Tag Archives: Credit Scores

What Does My Credit Score Even Mean?

What does my credit score even mean?

As we all know, credit can either help us turn our dreams into a reality or it can be the one road block that keeps getting in the way. What does my credit score even mean?

What is credit?

The credit scoring system was originally designed in the 1950’s to help lenders determine how well consumers could pay back borrowed money. While there have been many updates to how this system is used, the components of a credit score consist of these major factors:

  • Payment History – 35% Impact
  • Outstanding Credit Card Balances – 30% Impact
  • Credit History – 15% Impact
  • Inquiries or New Credit – 10% Impact
  • Types of Credit – 10% Impact

 

What can impact my credit score?

Paying off debts on time has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Keeping lower balances on the open credit accounts you have is a sure way to keep that score going up! The longer you have positive credit history, the better. However, multiple credit inquiries in a short period of time, such as applying for multiple credit cards, can have a negative influence on your score. The type of credit you have is also a factor. Having a mix of credit, such as an auto loan and a credit card, is more positive than a combination of debt from multiple credit cards.

What if I don’t have any or enough credit?

There are simple ways to begin building credit history. Start establishing credit history by opening  a small line of credit with your bank or credit union and begin making minor purchases that can be easily paid off. Your bank may offer a secured credit card if this is your first time applying for credit. This type of card works like a debit card and will require deposited funds for purchases; just be sure your history will be reported to all three credit bureaus.

What if I have less than perfect credit when applying to purchase a home?

Knowing what is on your credit report is the first step. Obtaining a credit report will show which areas are helping your score and which areas need to be worked on. When applying for a mortgage, your loan officer will be able to see if there are any areas that need work to help you get on the right track for a future purchase.

Want to find out where you stand? Let’s get the conversation started.

https://alphamortgageapplication.com/

 

To keep up with all things mortgage, housing, and real estate, be sure to subscribe to our blog! Here at Alpha Mortgage, we’re proud to be North Carolina’s #1 mortgage company. Contact us today to make owning your dream home a reality.

How to sell your home fast!

In today’s market, homes are selling faster than ever. Have your sights set on your next dream home and need to get your current home ready to sell? Let’s take a look at a few ways to help you get your house to SOLD!

We can’t stress enough how important it is to get connected with an experienced real estate agent right away. Working with a quality real estate agent will not only give you the advantage of having their experience on your side but they can also help you get more from the sale of your current home, giving you a healthier budget for furnishing your beautiful new home!

Now, how do we get this place sold? One thing your real estate agent may share with you upfront is that the home needs to be priced appropriately. Okay, we can get a bit sentimental when it comes to putting a price on the house we made a home. After all, how can you put a price on the whole summer it took to get those flowers to grow in the back yard or the upgrades you paid an arm and a leg for to make the kitchen your morning oasis? While those items need to be accounted for to determine the home’s total value, the price that is set needs to be realistic for where your home is located and what it has to offer.

Vamp up your curb appeal:

This will be a potential buyer’s first impression of your home. The moment they pull into the driveway, buyers will make a snap decision before they even step out of the car. Bringing life to your home’s exterior is easier than you think.

  • Give a fresh coat of paint to old front and garage doors.
  • Clean the siding and clear out cobwebs and debris from the entryway.
  • Revamp landscaping by adding potted plants to the front porch and walkway.
  • Trim back overhanging tree limbs and lay down fresh mulch.
  • Lastly, don’t forget the welcome mat!

Create an inviting atmosphere:

Now that you have ensured potential buyers want to enter your home by dazzling them with newly enhanced curb appeal, it’s time to awaken their senses. When potential buyers are walking through your home, you want their first impression to be a great one! There is nothing that turns people away like a stinky sink or foul-smelling carpet. While getting the carpets cleaned may be an obvious check off the to-do list, adding simple scents to the atmosphere have been shown to help sell your home!

  • vanilla
  • orange
  • lavender
  • fresh baked cookies

Yes, fresh baked cookies! Popping a couple rounds of cookie dough in the oven when you have a showing will help buyers feel warm and invited into your space and make them want to stay.

Declutter, depersonalize and brighten up the place:

When families are walking through your home, they want to feel at home themselves. Clearing all the clutter and stowing all personal items will help open up the space and let their imagination run freely. Removing excess items will allow potential buyers to visualize the space with their own furniture. Painting the walls a neutral color and opening the blinds to brighten up the place will insure your home is looking its best.

The forgotten details:

Taking the time to check off a few last items on the list will ensure your home is walk-through ready.

