Rent vs. Buy

A recent article in Forbes Magazine highlighted findings in a report done by Trulia, where it was determined that in 98 out of 100 of the major metro areas of our country, it is actually less expensive to buy a house than it is to rent one.  And, in the other 2 areas, what Trulia found is, when you factored in the mortgage interest deduction on your taxes, for someone who is itemizing on their tax returns, it is actually cheaper to buy versus rent.  When you factor that in, in 100 out of 100 major metro areas, it makes more sense to purchase a home, rather than rent one.

With rents projected to consistantly increase, if you've been considering buying, now is the time!!

Interest rates and sales prices of properties are still at one of the lowest points in history.  Get pre-approved so you not only know what you can afford, but so that you have the negotiating power in an offer/counter offer situation.  Get aligned with a realtor who knows your area.  DO NOT try to buy a home without utilizing the expertise of a licensed real estate professional.  You don’t pay them, the seller does, so why wouldn’t you use this free service!  There’s never been a better time to own a home!

Gift of Equity - The Hidden Asset

Some young, first time, homebuyers have been fortunate to have family members assist them with a down payment to purchase a home.  Savings, checking, stocks and mutual funds are different forms of assets.  Many people don’t know that when they purchase a home from a relative, there is a guideline that allows for the equity in the home to be used as an asset and therefore, a down payment.  There are two different ways this is done.

Buying from the owner occupied relative (FHA guideline)–

If you are purchasing a home from a relative that lives in the subject property, you can get financing of up to 96.5% of the sales price.  Therefore, as long as there’s 3.5% equity, you can buy this property with no money out of pocket.

Buying from the non-owner occupied relative (FHA guideline)–

If you are purchasing a home from a relative who does not live in the subject property (ie, rental property) the maximum financing on that transaction would be 85%, so there would need to be 15% equity in the property to be able to purchase this with no money out of pocket.

For conventional financing, any gift of equity that is less than 20% would require the borrower to invest 5% of their own funds.  A 20% gift of equity would require no out of pocket investment towards the down payment.

So when purchasing a home from a relative, investigate these options before finalizing the transaction.

Revising Paid Collection Accounts From Your Credit Report

While collection agencies and the collection departments of creditors like to put those overdue and unpaid accounts on your credit report to light a fire under you to get you to pay the bill, but once you've paid it, there are no mechanisms in place to force those agencies to update your balance or information, once you've paid the bill. At this point, it's up to you, the consumer, to get this information updated. I say "updated" as opposed to "removed" because the information will stay on your credit report for at least seven years. You can get it to reflect a balance of $0.00, but it is still part of your credit "history."

Once the account has been paid off, you will need to contact any and all of the credit agencies that are reporting the account. The three major reporting agencies are Equifax, Trans Union, and Experian. The account may be only appearing on one of these company's reports, so it's up to you to find out who is reporting it. You can get a free copy of your credit report, once a year, from ANNUALCREDITREPORT.COM. This is the ONLY authorized source for the free report that you are entitled to by law. You can get all three reports from this site and know just who is reporting what, to which bureau. You may or may not have to contact all three bureaus as a result of this search.

At this point, you would need to write a letter to each bureau and let them know that you paid the account in full and would like the erroneous information updated to reflect a zero balance. It is important to include your full name, correct mailing address, and social security number in the letter. You will also need to enclose a copy of your photo ID. The agencies will not process your request without the copy of the photo ID.

After mailing in the listed information, you may first receive an acknowledgement of the request. Do not be alarmed by a letter that states "We cannot process your request with the information provided." This simply means that the agency will contact the creditor to verify the information. Don't worry, they're looking into it. You will at some point, receive a letter that states "We have concluded our investigation of the matter and the results are as follows...." and you will see that they have either removed the information, or been told that the information was accurate. More times than not, the information will be updated properly, if in fact, you've paid off that account.

It's as simple as that. Writing the letters only takes a few short minutes and the length of time to get a response can take anywhere from 2-4 weeks. There are "Credit Repair" companies, that will charge you to do this and get it done in less time, but if there's no need for a quick reply, why pay for it. I once asked a woman who owned one of these agencies why people would pay for such a service when I have seen it done for free and her response was a good one. She said "People can cut their own grass, but they still hire landscapers." If you take a little time and pride in your work, you too can get this information updated for free and end up with a better credit score.

Contact any of these agencies for more additional information:

Equifax Information Services

P.O. Box 740241

Atlanta, GA 30374

800-685-1111

Experian

P.O. Box 2002

Allen, TX 75013

888-397-3742

Trans Union

P.O. Box 1000

Chester, PA 19022

866-887-2673

Rick Masnyk is the manager of the North Smithfield, RI office of E Mortgage Management and is licensed with the Nationwide Mortgage Licensing System (NMLS) under license number 8621.