Credit Tips for Home Buyers, and Home Owners, to Consider

good-credit-vs-bad-creditYour Credit Score is the most obvious factor in your ability to getting your Mortgage Application approved. The higher your score, typically the less risk you pose to lenders and the lower your mortgage interest rate. So how is your credit score determined? And how can you improve it?
Here are some Credit Tips for Home Buyers to Consider:

• Consumers can obtain free credit score models on-line all with different ranges.
These scores can differ from the FICO score models used by mortgage lenders

      ♦ The Only Website authorized by law to provide the FREE Annual Credit
Report you are entitled to under the Fair Credit Reporting Act
annualcreditreport. com. 

• Mortgage accounts add more points to the FICO score since they are the most
difficult type of credit to qualify for.

• The higher the credit score, the more it drops after a delinquency.
• Most negative info remains on your credit report for 7 years.
• Revolving credit balances can have an extreme impact on credit scores.
     ♦ Revolving credit is classified as credit cards, overdraft protection on checking
accounts, and other lines of credit

• Most experts recommend keeping your overall credit card utilization below 30%.
Lower credit utilization rates suggest to creditors that you can use credit r
responsibly without relying too heavily on it, so a low credit utilization rate may
be correlated with higher credit scores.
You can calculate your credit utilization rate by dividing your total credit card
balances by your total credit card limits. The resulting percentage is a
component used by most of the credit scoring models because it’s often
correlated with lending risk.

• Closing revolving credit cards can reduce scores dramatically since it can alter the balance-to-limit ratio.
      ♦ All of the accounts on your credit reports count, even if they are closed.
• The older the average age of credit, the better it is for FICO scores.
• Seasoned credit is credit accounts that are over 2 years old.
• Consumers with the strongest credit scores tend to have a mix of different
types of accounts.
The key is to manage all these accounts responsibly. Credit scoring models are
looking to see if you can handle all different types of financing as they assess
your creditworthiness.

• When consumers find errors on their credit report, they should speak with a credit expert before calling the creditor directly.
Consumers often rush to call creditors about errors on their credit  report
thinking it will help them. Often times, they may make a statement that
confirms their guilt or makes it more difficult to reach a successful resolution.

Resources: Northshore Advisory. www.northshoreadvisory.com

 

 

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100% USDA Loans Now Cheaper: Lower MI in 2017 for USDA Loans

usda 2The USDA Guaranteed Rural Housing Development Loan (aka USDA RHD Loan) is extremely popular with Millennial Home Buyers.  That’s because the program requires Zero Down Payment. That’s right… 100% Financing is available to purchase eligible properties in select areas of Connecticut.

And, it just got more attractive  Just in time for the New Year, the USDA lowered its new year.jpgUp-Front Mortgage Guarantee Fee from 2.75% to 1.00%. And… it also reduced its Monthly Mortgage Insurance Premium from 0.50% to 0.35%

The USDA loan is now one of the most affordable home loans available, This fee reduction makes the RHD less expensive than FHA products. A USDA home loan can make owning a home less expensive than renting one  and could be the avenue for Millennial Home Buyers to move into a new home in 2017. 

What Is a  USDA Loan? The United States Department of Agriculture partners with approved local lenders to assist homebuyers with competitive interest rates and loan terms to buy their primary residence in select areas of Connecticut

The Program Offers:
usda 3100% Financing – No Down Payment is Required. Coming up with a Down Payment is one of the biggest barriers to entry into the housing market for Millennial Home Buyers. A USDA mortgage eliminates that obstacle.

Closing Costs Can Be Rolled Into the Loan Amount. The closing costs associated with obtaining a mortgage can be included in the loan amount when the appraised value exceeds the contracted sales price.
Liberal Credit Scores. The USDA Guarantee allows lenders to approve mortgages that would not qualify under guidelines for other programs. Applicants with credit scores down to 640 are eligible for this loan.
Debt:Income Ratios: To qualify, you must meet debt-to-income requirements. The DTI ratio limits are 29% (for PITI) and 41%. The reduced fees make it easier to meet these ability to pay guidelines.

Millennial Home Buyers often chose the more expensive FHA loan program, even when they are buying in USDA-eligible areas. If you are buying in a suburban or rural area, it pays to check USDA eligibility maps. Choosing USDA can save you the 3.5% down payment that FHA requires. And, now that the reduced mortgage insurance fees are in effect, you can save money each month over FHA

Eligible home buyers should weigh the benefits of a USDA loan.

Questions First Home Buyers Should Ask

questionsKnowing when to think about buying a home can be challenging. You may not know what to consider when making the decision and it can be hard to think long-term. Here are some Questions First Home Buyers Should Ask themselves to determine if now is the right time to begin the home-buying process.

Am I staying here for a long time? If you are planning on living in the same place for the next five to ten years, you might be better off buying a home. You recoup the costs associated with buying a new home by living in it and building equity. Talk to your tax advisor about the tax benefits of owning a home too. And when you sell your house in years to come, the more equity you’ll have, the better off you’ll be.

Is my rent higher than a mortgage payment? Rent can add up, and you are essentially paying off somebody else’s mortgage. If the cost of your rent is more than the cost of owning and maintaining a home, you might want to consider your buying potential now.

Do I have enough money for a down payment? If you can determine the cost of a down payment and the cost of a monthly mortgage payment, and still have a small cushion for any life emergency, it would be worth the investment to look at purchasing a home. Talking to a mortgage professional can help you determine how much house you can afford.

Is my credit good? A high credit score helps you get the best deal on a loan. The higher your score, the lower your interest rate should be. Reviewing a copy of your credit will help you determine where you need to be in order to afford the house you want.

If you answered these questions truthfully and feel buying a home is in your best interest, thenGet Pre-Approved getting Mortgage Pre-Approval is the next step. Every First Home Buyer has different things to consider and different options available to them.  Speaking with a mortgage professional is the best place to start.

Most First Home Buyers come to me for Mortgage Pre-Approval with big dreams, high hopes and a lot of questions. Too often folks want to buy a home in a price range they cannot afford. It is my job as a Mortgage Consultant to help First home Buyers set realistic expectations and help them see how big a house they can afford and how large a mortgage they qualify for. Getting prospective home buyers Pre-Approved for mortgage is an exercise to insure that “families live comfortably and financially secure in their own home.”