A credit score is a number number that lenders use to determine risk. Essentially, your score tells a lender how likely you are to pay them back in full and on time. And it's really important, this number determine if a lender will let you borrow money, but also the amount, terms and flexibility the lender will offer you.
A FICO score is comprised of five major factors, although some are weighted more heavily than others, such as payment history and debt owed. Here’s the breakdown:
Payment history: Your account payment information, including any delinquencies and public records.
Amounts owed: How much you owe on your accounts. The amount of available credit you’re using on revolving accounts is heavily weighted.
Length of credit history: How long ago you opened accounts and the time since account activity.
Credit mix: The mix of accounts you have, such as revolving and installment.
New credit: Your pursuit of additional credit, including credit inquiries and the number of recently opened accounts.
A better credit score improves our ability to borrow and satisfy those like our landlord who want us to be creditworthy.
Improving credit isn't an immediate process. An excellent credit score is most often the result of years of conscientious financial behavior. While some strategies will let you see small improvements quickly, joining the ranks of those with the highest credit scores will take time.
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Comparing home mortgages can be complicated. But you don’t need a finance degree to make an informed decision. Here are some steps to help you get there.
Look for lenders to consider:
During your first conversation, you and the loan officer will usually ask each other questions, and the loan officer will use that information to assess your situation. That may sound cut and dried, but the meeting should be fluid based on what you’re ready to do. Scope out the lender’s communication strategy and their process for delivering on time. Ask questions like:
Thirty-eight percent of buyers think comparing multiple mortgage offers in a short time will hurt their credit rating, according to a 2020 LendingTree survey. But as long as the lenders all pull the borrower’s credit within a couple of weeks, it’s counted as a single credit inquiry. It is not problematic if they do it within a narrow window of time.
Compare the financial information located on the loan estimate form. You’ll want to drill down to origination charges in the lender section. Make sure you’re comparing apples to apples. If one lender is offering a 30-year fixed rate at 2.875% with no lender fees and another is offering 2. 75% with $1,500 in lender fees, those are unlike products. Get the fees at the same rate to find out who’s less expensive.
Comparison shopping can get complicated. Here are six ways to simplify the process.
1. Keep Your Pool Manageable
Mortgage shopping depends on the borrower and the personality type and how they’re work. The process can seem overwhelming. That’s why it makes sense to have a select few options to compare so borrowers can process and assimilate them.
2. Get a Fees Worksheet
The best way to compare effectively is to zero in on the fees worksheet, which the loan officer should provide. Then you can figure out just what the lender’s direct fees are, and you can make a nice, simple comparison.
3. Understand a Fees Worksheet Versus a Loan Estimate
Keep in mind that the numbers on the worksheet are estimates and not locked in. Interest rates are fluid and change daily. On the other hand, after you have a contract with a seller, the loan estimate and loan application are where the information is binding barring structural changes to the loan. Make sure the information reflects previous discussions with and disclosures by the loan officer.
4. Be Careful Interpreting Third-Party Fees
Third-party fee estimates are included on the worksheet. Two lenders could each come up with different estimates for title, escrow, or appraisal fees. But not all are negotiable. For instance, the seller chooses the title company, so the lender doesn’t control the choice or the fees. The lender could be choosing the high or low end of a range, but it’s only an estimate.
5. Think About Timing
Make sure lenders are using the same time frame for locking in pricing and that it will extend through the closing.
6. Always Apply for Loan Approval Before Finding a Property
But some lenders will allow borrowers to go through the formal underwriting process — not just preapproval — without having a property. The borrowers can get a bona fide mortgage commitment with all of the major buyer financials truly underwritten at that point. Then when borrowers make an offer, they can close more quickly.
You'll have to invest some time and effort into comparison shopping for a mortgage loan and selecting a lender and a loan officer. But your return on investment can pay off over the long haul.
Whether you want to buy or sell a home locally or globally, I can help you finding or selling your home so you can create the life you love! ☎️ 706.530.1114 or email us.
