Posted by Muneeza Realty Group on 10/6/2018

What do buying a house, opening a credit card, and getting approved for an auto loan have in common? They all depend on your credit score.

Building credit is a multifaceted undertaking. In a way, this is a good thing--you wouldn’t want lenders to base their opinions solely on one aspect of your financial history. The downside is that understanding just what makes up your credit score can be difficult.

To complicate matters further, there isn’t one standard method for scoring your credit, and different credit bureaus each use their own criteria.

In this article, we’re going to talk about some of the factors the major credit bureaus use to calculate your credit, and give you some ways you can boost your credit.

But first, let’s talk about some of the implications of having a good credit score.

Why credit matters

Typical credit scores range anywhere from 250 to 850. The three main reporting agencies (Equifax, TransUnion, and Experian). Most lenders use a combination of those scores that is reported by FICO.

Most credit reports will rank your category from “bad” to “excellent.” Here’s an example of what a credit ranking might look like:

  • Excellent: 750+

  • Good: 700 - 749

  • Fair: 650 - 659

  • Poor: 550 - 649

  • Bad: -550

U.S. legislation makes it possible for Americans to receive a free report of their credit score and to challenge and correct the score if it contains inaccuracies.

If you’re thinking about buying a house, opening a new line of credit, or taking out a loan of some kind, then the provider will likely run your credit score. Those providers are going to want to see a return on their investment, so they’ll charge interest.

If you have a high credit score, it tells the lenders that you are a low-risk investment, and therefore they can offer you a lower interest rate, saving you money in the long run.

Components of a credit score

There are five main factors that credit bureaus take into consideration when formulating your credit score. Not all of the factors are treated equally. Your ability to pay your bills on time, for example, is considered to be more important than the types of bills you have. Here’s a breakdown of the five components that make up a credit score:

  • 35% - Bill and loan payments

  • 30% - Current total amount of debt

  • 15% - Amount of time you’ve had credit (since you took out your first loan or opened your first credit card)

  • 10% - Types of credit (cards, loans, etc.)

  • 10 % - New credit inquiries

Quick tips for building credit

It takes time to build credit and improve your score. So, if you’re hoping to buy a home within the next few years, now is the time to start working on your credit. Here are some best practices for building credit:

  • Set up autopay for your bills to avoid late payments. Even if the service doesn’t offer autopay, you can likely set up recurring payments through your bank.

  • Settle outstanding debt. Avoiding debt that you can’t pay off will only hurt you more in the long run. Call your creditor and see if they offer debt relief programs. More likely than not they’d rather work with you to ensure they receive some repayment rather than none at all.

  • Start budgeting the right way. New budgeting software like Mint and “You Need a Budget” are easy to use and link up with your accounts. They’ll help you monitor your spending and start paying off debt.

  • Don’t open new lines of credit close to when you want to take out a loan. New credit inquiries can briefly lower your credit, especially if you make more than one. Viewing your free credit reports doesn’t count as an inquiry, so feel free to do that as often as needed to check your progress.

  • Get credit for bills you’re already paying. You can report your monthly rent payments, switch bills into your name that you contribute to, or take out a credit builder loan. All three will help you build rent without changing your spending habits.





Posted by Muneeza Realty Group on 9/29/2018

Purchasing a home is a sign of new financial responsibility for many people. The leap into homeownership is a big and important step. Finding a home and securing a mortgage isn’t easy. Getting ready to take on a mortgage can require a lot of research and education on your part. Before you get too confused, you’ll need to learn the basics of a mortgage and what you should know before you apply. 


Be Prepared


This is probably the best advice for any first time homebuyer. Find some good lenders in your area. You can sit down with a lender and talk about your goals. The bank will be able to explain all of the costs and fees associated with buying a home ahead of time. This way, you’ll know exactly what to expect when you head into a purchase contract without any surprises. 


What’s Involved In A Loan? 


Each mortgage is a different situation. This is why meeting with a lender ahead of time is a good idea. Your real estate agent can suggest a mortgage lender if you don’t have one in mind. No one will be happier for you than your real estate agent if you have a smooth real estate transaction. You’ll be able to walk through the mortgage process step by step with a loan officer and understand the specifics of your own scenario.


What You’ll Need For A Mortgage


There’s a few things that you’ll need to have ready before you can even begin searching for a home. 


