HEADLINE: Score a Great Mortgage
With Good Credit Scores
Sub-hed: The housing
market is heading into prime season for buying a home
If you’re an
apartment dweller, you know the drill. Each month, you write a check to your
landlord, watching as a thousand dollars or more goes from your pocket to his
The real estate
website Zillow notes that the median rent price in Los Angeles County hit
$3,000 as of November, 2017. That means $36,000 per year is going to someone
else if you live alone. In some markets – particularly in the hottest and
hippest areas to live – rent can consume as much as half of take-home income.
continuing on that path to nowhere, you could make a smooth transition to home
ownership. The median home value in Los Angeles County is now $588,000, per
Zillow. While some claim the market is due for a correction, there’s also an
old saying – no one ever went broke buying California real estate. That’s because
they aren’t make any more it, and this is a state whose population is growing.
situation, it may be time for you to explore getting out of the rent race and
consider owning your own house, townhouse or condominium. By doing so, you gain
control of your living situation and benefit from any appreciation on the
not everyone can qualify for a home loan. You need a down payment in most cases,
must be employed or doing well in your own business, and your credit score can’t
be terrible. While there are many factors that go into a loan determination,
there are credit score minimums in most cases.
Communications, a public relations firm that monitors the real estate market,
determined that a FICO score of at least 650 is a good level to be at for most
financing situations. But you can have a lower score, in some instances, and
still manage to secure a loan.
and Freddie Mac are government-backed mortgage lending houses, and many other
lenders look to them for guidance on standards. Fannie Mae requires a minimum
credit score of 620 with a 20 percent down payment for its loans, and no more
than 45 percent of your income can go towards paying debt.
Housing Administration and the Veterans Administration also provide credit to
certain segments of the population. The FHA requires a minimum credit score of
580 and a 3.5 percent down payment. The Veterans Administration is an even
better deal – there is no minimum credit score required to qualify for a loan,
and 100 percent financing is available. However, any down payment and a good
credit score will lower your mortgage’s interest rate. To qualify, you must be
an armed services veteran.
THE FED MAY RAISE RATES
decide to move forward on getting a home and your credit score matches up with
the lender’s standards, it’s a good idea to move fast. Interest rates on home
loans are still at historic lows, but that could change in the coming year.
Reserve is the central bank that determines the prime lending rates that
influence what you pay for your mortgages, credit cards, and other loans. Last
year, they raised the prime lending rate a few times, marking only the second
time since the 2008 financial crisis that the needle has moved upward.
rates rise, you pay more for any loans. Although no one can predict which way
the economy is headed and the Fed’s response to that movement, many seasoned
observers believe that interest rates will be raised several times in the
you have a decent credit score and a down payment, are gainfully employed in
some fashion, and are ready to seek out your new home. There are several steps
you can take before starting to call real estate agents that will make your
search easier and improve your chances of getting a home. These steps are being
pre-qualified and pre-approved for a mortgage.
PRE-QUALIFIED VS. PRE-APPROVED
become pre-qualified based on your own statements. A lender will ask several
questions either over the phone or via the Internet or an app. They will try to
get a picture of your income, debts and assets to get a rough idea of how much
mortgage assistance you will likely receive. Once they determine that, you can
begin looking at neighborhoods and houses within your price range.
Keep in mind
that pre-qualification does not mean you have a loan in place. In order to
qualify for a mortgage, you need to move from pre-qualified to pre-approved,
the next step in the mortgage process.
pre-approved is where the rubber meets the road in lending. Instead of relying
on your statements – a process that proved disastrous in the great real estate
meltdown of 2008 – the mortgage lender will now require tax forms, bank
statements, pay stubs and other documents that indicate that your claims of
prosperity are valid. These are particularly important in major metropolitan
areas, where high real estate prices require what’s known as a “jumbo” loan,
which is so large it’s not backed by the government.
lender determines how much they will be willing to lend you, you can begin
shopping in earnest. Sometimes, in a competitive housing market, there are
multiple bids for the same residence. Having financing in hand means you are a
serious bidder and will not present any undue problems to the seller regarding
closing. That can sometimes give you an edge over less-qualified people.
more step on the path to home ownership, though – your mortgage lender will
need to make a final commitment. In this process, the house you want to buy
will be evaluated to make sure you’re not wildly over-paying for it. The home
will also be appraised for structural flaws and any legal matters that may tie
up the title.
appraisal is going on, you may also undergo a final round of scrutiny on your
own finances. This is done to ensure that nothing has changed in your
circumstances since pre-approval, like losing a job or piling on some other
form of enormous debt.
everything clears, you will soon be filling out paperwork and picking up the
key to your new home. You will be done with rising rents, and now join the long
line of home owners that are the bedrock of any society.
credit score or other circumstances weren’t sufficient to get a home loan,
don’t despair. You can build up your credit score monthly by paying your bills
on time, paying down credit card balances, and making sure your credit report
doesn’t contain errors. Over time, you will rise to a level where mortgage
lenders will compete for your attention.
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