Plano Home Real Estate MortgageWhether you’re just out of college, recently married or simply haven’t jumped into the market yet, buying your first DFW home is an exciting prospect. It can also be an expensive one, which is why most people will take out a mortgage to help finance the cost.

If you are planning on engaging with a mortgage lender, you’ll need to have your finances in order. In today’s post, we’ll share a few key reasons why you’ll want to check your credit score well in advance of buying your first home.

Your Credit Score Is A Signal For Lenders

As you know, mortgage lenders have a responsibility to lend to those individuals and families who are at a low risk of default. So when a mortgage lender starts to dig into your financial background, they are looking at your credit history and credit score to help them assess that risk.

Note that having a low score doesn’t necessarily mean you have bad credit. If you’re still in your 20s and have only had a credit card, your score might be low even though you are fully capable of managing a mortgage.Plano Home Loan

Your Score Impacts Your Mortgage Interest Rate

As mentioned above, your credit score helps to signify your risk. If your credit score is in a lower range, perhaps a 640 or 660, you’re presenting a greater risk than someone with a score of 760 or 800. Because of this, the interest rate that you pay on your mortgage will in part be determined by your credit score. Those individuals who present a higher risk pay a higher rate to compensate. And vice versa, if your credit is spotless you can expect to pay a lower interest rate.

You’ll Need Time To Challenge Any Issues

Finally, you’ll need to give yourself some lead time to challenge any irregularities with your credit report. The credit reporting agencies aren’t perfect and they do make mistakes. There may be some old, retired credit card or other debt sitting on your report which is holding the score down. Even worse, there may be some incorrect delinquency or other error which ends up as a big red flag for potential mortgage lenders.

Plano mortgage ratesAs you can see, it’s worth spending the time to check your credit score. You get to check it for free once per year, so take advantage of the opportunity. And when you’re ready to discuss buying your first home, contact Warren Whitaker by phone or text at 972.523.8353 or Warren@Lendhome.com. He will share how to navigate the credit score and mortgage process so you can land the home of your dreams.

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Plano Home LoansTake a look at this short video on what affects your monthly mortgage payment ~ the amount of the down payment the size of the mortgage loan, the interest rate, the length of the repayment term, and payment schedule will all affect the size of your mortgage payment. In bullets:

  • Down payment

  • Loan size

  • Interest rate – fixed or adjustable

  • Repayment term – how long

  • Payment schedule – how often

all affect the size of your payment.

Plano Texas real estateWith all of the care and consideration that can go into deciding if a home is the right fit, it can cause a headache to realize that you may not have a lot of time to put in an offer. It’s certainly important to weigh all of the factors of buying a home before deciding to put yourself in the ring, but here is why you’ll want to come to a conclusion quickly when it comes to a home you love.

It’s An Ideal Home, For You…And Many Others

If you’ve finally found a home that you can see yourself and your family in, and you’re seriously considering putting in an offer, there’s a good chance that there are many other people who might also be quite interested in it. While you’ll need to determine whether it’s the right neighborhood, size and price before putting in an offer, you’ll want to consider these decisions relatively quickly so that someone doesn’t beat you to the punch.Plano Home

A Quick Decision Means You’re Serious

Most home sellers are interested in getting an offer that is quite close to their asking price, but like anyone, they can have intuitions about potential buyers and may be more comfortable with someone who is reliable. By posing an offer to the seller in short order, you will make them aware of your keenness and interest, and – at the end of the day – this may actually inspire more trust in them. If they need to sell the home quickly or are planning a move of their own soon, this can make a considerable difference.

Plano HomesThe Prices Are Always Rising

If you’ve been perusing the market for a while, deciding to make an offer on a home you can really see yourself in may end up being a money saver. According to a recent Dallas Morning News article, North Texas apartment rents are rising at a record pace.  The average rental price in North Texas has risen by 14% since 2011 to $975 per month, and home prices are also beginning to increase. This means that it’s becoming an even better investment to put money into property instead of rent, so that you can make up the difference in your finances in the present and the future.

It’s important to make an educated decision when deciding to purchase a home, but by deciding quickly if a home works for you and making your interest known you may have more success.

