thirdfederal.mortgagewebcenter.com to view complete rate and fee options and to lock in a great rate!