Jorge Chiriboga's Blog

Ever wonder why you can go online and be approved for credit within 60 seconds? Or get pre-qualified for a car without anyone even asking you how much money you make? Or why you get one interest rate on loans, while your neighbor gets another?

The answer is credit scoring.

Your credit score is a number generated by a mathematical algorithm -- a formula -- based on information in your credit report, compared to information on tens of millions of other people. The resulting number is a highly accurate prediction of how likely you are to pay your bills. People with the highest scores get the lowest interest rates.

Scoring categories
The FICO score is one such popular scoring method. Its scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage, according to data from Fair Isaac Corp., a California-based company that developed the first credit score as well as the FICO score.

Fair Isaac reports that the American public's credit scores break out along these lines:

Currently, each of the three major credit bureaus uses their own version of the FICO scoring method -- Equifax has the BEACON score, Experian has the Experian/Fair Isaac Risk Model and TransUnion has the EMPIRICA score. The three versions can come up with varying scores because they use different algorithms. (Variance can also occur because of differences in data contained in different credit reports.)

The difference in the interest rates offered to a person with a score of 520 and a person with a 720 score is 4.36 percentage points, according to Fair Isaac's Web site. On a $100,000, 30-year mortgage, that difference would cost more than $110,325 extra in interest charges, according to Bankrate.com's mortgage calculator. The difference in the monthly payment alone would be about $307.

Everyone is entitled to a free copy of their credit report every 12 months from each of the three major credit bureaus -- Equifax, Experian and TransUnion.

Key factors of your score
Just what goes into the score? Everything in your credit report, with different kinds of information carrying differing weights. The FICO-scoring model looks at more than 20 factors in five categories.

1. How you pay your bills (35 percent of the score)
The most important factor is how you've paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good. Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.

2. Amount of money you owe and the amount of available credit (30 percent)
The second most important area is your outstanding debt -- how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Also considered is the total amount of credit you have available. If you have 10 credit cards that each have $10,000 credit limits, that's $100,000 of available credit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.

"Carrying a lot of debt doesn't necessarily mean you'll have a lower score," Watts says. "It doesn't hurt as much as carrying close to the maximum. People who consistently max out their balances are perceived as riskier. People who never use their credit don't have a track history. People with the highest scores use credit sparingly and keep their balances low."

3. Length of credit history (15 percent)
The third factor is the length of your credit history. The longer you've had credit -- particularly if it's with the same credit issuers -- the more points you get.

4. Mix of credit (10 percent)
The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. "Statistically, consumers with a richer variety of experiences are better credit risks," Watts says. "They know how to handle money."

5. New credit applications (10 percent)
The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.

"Then, looking for new credit will be seen as an alarm because statistically, before people bankruptcy and default on everything, they look for a life preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.

Credit scores are not perfect
The major drawback to credit scoring is that it relies on information in your credit report, which is quite likely to contain errors. That's why it's critical that you check your credit reports annually, or at the very least three to six months before planning to buy a house or a car. That will give you sufficient time to correct any errors before a lender pulls your score (Pat Curry, Bankrate.com)

If you have more questions, please do not hesistate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.
 

Probably you have heard about all the buzz about buying foreclosures but you do not know how to start or what approach to use or perhaps you have already been looking to some properties or even perhaps you have placed an offer on one. Here I will give you five secrets about buying foreclosures.

First, you can bid lower than the asking price, and you should start lower. How much lower it depends on the desirability of the property, the days on market, whether or not there are offers already, and, of course, the comparable sales in the area. Your REALTOR® should provide the latter before an offer is placed.

Second, foreclosures advertise that they sell the house AS IS as they do not intend to repair the property. Just think about it, the bank's employee who is managing this asset is sitting somewhere in an office in another state and the last thing he wants to hear is your request for repairs. He will argue that you saw the condition of the property before you placed an offer, and that you should have taken that into account. However, if after receiving the inspection report you found some serious problems that were not visible to the naked eye, you can request the bank to account for those repairs. How much you get the bank to take care of that depends on the bank and the skill negotiations of your REALTOR®.

