Tag Archives: credit score

Achieving The American Dream

Achieving The American Dream

The American Dream. Having a loving family, attaining a stable job, and most importantly possessing your own home, even if it’s not in Santa Maria, California or somewhere near the Central Coast. All of these accomplishments can be challenging at times, especially taking the next step of  having your own home. With financial planning and legalities, it all starts with a bit of knowledge of the industry and some research.

Purchasing a Home in the United States

The United States Real Estate market is tremendous, especially the Santa Maria Real Estate area since it is continuing to grow. One thing to keep in mind is that each state has their own unique set of policies, set of laws, and not to mention taxes. So don’t be surprised when you notice different tax rates in various cities and states. Also Keep in mind that their are many incentives for individuals such as veterans who have served our country. Veterans qualify for loans known as VA Loans and many lenders out there offer these kinds of incentives that better help them achieve the home of their dreams.

Property Taxes

As mentioned above, taxes vary by state. So when you are asking yourself how much house can I afford, do not forget to include property taxes as the tend to add up. They are used to fund public projects such as schools, parks, and things such as law enforcement. Knowing ahead of time what kind of taxes you will be paying will give you a better picture of the cost of living in your new home, especially if you are planning on moving out of state; do some research.

Educate Yourself On the Real Estate Market

One should also know what exactly drives house prices in the market, especially in the Central Coast Real Estate area because it has gained popularity in past years. Instability in house prices vary from state to state and from region to region. For example, a home in the Arroyo Grande, California will not have the same price as a beach from property in the Pismo Beach, California area even though their proximity is not to far apart. Same applies to locations such as Los Angeles, California and New York (especially within the city). We at Greater Mortgage Solutions and Valley Hills Realty want to teach you about the macro and micro trends that influence the real estate market. That way you can make a better decision when making a mortgage deal that is being offered to you.

So when you, a family member, or a close friend of yours is ready to achieve The American Dream, consider allowing one of our team of experts at Greater Mortgage Solutions and Valley Hills Realty help you attain the precise mortgage and the home you have always wanted. We are filled with team members that are ready to help you every step of the way.

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What Everyone Should Know About Credit Scores

For starters there are different classifications for what is considered a good credit score. They can also be described as poor, average, good, great, excellent, or even exceptional based on the credit score number that you have. Your credit score will fall within one of these categories, but keep in mind the names for these categories differ from industry to industry but to give you a general idea of how good, or bad your credit score is, we have provided you this article outlining what most lenders or banks, even credit card companies and car dealerships, use to determine the likeliness of providing you with a loan at a reasonable rate. Below there is a pie chart outlining what FICO classifies credit score ratings nationwide.

fico-score-graphic

A good credit score depends on many factors. A credit score when applying for a mortgage is different when applying for a credit card or a car loan at your local dealership.
Based on our experience most credit scores, or what seems to be the average among individuals, fall within 620 to 669. A score between 670 to 680 would be considered above average or generally good credit for most lenders. Anything between 680 and 720 will be measured as excellent or very good credit and will help you attain that interest rate that everyone wants. Now, generally anything above 750 will be seen as exceptional credit, which is what lenders like to see. The higher your score, the better credit decisions lenders will make because they will be more confident that you will repay any future debts.

Credit scores are used by lenders, including banks providing mortgage loans, credit card companies, and even car dealerships to make decisions about whether or not to offer you a reasonable loan and what the terms of the offer (such as the interest rate or down payment) will be. We have broken down the differences among these types of loans below.

Home Loans
Mortgages have two key credit score requirements. The first is the minimum score needed to qualify for the mortgage and the second is also a minimum score but this is for qualifying for a low interest rate. Keep in mind that when buying a home there are many types of loans that one can attain. There are conventional loans, FHA Loans, and VA Loans, all with different minimum credit score requirements.

Credit Cards
Credit card lenders do not reveal their requirements unlike mortgages, credit card issuers don’t disclose their standards. There is no data readily available to the public in regards to credit cards.