Plano Home LoanThe last few years have been financially difficult for millions of homeowners, with job losses and decline in home values devastating families all over the US. As a result, a great number of homes have gone through short sales, which has had a detrimental effect on consumers’ credit ratings.

If you’ve considered or experienced a short sale, one of the biggest concerns you may have is how it will impact your ability to purchase another property in the future. Here are five key variables on how a short sale can impact your next home purchase.

Duration Of Delinquency Plays A Big Role

Short sale transactions take a long time to complete, depending on the state that you live in and the bank’s policies. During this process, homeowners in a short sale may have trouble continuing to make monthly mortgage payments. The duration of delinquency can have a major negative impact on your credit score, even before the final short sale is reported.

Deficiency Judgments May Have Long-Lasting Effects

A short sale usually comes with a large debt that is left unpaid that banks look to settle. In the case of short sale, this debt is the difference between the amount owed and the amount for which the home is sold.

When you’re on the hook to come up with this difference, a deficiency judgment is filed through the courts and is attached to your credit rating as a negative debt outstanding. This can have a lasting effect on your Plano Home Loanscredit rating, and can hinder your chances of buying a home in the future.

Lower Credit Scores Often Mean Higher Interest Rates

The poorer your credit rating, the more likely you are to be charged a higher interest rate when borrowing money. With the large cost of a home purchase, a high interest rate over a long amortization period can prove to be extremely costly, which many home owners may find difficult, if not impossible, to pay for.

Larger Down Payments May Be Necessary

Many banks and credit unions have specific guidelines that require you to put more money down on a future home purchase if you’ve experienced a housing-related credit issue in the past. Certain banks may request as much 20 percent for a down payment. Many homeowners may not be able to come up with such funds, or may need a lot of time to build up such capital before being able to buy a house.  To find out how much of a down payment may be required CLICK HERE.

Plano Short SaleA Long Waiting Period Might Apply

Since the housing crisis in the US, many major mortgage insurers and investors, like Freddie Mac, FHA, and Fannie Mae, have implemented new rules on how long you have to wait after a short sale before you can purchase again. Depending on the type of loan, this can be anywhere between two to four years on a short sale.  CLICK HERE for waiting requirements.

It’s critical to stay informed and understand how these rules can impact your ability to buy a home in the future after a short sale. Speaking with a seasoned mortgage specialist can help you stay in the know, and help you assess your finances and credit health before you plunge into the real estate market in the future.

Resources

How does a short sale affect my ability to purchase

Buying a house after a Short Sale in 2014

Will a Short Sale Ruin Credit? – Home Buying and Selling

Short Sales Affect Credit – Home Buying and Selling

Can You Get a Home Loan After a Short Sale?

How to Revive Your Credit Score after a Short Sale

How Does A Short Sale Affect Your Credit Score?

Just how do you figure out how much home you can afford?  In this short video, we’ll take a look at how you can calculate your maximum  buying power.

We need your comments or questions.

Please share if you find this video helpful.

If you are contemplating to buy a house or not, here are a few basic things to consider.

  • +Do you feel comfortable that your employment is secure and that you can afford it?

  • +Do you have the time and desire to keep a home in good repair?

If the answer is yes, then there are some very basic and important steps to buying a house.

Whether you are a first-time home buyer or not, you should work with a real estate agent because they understand the real estate market, can be a valuable source of information concerning the home buying process, as well as assist you in preparing a real estate sales contract.  All real estate agents have access to the Multiple Listing Service (MLS) which is a service that lists all the properties for sale by most major brokers across the country. Normally the seller pays the real estate brokerage sales commission which causes a question of who is representing you in the sales transaction.

In today’s real estate market you can get rock bottom deals. A new home may cost you a little more, however you may have to spend big bucks to bring a pre-owned home up to current energy codes and you may incur many other repairs.  Savvy pre-owned home sellers understand new home competition and will make upgrades and repairs to attract the right buyer.

There are three known requirements in regards to buying real estate, location, location, location. Look at neighborhoods, schools, nearby shopping and other services that play a large part in making a neighborhood attractive. These features may not affect you now, but they may affect your future buyer. This factor will also apply to a house that has a negative aspect that you feel you can live with; future buyers may be turned off by it. Other factors to consider are:  crime rates, taxes, transportation, town services and the local zoning laws.

