Buy or Rent?

With the slowdown in most markets, a common question that potential buyers have is whether to make the plunge and buy or if they should continue to rent. In many cases buying is the right thing to do, but there are situations when continuing to rent is the right choice. This article from the NY Times is a good primer in helping decide which option is he best:

NY Times: Is It Better to Buy or Rent?

I am not suggesting it because I'm featured in it, rather it's an unbiased article by David Leonhardt that aims to help with making the decision. You'll see that although I am a proponent of buying, I nevertheless was featured as a renter - and my reason is explained.

In our business we want to get buyers, however I believe it's best to look out for a client's best interest. And in my opinion, the best is to help them decide for themselves which is best. And I often prescribe this article as a good read.

Enjoy.

- Tchaka Owen
http://hooslending.blogspot.com/

Is Closing Your Card The Right Thing?

How many times have you spoken with a person who has climbed out of a financial hole and closed a credit card (or two) in order to increase his/her credit score? I cringe every time I hear that! In most cases it does NOT help your credit score to close off your cards.

The exact formula for determining FICO scores are kept secret but we do know that cards affect those scores and one of the criteria is utilization. In other words, if you have a credit card with a $5000 limit and you’ve charged $4500 on it, it will affect you negatively in comparison to if you’ve only charged $1000 on it. So let’s go back to the when the person is in a financial hole – it’s likely that cards were maxed out. Once the cards are paid off, the utilization is excellent as far as the FICO is concerned. But if you close off the card(s) you now no longer have an underutilized card to help raise your scores. Yet so many potential borrowers are unaware of this.

I even spoke to someone recently who had been advised by one of those ‘credit assistance’ type companies to close off a card she had just paid off. How can such a company be allowed to operate? This woman’s scores would have likely been 20-30 point higher. Please advise your potential clients who find themselves in a similar situation to merely cut their cards but not to close them. Otherwise they’re doing themselves a disservice.

- Tchaka Owen

Oversensationalizing

I understand the need to create a buzz when writing an article, however I feel some publishers mislead with their headlines. I wrote to Money once over a headline that did not in any way convey the message in the article. The author responded and informed me that the editors did that (I noticed a few hours it was changed). Just this morning I ran into another such scenario:

http://money.cnn.com/2007/01/16/real_estate/December_foreclosures_up_from_2005/index.htm?postversion=2007011706

Look at that headline: Foreclosure rates up big in December

Menacing, isn't it? My first reaction was one of concern - as a loan officer, licensed real estate agent and investor, I prefer to hear positive news. Upon reading the article, I noticed that the second sentence read "The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 percent from November but up 35 percent from December 2005, according to RealtyTrac"

Sure the numbers are much higher than last December, but isn't it more important to look at the trend? The trend is that foreclosures are DOWN 9% from the month before. No wonder the public is on edge and rather scared to buy!!

- Tchaka Owen