Car Loans
Also with car loans, there are no set standards, and credit score requirements vary from one lender to the next. Just like the rest of the type of loans (mortgages and credit cards) it is best to keep your credit score in the above average section of credit score rating. To get the best possible interest rate available as well as the type of loan you can be approved for.

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Do You Know What Affects Your Credit Score

First question any one buying a home or getting a home loan wants to know is what is the rate? Reality is that rate for you may not be the same rate for someone else simply because of credit.  That’s not to say that there are not other factors in play.  But credit score has a huge impact when qualifying for a home loan.  Someone with a 700 score is going to get a much better rate than someone with a 580 score.  And even someone that makes 10k a month and even a nice down payment, but with a 500 score is going to be looking at high double digit interest rates.

Here are the five categories in regards to your credit that have the greatest impact to what your scores are.

• Past Payment Performance (35%): Do you pay your bills on time? The more recent the late payments, the lower you credit score. In fact, a 30 day late payment today hurts more than a bankruptcy five years ago.  After a few months go buy those 30 days and 60 days will hurt your scores even less.  But usually that may take as long as 6 months to a year depending on how often you have done that.   Plain and simple budget and do not get your self in a situation where you cannot pay them on time.  Do not just live within your means but even below so there is always that extra cushion for those times when the car breaks down for example.

• Credit Utilization (30%): Have you maxed out your credit lines? Low balances on a few cards are better than high balances on one or two cards. Keeping balances below 30% of the credit line increases your chance for a higher score.  Once you pass that 50% credit limit you scores are going to drop.  Just because you have a credit card limit up to 2k or 5k.  Does mean you are suppose to use it.  Your credit card was meant for incidentals and emergencies stop buying into the hype every time you watch TV.  A kiss does begin with the letter “K” but it does not mean you have to spend 5k to get one.

• Credit History (15%): The longer your accounts have been open, the better, so surfing for a new lower rate on a credit card and transferring balances can hurt your score.  Just keep in mind that most lenders in trying to get you a home loan are looking to see credit lines established for at least a year.  This is sometimes an issue for those that filed Bankruptcy because they have no established credit after a BK.  As soon as your Bk is discharged get yourself a secured card that reports to the agencies so you can start to get some scores.

• Types of Credit In Use (10%): Getting a loan at a finance company rather than a bank or credit union lowers your score. Even if you have collection accounts believe it or not they will help you maintain a certain score.  They may not give you the best but sometimes your scores can actually drop if you pay them all off.   I know the commercial says “Problem Solver Loan” and get your money in just one day.  But those so called “Problem” solver loans are the problem.  Most of them in that tiny fine print disclose that the APR is well over 100%.  So not only are you paying nose bleed interest rates.  But they actually keep you from getting a better score, than you could of gotten from lets say your credit union.  But key to not getting or having to get in that situation is just watch your spending and get a budget.

• Inquiries (10%): Applying for new credit lowers your score, but multiple inquiries from the same type of creditor – like mortgage companies or car dealers – within 14 days count as only one inquiry, and many times in getting a mortgage the point drop even within a 45 day period if moderately done will not affect you. Promotional or administrative inquiries do not count against the score – only those times that you applied for credit count.  In other words just because you are Target or where ever and they offer you 10 % off your purchase.  You do not need it, because you keep applying everywhere will cost you so much more in the long run, when your scores drop.  

It is so much easier for your scores to literally drop like a rock than it is to get them to climb up in numbers.  So watch your scores the better your score the better your rates and programs that you can qualify for.

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Do You Know The Impact Of An Installment Loan Vs. Revolving Credit On Your Credit Scores ?

There are several things that affect your credit but one of the main factors to having credit and maintaining a healthy score is understanding debt.  Buying a home is a big step and getting a home loan sometimes seems intimidating.   There have been times that I have had clients that were reluctant to apply for a home loan thinking that they would not qualify.  When in reality they did.