Can you presently afford to buy a house?  Can you obtain a mortgage if the cost of the house is more than three times your annual household income? The mortgage company will hold your monthly payments to approximately 33% of you salary. Little debt and a larger down payment will qualify you to buy a more expensive home.

Considering that a home mortgage is one of your largest investments, approach it in a pragmatic manner and be conservative. First this is your home, your nest, your abode, etc. and an investment second. If you are betting on the future and over-buying, you stand a good chance of losing it all which would limit or maybe even prohibit future purchases and cause your credit rating to be marred as well as hiking future interest rates on all borrowed funds.

If you decide not to retain a real estate agent, here are several tips you should follow as you pursue one of the biggest purchases in your life. Ask your family and friends for a referral to Mortgage Loan Officer and have your credit reviewed and your home loan pre-approved.   If you are short on cash, try negotiating with the seller to pay some of the closing costs. This is not an unusual request for buyers to ask and the worst case scenario is that they will just say no.

Buying a house is a legal action requiring your signature on legal documents and a mortgage note. If you have retained a real estate agent, she/he is qualified through training and licensing to advise you and to protect your interests. If the real estate agent were to breach a trust to the buyer or seller, he would stand to lose his real estate license. If you don’t have a broker or if you feel uncomfortable about what you have been told or read, you will want to retain a lawyer to review all written documents prior to closing.

RESOURCES

What are the steps involved in buying a house? – msnbc.com

Basic Tips and Ideas for First-Time Home Buyers | Buyers Basics 

Buying a Home/U.S. Department of Housing and Urban – HUD

5 key steps to buying your first home, tax credit or no – USA Today

How to Buy a House: 7 steps – wikiHow

If you “like” this information – please SUBSCRIBE for my next post or share with the links below.

Okay, its’ happened to you, or a friend, or a family member, or a client…Life got in the way and everything went to H-E-Double-Hockey-Sticks fast.  So now what?  You “lost” the house, couldn’t sell-afford-whatever.  Hopefully…hopefully, you received advice or figured it out that a Short Sale (this is where you sale the home, with your lender approval, for less than current balance) or Deed-in-Lieu (where you transfer the ownership of your property to the owner of your mortgage in exchange for release from your mortgage) was an easier road than a flat-out-walk-away-foreclosure.

 

So let’s move on – pick up the pieces – pull on the boots and figure this out.  How long does it take to get a new loan for a home after a foreclosure or short sale?  There are many variables and below are some general guidelines.

 

All scenarios below assume the customer has re-established credit with good credit scores…

 

Previous SHORT SALE with new FHA purchase loan

  • Can purchase now with no mortgage default or late payments listed on credit report
  • 3 year wait if in default or late payments at time of short sale closing
  • Reduced wait time if borrower has re-established good credit and can show more qualifying circumstances (individual underwriter decision)
  • 2 year wait with 20% down
  • 4 year wait with 10% – 20% down
  • 7 year wait with less than 10% down
  • 2 year wait if able to document extenuating circumstances with more than 10% down

 

SHORT SALE with new Fannie Mae purchase loan

  • 2 year wait with 20% down
  • 4 year wait with 10% – 20% down
  • 7 year wait with less than 10% down
  • 2 year wait if able to document extenuating circumstances with more than 10% down

SHORT SALE with new Freddie Mac purchase loan

  • 4 year wait
  • 2 year wait if able to document extenuating circumstances

FORECLOSURE with new FHA loan

  • 4 year wait
  • 2 year wait if borrower has re-established credit and can document extenuating circumstances

FORECLOSURE with new Fannie Mae loan

  • 7 year wait from completed foreclosure sale date
  • 3 year wait if borrower can document extenuating circumstances.  Additional underwriting requirements apply
  • 7 year wait for 2nd home, investment property, or cash-out refi

FORECLOSURE with new Freddie Mac loan

  • 5 year wait from completed foreclosure sale date
  • 3 year wait if borrower has re-established credit and can document extenuating circumstances

 

**ALERT  “Extenuating Circumstances” are NOT applicable in most situations and is a judgment call for the underwriter.

 

**Disclaimer – The above is the opinion of Warren Whitaker.  Everyone’s situation is different.  Contact your professional for specific advice.

