What is a FICO Score?

FICO stands for the Fair Isaacs Corporation who developed the math that almost all lenders rely on to determine a potential borrowers ability to pay.

The score, made up of a number of different components will range from 200 to 800.  While the actual number that is considered “good” has varied over the years, generally speaking most lenders will not consider people with a score of less then 620 as being a valid candidate for a loan.

Some of the factors that go into determining your FICO score are:

* Your payment history
* The length of your credit history
* The total amount of your current debt
* The types of credit that you use or have used

CLICK HERE to download a report which explains it in more detail.

How to Hire a Remodeling Contractor

Don’t forget when you are hiring a contractor that the very word “Contract” is in his title.  You should not hire anyone to remodel your home – whether it’s a big or small job – with having some form of written agreement.  Unless, of course, you are hiring your brother or sister to do the work and I’m sure there are those of you who would attest that a written agreement might be even more important in that case. 

The National Association of the Remodeling industry has some tips which you can read at www.nari.org

The gist of it is that the more you spell out, the less chance there is for misunderstanding or disappointment later on. Some of the more vital points, in my opinion are that you should get the contractor’s full name, contact info, license and some evidence of his being insured.  In addition spell out as specifically as possible what the job will entail, what materials will be purchased, the approximate start and completion dates as well as the financial terms – including how much is expected up front and what, if any, intermediary payments will be due.

As is true with most people in most industries, the vast majority are honest, hard working and will put forth every effort to provide you with top quality service. I think you’ll find that most post-completion unhappiness on either side could have been avoided by clear communication at the outset.

What if the Other Guy Won’t Play?

I’ve had several comments and questions regarding the subject of a previous posting on Fair Negotiation. The common question is this – What if the other guy doesn’t want to play fair?

It’s a great point and the answer is very straightforward. Whether you are the buyer or the seller, if the other party in the negotiation is “playing hard ball” with a price that is significantly outside the range of the fair market value of the house, then you probably aren’t going to come to terms with that party.

Although it might be emotionally discouraging to begin a negotiation and then have to walk away from it, the bottom line is that you aren’t really losing anything. The value of the house you want to sell or buy, is determined by the market.

Sellers who stand firm on an unreasonable price are not likely to sell their house until they adjust their position. As I’ve written before, there are four things that are irrelevant in pricing a house for sale. “What you paid; What you owe; What you want; and what you need.” All of these things are important considerations in determining whether or not to sell a house but they have nothing to do with the value.

It’s the same with buyers. What a buyer can afford has nothing to do with the value of a house he wants to buy. How large of a down payment, the amount of his pre-approval and how much his current home will sell for all have nothing to do with the value of the house he is trying to buy.

So, as I wrote in the last report, work with your Realtor to come up with a range that represents the fair market value of the house you are trying to buy or sell. If the other party and his Realtor do the same, the negotiation should be a simple process.

Loan Modification for People NOT behind on their payments

Is there such a thing?  Can you get some assistance on your mortgage simply because the value of your house has depreciated to a level that is less than what you owe?

The answer is a definitive “maybe!” – and might be worth checking out. There are two avenues that might prove fruitful. Both of these can researched by contacting your lender.

Here’s the scoop.

If your mortgage is backed by Fannie Mae or Freddie Mac, there is a program available to lenders enabling them to work with borrowers on loan modifications that will bring the principal amount of the mortgage within the confines of the current market value of the home. It is up to the individual lenders to utilize this program or not and to set the basic eligibility. There is no assurance that your lender will do this but – some are doing it and it could be worth your time to contact your lender to find out how this might apply to you.

The second option that could come into play depends on whether or not you have PMI (Private Mortgage Insurance) on your loan. It also depends on which PMI company your lender uses.  Some PMI companies are offering homeowners a program that will help them out in a situation where they owe more than the value of their home.  There are a few different ways they can help but – again, it will depend on the specific PMI company that you have.  You can find this information out by contacting your lender.

I have to reiterate again that the availability of both of these avenues is dependent on who your lender and your PMI company is and what their policy dictates.  The thing to keep in mind is that you don’t necessarily have to be behind to get help.  The theory is that the lenders and the insurance companies sometimes feel that it is in their best interest to help the home owner a little bit now, rather than incur the cost of a possible foreclosure down the line.