Seminar Highlights: Car Buying

Going to a dealership and negotiating with a salesman may fill you with dread. But it doesn’t have to, according to Angie Anderson of Credit Union Lending Systems. Angie recently gave a seminar at West Community Credit Union preparing potential buyers on the art of negotiation. These were some of the tips:

Research
The key to any big purchase is preparation. Even before stepping into a dealership, do your homework. The Internet has made it easier than ever to find out the dealer’s cost for each vehicle and its options. Set a target price and start comparing rates. If you plan to trade in your current vehicle, find out its value in the NADA Guides or Kelly Blue Book.

It is important to consider the purpose of most of your driving. Is it commuting? Hauling kids? Weekends? Vacations? Finding out how different vehicles were rated in different categories from sites like consumer reports. They will help you distinguish hype from fact.

Personal Inspections
It is easy to get caught up in the excitement of the entire car buying process, but it is recommended that you thoroughly review the entire vehicle as closely as possible before making any commitments. Everything you discover can be used in your negotiations. Here are things to look for:

• Check the exterior and the paint for dents and scratches.
• Check the alignment, shock absorbers, tires, frame, windshield, windows.
• Check for rust – everywhere, especially tire wells.
• Check the interior including the seats, pedals, backseat, and trunk.
• Make sure all the buttons work: the air conditioner, the electric seats — anything that you push, pull, turn, or lever.
• Check the engine, all gauges, coolant, oil, all fluids, battery, air filter, power steering, and the transmission.
• Take a test drive. See how the car runs on the highway, up hills, down hills, and backing up.
• Don’t be afraid to ask the dealership mechanic to check out the car.

Never Appear Ready to Buy
Your actions at the dealership matter. Be comfortable and casual, but also be prepared to walk out if you are being pressured. Try to act like you are in a hurry and never sit down. It is important not to complete any paperwork until you are ready to close the deal.

When to Buy
The best time to buy a car is at the end of the month, an hour before the dealership closes. Have your research well prepared before making an offer, possibly even starting your negotiation a few days before going in to close the deal. The advantages of buying at the end of the year are that trades-ins are worth more in December than January.

Additional Coverage Options

• Extended Warranty shields you from future repair costs – even older used cars with high mileage. No matter where you travel in the U.S., you are protected against major mechanical expenses, with no deductible on covered parts or labor.
• Guaranteed Auto Protection (GAP) helps pay off your remaining loan balance if your vehicle is stolen or totaled in an accident – so you can start fresh with a new vehicle purchase. It’s inexpensive and can be rolled into your loan payments.
• Life and Disability Insurance takes care of your payments or outstanding balance in the event of disability or death. It protects you and your family by removing the financial burden of your loan should something happen to you. No physical exam or medical questionnaire is required.

ACTION PLAN  

• Research! Set your target price, compare rates, and decide on the car you want.
• Get pre-approved with a financial institution (but don’t mention this in your negotiations with the dealership until a price has been agreed upon).
• Negotiate the vehicle price, and then discuss your trade-in if applicable.
• Unless previously decided through your financial institution, negotiate warranty, GAP, and life and disability insurance.
• Close the deal and drive away in your brand new ride!

When financing a car, you should be certain your lender 
has your best interest in mind. West Community will work hard to offer you the 
lowest rate possible and monthly payments that fit into your budget. Apply online or call Member Services at (636) 720-2400 for more information and happy shopping!

Resources:
Make a Smart Vehicle Purchase and Get a Competitive Loan
See if Your Used Car is a “Lemon”
Find Out a Car’s Complete History at CARFAX 
Check Enterprise Car Sales
Save on Your Next Rental Car!

Seminar Highlights: Home Buying

Buying a home can seem complicated and possibly too expensive for your taste, but its appeal is rooted in the fact that historically, houses increase in value over time, have tax benefits and put a roof over your head. Lisa Boaz, Mortgage Manager with West Community Credit Union, breaks down the basics of what you need to know about securing a mortgage.

