Wow! Amazing to think it's been almost a month since my last post. It's been a crazy month with lots of new challenges. It was nice to have a long Thanksgiving weekend to catch my breath and recharge my batteries. Today I'm including an article I wrote myself for a newsletter I send out to all my clients once a month by email. If you'd like to be added to this list, just fill out the form on my website (http://www.januaryfinancial.com).

Also, if you get a chance check out another site and let me know what you think. It's http://www.homebuyingcodex.com, a site that was written by a real estate attorney that I recently partnered with. Let me know what you think by emailing me at carey@januaryfinancial.com.

Fixed vs. Adjustable

Apples vs. oranges. Boxers vs. briefs. Dave Letterman vs. Jay Leno. These debates may rage on for decades, and we can add another one to the list: fixed vs. adjustable. We’re speaking, of course, of fixed rate and adjustable rate mortgages.

Let’s start the discussion by talking about risk. If I had to pick one word that explained the mortgage industry, it would be risk. If you can understand the concept of risk and how it relates to mortgages, you’re way ahead of the game. In a nutshell, riskier loans mean higher interest rates; you compensate the person lending you money by paying them a higher interest rate. If you have low FICO scores, this is a higher risk to the investor since you don’t have a good history of paying your bills on time, so you’re going to have to pay a higher rate. If you can’t verify enough income to qualify for the loan, this is a higher risk and you’re going to have to pay a higher interest rate.

As it relates to this discussion, the longer you ask the lender to guarantee your interest rate, the higher risk for them since they’re guaranteeing the rate you get but they don’t know how much their funds are going to cost them going forward. This isn’t an easy concept to wrap your mind around, so don’t feel bad if you don’t get it yet. Lenders work on a concept called arbitrage, which is a fancy way of saying they borrow money at a certain rate and then lend it out to you. However, lenders don’t get money at 30-year fixed rates, so when they borrow money they have to try to gauge what it’s going to cost them over the time they lend it to you. If you’re following me so far, you can understand why they would charge a higher rate to guarantee you a certain rate for 30 years as opposed to 3 or 5 years. Now, on to our discussion…

On the one hand, we have fixed rate advocates. These days, this is a relatively easy argument to make since rates are at 40-year lows. The main reason to get a fixed-rate mortgage, whether it be a 15-, 20-, or 30-year fixed, is to protect yourself from adjustable interest rates. When you get a fixed rate loan, you know exactly what your payments are going to be and they’re not going to change for the life of the loan. In a time when rates are rising, a fixed rate mortgage gives you the security of knowing that you’re safe.

On the other hand, there are the adjustable rate advocates. The main argument here, in a nutshell, is that you shouldn’t pay for something you don’t need. A great majority of people out there will only keep their mortgage for 3-5 years. Maybe it’s a job change, maybe it’s an expanding or contracting family, a refinance for home improvements or college for the kids, or any number of life circumstances. Since you’re probably not going to keep your mortgage for 15 or 30 years, you’re probably better off to get a lower adjustable rate mortgage and pocket the difference.

I’m not going to say one argument is better than the other. There’s no such thing as a “good” or “bad” loan, but there are loans that are better or worse for certain people. In my career as a mortgage consultant, I can tell you that I’ve done very few fixed rate loans. I only recommend them in two cases – when people are on a fixed income and need to know exactly what to expect from their mortgage, or when people are absolutely sure that they’re not going to move or need to refinance for many, many years. In a great majority of cases, people don’t need a fixed rate loan and would in fact be much better off with a loan that accomplishes their goals and saves them money in the long term. Like oranges vs. apples or Letterman vs. Leno, fixed vs. adjustable is not a debate that can be definitively settled, but I hope I’ve helped you figure out which one may be right for you.

I hope all my readers had a great weekend! I went to the USC game, which was a blowout as usual. The good thing is that it cemented in my mind that I'm a UCLA fan, not a USC fan. I went to a Bruins game last weekend and was way more into it. I'm sure my dad will be happy to hear this, he's a life-long Bruins fan and can't even watch the games, he gets so into it.

Anyway, here's another article on credit, this time how it can affect your life. I really can't overestimate how important credit is in our world these days.

How A Bad Credit Report Affects Your Life

A low credit rating or bad credit report can negatively affect virtually every aspect of your life. Whether you are consistently late on your mortgage or utility bills or you are over your limit on your credit cards, bad credit can make purchasing on credit virtually impossible, and it can limit your lifestyle in many different ways. Though over time you can recover from a bad report, there are still many aspects of your life that can suffer from poor financial management and low credit scores.

For instance, if you are planning to purchase a new or used car, it may be virtually impossible to secure a financing loan if you have a low credit report rating. Even if you can obtain a loan, you interest rate may be up to one hundred percent higher than it would if you had excellent credit. Rather than paying six or seven percent interest, you could end up with a fifteen or sixteen percent interest rate. Having bad credit can cost you thousands of dollars over the course of paying back your car loan. Not only will you not be able to get that new car you want, but you will also end up paying much more for the old car that you have to choose instead.

If you are interested in purchasing your own home, you will have to take out a mortgage. If you have perfect credit, you can secure a low interest rate of around five percent or even less. This will make your monthly payments rather low. However, if you have bad credit, you might only be able to secure a loan that charges nine or ten percent interest, making your monthly payments much higher, and costing your thousands upon thousands of dollars over time.

Credit card debt is one of the causes of poor credit, and it is also one of the ways poor credit can cost you the most. If you have several thousand dollars in credit card debt, and you are paying up to twenty percent in interest, it will be virtually impossible for you to ever pay off your debt within your lifetime. One the other hand, if you have excellent credit, you may be charged rates as low as eight percent, or possibly even lower still.

Poor credit report ratings can affect not only your loan and credit card situations, but they can also affect your car insurance premiums! Though it seems unfair, automobile insurance companies sometimes consider people with bad credit as high-risk drivers. Having poor credit can cost your hundreds of dollars per year in car insurance premiums.

If you are renter rather than a homeowner, some landlords and property management companies run credit checks before allowing you to rent from them. If your credit report shows a low score, you can be denied housing. If you do end up being able to rent, you might not be able to turn on utilities in your name, especially if you have been negligent in paying your bills in the past.

Bad credit report ratings can affect virtually every aspect of your life, from your car to your house to your insurance premiums. Because of this, it can certainly also affect your health. Financial worries are a leading cause of personal and relationship stress, and this stress can lead to mental and physical health problems. There are many consumer credit counseling services that can help you gain control of your finances and get you on the right track toward good credit. Many of these companies are non-profits with their sole purposes of existing being to help people get back their financial and mental health.

About the author:
With many years experience in the lending industry, Sintilia Miecevole's site http://www.fixurcredit.comwill inform you of everything from credit cards, scores, payments, repair, theft, approval and quotations to loans and financing. Be sure to visit http://www.fixurcredit.comto learn about all aspects of credit.