 

RESOURCES

Short Sale – How to Handle a Real Estate Short Sales

Short Sale Option As An Alternative To Foreclosure

Avoiding Foreclosure Resource Center 

Avoid Foreclosure | Stop Foreclosure | Foreclosure Help

How to Avoid Foreclosure Before It’s Too Late – Forbes

If you “like” this information – please SUBSCRIBE for my next post or share with the links below.

 

Part 2 – Here are 6 ways to help and improve your credit score:  

 Click here for Part 1

1.  Piggyback on someone else’s good credit

The fastest way to establish a credit history can be to “borrow” another’s record, either by being added to a credit card as an “authorized” or joint user or by getting someone to co-sign a loan for you.  Keep in mind though it is a two edged sword.  You can gain good credit, however if either of you default, both parties suffer. (The co-signer has basically promised to make good on this account, so any delinquencies will show up on her credit report as well.)

 

Keep in mind that even if you get added to someone’s credit card, you may not be able to piggyback on his or her credit. Some credit issuers won’t report authorized users to the credit bureaus, particularly if the user is not married to the original card holder. If the point is to give you a credit history, the person who’s adding you as an authorized user should call the issuer and ask how (or if) your status as a user will be reported.

 

2.  Apply for a secured credit card

If you can’t get a regular credit card, apply for the secured version. These require you to deposit money with a lender and your credit limit is usually equal to the deposit.

 

You’ll want to screen your card issuer carefully because there are a lot of bad guys in this particular niche of the credit world. Some charge outrageous application or annual fees and really high interest rates.

 

The first place you should look is your credit union if you belong to one. You can also check at www.bankrate.com for a list of secured credit card issuers.  You may also call my office for a list of cards I recommend.  Ideally, the card you pick would:

  • Have no application fee and a low annual fee
  • Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
  • Be reported to all three credit bureaus.

If the issuer doesn’t report to the credit bureaus, the card won’t help build your credit history.

 

3.  Get a finance company card

Gas companies and department stores usually use finance companies, rather than major banks, to handle their credit transactions. These cards don’t do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.

 

Again, don’t go overboard. One or two of these cards is enough. If you get many more, you may find that later in your life these accounts could prevent you from getting the highest possible credit score. That’s not a reason to avoid them completely, because right now they’ll do you some good. Just don’t apply for half a dozen.

 

4.  Get an installment loan

To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages).

 

Once you’ve used plastic responsibly for a year or so, consider applying for a small installment loan from your credit union or bank. Keeping the duration short — no more than a year or two — will help you build credit while limiting the amount of interest you pay.

 

5.  Apply for credit while you’re a college student

There’s no easier time to get a card than while you’re a college student.  Lenders are willing to take risks with you that they won’t once you graduate, probably because they know that your parents’ willingness to bail you out will end once you get your diploma.

 

Be careful, though. Look for a card with a low or nonexistent annual fee and low interest rates. For now, just get one: Opening a slew of credit accounts in a short period of time can make you look like a risky customer.

 

6.  Use revolving accounts lightly but regularly

For a credit score to be generated, you have to have had credit for at least six months, with at least one of your accounts updated in the past six months.

Using your cards regularly should ensure that your report is updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it, the issuer could cancel the account. Just remember the credit tips mentioned earlier:

  • Don’t charge more than 30% of the card’s limit.
  • Don’t charge more than you can pay off in a month. Keep in mind, you don’t have to pay interest on a credit card to get a good credit score, and it’s a smart financial habit to pay off your credit cards in full each month.
  • Make sure you pay the bill, and all your other bills, on time.

 

 

Resources

9 fast fixes for your credit scores – 1 – debt management – MSN Money

What steps should I take to start my credit score?

10 Ways to Improve Your Credit Score | Entrepreneur.com

Seven Steps to Stellar Credit

Five Credit Score Secrets of the Young and FICO-Savvy | Fox 

It is vitally important to have good credit today.  Not only does it determine the interest rate you will pay when you buy a car or a home, but a good credit history is also a factor when you are applying for a job, renting an apartment, obtaining car insurance rates or applying for a credit card.  What may seem like a tiny mistake to you, can actually drag you down for many years.  One late payment, maxed out credit cards, or taking out several loans at the same time all appear to be minor mishaps, however, the credit bureaus view them as a black mark on your credit report and creditors respond accordingly.

