Frederick Md Homes For Sale – The Historic District

The mortgage industry has become a little more tricky to navigate in recent years, but getting qualified and getting the loan is still attainable… just don’t make these rookie mistakes:

1. I have always paid cash for everything, so I don’t have any late payments. I should be good credit-wise, right?

Usually, your credit history is the most important factor in a mortgage qualification process. If you don’t have any credit, you may find it difficult to qualify; you have to have some credit to have a credit history. You have to get credit, even if it starts with a secured or high interest rate card, and make the payments on time.

2. I have been able to get credit whenever I apply, so I don’t need to check my credit report, do I?

A mortgage is different from other types of credit, especially when lenders are being more picky than they used to. You should check your report in advance of applying for a mortgage to make sure there are no errors.

You need to check all three reporting agencies, Equifax, Experian and TransUnion, to see if there are any omissions or inaccuracies, check to see if balances were cleared after pay-off, and if there has been any fraud.

You are entitled to a free report from each agency every 12 months, go to   www.annualcreditreport.com.

3. I need to raise my credit score, so I’m going to close some credit lines.

No! Don’t do it! I will most likely hurt, not help. Part of your score is based on your history, in which case the longer the better. Part of your score is based on  ratio of credit available to credit used, so if you close some of your lines, you inadvertently lower your ratio, which will hurt your score.

4. Our mortgage has been approved, but we haven’t closed yet. We can go ahead with plans to buy new furniture and a car, right?

You don’t want to do that yet. The lender will run your credit one last time right before settlement, and this new spending will more than likely lower your credit score… best to wait until after settlement.

5. I just got offered a new job closer to our new house!

Again, best to wait until after you settle on your new house. Lenders double-check loan applications right before settlement to verify that your are still employed at the job on your application. Best to wait until after closing. Then you can move, buy, get that new job… just be sure to pay that new mortgage every month on time!

_____________________________________________________________

The Highland  Group
Chris & Karen Highland *        301-831-9947
Turning Point Real Estate “ 301-831-8232
email us: isell4u2@msn.com
Text Us: 301-401-5119

FICO Scores consider 5 main categories of information, and each category weighs differently in the calculation of your credit score:

1. Payment History – 35%:   What is your track record?   Obviously, one should make every effort to make their payments on time.   But even within this category, there are several types of payments, each weighing differently.
   • Mortgage Payments count 100 points.   They are reported late after 30 days.
   • Installment Loans, like car payments, count 50 points.   They are reported late after 11 days.
   • Revolving Accounts, like credit cards, count less than 50 points.   They are reported late after 1 day.
2. Amounts Owed – 30%:   You must have a low ratio of amount owed to amount available.   Many people mistakenly close unused credit cards, when all this does is make your ratio higher.   The best strategy is to keep low balances.
3. Length of Credit History – 15%:   The longer your accounts have been established, the better your history.   A young person can establish a good credit score in 2 or 3 years if they monitor it carefully.
4. New Credit – 10%:   FICO recognizes that people today shop for credit more frequently than before.   Just be careful to shop for an auto loan, for instance, in a short amount of time, 2 weeks. FICP scores distinguish between a search for a single loan and a search for many new credit cards.   It can damage your score to open up too many credit cards too quickly.
5. Types of Credit in Use – 10%:   You need a healthy mix of accounts, credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.   This is not a big factor, but is more important if your credit experience only includes one type of credit account.

Establishing or Re-establishing a healthy credit score is more important than ever. Not only for large purchases, like a mortgage or car payment, but many employers are even considering credit scores in their hiring practices.   You are allowed by law to receive 1 free credit report per year, a wise idea to keep your eye on your credit score.

Learn more at www.myfico.com/crediteducation.

______________________________________________________
                                       

                     
                                                                                                                                                                                                                                                                                                                                                                                             
The Highland Group – Real Estate Teams

Chris & Karen Highland *
Frederick County MD Real Estate Agents

301-831-9947              
  Real Estate Teams, LLC
Karen@highlandrealestategroup.com

There are some things you should do while in the loan process:

• Do join a credit watch program.   Your bank, credit union or credit card company may be able to direct you to a free credit watch program that can alert you to any changes in your credit report.   This way, if something pops up, you can intervene before an underwriter sees the problem.
  
• Do continue to use your credit as you normally would.   Red flags are easily raised within the scoring system.   If it looks like you are changing from your normal spending patterns, it could possibly cause your score to go down.   Example:   if you’ve had a monthly service for internet access billed to the same credit card for the past 4 years, there’s really no reason to drop it now.   Again, make your changes after the closing.
  
• Do stay current on existing accounts.   Late payments on your existing mortgage, car payment, or anything else that can be reported to a credit reporting agency can cost you dearly.   One 30-day late payment can cost anywhere from 30 to 75 points on your credit score.
  
