Mortgage applications are being reviewed far more thoroughly now than in the past, and your credit score should be 680 or higher to qualify for the best interest rates. So how do you determine your score, and know you're getting the credit you deserve?
Everyone is allowed one free credit report per year from the three reporting agencies (Experian, Equifax and TransUnion). Review the reports for accuracy and act quickly to correct any errors or omissions.
Approximately 35% of your credit score is based on the timeliness of your payments. Make sure that no late payments older than seven years are still on your report.
If you have paid off loans or credit cards, a zero balance should appear on those accounts. Sometimes, agencies don't properly update those balances after settlement.
15% of your credit score is based on the length of your credit history, so make sure that the opening dates of all your accounts are accurate. Also make sure that the limits on your credit cards are correct, and keep the balances under 50% of those limits. Total debt accounts for 30% of your credit score.
Finally, think twice about closing credit card accounts with zero balances, because this negatively reduces your ratio of "available credit" to your debt. First, get the facts. Then, make corrections. Finally, apply for home financing with confidence!
Showing posts with label credit score. Show all posts
Showing posts with label credit score. Show all posts
2/26/10
Little Steps Up To The Leap
As you've already read here, conditions are ripe to become a homeowner, and it's time to determine if you’re ready to make the leap. While the price of the home is the largest factor, don't forget about loan fees and closing costs, which add to your total financed amount.
Since banks are stricter in their lending, Step One is to polish up your credit report. A higher score gives you more power when it comes to negotiating terms and interest rates.
Similarly, a larger downpayment will positively affect your mortgage terms and reduce the amount you have to finance. If you can't manage 20% down, you will likely have to pay a monthly mortgage insurance premium.
Upon preapproval from a lender, you’ll know how much loan you qualify for, and how much is required for the downpayment. It's best to secure preapproval before you begin looking at homes, especially since sellers will see your offer as a solid one worthy of consideration.
In addition to newer fees being assessed on loans to less than stellar applicants, there are standard closing costs associated with the purchase, including appraisals, legal fees, credit reports and more. All are included up front on your settlement statement and some may be negotiable. Contact an agent today to get the ball rolling and find out how much home you can afford.
Since banks are stricter in their lending, Step One is to polish up your credit report. A higher score gives you more power when it comes to negotiating terms and interest rates.
Similarly, a larger downpayment will positively affect your mortgage terms and reduce the amount you have to finance. If you can't manage 20% down, you will likely have to pay a monthly mortgage insurance premium.
Upon preapproval from a lender, you’ll know how much loan you qualify for, and how much is required for the downpayment. It's best to secure preapproval before you begin looking at homes, especially since sellers will see your offer as a solid one worthy of consideration.
In addition to newer fees being assessed on loans to less than stellar applicants, there are standard closing costs associated with the purchase, including appraisals, legal fees, credit reports and more. All are included up front on your settlement statement and some may be negotiable. Contact an agent today to get the ball rolling and find out how much home you can afford.
10/23/09
Know Your Options
If any of your friends or family have recently applied for a home loan, you've probably heard that lenders are nervous, with tough new rules and demands for stacks of paperwork. Good mortgages are still out there, but you should be prepared before applying.
First, understand how your credit score impacts the interest rate charged on your loan. If your score is 720 or higher on the scale of 850, you will qualify for the best rates. If it's between 700 and 719, you could expect 0.375% added to that rate, while a score between 680 and 699 might add 0.5%.
Next, determine how much you have available for down payment, and how that will affect your loan's terms. A "conforming loan" (that would be purchased by Fannie Mae or Freddie Mac) will require a minimum 10% down payment.
However, if you don't have that much to put down, you can investigate a Federal Housing Administration (FHA) or Veterans Administration (VA) loan. These government-backed loans are targeted towards those with lower credit scores and only require a 3.5% down payment.
You can even use this year's First Time Homebuyer Tax Credit to help pay closing costs, buy down the interest rate, or add to your minimum down payment. Just have employment, banking and tax records organized, and be patient while overworked lenders review your application.
First, understand how your credit score impacts the interest rate charged on your loan. If your score is 720 or higher on the scale of 850, you will qualify for the best rates. If it's between 700 and 719, you could expect 0.375% added to that rate, while a score between 680 and 699 might add 0.5%.
Next, determine how much you have available for down payment, and how that will affect your loan's terms. A "conforming loan" (that would be purchased by Fannie Mae or Freddie Mac) will require a minimum 10% down payment.
However, if you don't have that much to put down, you can investigate a Federal Housing Administration (FHA) or Veterans Administration (VA) loan. These government-backed loans are targeted towards those with lower credit scores and only require a 3.5% down payment.
You can even use this year's First Time Homebuyer Tax Credit to help pay closing costs, buy down the interest rate, or add to your minimum down payment. Just have employment, banking and tax records organized, and be patient while overworked lenders review your application.
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