It is not that hard to establish and keep good credit, especially if you are just starting out.  Follow these simple rules, and your credit will sparkle.

Check your credit report

Before anything else, you want to see what creditors are saying about you.  Do this by going to www.annualcreditreport.com.  At this website, you can obtain your credit report for free annually from the three major bureaus: Equifax, Experian and Trans Union.   Credit reports are used to create a credit score, which is a three-digit number lenders typically used to gauge your creditworthiness. However, with this free credit report, your credit score is NOT included.  Credit scores range from 350 to 850 and lenders respond best when the score is greater than 620, which is the minimum credit score required to get a home loan.  Lenders will look at the report itself, as may the landlords, employers and insurance companies who use credit to evaluate applicants.

 

Establish checking and savings accounts

Lenders view checking and savings accounts as signs of stability, yet many people overlook this simple thing.  Opening an account is also one of the few things you can do to start building a financial history. While you must be at least 18 to get a credit card in your own name and can be legally held to a contract, many banks have no problem letting you open a bank account.

 

Understand the basics of credit scoring

A basic knowledge of credit scoring will help you build your score.  Two of the most important factors in building your score are:

  • Whether you pay your bills on time.
  • How much of your available credit you actually use.
  • What is the mix of credit that you use – revolving or installment
  • How many tradelines (that’s credit-speak for number of accounts listed on your credit report) do you have.  Ideally, to maximize your credit score, it is recommended that you have 4 to 5 “active” tradelines.

It’s absolutely essential that you pay all your bills on time. All it takes is a single missed payment to trash your credit score — and it can take seven years for the effects to completely disappear.

 

You also don’t want to max out any of your credit cards, or even get close. You will get the best possible credit score and prevent yourself from getting over your head in debt if you keep your credit balances to less than 30% of your credit limits.  (This means if you have a $3,000 limit your balance should stay below $1,000.)

 

And remember, you don’t need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time.

 

So here are 6 ways to help and improve your credit score:  To be continued in Part 2…

Click here to go to Part 2

 

Resources

9 fast fixes for your credit scores – 1 – debt management – MSN Money

What steps should I take to start my credit score?

10 Ways to Improve Your Credit Score | Entrepreneur.com

Seven Steps to Stellar Credit

Five Credit Score Secrets of the Young and FICO-Savvy | Fox 



Tip #1

In order to qualify for the VA loan, you should have served in the Air Force, Army, Navy, Coast Guard or Marine Corps. Additionally, you should have served for a certain period. If you have served during the war time, it is essential that you have served for at least ninety days. If you have served during the peacetime, you should have served at least one hundred eighty-one continuous days. Additionally, you should have not been discharged dishonorably.

 

Tip #2

You will be eligible for the VA loan for other conditions as well as long as you are eligible as determined by the VA. You may qualify if you have been dismissed because of disability, which resulted from rendering your services or when the government authorizes it for its convenience. However, all of this has to be properly determined first.

 

Tip #3

There are different people who can benefit from this type of loan. Aside from the military personnel and the veterans, the surviving spouse of the deceased qualified personnel can also avail of this. The surviving spouse should remain unmarried in order to be eligible. Many want to avail this type of loan not only because of the fixed rates but also because of the fact that it guaranteed by the U.S. Department of Veteran Affairs.

 

Tip #4

You will be able to know if you are eligible by applying for a Certificate of Eligibility. Go to http://www.benefits.va.gov/homeloans/eligibility.asp to obtain your Certificate of Eligibility.

 

Tip #5

More information about the VA home loan process can be found at http://www.benefits.va.gov/homeloans/

 

For more information on VA home loans or eligibility, credit, or qualifying, please call Warren Whitaker at 972.523.8353 or email Warren@LendHome.com.

Resources

Home Loan Guaranty Services – U.S. Department of Veterans Affairs

Eligibility for the VA Home Loan Program – Loan Guaranty Home 

Information on the Home Loan Program – Veterans Benefits 

VA Home Loans – A Quick Guide For Homebuyers and Real Estate 

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