The two basic forms of debt are installment and revolving and having too much of one can hurt you more than the other.  An installment loan is a loan based on repaying the loan with payments over a certain amount of time.  An example of this is a car loan, 3 or 5 years and fixed payments during that time. Your payments include both principal, which is the amount of money you borrowed, and the interest, which is the additional amount you pay for the privilege of borrowing the money.  This is the form of debt that is more predictable for the lender in regards to knowing exactly what the borrower owes and what the payments are going to be.   In fact if you have less than 6 months left on your loan most lenders won’t even count that debt against you.

A revolving line of credit, for example a credit card, may have a minimum payment based on the lender’s policies that may not even cover the interest you owe.  I have seen some cards where the minimum payment did not even cover the expenses for the interest so the balance owed was actually growing.  The outstanding principal which unlike the installment loan can literally last forever when you only make the minimum payments which never really pays down the principal, on the money you owe.  Keep in mind that if all you do is make the minimum payments that it will register with the credit bureaus as well and keep you from getting a higher score.   The better your credit score the better the loan terms can be for you when getting a home loan.  this does not mean you are guaranteed a home loan just means that you have better chances of qualifying with good scores.  Lenders feel more confident that you will be able to pay them back.

It is not exactly true that you need to have good credit to buy a home, you don’t need perfect credit either just relatively decent credit.  There are other programs available for people who have less than perfect credit. You must understand however that these programs consist of higher interest rates.  Reality is you cannot expect to get the same interest rate on a home loan as someone that may have perfect credit if you have issues with your credit.

Another thing with revolving credit is that if you have too many cards even if they have no balances.  The reasoning behind why it can affect your credit is because at any moment you can choose to run those cards up when ever you want.   Which puts you at a higher risk for lending money.   Keep a few cards for emergencies and those incidentals that pop up here and there.  Stay away from the department store credit cards to save that 10% off your purchase price it will cost you a lot more in interest when all is said and done.  Reality is, you can use a Visa at all those stores try to limit your credit cards  to 4.  Any more than that you really have to ask yourself why do I need all those cards?

If you have any questions on buying a home or getting a home loan just ask.

 

 

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What Kind Of Score Do You Need To Buy A House ?

Nancy asks…

trying to buy my first home but no luck?

ok me and my significant other have been living in a rental home for almost a year and we pay 700 dollars a month. Our only source of income is Social Security and rent takes up over half of our income. So we are trying to get a house but I do not think we have the credit to get a house citimortgage and wells fargo and unfortunately I have one credit score that’s 15 points short. i tried hud homes and they want 650 which is odd because a bank only wants 600 or 620 . I have no idea on how to get a house or anything. I am trying to move before Feb. 2013. My credit score is currently getting repaired and it is going up 10 points a month. Any hints or tips in how would I go about getting a house ( hud, foreclosed, whatever I can get) will be helpful. if it helps I reside in Alabama.I just do not want to rent anymore.

admin answers:

First, you will have trouble getting a mortgage with less than a 650 score…while some banks may take a look at your 620 score, the chances of getting the mortgage with less than a 620 are slim, and you will be paying at least 1% if not more over the best rates. Your other option would be an FHA loan – while FHA does not require any specific score, your credit must be clean for at least 2 years (that means no late payments in the past 24 months) and then it is up to the lender (yes, even though FHA does not require specific scores, they also give the lender considerable leeway which lenders are now using to tighten up their basic requirements).

10 points up per month is about the best you can hope for. Credit scores are based on credit history – what is past is done and you can’t change the past. You can only change you present and future, but time only goes by at its current pace – since scores are based on time, you can’t hurry up scores or time.

If the $700 is taking up half your income, that means that your monthly income is less than $1,400 and your annual income is about $16,000 – assuming you could qualify for a mortgage, the most you will be able to borrow is $48,000. Note you will need a minimum of 3.5% down (no borrowing for a down payment) plus 5% for losing costs – this puts your house price at no more than $50.000 total and you needed almost $5,000 to actually close on the house and move in – and that is $5,000 in cash. So the question is, do you have the $5,000 in cash and if not, can you save it by February?

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