Manage Your Credit Score to Purchase a Home

MANAGING YOUR CREDIT SCORE TO PURCHASE A HOME

A Few Tips to Establish and Maintain High Ratings

Recent tallies show a third of U.S. credit scores fall below 649. While not impossible, acquiring a mortgage loan will likely be more difficult and more expensive at this level than with higher scores. Its up to you to manager your credit score to purchase your first home.

Here are the fundamentals to guide you in establishing and maintain a healthy and legitimate score.

The somewhat obvious:

Borrow only what you can afford to repay
Make all of your payments on time.
Avoid excessive request or inquires for credit
Have an emergency account to pay for unexpected expenses.
Check your report annually to contest and remove any erroneous information

The not so obvious:

Do not open new store credit cards just to save on a purchase. New accounts can lower your score, and too many payments can be difficult to manage. Saving 10% on a $300 lawn more means little if it costs you even just fractionally more on a $300,000 home loan

Do not open new accounts just to transfer balances for introductory rate. In addition to possible lowering your score, these offers often have traps. Instead, use them to leverage a lower rate from you existing card company.

Do not close old accounts. If you have a good record of payments on old accounts, these will benefit your score. Using them occasionally and conservatively will keep them active and contribute toward a good score.

Do not be afraid to use credit. Without the use of credit, you will have no score and that can just be as bad as a low credit score.

Keep a high credit line and a low balance. Credit utilization rations measure this relationship and lower is better.

Maintain a variety of account types. A combination of revolving, installment and secured financing along with excellent records of payment history will yield a higher scores. Still, don’t run out and open an account just to have diversity, as this is the least influential factor.

Remember, if you have questions about managing your credit or what is the required credit score to purchase a home for you would be, The Mortgage Lady is here to help. Contact Me Today for your preapproval.

Learn more on how to monitor your credit here.

October 12, 2015

Hard vs. Soft Inquires :How Does it Affect my Credit

Hard vs. Soft Inquiries

We get many questions about how many points are affected by a credit inquiry. This is a simple yet difficult question to answer. Let me explain. There are two types of inquiries that a person must take into consideration. Here is a look at both of them:

Soft Inquiries: These do not affect your credit score and thus you don’t have to worry about them. They are reported on your credit report which confuse many people. A soft inquiry, or “soft pull” as we refer to them, are harmless in nature. There are many examples. Here are a few:

1) You have a credit card and you see they have pulled your credit. This is done by your credit card company to see if you have missed paying any of your other financial obligations. If you have been late, this allows them to increase the interest rate on your credit card per your agreement! Very few people notice this when they open a credit line because they don’t read the agreement.
I know what you’re saying: what does a late payment on some other line of credit have to do with my payment history on this credit card? Yes it’s unfair but non-the-less reality.

2) Pulling your free annual credit reports at www.annualcreditreport.com. Again, these don’t affect your score and is something everyone should do once a year. The credit reports are free but you have to pay a fee if you want the score.

3) Lending institutions regularly pull your credit for “pre-approved” offers. You know the main culprits here—usually credit card companies or other financial institutions that want your business.

4) A few other examples are when you apply for employment or by landlords for renting or leasing an apartment or a house.
Hard Inquiries: Ok, these are the only ones you have to worry about. When I talk to clients I make it simple by telling them if you apply or initiate an application for a vehicle, credit card, line of credit or a mortgage etc… then it is factored into your credit score.

From my experience many people get into trouble with inquiries when they are making purchases at major department stores or other large businesses. At checkout the clerk tells them they can get “15% off this purchase” if they apply for a credit card or line of credit with that business. Do not do this! Department store cards are not rated the same as major credit cards and the interest rates are usually much higher!

Finally, keep in mind hard inquires stay on your report for two years but are most often only factored into your score if they are within the last six months.

Learn more: What credit score do lenders use for home loan

May 15, 2014

Get a Loan 1-day after a Short Sale, Foreclosure, or Bankruptcy

There are many people that don’t think they can qualify for a Jumbo Mortgage because they have a recent Short-Sale, Foreclosure or Bankruptcy. They have been turned down by other lenders time and time again, and thought they have exhausted all chances of getting another Jumbo Loan. Well, the wait is over! The days of waiting 2-4 years after a housing event are long gone.

