When applying for a loan, one of the most important factors that will come into play is your credit score. Before you start the loan application process, you should have a clear understanding of how your credit score affects your mortgage rate so you can assess your financial situation.
Most lenders use the FICO (Fair Isaac Corporation) model for credit scores. This model provides consumers a numerical value on a scale between 300-850. Typically, the higher your credit score, the lower the interest rate the lender will offer to you. Lenders use your credit score to determine how reliable you’ll be as a borrower and the likelihood that you’ll repay the loan as agreed upon. Essentially, they want to make sure you’ll make your mortgage payments on time each month. A lower score might indicate that a borrower could make late payments or even miss some. This is all part of your credit history, which they will also take into consideration.
Not necessarily. It mostly impacts which type of loan you’ll qualify for and the interest rate you’ll receive. A conventional loan usually requires a minimum of a 620 credit score, whereas an FHA loan has a minimum of 580. However, it’s important to note that while some loan programs accept lower credit scores, they might require a larger down payment or some other way to mitigate the lender’s risk in taking on the loan. In addition, even though someone with a 580 credit score COULD qualify for an FHA loan, it does not mean that they will; it is at the discretion of the lender within the guidelines of the loan programs.
A borrower has obtained a conventional fixed-rate 30-year loan of $200,000 with 10% down, meaning the amount borrowed is $180,000. She has a 750 credit score and received a 4% interest rate. Her monthly mortgage payment is $859 (not factoring in other fees, such as private mortgage insurance (PMI) or real estate taxes that may be included in the payment). Now, say that borrower dropped to a 650 credit score. She instead received a 5% interest rate. That increases her monthly mortgage payment to $966. That 100 point difference between credit scores ultimately means an extra $107 added to her mortgage payment each month. While that might not seem like a big deal, keep in mind the duration of the loan is 30 years. Having a higher interest rate means a yearly difference of $1,284; over 30 years that totals $38,520.
If you’re interested in comparing interest rates and monthly mortgage payments, use our mortgage calculator.
Don’t worry if your credit isn’t the best right now. Raising your credit score can take a lot of time, patience, and discipline. However, if you follow these simple guidelines you will soon notice a positive change in your credit and ultimately your financial future. You’ll be able to qualify for better rates when it’s finally time to buy a home.
To learn more about credit scores and interest rates, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
*The figures used in this example are hypothetical and the results are intended for illustrative and educational purposes only. **NFM Lending is not a credit repair company. Please contact a credit repair company for more information on how to improve your credit score.
Buying a home is one of the most significant financial decisions you will make in your life. In order to make an informed decision, doing some research for each step of the process can help ensure a smooth transaction. Here are the 6 basic steps needed to purchase a home.
Step 1: Get Pre-Qualified
It is important to get pre-qualified so that you will know what you can afford, what you will qualify for, and what types of homes you should be looking at. Pre-qualification allows you to enter the home buying process prepared. It makes your home search more efficient and ensures that when it comes time to make an offer on a home, you are ready.
Step 2: Determine Your Loan Type
Conventional? FHA? USDA? VA? 203K? Find the best loan for you based on your personal financial situation, how long you plan to live in your home, how quickly you plan on paying your mortgage back, etc.
Step 3: Find Your Home (and Make an Offer!)
It’s finally time to begin your home search. This may be the most exciting part of the process, and it can be easy to get caught up in that excitement. It’s important to make this decision carefully, consider your options, and to work with knowledgeable professionals who can help you make the best choice.
Step 4: Apply for the Loan
This is the time to assemble and submit all your financial information and documentation to your lender for evaluation. Once you signed a contract, contact your Loan Originator to submit your loan. They are there to help you figure out what documentation you need to provide, and ask you questions about your financing so that you can submit the best possible loan application.
Step 5: Processing and Underwriting
Once you apply for a home loan, your Mortgage Loan Originator will submit all your documentation to processing, and from there, your loan will be sent to underwriting. Processing will order a title search to make sure that the seller has legal rights to the property and schedule an appraisal to determine the value of the property. From there, your loan will be sent to Underwriting where it will be determined if the loan is a good fit. A clear-to-close (CTC) will be issued if approved.
Step 6: Go to Closing (and enjoy your new home!)
At closing, all the necessary paperwork is presented and signed by both the sellers and the buyers, the title of the property is transferred, and all the documents are recorded. Congratulations, you are officially a homeowner!
Homeownership is a rewarding achievement. The home buying process may present challenges but having qualified mortgage professionals by your side can make all the difference. If you have any questions about the home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to buy a home, 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.
LINTHICUM, MD, June 26, 2015 — Elysia Stobbe, an NFM Lending Branch Manager in Jacksonville, FL, will speak at a Home Buyers Expo on Saturday, June 27, 2015. The event is hosted by the Northeast Florida Association of Realtors (NEFAR) and The Florida Times-Union.
Stobbe was invited to speak at the expo as a recognized expert in the mortgage industry. She will deliver two seminars at the expo, the first titled “3 Massive Mortgage Money Mistakes to Avoid” and “Why Shopping for the Best Interest Rate can cost you Money”; the second titled “7 Massive Mortgage Mistakes to Avoid” and “VA, FHA & Conventional Financing Highlights.”
“I am thrilled to be a part of the FL Times Union Home Buyer’s Expo!” said Stobbe. “An educated consumer is our best client. I consider it a professional responsibility and I am passionate about empowering home buyers to understand the details about how their mortgage affects their home buying options. I am proud to help raise the standard in mortgage lending by giving home buyers the tools and questions to ask when shopping for a mortgage. I hope that my new book, How to Get Approved for the Best Mortgage Without Sticking a Fork in Your Eye, helps home buyers make smarter decisions with their loan options.”
The Home Buyers Expo will take place from 9:00 a.m. to 3:30 p.m. at the University of North Florida (UNF) University Center. The event is expected to draw attendance from more than 1,500 prospective home buyers and sellers. It will feature speakers on various industry topics, as well as informational booths hosted by real estate agents, builders, mortgage companies, home improvement vendors, and more.
For more information about sponsorship or attendance, call (904)-359-4024. To contact Elysia Stobbe, call her at (904) 446-9007 or visit her website: www.nfmlending.com/estobbe.
About NFM Lending
NFM Lending is a mortgage lending company currently licensed in 29 states across the United States. The company was founded in Baltimore, Maryland in 1998. They attribute their success in the mortgage industry to their steadfast commitment to their customers and their community. NFM Lending has firmly planted itself in the home loan marketplace as “America’s Common Sense Residential Mortgage Lender.”
For more information about NFM Lending, please contact:
Toll Free: 1-888-233-0092