The Walking Cure: The Over-700 Club

Written by Troy Neff | Toledo Free Press Writer |

There is one easy way to understand mortgages and that is to think of the process from the point of view of the lender.

Suppose a lender was considering making a loan, which one of these questions would be the most important?

1. Does the customer have enough money to pay back loans?

2. Does the customer have a lot of consumer debt?

3. What is the customer’s attitude toward consumer credit?

4. Will the customer repay?

If you answered No. 4, you are correct, but according to a survey by the Consumer Federation of America, three out of four people would probably flunk this quiz.

Your attitude toward credit doesn’t matter. There is no way to measure attitude except based on your behavior. Again, if you pay your bills and pay them on time, the lender knows whether making a loan to you is a safe business arrangement or a risky one.

Here is the second question of the quiz: What indicates the likelihood that a person will repay a loan?

If you answered, “credit score,” you are correct. The higher the credit score (which ranges from 300 to 850), the higher the likelihood that a person will repay a loan. Typically, you need a score of at least 700 to get the best mortgage rates, and the best mortgage rates will literally save you thousands of dollars during the life of a loan.

Here’s the good part: Your credit score is in your hands. Pay your bills. Pay them on time. Keep your debt load reasonable. Then you, too, can join the ranks of The Over-700 Club, the people who pay the least interest on loans.

If you are thinking about buying a home, the U.S. government is ready with $7,500. The program ends next summer. The federal housing bill signed by President Bush gives first-time homebuyers a $7,500 tax credit as a head start to home ownership. First-time homebuyers will get a tax credit of 10 percent of the purchase price of a home up to $7,500. If you buy a new home by June 30, 2009, you get as much as $7,500 off your taxes. That can mean a lot to the
average wage earner.

However, the credit is not a pure gift. It is really more like a zero-interest government loan. Homeowners will be asked to pay back the credit during a 15-year period. Each year, they will be required to repay a small percentage. For example, if a homeowner qualifies for a $7,500 tax credit, the homeowner would repay the credit at $500 a year beginning with the 2010 tax return.

It’s easy to qualify. To be classified as a first-time homeowner, you must not have owned a home in three years. You must take the standard deduction on your income taxes (you may not itemize). You must buy or have bought a home between April 9, 2008, and June 30, 2009.

Published by Toledo Free Press on Thursday, November 13th, 2008

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People who live in a Glass City shouldn't throw stones.

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