Third, not all foreclosures are created equal. Not every foreclosure is necessarily a good deal. Some foreclosures are sold for values close to the regular sales. There is a way to identify the best deals in your area of interest and receive only those directly to your email address so you only focus on the best ones.

Fourth, the foreclosure's listing broker pays the commission of the buyer's agent. Therefore your REALTOR® will be compensated only when you close on your house.

Fifth, start your search on Monday or Tuesday as buyers are usually out during the last part of the week, and you maybe lucky to get your offer accepted before the weekend comes when most of the activity happens.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

In today's New World, it is more difficult to get approved for a loan and you may have probably experienced that yourself as your loan application has been denied due to bad credit or perhaps the lack of traditional credit in your financial history.

Even though it is true that 99 percent of the lenders will not lend you any money with a FICO score around 600, I have good news for you. There is one, and only one, special conventional loan program that will grant you a 30-year loan, with a 4.5% fixed interest rate, with no prepayment penalties, no closing costs and no dowpayment as long as you have been on time in all your bills for the last 24 months.

This is called character lending as they look at your financial discipline for the last 2 years and how you managed your money. Now, if you have been on time only for the last 22 months, they will still accept you into the program with some conditions.

This program will allow you to buy a house anywhere within a 100 miles radius from Houston with a maximum purchase price of $200,160, and there are no income limitations.

If you want to know more about this program or if you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information that I will be happy to go into more detail.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

A short sale is defined as an approved discount by a bank or mortgage lender of the balance owed by the homeowner as a result of two fundamental conditions:

The first one is when a homeowner is experiencing financial hardship such as loss of employment, an illness in the family, divorce, lack of savings, or any other situation that makes it impossible for the homeowner to keep current in his mortgage payments.

The second important condition is that the property can not be sold in the free market for what is owed on the property. Basically, the homeowner is upside-down in his mortgage. This situation is even more aggravated if the homeowner was not paying his mortgage for several months, and late fees, attorney's fees, and HOA dues have been added to the debt.

If these two conditions exist simultaneously, then the homeowner can hire a REALTOR® to list the property and request the lender to approve a short sale.

The benefits for a homeowner to use a short sale instead of walking away from the property is that this shows responsibility in part of the homeowner as he is trying to help the lender diminish its losses. That is why the impact on the homeowner's credit report is not as catastrophic as a straight foreclosure. Two years after the short sale, the homeowner will be able to buy again.

Once a contract is received and sent to the lender, the lender orders a BPO (Broker's Price Opinion) on the property. Sometimes they order two, from two different brokers, to  estimate the actual market value of the property. If the offer matches this value, the lender will approve the short sale, and the property will go to closing.

An important issue to take into account is that the difference between what was owed and what the bank receives is considered a deficiency judgement. In ordinary times, the IRS will consider this a taxable gift to the homeowner (ordinary income). However, for the time being this is not the case for homeowners as a result of the financial crisis.

Now, once we have detailed the short sale process, you should be aware of the following facts:

1. Only 2 out of 10 short sale listings close successfully. That is, the rest go to foreclosure anyway as the lender's realizes that they will make more money by going through a straight foreclosure as all the other debts (home equity loans, second mortgage, mechanical liens, etc) are wiped out with the exception of IRS liens, property taxes and HOA dues.

2. The listing price does not represent the actual price required by the lender as it is an estimated price established by the listing agent. The lender will establish the final sales price and they will attempt to sell for the highest "market value" possible. That is why lenders will not approve a short sale unless the property has been listed with a REALTOR® for maximum exposure.

3. The lenders are now receiving an average of 1000 short sale files a week so if the listing agent did not send "all" the required documentation proving all the above facts, the file will be moved to a second pile of incomplete files, and this will delay the process significantly.

4. Lenders are taking anywhere from 30 to 60 days to respond to your offer. Some other short sales may take up to a year.

5. Many short sale listings have been listed in the MLS for weeks and the listing agent continues to receive offers.

6. Many times lenders will not agree to help buyers with closing costs as this impedes them to recoup their losses.

7. Certified Distressed Property Experts (C.D.P.E) REALTORS® are trained to navigate through the complexities of this process.

