Buying a home, while very rewarding, is a major financial commitment that should not be taken lightly. Before purchasing your new home you should ask yourself these key questions:
Do I have a steady, reliable source of income?
Is my total debt (all credit cards, car loans, etc.) under control? Can I afford those debts and a mortgage?
Can I afford both the mortgage and the other expenses, such as electric, water, repair and maintenance costs?
It may seem like a lot – a lot of work, time, energy, and money – but purchasing your own home is definitely worth it. Not only from the satisfaction of owning your own home but also from the freedom, flexibility, and long-term investment that you won’t get from renting.
Two key areas that mortgage lenders will look at are your credit score and credit history but that isn’t all that they consider when determining whether to approve you. Here is a list of things that mortgage lenders will use to evaluate your credit worthiness and ability to repay your home loan:
Ensuring first that you are financially ready and prepared to buy a home will help prevent problems down the road, like foreclosure or bankruptcy, or simply financial hardship. If you have determined by now that buying a home is right for you, then you’ll need to understand the different types of mortgages so you can find the best fit for you.
Choosing the right type of home loan can make a significant difference to your livelihood down the road and should be considered closely before making a final decision. Below are the four main types of mortgages, the benefits of each, and features to consider:
Ask about the FHA Streamline Refi:
Ask about the Conventional HARP Refi:
Ask about the USDA Streamline Refi:
Ask about the Conventional HARP Refi:
Talk to your mortgage broker or financial advisor to determine which mortgage type will best suit your needs.
Once you’ve determined which mortgage plan fits your financial situation, you can then start applying for home loans. Keep in mind though, when applying for your new mortgage, you will want to ensure that you get the best rate possible in order to save more, lower your monthly mortgage payments, and build equity faster.
One of the most impactful areas that the lender will consider when determining your interest rate and eligibility for your home loan is your credit score. If you have a low or poor credit score, not only will it be difficult to get approved but you may end up getting stuck with a very high interest rate that could lead to financial difficulty down the road.
Below are two examples of credit scores and how they would affect your monthly mortgage payments on a home loan of $250,000:
As you can see from the graphs above, a 100 point difference between the credit scores can significantly lower your interest rate and monthly payment amount. With a 740 credit score you would save over $260 a month compared to the 640 credit score with yearly saving of over $3,100 and five year savings of almost $16,000. The higher credit score would also make it much easier to get approved for your mortgage.
If you are concerned that your credit score may not be high enough to get approved or aren’t satisfied with the interest rates that you’re being offered due to your credit score, then you may want to consider speaking with a credit repair specialist prior to applying for a home loan.
Credit repair services can help you significantly increase your credit score by disputing negative items on your credit report – such as bankruptcies, foreclosures, late payments or delinquencies and more.
Contact Credit Absolute by either calling or requesting your free credit audit and consultation by filling out the form. Increase your credit score quickly and affordably so you know you’ll get approved for your mortgage and get the best rates possible.