What Does a Mortgage Lender Look for in a Borrower?
Getting pre-approved will make the whole process go more smoothly and make your offer more desirable to a seller. There are a few things that can affect pre-approval like your credit score, employment history and income, assets, and current debt-to-income ratio. 

It’s important to maintain a good credit score since this is the primary way that lenders evaluate potential borrowers. If your credit report shows that you do not have a good credit history, talk to your lender. Not all credit issues will keep you from being pre-approved. Your lender can give you suggestions on how to re-establish credit. It is important to keep in mind, though, that adverse credit information may affect your interest rate.

Having a steady job will help you look more desirable to a lender. Typically, they will need to verify that you have two years of continuous employment and confirm your gross monthly income. There may be acceptable reasons why you have not been employed for the preferred period of time, so work with your lender to explain these gaps.

Once your loan information is approved, you will receive a pre-approval letter that is good for 90 days.

Current Debt and Monthly Obligations
Your credit report is also used to determine the amount of total monthly payments you currently have. Auto loans or leases, credit cards, personal loans, lines of credit and alimony/child support payments are taken into consideration. They are used to calculate your debt-to-income ratio by dividing your total monthly payments by your gross monthly income. Your lender must be assured that you can comfortably make all of your monthly payments so it is recommended that this number not exceed 45%. The amount of your mortgage payment will depend on how much you borrow, the term of the loan, the interest rate as well as taxes and insurance.

Private Mortgage Insurance (PMI) guarantees that the lender is paid off if the buyer defaults on a mortgage. This amount depends on the loan amount and the size of the down payment. The mortgage insurance premium is added to your monthly payment. A credit score of 680 or higher is required to qualify. If you put 20% down, you do not need PMI.

Types of Loan Programs

• Conventional – up to 97% loan to value (LTV). LTV is calculated by dividing the loan amount by the contract price. Any loan with an LTV higher than 80% requires PMI. There is no prepayment penalty and the remaining money needed to cover closing costs and prepaids can be gifted or serve as a seller’s credit.

• Federal Housing Administration (FHA) – 3.5% down payment required. Closing costs and prepaids can be gifted and/or a portion paid by the seller. Have your lender compare FHA to conventional to see what’s better for you.
• Veterans Administration (VA)

Fixed rate mortgages are popular because the rate stays fixed for the life of the loan. Only escrows (taxes and insurance) can change your payment. These are best for homebuyers who are counting on a predictable payment and plan to stay in the home for a long time.

The interest rates on adjustable rate mortgages will be fixed for a specific term then adjust annually based on future market conditions. Usually, ARMs have lower interest rates than fixed mortgages due to the borrower’s increased risk. The shorter the fixed period, the lower your rate.

ACTION PLAN

• Build up your credit and start saving for a down payment.
• Determine your price range.
• Find a reliable, reputable lender and get pre-approved.
• Select a real estate agent and begin your search for a home.
• Once you select a property, negotiate the contract and select a title company.
• After you close on the loan, move in!

Ready to start house hunting? Give Lisa Boaz a call at (636) 720-2495 for more detailed information about our mortgage loans or apply now.

Resources
How to Get a Mortgage in This Economy
Ten Things to Know About Mortgages
What to Know About Refinancing Your Mortgage

Seminar Highlights: Enhancing Your Credit Score

What’s in a number? Credit scores are basically your financial report card. Only now your financial habits are graded from 300-850.  So, what makes up that score and how does it affect you? Barbara Davis, a Credit Analyst with West Community Credit Union, tackles these questions in a recent seminar, “Personalized Review: Enhancing Your Credit Score.”

Everyone has a relationship with credit. Your score is predictive of how reliable you’ll be when paying back a loan by taking into acount your previous history with lenders. In other words, it evaluates your “creditworthiness” and can be the defining factor in your ability to purchase a home or new car.

A commonly used acronym for credit score is FICO which stands for “Fair Issacs Company.” FICO scores are used to assess risk, determine approval of loans and how to price them. So, the higher the score, the more likely a lender will take a risk on you. Negative credit activity, such as foreclosures or repossessions, can affect higher scores significantly more than lower scores.