Introducing our solution –

The Fresh Start Home Loan Program

Here are the basics for the loan program 1 day out of Short sale, Foreclosure or bankruptcy:

20% down payment (minimum)
580 mid FICO score (exceptions down to a 500 mid FICO )
Primary or Secondary Home Purchase
Loan Amounts up to
No Prepayment penalty
NOT Hard Money (much better rates)
Exclusive Jumbo Portfolio loan (not available at other lenders)
30 Year Fixed Rate Only
Florida Lending only

What are the rates like?

While I can’t quote rates here because they are constantly changing and are adjusted to your unique scenario. Complete the information box on the right of the page for a personalized rate quote.

This is a fully underwritten portfolio Jumbo loan. It’s NOT hard money.

Collections items do not need to be paid off.
Mid FICO scores must be above 500 to qualify.
The down payment is substantial ( minimum 20% ) depending on credit score

Other Programs available.

24 month bank Statement program for self employed borrowers
Non Warrantable Condos
5% down on a Florida Condo
500 Credit score Mortgage Loans

March 3, 2014

Is Your Credit Score Too Low For A Mortgage Loan?

If you are in the process of purchasing a new home, knowing your credit is the first and most important step. Have you been turned down for a mortgage loan previously because of credit issues? Have you recently pulled your credit report, only to realize that your credit is worst than you expected?

Well don’t throw in the towel just yet! There are several options for you to choose from.For instance, did you know that Paramount Residential Mortgage Group can get you a mortgage loan with credit score as low as 550? Well we can, FHA style! You just have to know we as a lender expect from you as a borrower if you have such a score. Contact us to find out.

Now for those of you who have a credit score lower than 550, then you have a little bit more work to do, in order to get your credit where it needs to be in order to purchase a home. One possibility would be to work with a home ownership counselor. There are some local and national nonprofits that offer home-ownership counseling such as Home Free-USA and Hope Now.

These organizations offer counseling to future home buyers who need help in raising their credit scores and navigation through the home buying process.Even though raising your score does not happen overnight, with the help of a credit and housing counselor, you can learn the steps to take to raise your score and get qualified for a home loan.

Bringing your credit score up is not hard to do, but it does take time and patience to get on the right track.Follow a few of these simple steps that can help you get your credit score up so that you can qualify for a mortgage.

1. Correct all errors on your report, even late payments or collections accounts that are being reported improperly

2. Make all of your payments on time. Late payments can be the number 1 mistake a person makes, which brings their score down tremendously.

3. Pay down any revolving debt such as credit cards. Keeping a high balance, mainly over 30% is a definite way to make your score go down.

4. Be patient! Keep paying down your debt and do not get any new debt, your credit score will rise.

Even if you did decided to purchase a home putting more money down with the minimum score of 550, still strive to achieve and even more perfect score. These are good, healthy credit habits to have to start for a lifetime.

For more information on getting you pre-qualified for a mortgage loan Contact Me today for a free no obligation evaluation.

December 20, 2013

Mortgage Pre-Approval Checklist

When your realtor asks your the million dollar question, ” are you pre-approved with a lender yet”, what will be your response? Make sure you are prepared. The mortgage preapproval letter is like gold because it means that a lender has committed to issue you mortgage loan for a specified amount based on their application approval process. When obtaining your pre approval make sure you have certain documents available.

Income Documents

When applying for a mortgage you will need to provided documents showing all borrowers income. These documents will be at least 2 years tax returns (will vary from lender and their programs), 30 days paystubs, 30 days bank statements, last 2 years W-2, just to start. More documents may be required by the lender if the first set of income documents needs clarification.

Credit Information

All home buyers, whose names are listed on the application will be required to provide their social security number in order for the lender to pull their credit report. On the application, you will have to state all financial obligations, such as credit card bill payments, car payments, child support payments, etc. These items must match your credit report. Please be sure to check your own credit before shopping for a lender, to ensure your report reflects all accurate information.

PreApproval Letter

Once your mortgage lender has reviewed all documentation and it satisfies their guidelines, a preapproval letter will then be issued. Keep in mind if your circumstances change for the worst, the letter can be rescinded, so it is not binding, nor are you obligated to go with the lender that provided you with the letter. Be sure to give a copy of the letter to your realtor and happy house hunting.