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It has been a bummer of a day as I write this. The U.S. failed to deliver at both the British Open and the World Cup but life goes on. Mother nature had her hand in both outcomes (arguably). The Japanese soccer team was carrying the burden of their country's tragedy earlier this year that resulted in so much death and destruction and uncertainty. The elements in England during The Open may have bothered the fair weather Americans but played into the hands of the native champion. In the mortgage world a storm brewing as the uncertainty about interest rates increases. How we manage our national debt in the near term will contribute to what happens with interest rates. In addition, real estate prices for single family homes are rising as the massive inventory and backlog of foreclosures is being worked through. The storm of higher home prices and higher interest rates is coming - how far off it is remains an unknown.
The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…
Mortgage Market: Free Reliable Foreclosure Avoidance Assistance & Forgivable Loans The Homeownership Preservation Foundation (HPF) is a nonprofit group that helps financially challenged homeowners navigate their budget problems and, whenever possible, help them to avoid mortgage foreclosure - and they do it free of charge. HPF is an independent organization but is closely affiliated with major government agencies like the Department of Treasury and Department of Housing and Urban Development (HUD), and quasi-government organizations like Fannie Mae and Freddie Mac. Free, confidential consultations are available by calling HPF at 888-995-HOPE.
Forgivable Loan Program
Homeowners with significant income reduction due to involuntary unemployment, underemployment or medical condition are eligible for the HUD Forgivable Loan Program. Up until July 22, 2011, homeowners can contact HPF at 888-995-HOPE to begin their application process. Emergency Homeowners Loan Program (EHLP). EHLP is a zero-interest forgivable bridge loan program of up to $50,000 to be used to cover mortgage payments for 24 months. This program is for principal residences only. For homeowners that stay in their home for five years after receiving the EHLP loan funds, the debt is forgiven and does not have to be paid back to the government.
Personal Credit: Learn How To Calculate Your Debt Score
You probably have an idea of what your credit score is, but did you know that you can also find out your debt score? It's good to know both because they measure different things. Credit scores inform a lender of the predictability that you will repay a debt. You can't have a great credit score without having a history of responsibly managing debt. But how do you know what a healthy amount of debt is? That's where your debt score comes in.
Is Your Debt Level Healthy?
Your debt score will tell you if you have an unhealthy amount of debt given your age, income and other factors. Your credit score can't tell you if you should take on a new debt, but your debt score can. Visit oweing.com to calculate your free debt score and learn how much of your income is allocated to debt. You want your debt score to be as close to zero as possible.
Are You In A High Income Growth Job?
An important part of whether someone can manage a debt is their income. Our incomes change over time. Workers in high income growth industries will be in a better position to manage their debt than those that work in jobs with low income growth. For example, between 2002 and 2008 workers in a healthcare practitioner field experienced average income growth of 26%. Over the same timeframe, people with jobs in personal care and service saw incomes rise only half of that (13%).
Economy & Financial Insights: Pay Now Or Pay Later What is the answer to the debt ceiling conundrum that our elected officials are playing political football with? The answer is it just doesn't matter. Would you like to experience financial pain now or later? Either way there will be pain. The "rip the band-aid off quickly" crowd wants to take our medicine now with acceleration of higher interest rates, increased taxes and reduced government spending. On the other hand, the "kick the can down the road" crowd wants to raise the debt ceiling, continue borrowing to fund deficit spending, and preserve tax cuts.
The fact is there is no good answer. The time for answers was years ago. Now the consequences of bad behavior must be managed and the argument is about how best to navigate those rough waters. If there is a silver lining to be found, it is in Europe where several countries are much worse off financially than the United States. The mass of confusion surrounding the debt crisis in Greece and other countries continues to make the U.S. Dollar a safe haven despite our own debt problems at home.