So, the next time you consider listing or buying a short sale property, anywhere in the United States, hire a C.D.P.E. REALTOR® to help you navigate through this process. If you need one outside of Houston, I can help you find one in your area.

If you have more questions, please do not hesistate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

My client came to me yesterday and ask me the above question. They have $20,000 in savings and want to keep their monthly payments below $750, and wanted to know how much they can afford. They wondered, is it better to put all that money for downpayment or to buy down the interest rate?

It happens that my clients have been approved for a special NO MONEY DOWN loan with a 4.25% fixed-interest rate for 30 years with no prepayment penalties. A very sweet deal.

They want to buy at least half an acre of land outside Harris County which will give them a 2% tax rate for their property taxes.

At 4.25% interest rate, if they buy a $105,000 house, their bank note would be $516, the taxes $183, and the insurance $50 which would give them a monthly payment of $749. Exactly what they are looking for.

However, if they put $20,000 towards their downpayment, their bank note would be reduced to $418.15 which would give them a monthly payment of $651. They would be saving $98 a month. Not bad

Now, if we use part of the savings to buy down their interest rate to 1.25%; that is, we buy 12 points, and each point is equal to 1 % of the loan, we estimated that they can buy a $140,000 home which would give them a bank note of $467, taxes equal to $233, and insurance equal to $60 which would give them a monthly payment of $760. In this case, they would have to pay $16,800 to buy down 3% of interest rate. They intend to live in this property for a very long time.

We can clearly see that my clients are better off by buying down the interest rate to 1.25% as this helps them to buy the best house they can afford and with an incredible interest rate. As you can see, Real Estate is all about the interest rate.

Now it is very rare to find a bank that would allow to do that but my clients are in top national program and they are taking advantage of every bit of it.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

Banks will never want to talk to the buyer directly. When a home is foreclosed, it is assigned to the bank's Real Estate Owned Department, and they in turn enter into an agreement to sell the property with a local REALTOR.

Most of the times, lenders are located out of state and they have never seen the property so they enter into a listing agreement with a local REALTOR. They, in turn, are responsible for re-keying the property, getting estimates for trash-out and repair bids, maintenance, the actual listing, negotiations, and closing. As you can imagine there is a lot of Real Estate tasks that need to be taken care of and that is the last thing they want to focus on.

Banks know very well that REALTORS are experts in their field as they are in regards to financing.

If you want access to the best bank owned homes in Houston, please go to www.bank-owned-sales.com.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

If you are the average person, it is better to buy a home as an investment as long as you buy it in a way that your total expenses like your mortgage note, property taxes, insurance, association fees, expected maintenance and 10% expected vacancy, are at least $100-$200 below your rental payment.

In order to check the rental rates in your area you have to talk to a REALTOR who specializes in investement property before you buy. If you do it this way, you will basically have your tenants buy the house for you with a positive cash flow.

On the other hand, land is good investment if you know the path of growth for your city. This is best done by visiting your local government and requesting information about the city plans for new areas for the next 5 to 10 years. This is the way builders secure land before anybody else. I know of a person who bought land in Katy for $65,000 and sold it to a builder for $540,000. The downside of this is that you can be waiting for a long time for your money if you have not done your due diligence.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

I often hear some savvy buyers say that they will get a better deal if they approach the builder directly as they can ask the builder to reduce the price by 3% because they are not bringing a REALTOR with them. Is this a good approach?

Even though this is a true statement, and the builder will automatically discount the listed price by that amount, there is much more that can be negotiated with the builder by using an expert REALTOR.

For example, I had a relo client whom I was showing properties from Spring to Pearland to Katy. One day, tired, they walked into a builder's office and they liked a home that was yet to be completed as the original buyer defaulted. As they realized how much time I had dedicated to them, they were loyal enough to ask me to come to the office and sign with them otherwise I would not get the commission. I thanked them for that and instructed them to stay quiet and wait for me until I come to the office.

Once there, I was shown the home they liked, and I asked them to leave the sales office with me, and went to have lunch with them. They told me they would be happy to pay the price the builder offered. Then I told them that I would be happy to get them that but I would get even more for them.

