Daniel Smith

Allied Home Mortgage Capital Corporation is the first national lender to offer the H.E.L.P. program to their borrowers. Allied's goal is to help families buy homes and help them adapt to homeownership. One of the reasons first time home buyers get in trouble is their inability to adapt to owning a home. Be it the stress of a monthly payment, budgeting or figuring out what else is entailed once you own the property, the H.E.L.P. program is designed to help you make it!

Through our alliance with a non-profit organization we bring you the H.E.L.P. program; you will receive pre-close and post-close counseling. Think of it as your very own Home Financial Planner Consultant.

Furthermore when enrolled through the country's 5th largest direct lender of FHA loans, you are protected from job loss. In the unforeseen circumstance that you lose a job, being enrolled in the H.E.L.P. program reduces the potential of not meeting your mortgage obligation by paying up to six months of your mortgage payments ($1800 maximum PITI per month).

If some hardship presents itself to you, the H.E.L.P. program also has funds that you can apply for a grant to help you through these tough times as well.

Interest rates are low, home prices have come down, the US government is giving first time homebuyers an $8000 tax credit and now you can protect your new purchase from hardships, job loss and by being the most educated home owner on the street. Allied is dedicated to making your home ownership a success, shouldn't you?

"Good news! Interest rates on home mortgages are dropping below 4.500%. And, thanks to the Fed, they'll remain there until Summer." So says the spin coming from the media. Since the media isn't in the business of creating fiscal policy, how could they possibly know this? They're making a prediction, and a faulty one at that.

Let's look at what's really happening. The Federal Reserve is purchasing mortgage backed securities with coupon rates of 5.000% and 5.500%. Since the coupon rate reflects the yield that an investor will earn, the notes in these mortgage pools have interest rates in the neighborhood of 6.000-6.500%. Why the difference? There's a long line of hands between the origination of a loan and that loan being packaged into and then sold as a mortgage backed security; each one takes a piece of the profit. Thus, a borrower paying an interest rate of 5.750% would net-down to a coupon rate of 5.000%.

Will this lower interest rates? The short answer is no. But, it will limit how high interest rates can go. With that said, a better assertion would be, "Good news! Interest rates on home mortgages are not going to climb above 6.000% as long as the Fed continues with their purchasing program."

As we head north of 2 Trillion dollars in economic stimulus, many denizens are excitedly expecting. Unfortunately, the average American isn't in line for a bail-out. In his testimony to the Senate Banking Committee, Fed. Chairman, Ben Bernanke stated it pointedly, "If there is one message that I'd like to leave you with, if we're going to have a strong recovery, it has got to be on the back of a stabilization of the financial system. It is black and white."

In a healthy banking market, lending institutions margin an average profit of 3%. If they pay 4% to borrow the money, they lend it to us at 7%. With the Federal Funds Rate hovering around 0.25%, banks now have an opportunity to double their expected margins. And that is exactly what they are doing. There is no emphasis being placed on lowering interest rates below their current levels, especially for refinance transactions, as that would erode the profit levels on these products.

So for those expecting mortgage rates to bottom at 4% or 4.5%, it's time to stop waiting in line, that's not where the monies going, and you will miss today's opportunities.

If drastically reduced home values and extremely low interest rates are not enough to entice a homebuyer into this Real Estate market, perhaps the $787 billion American Recovery and Reinvestment Act may help. Tucked quietly away within this massive stimulus package is an $8,000 tax credit. To qualify: an individual will need to purchase a primary residence between January 1, 2009 - December 1, 2009. The credit is only available to first-time homebuyers, and there are income limitations. A single person earning over $75,000 per year or a married couple with a combined income over $150,000 per year will not qualify for this credit. The tax credit is not a loan and will not require repayment unless the home is sold within the first three years of ownership. Lastly, the $8,000 is a true tax credit and will reduce the tax liability of the home buyer.

The median price of a home in Pierce County is $235,000. When compared to this figure, the $8,000 tax credit accounts for 3.4% of an average homes value. Those seeking FHA financing will need to make a down-payment of 3.5%, and while the tax credit cannot be used for this purpose, it is comforting to know that once income taxes are filed, the majority of what was spent on a down-payment may be reimbursed via the credit.

In 1958 Fair Isaac and Company sent a letter to the 50 largest credit granting institutions in America asking for an opportunity to present a new concept, credit scoring; only one responded. Cogitate on that. There was a period of time when applying for a loan didn't involve a credit score. A person wasn't confined to a range of numbers that deemed them worthy or not of borrowing money. Often, a freshly pressed suite, firm handshake, and a promise to repay were enough. And while those things still help, today it's all about the FICO score.

Which prompts this question, do you know yours? If not, I'm aware that there are quaint commercials promising a life void of selling fish to tourists, driving an ugly car, or even marring someone with bad credit, and all one must do to achieve this grandeur is order a credit report. The problem with that idea, however, is the scoring model.

In 2003, Congress passed an amendment to the Fair Credit Reporting Act of 1978 called the FACT ACT (fair and accurate credit transaction act), and while this law established a mandate for consumer access to the information in their credit report, it failed to address scoring. Therein lies the problem. While it is possible for a consumer to order a credit report from a non-banking company, the credit scores are usually generated with a scoring model such as Vantage (which offers a range from 501-990). On the other hand, mortgage lenders use scoring that stems from the FICO model with a range from 300-850. Thus, it's possible for someone to believe that their score is higher than it actually is.

If all of this seems unsettling, worry not. I provide every client with a copy of their FICO based credit report with actual scores from all three repositories: Equifax, Experian, and Trans Union upon loan application. What the banks see, you see. And since it's always important to remain apprised of ones credit, once a year, past clients can request an updated copy of their credit report.

So no matter how much a commercial promises to improve your life with their credit report remember, they're offering the wrong score.