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A mortgage is one of the biggest single debts you’re likely to willingly take on. As such, being able to properly manage your mortgage is very important. With so many options when it comes to loans, repayment and refinancing, it can all get a bit confusing. One point in particular that you might hear a lot of talk about is prepaying your mortgage.
Should you prepay your mortgage?
Should you focus on other things first? Before rushing into prepayment, make sure you have all of the information first. We’ll start by looking at exactly what mortgage prepayment is and how it works.
What Is Mortgage Prepayment?
As the name suggests, mortgage prepayment is the act of paying some or all of your mortgage principal before it’s actually due. This can take a number of forms, from paying a higher amount than the actual payment that’s due each month to making additional payments in months where you have money to spare. Some homeowners even make a single large additional payment every year after getting a tax return. Regardless of the specific form that prepayment takes, the end result is the same: More of your outstanding mortgage balance gets paid off, resulting in a decrease in both the amount that you still owe and the amount that interest can be applied to.
What Are the Benefits of Prepaying?
There are several benefits to prepaying your mortgage, regardless of how often the payments are made. Consider the following and how they might apply to your mortgage situation:
Are There Any Downsides?
While there are definitely benefits to prepaying your mortgage, there are potential downsides as well. Some mortgages, especially those with adjustable rates, are designed to not allow prepayments; if you attempt to prepay on the mortgage, this can trigger a penalty fee. Additionally, some lenders only accept prepayments in certain forms and will apply any other money received as simply an early payment against the next month (which means that the money will go toward interest and principal and not just your principal loan balance.) Attempting to prepay when you have significant debt elsewhere or don’t have a safety net built up for yourself isn’t a good idea, either; your mortgage likely has a lower interest rate than most if not all of your other debts, so you may be better off paying them off and building up savings and retirement funds first before you start worrying about prepaying a mortgage.
Should You Prepay Your Mortgage?
Whether or not you should prepay your mortgage depends on a number of factors. You should consider the type of mortgage you have, how much your monthly mortgage payments are and what your interest rate looks like. You should also take a look at your overall finances and how well prepared you are for emergencies and retirement; it’s possible that your money would be better off going elsewhere at the moment. Even if prepayments seem feasible and affordable, make sure that your lender accepts prepayments without penalty and that you know how they prefer to receive prepayments. Those extra payments won’t do much good if your lender simply applies them against interest or charges you a penalty fee because prepayments aren’t allowed by your loan.
Do you have any questions? I can help!
Iveth Caruso, your REALTOR in the North Atlanta Area
Choosing to enter the home buying process is likely the largest financial decision you will make in your lifetime, so it is not one that should be taken lightly. Ensuring that your other current and upcoming financial responsibilities are under control is crucial to having a smooth transaction and being able to enjoy your investment fully. These tips will help you prepare your budget for purchasing your dream home.
Calculate your monthly income. How much money is coming in every month? This is the amount that is left after taxes, health insurance, and retirement savings are taken out of your monthly salary.
Understand your current expenses. Make a list of all your current recurring expenses month to month. Don’t forget to factor in things like loan payments, gym memberships, car maintenance, groceries, self-care appointments, etc.
Determine where you can find savings. Are there any ongoing memberships or subscriptions you don’t use that can be canceled? Can you cut out your daily coffee or eating out lunch? Make these adjustments right away to start saving more.
Boost your financial standing. Before buying a home, it is recommended that you dedicate extra effort to paying off other debts and boosting your credit score. Taking these steps will help you during the loan approval process.
Don’t move finances around. Your lender will review your bank statements during the pre-approval process and then again during underwriting. Any large withdrawals or deposits may throw a red flag so try to avoid these when possible. If you can’t, make sure you have proper documentation to explain the movement of money.
Have any questions? I can help!
Iveth Caruso, your REALTOR in the North Atlanta Area
The information on this site is intended to be a free resource to provide general information to the public. The information is intended to supplement instruction from your legal, financial or real estate adviser. The information contained on this site should never be taken as a substitute for legal or financial advice from a licensed professional.