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CELEBRATING St. PATRICK:
Good credit saves $1,000s and it can make or break your home purchase.
Here's some powerful info about home financing that will both help you buy your home and save those $1,000s by attaining the lowest rates.
It is quite often that I receive inquiries of folks that are making very good money but they not manage their income wisely therefore the end up not being able to purchase a home – that point in time – or they have to pay a premium to attain financing …either of these cost $1,000s to the person seeking a home purchase.
I will demonstrate below how much it can cost if the homebuyer pays a premium.
However it is
still the lesser of the two evils: Continuing to pay rent is simply put ‘to pay
somebody else’s mortgage’ – it is money that will never return to you.
I would like to give some examples and ideas of how to maintain good credit - regardless the amount of money you make.
I recent worked with a young buyer who is doing very good income however she had bought a nice car just prior to going into the market to buy a condo …that on the top of other purchase that also showing on her credit reports put her in disadvantage against her considerable good income versus the financing obligation that she had.
Lenders want that your debt to income ratio (DTI) to be 43% or lower.
So here is an example to clarify the rule: say you are making $72,000/year which breaks down to $6,000 / month, you cannot exceed $2,580 per month in outstanding debt - that will show on your credit report.
That would be 43% of your income – if you can show a lower percentage it will be much better and your rates potentially could lower.
Payments owed to the IRS as well as student loans are included in the ratio – of your own and sometimes that you eventually co-signed :- (
Debts that are paid in “fix installments” and will be fully paid in 9 months or less, can be a mitigating factor on the lender’s decision.
So we are talking here that there is a distinction between ‘installment debts’ and those that only have ‘minimum payment due.’
Debts that are financed for a long period – like cars – are scrutinized very closed by lender and weight heavy in their decision of what percentage you will pay.
Look out: They will look up on your cell phone contracts as well!
If you are to attain a FHA or VA loan that are ultimately guaranteed by the government you better believe they will be looking up close on your payment history and you will need to be updated to the minute.
I once worked with a veteran who was behind a few thousand dollars on his student loan payments – we were just to move forth with his VA loan when he brought payments up to date.
This was one of the occasions that I expressed on the introduction – ‘credit will make or break the home purchase’
I recently worked with a client who made some small miscalculation on the way he handled his credit: He closed an account that he had had for a long time and he score dropped the mid-600s [660 to be precise].
Well, his loan percentage went up from 3.875% to 4.125% …That ‘miniscule’ percentage will cost him an additional $21.61 (‘no big deal,’ you might say) however it will be a whopping $7,779.00, in the life of the 30 years loan.
Most people do not realize that some $21.61 per month times 360 times [the number of months in a 30 year loan] really adds up.
…all before you make the first call to a REALTOR® to help you find a nice place for you to call home.
I guarantee that you will be glad that you did!
One of the first features I built in this site was the “Mortgage Calculator” – that you can see by click on the above link.
I judge it to be so important that I placed it twice – rather conspicuously - both at the very top and then again on the bottom of the right column – please visit it whenever you need to ‘check your numbers,’ more especially before you make the big decision of who will finance your new home.
It is fun, easy to use and completely accurate to the last penny: just plug in the known numbers like loan amount (which it the purchase price minus the down payment), percentage rate (to the last digit that you were given) and number of years i.e. 30, 20, 15…
Nowadays, lenders are extremely sensitive to the “FICO ® credit scores.”
FICO® scores is one of the things in our lives that it is little understood and yet it affects our finances tremendously.
There are many other factors that will make your credit scores – I have a page with much more details about it – click on the link above to learn more
However all what I mentioned above are compounded into the final scores as well – however they are not limited to the things mentioned here.
I understand that sometimes a person may have expenses that are beyond one’s control …like medical bills …and those are added to the DTI as well :- )
But, ultimately, when you make the decision to buy a home, you need to show the lenders how you manage your money: If you are in a position of strength, you will be able to buy the home that you want and get better rates that potentially can save lots of money.
Getting your free credit report is but one of the ten most important steps that will lead you to a successful purchase of your new home!
Please follow these links to learn more about the other nine steps:
Now it is YOUR turn: Please give us your input!
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JC Fagundes, Qualifying Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141