• Do call your loan officer.   If you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score, call your LO so they can try to direct you to the right resouces and prevent any negative reporting to the credit bureaus.

information provided by:   www.creditresourcecorp.com

Related Articles:   Do’s and Don’ts During the Loan Process

___________________________________________________________

The Highland  Group “ Real Estate Teams
Chris & Karen Highland *        301-831-9947
                                                                        Real Estate Teams, LLC
email us: isell4u2@msn.com
TEXT US:   301-401-5119

Between the time your offer on a home is ratified, becoming a contract, and the time you go to close on the home, this is the time your loan is in process.   You should not do anything that will have an adverse affect on your credit score.  

What kind of things have an adverse effect?   Glad you asked:

• Don’t apply for new credit of any kind.   No credit cards or lines of credit.   No new car loans.   None of that.
  
• Don’t pay off collections or charge-offs, unless  your lender asks you to.   This is a hard one for people to accept.   Generally, paying off old collections causes a drop in your credit score.   When you do, it brings that particular account to the forefront of your credit.   In most cases, it counts as less of a negative, the older it is.
  
• Don’t close credit card accounts.   If you close an account, it will affect your ratio of debt to available credit which has to be under a certain ratio.   This accounts for 30% of your credit score.   If you really want to close an account, do it after you close on your home.
  
• Don’t max out or over charge existing credit cards.   Running up your credit cards is the fastest way to bring your score down; it can drop up to 100 points overnight.   You should try to keep your credit cards to below 30% of the available credit limit.
  
• Don’t consolidate debt to one or two cards.   Again, you don’t want to change your ratio of debt to available credit.   You also want to keep your good credit history on the books.
  
• Don’t raise red flags to the underwriter.   Don’t co-sign on another person’s loan, or change your name or address.   The less activity that occurs while your loan is in process… the better.

Next Article:   The Do’s of the loan process.

___________________________________________________________

The Highland  Group “ Real Estate Teams
Chris & Karen Highland *        301-831-9947
                                                                              Real Estate Teams, LLC
email us: isell4u2@msn.com
TEXT US:   301-401-5119

Question:   What is the minimum credit score I need to purchase a home?

The answer to that question gets more complex as time goes on.   Where we used to see one answer, now this seems to be a mulitple choice answer.

FHA,  (Federal Housing Administration) in an effort to build up its depleted cash reserves, unveiled tighter underwriting guidelines on Wednesday.   These include a bigger downpayment for low FICO score borrowers, an increase in  the MIP, mortgage insurance premium, and a decrease in seller concesions.

• A  10% downpayment will be required for those borrowers with  FICO scores of 580 or less.
• The MIP will be increased from the current charge of 1.750 to 2.25.
• Seller concessions will be decreased from 6% maximum to 3% maximum.

Most of the new guidelines outlined will go into effect this spring.   FHA is also pursuing legislative authority to increase the monthly fee from the .55 to a higher monthly amount.

We’re seeing more FHA loans these days than we did during the “boom” years.   In December the majority of sales were FHA financed, 42%.     As it is now, FHA doesn’t consider  FICO credit scores as the primary indicator of credit-worthiness, but rather uses “common-sense” indicators, and takes  many criteria into consideration, like your credit history.    Typically,  credit scores  between 600 and 620 are the lowest we see.

This change in downpayment, in effect, opens up lending to those with lower scores.   If they have more cash to balance the risk their lower scores pose to lenders.

As for seller concessions, we don’t usually see concessions higher than 4%.

When will they take effect?   Some time in the spring.

This will probably raise a controversy, in a time when the mortgage industry is struggling.   All in all, in our opinion, these changes probably aren’t going to have any negative effect on the market.   They may even help a bit.

Use our free MLS property search…

___________________________________________________________

                                                        The Highland Group – Real Estate Teams
Chris & Karen Highland *        301-831-9947
                                                                                Real Estate Teams, LLC
email us: isell4u2@msn.com
TEXT US:   301-401-5119

That’s a good question.   It’s very important to keep track of your credit score regularly.   I’ve written several articles about credit score maintenance.

Knowing what to shoot for is important if you’re planning to buy a home in the future.   The tightening of credit by lending institutions lately has caused some changes that we all need to be aware of.

Fannie Mae has increased the minimum borrower credit score from 580 to 620.

Brian Faith, a spokesperson at Fannie, says that the  hike reflects a careful analysis of borrowers™ ability to repay their mortgage obligations over the life of the loan.

œOur experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period, Faith said in a statement.

Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.

Faith said that high DTI ratio loans also have higher levels of serious delinquency.

FHA (Federal Housing Administration) is considering a hike as well.

Use our free MLS property search:

                                         
                                                                                                                                                                                                                                                                                                                                                                                             
                                              The Highland Group – Real Estate Teams                                
               Chris & Karen Highland *  Frederick County MD Real Estate Agents
                                                               Specializing in Frederick County Real Estate
    301-831-9947          
Real Estate Teams, LLC
isell4u2@msn.com