Getting ready to buy a home requires setting a few ducks in a row. For example, ensuring your credit is in the best possible standing. This might require some time (and patience) but it needs to be done. The better your credit score is, the higher the possibility that you will be approved for a loan, as well as receive a better interest rate. The following are ways you can avoid running into common credit issues.
Incorrect Information: It is recommended to obtain your credit report every year, so you can review your information. When you receive it, ensure your name is spelled correctly. If this is inaccurate, there could be data on your report from someone else with the same name. Likewise, double-check all your information, including your address, birthday, employer data and Social Security number. If you do find an error in your credit report, write, don’t email or call, the credit reporting company. While the three credit reporting companies, Equifax, Experian, and TransUnion, offer the option to dispute errors online or by phone, most experts recommend mailing a certified letter, so you have documentation in case your dispute isn’t resolved. In the letter, you should explain what the error is, include photocopies of any documents that support your claim, and ask them to correct the error. You can also include a copy of your report with the error highlighted. Make sure to keep copies of your letter and all documents. Lastly, keep in mind that through the three credit bureaus you are entitled to a free report every year. Therefore, you should request a free credit report from one bureau each quarter to monitor your credit score.
Identity Theft: Identity theft occurs when someone uses your name, Social Security number, date of birth, or other identifying information, without your permission to commit fraud. There are several steps you can take to protect your credit and identity. These are just a few:
Missed or Late Payments: Everyone can be a little forgetful, so if you find you’re having a hard time remembering to make credit card payments, this could affect your credit score. Making credit card payments on time is the fastest way you can enhance your FICO score. If you miss any payments, you will see your score drop rapidly. If you have trouble remembering to make payments, try setting up a calendar reminder on your computer/social device. Every little reminder will help. You might also want to consider setting up automatic payments but be careful not to overdraw your account.
Overspending: Using a credit card is a fast and easy payment method, but if you are not cautious, you could sink into debt before long. It is important to recognize that credit is not free money and must be paid back. Your credit score will reflect the negative impact of having a lot of unpaid debt. The best way to avoid this situation is to curb your spending as much as possible. You don’t want to completely stop using your credit card, but if you create a budget, have a little self-control, and can afford to make larger payments towards your debt, you can improve the state of your credit.
Closing Old Credit Card Accounts: Closing old accounts can lower your credit score. Account history is an important factor of your credit score. Your mortgage lender will be able to see your financial responsibility throughout time, so the older the account is the better. Even if you pay off a credit card, you’re usually better off keeping that card open.
New Accounts: While you are trying to repair your credit score, don’t open any new credit card accounts or make any large purchases. It is best to focus on the accounts you have. It may be tempting to open a new department store credit card to receive a discount, but it may impact your credit negatively if you can’t afford to make the payments. If you really believe you should get one of these credit cards, review your financial plan and determine if you can truly manage the cost.
Achieving your dream of homeownership is possible, it just might take a bit of time and effort. Having good credit will make that dream more financially attainable.
If you have any questions about credit, mortgages, or the homebuying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!
There are many ways to prepare to buy a home, but a major one is to ensure your finances are completely sound. A lender is going to request many financial documents, one of which will be your bank statements. While it might seem like an insignificant request compared to your taxes or paystubs, your bank statements are vital to get your loan approved. So, what do mortgage lenders review on bank statements?
The simple explanation is that a mortgage lender needs to ensure you have sufficient funds to cover the down payment, closing costs, and some might even want to see if you have enough reserves to cover the first few mortgage payments. It is paramount these funds belong to you and they have been in your account for a while. Underwriters are thoroughly trained to pinpoint all unacceptable sources of funds, hidden debts and other red flags by analyzing your bank statements. Before you begin the homebuying process, it is best to ensure you don’t have anything questionable on your statements that will raise a red flag.
Here are 3 of the most common red flags:
Applying for a loan is not something to take lightly. Your lender is going to inspect your finances to ensure you have the money you say you do, and that the money is really yours. It is best to analyze your finances from the perspective of a lender a few months before applying for a loan to ensure you reduce the risk of having any red flags. This will also give you time to gather the documentation or explanations you might need in case you think something will catch the lender’s eye. Keep it simple both before and during the application process by not adding or taking out any unnecessary funds, and to help ensure you have a smooth experience.
If you have any questions about the home buying process or documentation requirements, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
Congratulations! You’re married! If you are like many married couples, the next big step on your To-Do List is to buy a home. More and more couples are choosing to wait until after the wedding to buy a home because they don’t want the additional stress on top of wedding planning and work. Whatever your reasons are for waiting, you know that buying a home is a major milestone. We want to make sure you are prepared, so we’ve come up with a list of important things to know about buying a home after marriage.
Finances: Now that you are married and applying for a loan, you need to understand that your finances have also tied the knot. While you’ve probably discussed your spouse’s income or savings, there is much more you need to know. Make sure you thoroughly investigate all your finances before you begin the homebuying process to ensure you are aware of all potential issues that may come up. A lender will take both of your credit scores into consideration when reviewing your application, so it is vital you know where your partner stands financially. Bad credit scores and student debt can severely impact the loan value and interest rate a lender is able to offer you. If one of you has a poor score or a large sum of debt, it could influence how you choose to proceed with the loan. You may need to proceed with only one person on the loan and decide who should be on the title of the property. Once you are ready and have your finances straightened out, meet with a lender to get prequalified.
