Articles Tagged "Home Loan"

Credit scores have long been a mystery to homebuyers, in both how they are determined and how they matter in the long run. Most people think that if you pay your bills on time, you'll have a good score, but our real estate agents can tell you that there is far more to it than that. But while the exact formula used to determine your score is not public knowledge, you still have a great deal of control over it. Here's how you can optimize your credit score and qualify for a mortgage with a good rate.

• Monitor Your Credit Activity
  Federal law requires that you be able to access your credit reports once each year, free of charge. Ignore all the ads you see for quick credit repair and go to the federally mandated site: annualcreditreport.com. Run one report from TransUnion, Equifax, or Experian. Each will have the same information and will vary by only a few points. Check for any item that is not accurate. Such items could be fraudulent use of your name and Social Security number, debts that were paid but still show open, or items older than seven to ten years. A single negative item can drop your credit score by a hundred points or more!

• Pay Down Your Debts
  You may think that paying the minimum balance on time each month will mean you have great credit, but it's important that you don't use close to your limit. You never want your debt to exceed 30 percent of your total credit available. Carrying a monthly balance on a card does not increase your credit score. Paying it off each month does. Many people with high credit scores use one card each month for convenience in tracking expenses, then pay off the entire balance each month. Not only does this practice support a healthy score, but it also eliminates interest payments.

• Don't Chase Credit
  Retailers often lure buyers with special deals if they apply for a store credit card. Credit companies consider the length of time the card has been open, lowering scores for new cards. Be particularly careful when purchasing a car, as multiple credit checks can also indicate poor financial health. Apply for additional credit with as much consideration as you use when considering a major purchase. This is an example of a hidden cost.

• Maintain a Healthy Credit Mix
  Maintaining a few credit cards and paying them off each month will help your overall score, but the scoring model also looks at car loans, cash loans, and mortgages. Making your payments late on any of these, even by just a few days, can really damage your credit score. Just because you make your payment before a late fee is applied, that doesn't mean "on time." Use auto-draft options if you have trouble tracking payments to avoid being late. 

• Understand How Your Score Affects Your Rate
  Mortgage companies offer different interest rates for different credit scores. While you may be able to qualify for a $300,000 home with a credit score of 620, that could mean an APR of about 3.962%. The same loan to a buyer with a credit score of 800 may have an APR of about 2.373%. The difference over 30 years is $93,611!

If you're considering Richmond homes for sale, be sure to contact us for help navigating the mortgage process. 

Our REALTORS® know getting a mortgage on the best terms is something all buyers think about. That's especially true of first-time buyers! When you're exploring the best Richmond homes for sale, sound financing means peace of mind.

Luckily, the mortgage process is a lot easier than it seems at first!

The more you know, the simpler it is to get a mortgage loan you can be happy with. We'd like to address one of the most common questions about home financing our team gets: The difference between pre-qualifying for a loan versus receiving pre-approval.

Pre-Qualification and Pre-Approval: What's the Difference?

When it comes to getting a great home loan, starting sooner makes life easier.

Prequalification and preapproval are steps you take to smooth the path to your final loan package. You can think of one of them as the trial run, while the other is the "real deal."

Pre-qualifying can happen in a matter of minutes the first time you talk to your lender. You discuss your finances and get a ballpark estimate for what loan amount you can expect. It's not necessary to document your income, and you're not committing.

Pre-qualification is often the first or second step someone takes before starting a house hunt since it indicates what homes and neighborhoods to focus on. It's a good idea to check with several different lenders and take an average of their estimates.

Pre-approval, on the other hand, represents a conditional commitment by your lender. During the pre-approval process, you submit detailed documentation of your income. The lender takes extra steps to verify your financial health, including a detailed credit check.

Once you "pass" pre-approval, your loan package is effectively ready. You can bid on a home at or below your conditional loan approval amount. However, you need to act quickly. Specific loan amounts and rates are usually only locked in for 30-90 days.

