Five Inside Credit Secrets for Getting a Great Mortgage

Five Inside Credit Secrets for Getting a Great Mortgage

With home prices rising and interest rates well below historic norms, many potential buyers would like to get into the marketplace but are stymied by one hurdle: credit.

“The credit process mystifies many borrowers,” said Ray Brousseau, executive vice president of a nationwide lender. “They worry that their credit may be imperfect or that a late payment from long ago will doom a loan application, when the reality is different.”

Brousseau explained that “lenders and borrowers have similar goals. They both want the mortgage application to go through. The lender will create a package to provide a full picture of the borrower’s financial status. In many cases, borrowers will be surprised that their credit standing is stronger than expected.”

So, how do you make sure you have tip-top credit when applying for a mortgage? Here are five strategies that can lead to a faster – and better – mortgage credit review.

First, prepare for your mortgage application.
Since 2010, most real estate financing has been in the form of “qualified mortgages,” loans that meet the standards outlined by Wall Street Reform. A qualified mortgage – or QM – must show that the borrower has the ability to repay the loan. To meet QM requirements, you can expect lenders to want signed tax returns or W2s for at least the past two years, year-to-date pay stubs from the past 30 days, plus complete copies of all financial statements, usually for at least the last two months. If self-employed, a lender might also want a balance sheet as well as a profit-and-loss statement. Having such information in hand can greatly speed the mortgage review process.

Second, check your credit report in advance.
The better your credit report, the better your credit score, thus the reason to check credit reports for errors and outdated items.
Under the Fair and Accurate Credit Transactions Act (FACTA), consumers can get one free copy of their credit report from each of the three nationwide credit reporting agencies every 12 months. This can be done in a few minutes by going to the official website, AnnualCreditReport.com. Print out your report or save it as a PDF.

Third, know how credit scores work.
In basic terms, credit scores weigh the answers to five questions:

Have you paid bills on time?
How much of your credit is now in use?
How long have you had credit and when was the last time you used selected accounts?
What is your mix of credit card debt, auto loans, student debt, mortgages, etc?
Have you recently opened additional lines of credit?

“Once a loan application is made, most lenders will automatically provide borrowers with a free copy of their credit score,” said Brousseau. “A good credit score can greatly help in the application process, and a lower score can often be overcome by selecting a certain type of mortgage product.”

Fourth, a lower credit score does not always mean no credit.
Borrowers can readily finance and refinance with an 800 credit score, but it’s also true that mortgages are available with lower credit scores. For instance, more than 40 percent of recent FHA borrowers had credit scores between 620 and 680.

Fifth, beware of surprise credit snags.
It used to be that lenders checked credit reports when a loan application was first made and then again just before closing. Now lenders have the ability to even check for daily credit report changes. When new debt or credit lines show up, lenders re-calculate the ability of borrowers to qualify for financing.

Avoid opening new lines of credit, making big purchases or getting more credit in the middle of the application process. When your credit reports are re-checked, and new credit activity shows up, that activity can sometimes scuttle a once-solid mortgage application.

Source: Carrington
This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Reprinted with permission from RISMedia. ©2013. All rights reserved.

5 Steps to Obtaining a Mortgage

Today’s stricter lending environment means that processing a mortgage application is more complex than ever, given the number of steps that lenders, underwriters, and mortgage insurers must all complete before home buyers truly have their financing in place…

5 Steps to Obtaining a Mortgage by Eric Slifkin 772-288-1765

 

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

 

Top 8 Things to Know about a Mortgage


Real Estate Web ReportTop 8 Things to Know about a Mortgage

By Barbara Pronin, RISMedia Columnist
Deciding what kind of home loan is best for your needs is an integral part of the home buying process. But it’s not always easy, according to California mortgage broker Ken Go.