What makes up a credit score?

• 35% Payment History — Your on-time payment history is the biggest factor when it comes to your credit score. You may want to check your loan documents and credit card statements to see if you have a grace period (which is typically 15 days). Companies usually report all loans that have a payment that is 30 days past due.

• 30% Capacity — Capacity is a heavily weighted factor of your credit score. It refers to your credit cards and the amount of available credit on revolving accounts. It can be calculated by taking your total credit card balances and dividing it by your total credit card balance limits. It is best to keep your balances under 30% for good credit health. Credit cards are a very good way to build credit and you may not need to use them to keep your cards active (check with your lender concerning annual fees, etc.).

• 15% Length of Credit — Some people can be considered too responsible with their money. They hardly ever use credit, preferring cash. This can cause you to have a harder time getting credit than the guy who has debt. Just six months of on-time payments will get you “established,” but the longer your credit history, the more accurately a lender can assess your creditworthiness. Not using an open card will not move your score up or down, but closing the account will hurt your credit.

• 10% Debt Accumulation — This percentage refers to credit inquiries, which typically occur when you’re applying for credit and a lender checks your score to decide whether or not to approve you. These can negatively affect your credit, so we suggest when shopping around, to do so in a short period of time. Soft inquiries, such as pulling your credit for a job interview, auto insurance or other non-lending purposes do not affect your score.

• 10% Mix of Credit — Consumers with a mixture of revolving, installment (auto loans, personal loans) and mortgages generally have better credit scores because it indicates that more lenders are willing to grant them credit. Also, having a variety shows an ability to manage multiple kinds of credit.

ACTION PLAN TO INCREASE YOUR CREDIT SCORE

• Pay your bills on time—this should be the top priority.
• Keep your credit card balances low.
• Rate shop within a focused period.
• Keep unused credit cards open, even if you do not plan to use them.
• Focus on correcting negative factors.
• Check your score regularly. You are guaranteed a free copy of your credit report every year. 

Solutions for Debt: Trade Revolving Debt for Installment
If you have too much credit card debt or you just want it paid off much quicker, you may consider consolidating that debt into a fixed term signature loan or refinancing your vehicle as collateral. This could help you pay off your debt much faster with one low monthly payment. If you think you may need help, see our Listening & Lending® Solution.

A good credit score is critical if you ever plan to apply for student loans, buy a car, or get a mortgage. If you want to review your credit report or talk to someone about establishing credit, eliminating debt or consolidating it, schedule a meeting with a Member Services Consultant at (636) 720-2400.

Resources:
Ten Things to Know About Your Credit Score
Pay Down Debt and Start Saving
Important Things to Know About Fixing Your Credit
Get Control of Your Debt
Credit Score Myths and Facts
Choosing Your Credit Card Wisely
Be a Smart Shopper

Valentine Credit Love: “What’s Your Score?”

Credit scores are used by lenders to help size up the risk of providing loans to people who want to purchase a house or car. These days, even employers use credit scores to evaluate job candidates.

Now, singles are increasingly using credit scores to size up their dates. More and more people are directly asking dates about their credit score, using it as a way to evaluate the chance of having a successful future together with shared finances.

You can spot the trend online with credit score dating sites like datemycreditscore.com. Membership to these kinds of sites is increasing because people are becoming more concerned about financial responsibility in relationships. In fact, couples who fight about money are 30% more likely to get divorced.

A really good score is anything over 760 on the fico scale – it’s the one that lenders use. So, if you are curious about your credit score and how it might impact your love life, you can get a free copy of your credit report through AnnualCreditReport.com.

In the meantime, you can do a few things to improve your credit score and your chances that cupid will strike. Pay your bills on time. Don’t apply for new credit cards. And, don’t close cards that you already have. Do these things and with any luck, your love life might just improve!

Source: “Credit score dating: Finding financial compatibility.”
The TODAY Show – aired January 29, 2013