If you’ve decided to buy a home this year, you may have some questions about how your credit score will impact your purchase ability. This is a common question for many potential homebuyers, so here, I will discuss some of the primary things that you’ll need to know once you start the homebuying process.
Credit scores and credit reports will affect a borrower’s ability to purchase a home in a few different ways. Credit reports are a footprint that allow banks to review a borrower’s credit history. The information found in these reports will give them the information they need to determine the level or risk they’re taking by loaning money to this person. The higher the credit rating, the lower the risk for the bank. The lower the credit score, the higher the risk for the bank. In addition, remember that your credit score will affect the interest rate of the loan you obtain.
Here are some helpful tips on how to bolster your credit score and secure a good loan on the home of your dreams.
- Make on-time payments on all borrower accounts
- Missed or late payments will negatively affect your credit score
- Satisfy unpaid collections, judgements and tax liens (even if these are medical in nature, it’s ideal to pay them off or settle prior to purchasing a home)
- Establish a credit history by opening a credit line. We are often taught that credit cards are bad. However, they’re essential for establishing a solid credit rating to borrow future funds. The key is to keep the balance below 30% of the allowed limit, always. It’s ideal to pay the balance off each month as well.
- Minimize credit iniquities. Too many inquiries can cause credit scores to drop.
- Don’t close existing revolving trade lines if they’re in good standing. When you close a credit card you lose the on-time payment history which influences your credit rating. (1)
The specific details as to what credit scores are needed to obtain a specific home loan:
– Conventional Mortgage: credit score of 620
– FHA Mortgage: credit score of 580
– Veteran Affairs (VA) Mortgage: While the VA does not have a minimum credit score requirement, Quicken Loans requires a 620 credit score on all VA loans. (2)
The bottom line: the better your credit score, the easier it will be to get a loan for your home. Contact me today for information on what it will take to embark on your journey in buying or selling a home.
- Information courtesy of: Aaron Hicks, Mortgage Consultant with Homestreet Bank
- Information courtesy of: Jevon Domench of Academy Mortgage Corporation
Winter weather has arrived and we’re likely to have more snow and ice in the coming months. When the frozen weather hits, we want to stay warm and cozy, but not break the bank on heating bills. Here are some simple winter energy savings tips that can help you save energy and keep your heating bill under control.
Tip #1: Don’t let air leaks go unattended.
If your home is leaking cold air in and warm air out, you’re likely wasting hundreds of dollars every year. Be sure to caulk and seal around any small openings around windows or doors. Door frames should have weather stripping secured around door frames, especially if they are showing signs of deteriorating. If you have old ductwork in your home, call a professional heating and cooling company and ask about duct sealing. This can be an affordable and effective way to seal air duct leaks and will help keep harmful particles out of the air you breathe inside the home.
Tip #2: Service your furnace.
Plan on having your HVAC system serviced once a year. These regular check-ups are helpful because technicians can take a close look at the furnace or heat pump and be sure that everything is working at its peak. They’ll replace air filters, offer solutions on how to make the system more efficient during the winter, and will point out any problems that may need repair.
Tip #3: Turn your thermostat down.
When you keep your thermostat in the 60 to 70 degree range without changing it all the time, you can save up to 5% on heating costs. If you keep your thermostat down to 68 degrees at night and instead use extra blankets while you sleep, you could be saving a lot of money every year. In addition, if you plan on being away from your home for an extended period of time, set the thermostat to 55 or 60 degrees. There’s no need to keep the heat on in an empty house.
Tip #4: Replace old appliances.
Has it been a while since you’ve replaced your appliances? Did you know that old appliances (especially old refrigerators) are huge energy drains! Replacing your old gas or electric appliances with those that have Energy Star® labels can be a great way to save energy and decrease your monthly utility bills.
These tips aren’t just helpful in the winter, either. They’re helpful all year long! Stay warm this winter!
If you have lived in your home for a while and you’re considering completing a refinance, you likely have some questions as to when or if it’s the right time to do so. Refinancing is a big decision, as it requires a lot of details and time, but it can have some great benefits to it once it’s all said and done. When deciding whether or not you want to refinance, one of the key questions is to ask yourself how long you plan on being in the home. If you intend on staying in the home for several years, a refinance could be a great choice, as you’ll likely recoup the closing costs over your time spent there. For those that are looking to move in a couple of years, refinancing might not make as much sense.
Aaron Hicks, Mortgage Consultant at HomeStreet Bank in Vancouver provides some great reasons to take into consideration on when a refinance might make sense for you.
Reason#1: Reduction in interest rate
Refinancing to lower your interest rate and payment is one of the main reasons why people choose to refinance. Hicks says, “There are still many people out there that have a much higher interest rate on their home loan than they should considering the current market. Refinancing could very well favor a lower interest rate or reduced monthly payment that reduces a person’s overall outgoing monthly debt.”
Reason #2: Reduction in loan term
If you want to pay off your loan faster, refinancing to significantly lower your loan term could be a fantastic idea. In most situations for example, if a borrower wants to refinance from a 30-year fixed mortgage to a 15-year fixed, the borrower will save a substantial amount of money in interest every year.
Reason #3: Cashout.
If you have been in your home for a while and it has gained significant equity, many homeowners choose to refinance and take cash out of the equity. Hicks says, “Some people do this to consolidate liabilities, make home improvements, or use the cash to invest in additional real estate. The ultimate goal here is to have the cash you are taking out work toward future financial freedom.”
Reason #4: Change loan programs.
If you have an adjustable rate mortgage (ARM), it can be very helpful to refinance to a fixed rate loan. Hicks shares, “ARMs carry the risk of having their interest rate increase significantly. When this happens, this can cause severe financial burden on a person’s finances.”
There are many reasons to consider a refinance, but each homeowner’s situation is different. What may work for one, may not work for another. Sit down and look closely at your home loan and what is left to be paid back and consider whether a refinance is right for you.