Go notes the eight most important factors to compare when shopping for a mortgage:
• Principal – The principal is the amount you are borrowing—or the price of the home you are buying minus the down payment. Lenders will tell you how much they are prepared to lend you based on your income and credit score. That will help you determine how much house you can afford.
• Mortgage type – Mortgages fall into two categories; fixed rate or adjustable. With a fixed rate mortgage, you pay the same amount each month for as long as you have the loan. The interest rate is slightly higher than some adjustable rate mortgages, but adjustable rates change with the market and will likely rise over time.
• Interest rate – A loan with the lowest posted rate may have higher closing costs. Consider the Annual Percentage Rate (APR), which takes into account the interest rate and the loan’s other costs.
• Monthly payment – A mortgage loan should help you build equity in your home. The best one may or may not be the one that carries the lowest monthly payment. Consult a mortgage broker for details.
• Term – The term is the number of years your loan will remain active. Mortgages with shorter terms generally carry a higher monthly payment but they can save you a lot of interest over the years.
• Discount points – A point is equal to one percent of the principal. Lenders may offer you the chance to pay points in order to lower the interest rate of your mortgage. If you plan to stay in the home a long time, it may make sense to pay points.
• Lock-ins – When you apply for a loan, the lender will quote you the rates. But rates can go up while you shopping for a home, so it’s a good idea to lock in the quoted rates. There may or may not be a fee to do so.
• Closing costs – Origination fees, appraisal fees, and other costs will be added to your loan. Ask your lender for a good faith estimate of the costs, and an explanation of any charges you don’t understand.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Tips to Get Financially Fit In the New Year

With 2012 just around the corner, SavvyMoney.com, a comprehensive resource for information, education and “do-it-yourself” tools for people coping with personal debt, is providing tips to help consumers reach a better financial future in the New Year. Written by industry expert and author Jean Chatzky, Director of Education for SavvyMoney.com, these tips are geared to consumers looking to set realistic, achievable financial goals.

Chatzky’s five tips for getting financially fit in the New Year include:

1. Make a plan for the year. Determine your overarching goal and write it down, whether it is paying down debt, putting more in retirement savings, or paying for a vacation in cash. Then, set some benchmarks by breaking that goal down into manageable pieces. If you’d like to save $5,000 by the end of the year, recognize that that’s $400 a month, $100 a week. If you focus on that weekly amount, you’re more likely to get there. And in all cases, it will help to track your spending for the first month by saving your receipts and recording them regularly or using an online program. Once you do, it will be easier to cut back.

2. Automate – but pay attention. Most people benefit from a relatively hands off approach to their savings. Set it up so your employer pulls money out of every paycheck and deposits it in your 401(k), or allow your IRA provider to deduct a set amount from your checking account. That way, you don’t have to make the decision to save. But that’s where the automation should end. You need to look at those investments once in a while and see that you’re on track. Make part of this year’s resolution about rebalancing your investments, either right now or on your birthday.

3. Put a windfall to work. Right now through the first few months of the New Year are ripe for windfalls. You might receive an end-of-year bonus, raise, or a tax refund. The best thing you can do with this money is pretend you never received it. Funnel a bonus or tax refund directly into savings, without giving yourself a chance to spend it (if you’re carrying credit card debt, use this cash to pay it off or make a solid dent in your balance). When you get a raise, bump up your retirement contribution to match the increase in salary – research shows that otherwise, you’ll adjust spending to the new amount and hardly feel like you’re earning more.

4. Spend smart. Start the year with a bill audit. Look over every bill that comes in this month, paying particular attention to the ones you pay automatically with a draft from your bank account or bill pay through your bank. You’ll likely find you’re paying for things you don’t need or didn’t even know you had – extra cell phone minutes, HBO when your favorite show is in the off-season, an equipment protection program from your satellite TV provider. Call your insurance providers and see if they’re willing offer you a better rate. Then make a commitment to save money every day, by clipping coupons, shopping around for the best deals, using energy efficient light bulbs and making sure your doors and windows are sealed for winter to conserve electricity.

5. Earn more. If you’re truly not going overboard with the discretionary spending and you still can’t get ahead, you may not be earning enough money to support yourself. If you haven’t gotten a raise in a while, it’s okay to ask for one now, but approach the situation lightly in this still-shaky economy. Go to your boss’s office prepared with ammunition – lay out how you save (or earn) the company money and how much competitors are paying people in your position. If you work for yourself, the New Year is the perfect time to raise your rates slightly.

For more information, visit http://www.savvymoney.com.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

5 Factors That Decide Your Credit Score

5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.