Understanding Your Credit Score

What Is A Credit Score?

When lenders evaluate a loan application, a process called underwriting, they try to evaluate your ability and willingness to repay the loan. They judge the borrower’s ability to repay by reviewing the income and stability of past earnings. This practice helps the lender to determine if the borrower can afford the loan payments. The review of past credit history is used to judge the willingness of the borrower to repay the loan.

Lenders want their evaluation to be as accurate, objective and consistent as possible. To help achieve this goal, home mortgage lenders use credit scores to assist in the underwriting process. Credit scores are numerical values that rank individuals according to their credit history at a given point in time. A credit score is based on past payment history, the amount of available credit, and other factors. According to Fannie Mae and Freddie Mac, two large investors in mortgage loans, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.

Credit scores are just one of many factors considered in the underwriting process. The lender will review the many components that make up the financial situation of a borrower. Even when a credit score is low, there are other factors that could overcome the negative credit issues and satisfy other underwriting criteria.

Click HERE to read more. As always, please feel free to call me anytime with your real

estate questions and needs.

Stacy Schnell – Realtor Associate – Cell : 856-364-0772

Below are a few of the questions clients often ask when making a purchase.

house pic

 

Question: What qualifies me to be a first time home buyer ? 

A- If you’ve never owned a home, you are considered a first-time home buyer. But you are allowed to be a previous homeowner and still qualify as a first-time home buyer. According to the FHA, you can do so if you have not been an owner in a primary residence for at least three years leading up to your purchase.

Question: What are closing costs?

A: Closing costs are a fee charged for various items the lender charges. These fees are an additional cost that is added onto the amount of the loan. For example:  can include items such as loan processing fees, attorney’s fees, transfer taxes, title insurance costs, inspection fees, and more. You can ask for help with these fees in certain loan situations from the seller but still must supply your down payment for the loan.

Question: What is a seller concession?

A: When there is a seller concession in place, the seller will pay for part or all of the closing costs. Different loans offer different percentages that a seller can contribute.

Question: How much money will I need down? 

A: This depends on what type of financing that you qualify for with your mortgage company. Each depending on credit score and down payment.

FHA loan requires 3.5% down and you will need to get private mortgage insurance.FHA does allow closing costs to be paid by the seller. A friend or relative can also gift the closing cost amount to the borrower.

Conventional Loan can be as high as 20% but are now lending with 5% and even 3%. Conventional loan borrowers making a down payment of less than 20 percent will need to get private mortgage insurance (PMI). The good news is that once you reach a loan-to-value ratio of at least 78 percent, you can cancel the insurance. The only way to not pay your closing costs out of pocket would be to include a seller credit as a contingency of your offer.

USDA Rural Development or USDA loans come with 100% financing. This means that no money down is required and closing costs can be either paid by the seller or financed into the loan. In short, no-money-down means the home buyer is typically not required to pay any out-of-pocket expense when the house closes. … No Closing Costs.

6 Things You Must Do Before Buying a Home

(TNS)—Buying a home is a huge investment—probably the most significant purchase of your life. It’s not something you should do without preparation.

Before you start on the road to homeownership, make sure you are ready.

Improve your credit score.
A high credit score snags you the best deals. “Below 660 or 680, you’re either going to have to pay sizable fees or a higher down payment,” says Barry Zigas, director of Housing Policy for the Consumer Federation of America.

This excerpt from RIS Media, please CLICK HERE to read more.