Monthly Archives: October 2013

Credit Score is Key to Low Mortgage Rates and Costs

Many people are not quite sure how their credit scores affect their mortgage rate. In the simplest terms, the better your credit score, the better chance you have of qualifying for the mortgage loan that is ideal for you. This could mean better interest rates, more loan options, and lower costs.

Your credit score is also referred to as your “FICO score”. FICO is an abbreviation for the “Fair Issac Company, the developer of the original scoring model. The credit score that FICO gives you in a number between 300-850, with a higher number being a better score. The score is based on many factors, such as past late payments, debt utilization, and the age of your active accounts. However, how the final score is exactly calculated has not been released, as it is a trade secret closed protected by Fair Issac Co. It is very important that you know and understand your credit score before you start evaluating mortgage loan options.

Two Ways to Get Your Credit Scores:

1. Go to www.myfico.com and sign up to obtain your credit score directly from FICO. Be careful that even though you can obtain your score for free, you must then cancel your free trial within 10 days to avoid being charged for 3 months of service.

2. Use www.creditkarma.com. CreditKarma is a truly free way to obtain, and monitor, your credit score over time. CreditKarma is supported by their advertising partners that advertise credit cards, loan programs, and more so that you can use the website free of charge. Credit Karma also offers you advice on how to improve your credit score by analyzing the different factors that make up you total score (length of credit history, hard credit INQUIRES, late payments, etc.)

You can also get your credit report free, once per year, but with no scores, from the government sponsored website www.AnnualCreditReport.com. Beware of the many sites that advertise ‘free’ credit scores, like FreeCreditScore.com. These sites all charge you for a credit monitoring service in order to get your ‘free’ score.

Also, many of these sites do not use the FICO scoring model used by most lenders. In fact, some web based consumer scoring sites may give you a credit score based on a 500-1000 point rating vs. the standard 300-850 that lenders use. You could think you have an excellent score when, in fact, it is sub par, costing you thousands in increased costs when you go to get a mortgage loan.

It is important to note that while your credit score is a key component, it is not the only factor that a lender considers when approving a mortgage. Be sure to contact The Chaffee Team, before you shop for a new home so you know how to improve your chances of qualifying for the loan that is ideal for you.

Tips to plan for homeownership.

Have you been thinking of purchasing a home?  Has the task seemed daunting, not attainable or too scary? We are always here to help you when you need it!

Here are a few tips to help you prepare for this big financial and life move.

1)  Plan ahead.

Meet with a Mortgage Professional to find out where you stand compared to current lending guidelines.  We will check your credit standing, assets and overall affordability.  Our no cost ‘Homeownership Strategy and Coaching Session’ can help you on the road to purchasing a home.  Mortgage lending guidelines don’t always make logical sense, so it is very important to make sure you are on the right track before you find your perfect home!  If you don’t currently meet the guidelines, your Mortgage Advisor can help you make a step by step plan to get where you want to go.  Next all you have to do is execute!

2)  Be realistic.

Sit down and look at your cash inflows and outflows on a monthly basis.  Determine a comfortable monthly mortgage payment including taxes, insurance and any PMI (private mortgage insurance) and then proceed from there to find out what that means in terms of a purchase price.  Our job as mortgage advisors is to set you up for success, but real success comes from knowing what will work for you!

3)  Determine your priorities.

Qualifying for a mortgage can be difficult.  We take a close look at your current financial scenario to see where you might be able to make some changes.  If your debt to income ratio is too high, we will take a look at your current monthly debts and advise you as to what needs to be paid down to make the numbers work.

  • Can you reduce credit card spending and pay down your cards?
  • Do you have a high car loan payment that can be restructured or reduced via trade? 
  • Is your bank account balance too low?  Are you not sure where your money has gone?  Print out your last month of bank statements and add up the totals in the following categories: Housing, Food at home, Food out at restaurant, Entertainment, Gifts, Savings/Investments, Clothing/Accessories, Other spending.  Look at the totals from the last month and ask yourself if your spending aligns with your goals.  If not, make a budget and stick to it.  A great tool for this is Mint.com.  This completely free tool helps you make goals and budgets and stick to them!

4)  Ask.

If you need help ask for it.  We all need help at one time or another and many people are happy to help you out!

We believe homeownership is valuable for our community and economy.  We are here to help you make your next move.

Awards & Recognition:

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