How is My Credit Score Calculated?
September 13, 2012
Banks use your credit score (aka FICO score) to help determine whether you are a worthy risk for a Hendersonville home loan. It’s also one of the deciding factors regarding your interest rate on a mortgage loan. Most likely, you already know WHAT a credit score is. But have you ever asked yourself, “how is my credit score calculated?” That’s a much more complicated answer.
Lenders like it when you have several different types of credit. That includes not only revolving credit, like credit cards and department store accounts, but also previous mortgage notes on other Hendersonville area homes, installment loans, student loans, car loans, etc.
Most Hendersonville home owners have debt. It can sometimes be unavoidable. But, too much debt makes you look risky. Make a concerted effort to pay down as much debt as you can before you apply for a mortgage loan.
Banks live by the mantra “those who cannot remember the past are condemned to repeat it.” Your payment history says a lot about your creditworthiness. Late payments on any bill, including the cable, cell phone, electric bill, etc., may be reported to the credit reporting agencies, reducing your score and your chances of scoring a home loan.
Not only is your payment history important, but the length of time you have had credit can affect your score as well. The longer you’ve had a history of credit accounts and payments, the more complete a picture a mortgage company will have at your spending and repayment habits. A long history of credit with faithful payments makes your Hendersonville home loan a much more attractive risk than someone who just received a credit card two months ago and is applying for a home loan.
Finally, opening new credit while trying to purchase a Hendersonville home is a definite “no-no”. First of all, your credit is hit by 5-10 points every time someone makes an inquiry. When you purchase a car, for example, the dealership may try to find you the best deal by shopping around at a few lending institutions. That could mean three to four different hits on your credit at one time. Secondly, a mortgage company could look at this as someone who is set on a spending spree, which makes you look less fiscally responsible and can cost you approval on your home loan.
Knowing how your credit score is calculated can help you stay on top of your credit in a more effective manner. Keep these tips in mind before you apply for a mortgage on your Hendersonville home. A good score not only means loan approval, but can also determine how much it will cost you for any loan you take out.
Rich Cooke, your Western North Carolina real estate specialist
Originally posted on my Western North Carolina Real Estate blog here: http://rich-cooke.com/2012/09/13/calculating-credit-score/.
Congress Approves Homebuyer Tax Credit Extension
July 1, 2010
In a late vote last night (June 30, 2010), Congress approved an extension of the homebuyer tax credit. Previously, homebuyers with a signed contract by April 30th had to have their loans closed (through escrow) by the end of business day on June 30th to take advantage of the $8000 first time homebuyers tax credit and $6500 homebuyer tax credit. Because so many people rushed to get their loans in under the April 30th deadline, there was a huge backlog of loans that needed to be approved. Usually, two months is plenty of time to close out a loan. However, the backlog pushed about 180,000 people to the edge of missing out on the tax credit, according to the National Association of REALTORS®.
The tax credit deadline only extends to those people who had a signed, binding contract for their home loan by the end of business on April 30, 2010. If you bought a home after that, you are not eligible for either tax credit. For those homebuyers who had their contracts under way by April 30th, you now have until September 30, 2010 to close escrow to still be eligible for the $8000 or $6500 homebuyer tax credits.
Now that congress has approved the homebuyer tax credit extension, many homebuyers can breathe a sigh of relief. Even if you missed out on your chance to take advantage of the tax credits, it’s still a great time to purchase your dream Hendersonville home. Home prices are very affordable, a variety of different types of homes are available and interest rates remain at historical lows. Just contact me today!
Government Program Eases Short Sale Process
April 15, 2010
A new government program helps ease the short sale process. The Home Affordable Foreclosure Alternatives (HAFA) program has set new rules that make the long, arduous process of a short sale much more streamlined and effective. How is this possible? For one thing, HAFA offers mortgage companies incentives to participate in their program. If you are in danger of foreclosure, have tried a loan modification through the HAMP program but have not been successful and need to sell your home for less than you owe before the bank takes it back, the HAFA program may be able to help.
Previously, homeowners didn’t know the minimum amount a bank would accept. So, they would put their home on the market at a price they thought was OK and had to wait for the mortgage company to approve or reject the offer. This process could take several months. But through the HAFA program, homeowners are allowed to get a preapproved agreement from the bank on the terms they are willing to accept. Another great outcome through the HAFA program is that the lender also must accept the proceeds from the short sale as payment in full for the seller’s loan. They cannot try to collect the remaining balance after the sale is completed.
For homeowners to qualify under the HAFA rules, the property must be their primary residence, they have tried to do a HAMP loan modification, the mortgage was originated before January 1, 2009, the homeowner is either delinquent on payments or is in danger of foreclosure, the monthly mortgage payment is more than 31% of the homeowner’s gross income, the balance of the loan is under $729,750 and the homeowner can prove hardship. Only mortgages guaranteed by Fannie Mae or Freddie Mac will be considered.
Take advantage of the HAFA government program to ease the short sale process. If you are looking at purchasing or selling a home in a short sale in the Hendersonville real estate market, please contact me today. I can help you!
$8000 Tax Credit Extended
November 12, 2009
The $8000 First Time Home Buyers Tax Credit has been extended both in time and to include a $6500 tax credit for existing homeowners. Previously, only first time home buyers (those buyers who have not owned a home for at least the three previous years) were eligible for an up to $8000 tax credit based on the purchase price of the home. This was set to stop December 1, 2009. However, President Obama has just signed an extension to the First Time Home Buyers Tax Credit that applies to all homes purchased by April 30, 2010. If you have a signed binding sales contract in effect by April 30, 2010, you have until July 2, 2010 to close escrow.
In addition to the $8000 First Time Home Buyers Tax Credit, President Obama made available a $6500 tax credit for current homeowners looking to purchase a new home. Existing homeowners must have used their home as their primary residence for at least five consecutive of the last 8 years to qualify for this new tax credit.
Income Limits:
If you are a single home buyer or married filing head of household, you cannot make more than $125,000. If you are married and file jointly, you cannot make more than $225,000 to receive the total tax credit you are eligible for. You are eligible for a partial credit if you are single or a head of household filer and make between $125,000 and $145,000 or married filing jointly with an income between $225,000 and $245,000.
Homes That Qualify:
Only a home that is purchased and used as a primary residence is eligible for the appropriate tax credit. That means that vacation homes, rental properties and commercial properties do not qualify. Also, the purchase price cannot exceed $800,000.
These tax credits do not have to be paid back provided you use your house for your primary residence for at least three years. However, if you sell your home before the three year time period is up, you will be required to pay back all the tax credit you received. For more information on the tax credit extensions and how they effect you with your Western North Carolina home, please contact me.