  • Park vehicles down the street to allow for easy access
  • Take the pups for a walk or arrange for a place for pets to stay while your home is being shown by a real estate agent. An anxious pet can cause tension during a walk-through and deter potential buyers.
  • Leave a detailed list on the kitchen countertop describing the features of your home and neighborhood. Buyers want to know as much as possible, such as history of the home, upgraded features, school districts and amenities that set your neighborhood apart. Do you have great neighbors? Tell them about it! After all, who could know better than you?

 

Which Loan Type is Right for Me?

Searching for the right loan program

Cutting Through the Confusion

Getting lost in all the mortgage lingo? You are not alone. According to a study performed by the Mortgage Bankers Association of America, “many borrowers say they get too much information when they go through the home-lending process…” Working with an experienced mortgage lender will save you a world of frustration by cutting through all the confusion. Your Lender will present the relevant information to get you on your way to moving day!

Which Program is Right for Me?

When purchasing a new home, a little research can go a long way. Asking the right questions will help us identify the right program that meets your needs.

  • Are you a first-time homebuyer?
  • Are you active or retired military?
  • Where is your future home located?
  • Which government programs do you qualify for?\

Common Loan Programs

You may have heard of these common loan programs: Conventional, VA, FHA, USDA, ARM (Adjustable Rate Mortgage), Jumbo…but what do they mean?

Conventional

The conventional mortgage is the most commonly used loan program for borrowers with good credit and steady income and can be used for purchasing a primary residence, second home or rental property. Conventional loans do require a down payment that can be as low as 3% of the purchase price of the home. PMI, or private mortgage insurance, is required when the down payment on the home is less than 20%. After 20% equity has been built up, the loan becomes eligible to have PMI removed.

VA

As a thank you in advance for those who are currently active duty, retired military or eligible reservists, this loan program offers veterans 0% down payment! The VA loan is guaranteed by the Veterans Administration and is government insured. Rather than having a monthly mortgage insurance fee, this loan program has a VA funding fee that is calculated into the initial loan amount. For borrowers who are considered disabled, the VA funding fee is waived entirely.

From all of us here at Alpha Mortgage Corporation, thank you for your service!

FHA

Insured by the Federal Housing Administration, the FHA loan requires a down payment as low as 3.5% and comes with a maximum loan amount that is determined by the location of the property. The FHA loan is helpful to borrowers who may have a higher debt to income ratio and allows for less than perfect credit. The FHA loan program does require PMI, or private mortgage insurance.

USDA

The USDA loan is insured by the US Department of Agriculture and is offered if your potential property is located in a USDA acceptable rural area. One of the benefits of the USDA loan is that it offers 0% down payment. Check here for USDA eligibility and income limitations: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do;jsessionid=12MOUsHhXtG476sIGOnK5FRY#

JUMBO

The Jumbo loan is meant for loan amounts exceeding $453,100. In order to qualify for the Jumbo loan, borrowers must have a higher credit score.

 

To keep up with all things mortgage, housing, and real estate related, be sure to subscribe to our blog! Here at Alpha Mortgage, we’re proud to be North Carolina’s #1 mortgage company. Contact us today to make owning your dream home a reality.

 

The Importance Of Good Credit

download

It’s no secret when we tell you that the better your credit score is, the easier your life can be. Your credit score is a three-digit number that represents how trustworthy you are from the perspective of someone that would lend you money for something like a loan or a mortgage. In fact, your credit is THE single most important determining factor from a lending perspective. Our economy runs on credit. So what is so important about those 3 numbers, and how does it impact your mortgage rates when you decide to buy a home? Here’s what you need to know:

  • Your credit report = Your financial report card. You want all A’s – Like we mentioned before, your credit score is a representation of how well you can handle your money, and can make or break a lender’s decision to approve you for a loan or mortgage, and impact your interest rates majorly. Your credit report is made up of how much money you’ve borrowed, your history of paying it back, and how much open credit is available to you. Here is what appears on your credit report: debts and a history of how they’ve been paid, public record information (tax liens, bankruptcies), bills referred to collection agencies, and inquiries made about your creditworthiness.
  • Credit score: Credit scores range from 300-850 points and are based on debt, amount of time you’ve used credit, debt totals, how often you apply for new credit, and types of credit you currently use based on information received from your credit report.
  • The higher your credit score, the lower your interest rates will be, and vice versa- The better your credit score is, the more banks and lenders can trust you, resulting in much lower interest rates for loans and mortgages. Don’t think interest rates are that big of a deal? Consider this- for a long-term credit loan such as a mortgage, interest alone can add thousands of dollars to your original buying price. Ouch.
  • Banks aren’t the only ones who look at your credit – so do landlords, employers, insurance companies, utility companies, phone companies, and more!