Compromises: Whether you’ve been living separately prior to the wedding or if you have been living together for a while, there are some compromises to make when purchasing a home. Any couple buying a home together will face the typical issues: where do you want to live, what kind of house do you like, what size home, etc. If you were living separately, you could also face the discussion of whose furniture you’ll keep or whose appliances or electronics are better. It is likely you won’t be able to use everything both of you have. Get ready to spend time compromising on everything the two of you own, on top of the compromises involving the home you choose.
Name Change: Waiting to purchase a home until after the wedding is great, but do not wait to change your name after you’ve begun the homebuying process. There is a significant amount of paperwork that is done by your lenders. If you decide to change your name in the middle of it, the process will be completely thrown off and even delayed. You should either change your name completely before you start the process, or wait until after you have closed on your home to avoid any conflict.
It’s More than Just a Financial Purchase: Buying a home with your spouse is not just a financial investment, it is also an emotional one. The homebuying process is stressful and mentally draining; you are going to need to support one another. You are also going to have to discuss all possible future outcomes, such as divorce and separation—especially if your loan or title is going under one person. If your relationship turns to that direction, you don’t want to be caught off guard or have the obligation of a mortgage payment to fall on one of you. There needs to be an honest conversation between spouses to discuss every aspect of the homebuying process to ensure you are on the same page and completely ready.
Waiting to purchase a home until after marriage can be beneficial, but there are some challenges that can arise. Have a complete picture of your spouse’s finances before you choose to move forward with this investment. Buying a home together should be an exciting milestone, so don’t let compromises or finances get in the way.
If you have any questions about the homebuying process, contact one of our licensed Mortgage Loan Originators.
Divorce can not only be emotionally painful, but it can also affect your finances. All shared accounts and co-signed loans suddenly become the cause of major issues, especially large loans and mortgages. And it is how you handle these financial obligations that can determine if and how your credit scores change.
How to ensure your credit stays in good standing:
Divorce degree and your debt
It is important to understand that a divorce decree does not change your financial obligations to your creditors. However the obligation to pay the debt is arranged, through settlement or court order, both spouses must ensure that the party obligated to pay the debt makes the payments. If the payments are late or missed, both spouses will end up with a negative item on their credit reports resulting in lower credit scores.
It is best to close all joint accounts before you divorce. These accounts will include car loans, credit cards, bank accounts, etc. Arrange new individual lines of credit with the same lender, or replace these joint accounts by transferring agreed upon balances to the new account. For accounts that cannot be closed due to a high balance, request that a freeze be placed on the account. This will prevent any further charges until you can figure out how to proceed or pay the amount owed to close the account.
Managing shared accounts
There may be some accounts that you cannot close until they are paid off. In order to manage those shared accounts, set up the accounts online. This allows both spouses to monitor the account activity, and allows both parties to ensure that there are no late penalties or late payments reported to the credit bureaus. Car Loans can be titled in the name of the spouse who will retain the automobile, and that spouse can refinance the auto loan in their name only.
Breaking up the mortgage
Usually, the mortgage is the biggest liability a couple has, and divorcing a mortgage is not easy. The following are 4 ways you can divorce your mortgage:
If you have any questions regarding mortgage solutions available for you while going through a divorce, please click here to contact us.
If you have just gotten your tax refund or plan to receive one soon you should start thinking of ways to use your money responsibly—or just treat yourself! According to the Internal Revenue Service, the average individual tax refund was $2,651. Here are 8 ways to use your tax refund this year:
1) Save Your Money
You can’t go wrong with putting your tax refund in savings. If you are trying to build your savings, consider putting at least some of this money in your savings account. Are you looking to buy a home soon? Maybe you should put this money toward your down payment.
2) Pay off Debt
Paying off some debt may be the most common way people use their tax refund. If you know you have bills that need to be paid right away, put this money directly toward that.
3) Plan That Trip You’ve Always Wanted
Enjoy a vacation on an island like the Bahamas or take your partner on a romantic getaway to Paris! Everyone deserves to treat themselves occasionally.
4) Upgrade Your Technology
This is the perfect time to splurge! Get that new television for your family room, or a new laptop. Have you had your eyes on one of the larger more advanced cell phones? Go ahead and purchase it, along with some great accessories. There’s nothing wrong with keeping up with the ever-changing digital times!
5) Donate Your Money
Consider putting some of your money toward a local charity organization. Remember donating your time is just as important as donating your money.
6) Take a Class
Do you wish you knew more about the business world? Try taking a management class at your local community college. You could also express your creative side by taking a cooking or arts and crafts class. You’re never too old to learn new things!
7) Update a Room in Your House
Is your bedroom design starting to bore you? Splurge on a fresh coat of paint, new linens, and new artwork. If you want to give your kitchen a facelift, try replacing the cabinet doors. A little bit of money can go a long way toward making cosmetic changes in a room.
8) Dedicate Yourself to Fitness
Join a gym, and put money aside to cover the cost of a year’s membership—this way you won’t have to worry how you’re going to pay for it in the future. If you’d rather workout at home, consider buying a treadmill or an elliptical machine.
Hopefully you consider using your tax refund money in one of these ways or even use a combination of these tips. Whichever one you choose, make sure you’re using your refund in a way that makes you comfortable.