I asked them to give me a list of what they had been offered by the sales person, and, in turn, we put together a strategy to achieve what they would call the best deal of the world. With that strategy, I went to the builder by myself and presented my request on behalf of my clients. The sales agent did not take it very well and even got upset with me for ruining "the sale". I told her I would leave now and wait to hear from her soon.

After one hour, she called me and in a nice tone of voice she told me the builder had accepted our offer, and congratulated my clients. My clients could not believe it. They got what they wanted and even more with lots of upgrades (tile, upgraded appliances, countertops, ect) that not only paid for my commission but much more. All of that for the same price they wanted to accept!!!

Today, 4 years later, they wanted a bigger home, and they hired us to sell it. It got under contract in 3 days with $5,000 more than the asking price. They could not believe it. They went to celebrate and had a great lunch together. Then we helped them buy their new beautiful home, and they consider us their REALTORS for life.

So, you see, next time, please reconsider your options and use an expert  REALTOR that will fight for every penny of yours as if it would be his own.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

Here is what Ruben & Nohemi shared with us today:

"It has been an exciting time for Ruben and I workign with Jorge & Suzanna in looking and finding our first home. We appreciate the service the Chiriboga's have given us. It makes the difference when you have people you can trust and your best interest in mind."

Ruben & Nohemi Ruiz, Katy
October 20, 2009

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

As of today, closing on a house takes an average of 45 to 60 days as this issue often depends on three factors: First, how soon you can deliver to your lender your paystubs, W2's, bank statements, and/or tax returns. Second, how fast you can get the title work, the inspection, the survey and the appraisal ordered; and third, what lender you are using. Here you will learn how to speed up the process to even close in a week if you follow the right steps.

Obviously you can control the first two steps but not the third one, and here is where you want to be very informed who you use as a lender. For one thing, some foreclosures will not accept pre-approval letters from mortgage brokers (i.e. your friend who has an independent loan officer license) but rather "direct endorsement lenders", a.k.a, banks. National banks are now taking  an average of 45 days in to close on a transaction due to the large number of applications they receive, and more time if they ask you for additional documentation at the last minute.

Your best option is through a local Mortgage Banker. They meet the direct endorsement requirement, have local underwriting, and are more knowleadgeable about our local Houston Real Estate market to evaluate your files more quickly.

My personal experience when I used a well-known Mortage Banker here in Houston is that I have been able to close on a transation anywhere from 5 days (when the file is complete) to two weeks. Please remember that when you offer to close in two weeks, your sellers like your offer more as they see you as a solid buyer.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

Take this IRS form to your accountant, file it before October 15 and get your check this year. Otherwise, you will receive it in 2010.

Click here for the form.

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

By living on the information age there is so much information available to us at the reach of our fingertips. Whenever I need to know anything I just google it, and there it is. It makes me feel good when I almost can become an expert on any subject. As a professional REALTOR, I am always marveled about the topic of home values as mentioned by my friends and clients. The number one website mentioned is Zillow, and I have to admit it is a wonderful website, and I like it a lot but when it comes to home values, we need to be cautios about those values. For instance, if you or friend have recently sold a house in the last three months and you compare the sales price with the value calculated by Zillow, you will see how accurate or innacurate it was. For a more formal study on the subject, click here...

If you have more questions, please do not hesitate to Email me or contact me at 832-607-0149 for more information.

As a By Referral Only®, and C.D.P.E, REALTOR® , I am committed to providing such extraordinary service and expertise that you will gladly refer your friends, family and acquaintances. With your help I am able to build strong business relationships one person at a time.

"When I was looking for a realtor to help me find a house, I did not hesitate to ask Jorge Chiriboga. His honesty, professionalism, and care for people’s individual needs showed me that I could put my trust in him. He actively looked for a house that was in the price range I could afford, the number of rooms I wanted, and the area I preferred. He looked and showed me houses until I was completely satisfied and happy to buy it. Also, he explained to me very patiently the home buying process. Because I understood the steps in the process of home buying, I can confidently say that I made a good decision when buying my first house."

Sandra Infante, Houston