Credit Dos and Don’ts During the Mortgage Process

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A good credit score is critical when it comes to obtaining the best interest rates and terms on a mortgage. Here are some Credit Dos and Don’ts when looking for a mortgage.

  Do Stay Current on All Existing Accounts. One 30 day notice can hurt you.

­   Do Continue to Use Your Existing Credit As Normal. If it appears your are changing your pattern, it will raise a red flag and your score could go down.

 Don’t Apply for New Credit. Every time you have your credit report pulled by a potential creditor or lender, you can lose ponts on your credit score. This includes co-signing for a loan.

 Don’t Pay-Off Old Collection Accounts or Charge-Offs. Talk to your loan officer first. Yes, you are liable for these debts, but now might not be the time. If you must pay-off these old debts, do it through the closing process of your mortgage. Be sure to request a “letter of deletion” from the creditor.

 Don’t Close Credit Card Accounts. When you close an inactive credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.

 Don’t Max Out or Over Charge Credit Card Accounts. Don’t make any large purchases. Keep your credit card balances at 30% of your credit limit before and during the application process. If you do pay down balances, do it equally across the board.

 Don’t Consolidate Your Debt. When you combine all your balances into one or two credit cards, it will appear that you have “maxed out” on that card and you will be penalized.

­   Do Call Your Loan Officer. Talk to you Loan Officer before taking any action that may possibly affect your credit score.

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Get Mortgage Pre-Qualification in 2015

If you are thinking about purchasing a new home in 2015, it is important to be properly prepared. A homebuyer must lay down the necessary groundwork before they are able to purchase the home of their dreams. This is why Home Sellers and Realtors© require First Home Buyers to get Mortgage Pre-Qualification before they go too far into the home buying process.

In order to help you better understand what a Mortgage Pre-Qualification is all about, here is more information about the Mortgage Pre-Qualification process.

What is a Mortgage Pre-Qualification? Getting pre-qualified is the first stepFHA MI in the mortgage process, and it’s generally very simple. You supply a bank or lender with your overall financial information, such as your income, paystubs, W-2’s, and credit. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify.

When Should You get Pre-Qualified? The best time to get pre-qualified is before you start looking for a home, as soon as you decide you are interested in buying.
Getting pre-qualified will give you a general idea of your home buying budget, how much of a monthly payment you can comfortably afford, and it will allow you to estimate the loan type that is right for you. Also, when you’re searching for a home, getting pre-qualified will help you and your Realtor to know which homes are in your price range.

How Do You Get Pre-Qualified? In order to get Pre-Qualified, you check out different lenders to find out which one is the best “fit” for you. Chose a Loan officer you are comfortable with and one you can trust to guide you through the lengthy home purchase process. There is usually no cost involved, and does not include an in-depth evaluation of your ability to purchase a home.

What’s the Next Step After a Pre-Qualification? After you have been Pre-Get Pre-ApprovedQualified, the next step is to be Pre-Approved. The Mortgage Pre-Approval process tends to be much more involved and much more thorough. In the Mortgage Pre-Approval process, your application will be reviewed by an underwriter and your Loan Officer will have more detailed information to advise you on the best mortgage options available to you.

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Call Me at 860.945.9284 to take advantage of my FREE Mortgage Pre-Approval service and discuss the right mortgage options for your family

Your Credit Score and Your Mortgage Application

Your Credit Score is the most obvious factor in your ability to getting your Mortgage good-credit-vs-bad-creditApplication 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?

Your Credit Score is based on the following 5 factors:
1. Your Payment History. (35% of your score)
♦ Your payment history shows whether you make your monthly payments on time, how often you might miss making your payments, how many days past due the due date you eventually make your payments, and how recently your payments have been delinquent.
♦ How To Improve It: Make all your monthly payments on time. The more payments you pay     promptly, the higher your score. Each time you miss a payment, you risk losing valuable points on your score.