Compromise always rules the day in Washington D.C. and the debt ceiling hurdle will ultimately get resolved with a little bipartisan give and take that reduces government spending over the next decade, allows for continued deficit spending, albeit at a decelerating pace and the tax matter will probably be punted until after the next election. No one wants the inevitable need for tax increases on their voting record until after the next Presidential election.
Question of the Month: Do You Recommend An FHA Loan? I receive calls regularly from people who have good jobs, steady income, but for one reason or another, their credit score is low. It may be due to a nasty divorce. Or maybe there was a previous job loss which caused late payments. Most lenders don’t care why the score is low – it is what it is.
But there is still an option to get a mortgage without seeking private money sources. An FHA loan is a mortgage loan fully insured through the Federal Housing Administration (FHA) and issued by FHA-approved lenders. FHA insures lenders against losses that may result in the event of a borrower default. Advantages of an FHA loan are:
-Low down payment.
-Easy credit qualifying.
-Straightforward mortgage terms.
Mortgages For Credit Scores 580 And Below
Let’s focus on the easy credit qualifying part. At one time, credit scores were irrelevant but they’ve tightened up slightly since 2010. If your credit score is above 580 and you have good income and little other debt, you may qualify for a program with a minimal down payment – 3.5%. If your score is below 580 you may still get approved, but the down payment minimum jumps to 10%.
Special Consideration For First Time Homebuyers
FHA is more concerned with your monthly income and debts. FHA especially likes to help first time homebuyers. When adding up your monthly debts, do not include your monthly expenses such as cell phone and utility bills. Rather, debts include any loans like car loans and student loans as well as your credit card debt. An acceptable ratio of monthly debt payments to monthly gross income is something below 43%, but sometimes exceptions can be granted.
Example Of Calculating How Big A Loan You Can Afford From Your Debt Ratio
If you had a car loan payment of $290 per month, a student loan payment of $100 per month and you pay $100 per month toward credit card debt, your total monthly debt is $490.
If you gross $3,000 per month from work your debt ratio is $490 divided by $3,000 or 16.3%. Given that the maximum debt ratio for an FHA mortgage is 43%, you can estimate what you can afford in a mortgage payment (remember to include estimates for taxes and insurance).
In this example, 43% of $3,000 is $1,290. Since you already owe $490 per month you have $800 left. Taxes and insurance on a small home will run at least $200 per month so that leaves $600 for principal and interest. At a 5.00% interest rate on a 30 year fixed loan, you could do a loan of $110,000 and have a principal and interest payment of $591.
Giving Back: Michelle' Angels Unveiled To Florida Public Relations Professionals The Earlier this month I had the opportunity to introduce the Michelle's Angels Foundation to dozens of professionals at the Southwest Florida chapter of the Florida Public Relations Association. The theme of their meeting was "Professional Philanthropy-Giving Of Your Time" and I want to thank the FPRA for allowing me to share the exciting free services available from Michelle's Angels, including a hint that a Michelle's Angels Hope Concert is in the works for Florida within the next 6-8 months. Listen to the free, inspirational musical tracks at michellesangels.com and if you have a friend or loved one facing an illness or other challenge, please add them to the free Online Global Prayer List.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to email@example.com by the 5th day of each month and we will do our best to include your information in the next issue.
The summer is flying by. By the time the next Mortgage By Randy newsletter is published I will be celebrating a big birthday and packing for a 2 week trip in New York for two tradeshows and some important family visits. Despite the intolerable workload I am forcing the issue with balancing life and work as I get reacquainted with my bat and glove and I'm also learning a little rugby. Work hard, play hard seems to fit for us, so until next time...
_______________________________________________________________________________________________ Mortgage by Randy newsletter, Copyright 2008-2011 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.
Mortgage by Randy personal finance newsletter is sent monthly. The newsletter covers topics including the mortgage market, credit scores, identity theft and identity protection, U.S. and global economy, questions from readers and charitable endeavors that are important to my family. Feel free to share Mortgage By Randy on your blog, Facebook, Twitter, Google+, etc.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.