A loan commitment is a final step. It's issued only when the lender approves both the funding amount and the property. This takes longer because lenders want to make sure the home is insurable, usually by awaiting the results of a home inspection.

Why Do Both Pre-Qualification and Pre-Approval?

Technically, you can skip pre-qualification if you wish. It is not a requirement, but it will give you some beneficial advantages as you move through the buying process.

First and foremost, you'll never have to guess how much funding you may qualify for. That saves you time and effort you might otherwise waste on properties that won't fit your budget.

Plus, you have the chance to see whether a given lender seems right for you. How a lender responds to your questions and discusses your needs can provide you with plenty of insight.

Pre-approval is valuable, too. Although it's not the same as a loan commitment, it gives you a negotiating edge when working with sellers. They'll know you are ready to move forward right away. Only cash bidders can offer sellers a faster process.

Whether you're pre-approved, pre-qualified, or just getting started, Napier ERA is here for you.

Our experienced team members are experts in the Richmond area. We'll work with you to find properties fitting your needs and your budget. Contact us to find out more.

7 Steps to a Better Credit Score

So, you're ready to make the leap from renting to owning your own home, but you're worried that your credit score might hold you back. If that's the case, you're far from alone. Our real estate agents get a lot of questions about how prospective homeowners can improve their credit score before buying a house, and we're here to provide some answers. 

1. Get Started Early
   As much as we'd all like to improve our credit scores overnight, bear in mind that working on your credit is a marathon, not a sprint. There are plenty of actions you can take that will boost your credit and make you look better to lenders, but they take time. The earlier you can start working on your credit, the better off you'll be.
2. Check Your Credit Report
   TransUnion, Equifax, and Experian all offer free credit reports. Get your hands on one, and go over it carefully. Not only will this give you a better idea of where you stand and what you need to do to make improvements, but it also gives you a chance to check for errors. Many credit reports contain mistakes that you can dispute, immediately improving your score. 
3. Keep Your Bills Current
   We know this is sometimes easier said than done, but paying your bills on time is one of the best things you can do for your credit score. Most creditors will report whether your payments are timely or not, and your payment history affects 35 percent of your credit score, making it the biggest single contributing factor. If you have trouble remembering to pay bills on time, set up automatic payments to take forgetfulness out of the equation. 
4. Improve Your Credit Utilization
   Credit utilization is the ratio between your credit card balances and your credit limits. For example, if you have outstanding credit card debts of $300, and your credit limit is $1,000, then your credit utilization is 30 percent. You want this number to be as low as possible, and the best way to achieve that is to free up credit by paying off your credit card debts.
5. Use Credit Responsibly
   Using credit cards isn't a bad thing. In fact, making responsible purchases and routinely paying credit card bills on time is a great way to build credit. So once you have your credit card debt under control, feel free to use credit cards to pay bills and make small purchases; just make sure to keep the balance current.
6. Keep Positive Accounts Open
   You might be tempted to close out credit accounts once you've paid them off or eliminate old lines of credit that you no longer use. In reality, there is no discernible benefit to doing this, and it could actually hurt your credit score. Actually, leaving old accounts open can help your credit score by giving you a longer credit history. 
7. Be Careful About Getting More Credit
   There are pros and cons to opening new lines of credit. On one hand, having more available credit will improve your credit utilization ratio. On the other, opening a new line of credit decreases the average length of your credit history, which may hurt your score. Be sure to carefully weigh the potential costs and benefits before you open any new credit accounts.

We firmly believe that homeownership should be within everyone's reach, and we're committed to providing the tools you need to make that dream a reality. In fact, we've designed a home-buying tool just for you! You enter a few pieces of information, and we'll return a list of homes we think are affordable for you based upon those entries.

Our mortgage partner, Movement Mortgage, is available to assist you in qualifying for and obtaining a home loan.

Contact us today to learn more about how you can boost your credit score and improve your ability to own your own home.