2. Amount Owed on Loans and Credit Cards.(30% of your score)money management
♦  Your score is also based on the entire amount you owe, the number and types of credit accounts you have, and the proportion of money owed compared to how much credit you have available.
♦  How To Improve It: Smaller balances on your credit cards can raise your score – if you pay on time. High balances and maxed out credit lines will lower your score. Keep your credit card balance to less than 30-50% of your credit line.
New loans with little payment history may drop your score temporarily because your report will show the recent inquiry into your report to obtain the new debt.
Loans that are closer to being paid off can increase your score because you have a longer track record of paying the installments on time.

3. Length of Credit History. (15% of your score)
♦  The longer you can show a history of meeting your obligations in a timely manner, the higher your score will be.
♦  How To Improve It: This simply takes time. No credit or no no recent credit is not necessarily a good thing. It may seem wise to avoid using credit, or to avoid applying for credit, but it can actually hurt your score if mortgage lenders have no credit history to review.

4. Types of Credit Accounts.(10% of your score)
♦  A mix of credit accounts is best.
♦  How To Improve It: If you only have one type of credit account, add another type when it makes financial sense to do so. A mix of car loans, personal loans, retail store accounts and major credit cards will improve your score – if you manage them wisely and make the payments on time.

5. Recent Credit Activity. (10% of your score)
♦  Steady credit activity is best.
♦  How To Improve It: If you’ve opened a lot of accounts recently, or applied to open new accounts, it suggests potential financial trouble and can lower your score. The lender will see the inquiry on your report and require a letter of explanation as to why you opened these accounts and whether there are balances  that haven’t shown up on your report yet.
However, if you’ve had the same accounts for some time and you repay them on time – even after some payment troubles – your score will eventually go up.

Review Your Credit Report Annually
It’s smart to stay on top of your credit report, and to kow what potential mortgage lenders will see. You can request a FREE Annual Credit Report from each of the 3 major credit reporting agencies – Equifax, TransUnion & Experian once a year at www.AnnualCreditReport.com

Review your reports carefully, as each one may contain inconsistent information or inaccuracies. You have the right to dispute any error by contacting the agency with in 30 days of receiving your report.

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No Jobs Slows Housing Recovery

“While rising interest rates, inventory shortages and dwindling investor purchases have all weighed on home sales, “fundamentally … the slow pace of the single-family housing recovery reflects steady but unspectacular job growth” according to a recent Harvard University study.

kidsThe lack of jobs, coupled with large student loan debt caused the U.S. home ownership rate to drop again in 2013, thanks in no small part to the fact that 18 million 25 to 34 year old adults were found to be still living with their parents last year helping bring the home ownership rate down to 65.1 percent

It may take 10 years before those 30-somethings and Millennials make their presence known in the owner-occupied market. Until then, continue to expect rents to increase and property values creep up. The market will have changed by then and it will be more expensive to fulfill the American Dream of home ownership.

Now Is the Time to Buy .. if you can.
Call Me @ 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my FREE Mortgage Pre-Approval service. We’re licensed in all 6 New England states; NY & FL too. I’m here to help.

What Determines a Borrower’s Mortgage Rate?

Here’s a follow-up to my blog What Makes Mortgage Rates Go Up and Down. Now let’s talk about What Determines a Borrower’s Mortgage Interest Rate?

As we discussed, many factors determine the interest rate on a particular mortgage. A Interest Rates Will Riseborrower’s rate will reflect general conditions in the financial markets, the type of mortgage they chose, the lenders assessment of the risk involved in your financial situation and, of course your credit history.
That’s why a quick “rate quote” over the phone or a rate you saw online or pulled from a newspaper advertisement may not reflect the interest rate you will finally be offered once a lender has evaluated your specific circumstances as presented in your mortgage application.