Cash For A Down Payment


You’ll need to save up a bit of cash before you know that you’re ready to buy a home. It’s recommended that you have at least 20 percent of the purchase price of a home to put down towards your loan initially.   



A Good Working Knowledge Of Personal Finances


You should have an understanding of your own finances in order to buy a home. Not only will this help you save, but it will help you to ensure that you’re not going to overextend yourself financially after you secure the mortgage. To get your finances in order, honestly record all of your monthly expenses and spending habits, so you know exactly what you can afford.   


The Price Range Of Homes You’re Interested In 


If you have an idea of what kind of home you’d like, it will make your entire house shopping experience a lot easier. You’ll be able to see exactly what you can afford and how much you need to save. When your wish list equates to half-million dollar homes, and you find that you can only afford around $300,000, you don’t need to go into shock! It’s good to have an idea of how much house you can afford and what it will get you. When you do a little homework, you’ll discover that buying a home isn’t such a hard process when you’re prepared!





Posted by Muneeza Realty Group on 1/13/2018

For the generation that grew up at the height of the subprime mortgage crisis, buying a home is a scary concept. Many young people in the 18-34 age range are dealing with high rent, a poor job market, unpaid internships, and student loans the size of a home loan. Yet, others are finding their footing and realizing that owning a home is advantageous in the long run. If you're thinking of delving into the world of home ownership for the first time here's a crash course in Home Buying 101.

Figure out your finances

You should be an expert at you and your significant other's personal finances if you are thinking about buying a home. The first thing to look at is your income and expenditures. Put the following information in a spreadsheet:
  • Total monthly income
  • Total monthly expenditures (bills, gas, food, etc.)
  • Total monthly savings
  • Total savings and assets
  • Credit and FICO score (request both of these online)
When crunching these numbers you should (hopefully) find that your income is higher than your expenditures and your savings should account for most of the difference. If your savings is lower than it should be, you either missed something on the expenditures list or you are spending more than you should be if you want to buy a home. Down Payments Down payments on a home, post-financial crisis, range from anywhere between 0-25 percent of the price of the home, 20 being the median. A down payment ideally shouldn't break your savings in case you have any unforeseen expenses once you buy your home. Moving is time-consuming and can be pricey, so you'll need to account for this in your finances.

Lock Down Your Financing

There are several types of mortgages that you'll need to choose from, and you'll want to learn about fixed and adjustable mortgage rates. This information should be informed by your long-term plans. Are you looking for your first home or your forever home? If you don't plan on fully paying off the home you might look for a low, adjustable rate while you earn money. But if you want to stay in your home until it's paid off, a fixed rate might be better for you.

Finding and buying your home

Once you've determined your price range, start thinking about things like location and the kind of home you can afford. If you're handy with tools and have the time, it might be in your best interest to buy a home than needs some work at a lower cost. If you'd rather put in more hours at work, go with the home that needs less work and save money that way. Depending on whether or not you're in a buyer's market or a seller's market, the ball can be in your court or the seller's. In a seller's market, which is more likely today in many parts of the country, the seller will have more leverage in negotiations, including closing dates and move-out dates. Due to high competition, you should also be prepared to miss out on some offers. But be patient, and you should find the home you're looking for.  





Posted by Muneeza Realty Group on 8/26/2017

Whether you’re a first-time homebuyer or someone who has previously owned a home at some point in their life, you most likely know how expensive buying a house can be.

Fortunately, there are many organizations who would agree and who seek to help qualified buyers. There are a number of programs available at the state, local, and federal level designed to help certain buyers purchase a home.

There are also a number of myths around these programs, such as what the term “first-time homebuyer” really means.

In this article, we’ll talk about some of the programs you can look into to get help paying for a home.

Who Qualifies as a First-Time homebuyer?

Contrary to what it sounds like, you can still qualify as a first-time homebuyer if you’ve owned a home in the past. The Federal Housing Administration (FHA) has been helping people achieve their goal of homeownership since the 1930s. The FHA connects first-time homebuyers with lenders if the buyer meets certain criteria. Those criteria are:

  • Someone who hasn’t owned a home in the time previous three years. This includes spouses.

  • A single parent who previously owned a home with a former spouse, or a “displaced homemaker” who has only owned a home a former spouse.