Having good credit is essential for having a healthy financial presence. So now that you understand how vital it is, check out these tips for improving your credit before shopping for a mortgage!

Credit Checklist Preparing for a Mortgage:

  • Start early – A year to a year and a half before you will be buying a home, do a deep analysis of your credit report. This will give you time to make minor changes to your score that can save you big bucks in the end when you start shopping for mortgage rates.
  • ALWAYS pay your bills on time- This is a given! It is also important and make an effort to pay more than the minimum balance if possible.
  • Have a mix of credit (auto, credit cards, student loans, etc.) – Lenders like to see a long and versatile credit history.
  • Keep a low balance – on any given credit card try not to use more than 30% of your limit.
  • Start saving now– It is ideal to try and aim to put a 20% down payment on your home, which requires a decent amount of cash upfront. Start bulking up your savings account now!
  • Don’t forget about closing costs!
  • Whatever you do- do not do these 5 things that will destroy your credit while looking for a mortgage!

When it is time to find a mortgage for your dream home, be sure to contact us so we can help make your dream rate a reality!

 

 

 

 

5 Things that will Destroy your Credit while looking for a Mortgage

calculator house

In the lending process, one of the most important things that brokers look at when determining if an applicant should be approved or denied for a mortgage is credit score. Credit score refers to the three-digit number that represents how well you handle money. Credit scores are calculated through data records that come from previous statements, monetary amounts owed, length of one’s credit history, new credit, and types of credit used. There are three different credit scores: Experian, TransUnion, and Equifax. FICO scores are what most lenders check when applicants are applying for a loan. There are three FICO scores checked, one for each respective bureau, to determine risk. FICO scores range from 300 to 850, and the higher the number is, the better credit one has.

According to the FHA, “Generally speaking, to get maximum financing on typical new home purchases, applicants should have a credit score of 580 or better.” Lenders will look at your score before approving you, and often during the loan process as well to make sure that nothing has changed. If your score is a bit lower than 580, don’t sweat it. As long as your credit future looks promising, you still can potentially get a mortgage, you just may have to pay a higher down payment. If you’re in the clear, congratulations! You are one step closer to owning your dream home. However, regardless of score, it is essential to avoid these 5 things when you’re applying for a mortgage that can potentially destroy your credit score.

1. Opening up a new line of credit– There are two types of inquiries when it comes to someone wanting access to your credit- soft inquiries and hard inquiries. A soft inquiry occurs when you want to check your own credit score, potential employers run background checks on you, or other small questions. A hard inquiry is a serious check into your credit either conducted by a lender, credit card issuer, or other financial institution. These hard lower your credit score for a few points and stay on there for up to two years. They must be authorized. When you open up another or multiple lines of credit during the lending process, this raises a red flag to your lender that you’re desperate for credit.
2. Closing a credit card account– On the opposite end of the spectrum, closing credit card accounts can also lower your credit score and cause issues when you are applying for a mortgage. According to Next Avenue, when you close out a credit card or consolidate all of your credit card debt onto one account, your credit score will take a ding. The article states “when you close a credit card account, you lose the amount of available credit on that card. This increases what’s known as your credit utilization ratio, or CUR, a figure that compares the amount of credit you’ve used with the total amount of credit you have available. The way to maximize your credit score is to have a low utilization ratio.” Avoid this when applying for a mortgage.
3. Not paying your bills on time– This is a given… but sometimes we forget that even the smallest slip in not paying bills can be an issue when it comes to your credit score. If you don’t already, set up reminders for every bill that needs to be paid a few days in advance to the due date.
4. Shopping around for a mortgage– It is extremely important to check your options when looking for a mortgage in order to secure the best rate possible. However, your FICO score takes a hit with multiple inquiries from different lenders. To compensate for this, within 30 days of a mortgage inquiry, additional inquiries are lumped into the first. What does this mean? If you are shopping around for the best mortgage rate, do so within a concentrated 30-day or less period.
5. Co-signing loans– As a parent, helping your child with a loan may seem like the best option to help them build credit, but be very careful when co-signing with your children for finances. It is in fact a good way to build their credit up, however, if they miss a payment it could shave up to 50 points off of your credit score. If you do co-sign, make sure to set reminders for when payments are due to remind your child and ensure that no payment will fall through the cracks. Yikes!

Want to apply for a mortgage? We can help.