Risk Matters
When lending money to finance a home purchase, lenders and their investors seriously consider the risk that these borrowers may not repay the money loaned to them. For example: the larger the down payment, the greater the investment in the property and the lower the perceived risk. Therefore, the lower the mortgage interest rate. Vice versa: The smaller the down payment, the less equity in the home and the greater the risk of default. The higher the risk, the higher the interest rate

When someone calls me inquiring about interest rates, I tell them, “I don’t sell interest rates.” I go on to explain, “There is no “one low mortgage interest rate.” Rates fluctuate daily-even hourly-with movements in the financial markets. A borrower’s final interest rate is determined on the day it is “locked” by an assessment of:FHA MI
•  Mortgage type
•  Mortgage term
•  Loan amount
•  Type of property
•  Credit Score
•  Debt-to-Income Ratio
•  Amount of cash the borrower will contribute to the down payment, closing costs and points.
I might tell them, “Today, at noon on July 2, 2014, it is conceivable for a buyer want to buy a single-family home selling for up to $400,000 with a conventional 30 year fixed rate mortgage has a credit score greater than 740, is able to make a 20% down payment and is willing to pay all closing costs and about 2 points to get a rate in the 4.00% range. If any of these criteria do not fit your situation, then the rate will be higher. How does that sound to you?”

Bottom Line
In the final analysis, it is the borrower’s unique personal situation that determines his/her final mortgage interest rate. His financial position will help him decide which mortgage program right for him and what interest rate scenario is right for his family budget, how big a house he can buy and how large a mortgage he can afford to repay. My job was to guide you to that decision.

Do not hesitate to reach out to me with any questions or concerns you may have about how your situation might impact your mortgage interest rate. I’m here to help.

Is It Cheaper to Rent vs. Buy?

Is Renting or Buying a better financial bet? Trulia says No! One young family in Litchfield County CT agrees!

dreamAlthough mortgage rates have risen in the past 6 months, home price gains have slowed. Trulia says “Buying a home now is 38% cheaper than renting an apartment.”

They caution that the gap may narrower if spring demand causes prices to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to a strengthening economy and Fed tapering.

I working with a young couple now who, with a new baby, are looking for a real home. I’ve Pre-usda 3Approved them for a mortgage sufficient to buy $185,000 house with mortgage payment, tax and insurance escrow plus MI that is $150 less than their current rent.
The Bonus is that with a USDA Rural Housing Development loan, they just might be able to move in with 100% Financing and roll their closing costs into the loan amount That $1800 savings per year is a lot of diapers.

The Spring 2014 Buying Season is near! Now is the Time To Buy!

Call Me at 860.945.9284 to discuss the right mortgage option for your family and to take Get Pre-Approvedadvantage of my FREE  Mortgage Pre-Approval service. Then call your agent to schedule a showing and be ready to make an offer.

Banks To Layoff Thousands! What It Means To You.

News FlashJPMorgan Chase plans 8,000 layoffs in 2014 on reports of double-digit declines in their mortgage and retail banking business. That’s in addition to 16,500 layoffs in those divisions last year. Other banks expected to make similar announcements soon.What does that mean to you?
1.      Rising Interest Rates. JPMorgan and other big-box banks expect interest rates to continue to rise in 2014. With higher rates, fewer Americans are walkingRising Home Prices through their doors seeking to refinance their mortgage. They expect that trend to continue.
2.     Service. Fewer loan officers in the branches means home buyers will be directed to a sales clerk at an 800#. Purchase or Refinance…borrowers will not be able to talk face-to-face with some about the most significant transaction in their financial lives.
3.     Products. As the level of service declines, the range  and complexity of the product line has to decrease also to adapt to the experience of the sales force.
So I ask …Do you want to be a faceless #, Or…do you want to work with a Mortgage Broker who will continue to meet up close and personal with his clients? I will bring 40 years of financial services experience to the table along with direct relationships with over a dozen trusted lenders who offer a wide range of mortgage options.
I have the keys to help families live comfortably and financially secure in their own home; and I will uphold my promise to ‘”Do my best to provide the right mortgage solution at the right rate to meet a family’s unique situation.”