  • People who have only owned homes that didn’t meet building code or a residence not fixed to a foundation.

The way the FHA helps buyers secure an affordable home loan is by insuring the mortgage. This makes it safer for lenders to approve you for a better rate for your home loan.

Veteran, Rural, and Native American Loan Programs

Aside from FHA loans, you might also qualify for a VA loan, a USDA program, or the Section 184 Indian Home Loan program.

VA loans from the U.S. Department of Veteran Affairs help veterans secure low-interest loans with affordable down payments. They will also help repeat veteran home buyers who have had financial difficulties in the past such as foreclosure and bankruptcy.

The Section 184 Indian Home Loan Guarantee Program works similarly to an FHA loan in that the federal government insures the loan so that the buyer can receive a better rate and lower down payment.

This program is designed for American Indian and Alaska Native families. However, not every state is eligible for the loan.

The United States Department of Agriculture is another federal department that offers mortgage assistance. You don’t need to be a farmer or have agricultural aspirations to be approved for a USDA loan. Rather, these loans are designed to help develop rural areas by offering loans with no down payments.

State, Local, and Private Programs

Each state in the United States offers various buyer’s assistance and incentive programs. Be on the lookout for programs specific to your area to find low-interest rates and affordable down payments.

Fannie Mae, Freddie Mac, and other companies work with lenders to create affordable lending programs throughout the country. Remember to shop carefully when dealing with private lenders and look out for hidden costs.





Posted by Muneeza Realty Group on 8/5/2017

Everyone knows that their credit score will affect the mortgage they qualify for and the interest rate they receive. The details of how exactly those numbers are arrived at, however, are a bit hazy for the average prospective homeowner.

This confusion is due to a number of reasons. Chief among them is the fact that your average person isn’t well-versed in credit terminology or the variables that go into determining their credit scores.

In this article, I’m going to break down credit scores and credit bureaus, then discuss how each of them affects the mortgage rate you could receive. Then, we’ll talk about some ways you can boost your score to qualify for a better rate.

Anatomy of a credit score

Credit scores are determined by five main variables. In order of importance, they are:

  • 35%: your payment history on loans, bills, credit cards, etc.

  • 30%: your total debt amount for all of your accounts

  • 15%: length of your credit history (how long you’ve had open accounts for loans, credit cards, etc.)

  • 10%: types of credit you have used (auto loan, student loan, credit card… diversity of loans matters)

  • 10%: recent credit inquiries (such as taking out new loans or opening new credit cards)

To have a “good” (over 700) or “excellent” (over 750) credit score, you’ll need to focus on each of these factors. For most people, paying their bills on time over a long enough timeline is enough to get them into the excellent range.

But things happen in life. People forget to pay an important bill, they have financial emergencies, or they have to take out a loan for an unforeseeable expense.

The credit bureaus

So, who are the people that determine your credit score?

There are three main credit bureaus: Experian, TransUnion, and Equifax. Lenders will look at reports from all three bureaus to determine your rate. Due to the Fair and Accurate Credit Transactions Act of 2003, consumers are able to receive a free copy of their credit report from each bureau once per year.

Since then, companies like Credit Karma have made credit reports even more accessible. Users are able to check in on their credit as often as they want free of charge.

Since much of your credit score is out of your hands, at least in the short-term, what can you do to help boost your score over the next few months to increase your chances of getting a good interest rate on your loan? Two things.

Credit and mortgages

So, just how much of an impact does your credit score have on your mortgage rate? Having an excellent score can give you a full percentage point lower on your monthly interest rate.

One percent doesn’t seem like much, but over the period of a 30-year loan that can amount to tens of thousands of dollars that you could have saved if you had a better credit score. As you can imagine, having an extra $2,000 per year can be quite helpful to a new homeowner.

So, what can you do to boost your score?

Make corrections

Since you have access to free credit reports be sure to go through your detailed report a few months before you plan to apply for a mortgage. Report any harmful errors to help you increase your score.

Don’t apply for new credit

The period from now until you apply for a mortgage is an important one. If you make new credit inquiries (i.e., open up new credit cards, take out new loans, etc.), your score will temporarily decrease. Wait until after you sign on your mortgage to take out other loans.




Categories: Uncategorized  




Tags