Check Your Credit Report Before Buying

Getting an annual Free Credit Report is important in this age when credit is important not only when buying a house but even when seeking employment,

There are businesses that exist solely to scrutinize your credit history. Credit card companies and other lenders rely on this information, so your credit score determines your chances to borrow money — and how favorable the terms will be.

A Crash Course in Credit Scoring

There are three major credit-reporting agencies: Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion (www.tuc.com). The website of each details how to get a copy of your report via mail or Internet. Be sure to order one from all three.

Until recently, credit scores’ calculations (and how to improve them) were literally a secret. Fair, Isaac & Co. is the company that blazed the credit scoring trail 40 years ago, and — under pressure from consumer groups, Congress, and lending institutions — they recently decided to provide credit scores and guidance on their website (www.myfico.com).

Credit scores can range from 200 to above 800. Scores below 620 are considered risky, but 720 and above should afford you excellent rates and terms for any kind of credit.

There are five categories used in determining a credit score:

1. Payment history (35% of total score): Late payments and amount owed are the two areas scrutinized most closely. What you may not realize is that recent late payments are more detrimental than those from years before. According to Fair, Isaac, “A 30-day late payment from last month will count more than a 90-day late payment five years ago.”

2. Amount owed (30% of total score): Large outstanding balances on your accounts do not necessarily damage your score. The significant factor is the percentage of total available credit you’re using on your credit cards. A common mistake is to consolidate many small credit card balances onto one card. This will actually cause your score to go down because your credit line on the one card will be closer to your credit limit.

3. Length of credit history (15% of total score): If you’re just starting out, you know that you need credit to get credit. There’s no way to improve this part of your score other than to wait. Logically, it makes sense for parents to establish a credit card in their child’s name just to get the ball rolling.

4. New credit (10% of total score): Applying for too much new credit in a short period of time is the most common and costly mistake most consumers make. While it counts for only 10% of your score, your score still drops when too many companies request your credit report in a short time. Note that if you request your own credit report (a “consumer-initiated inquiry”), it doesn’t count against you.

5. Types of credit (10% of total score): This category considers the overall mix of the credit you carry — installment loans, mortgages, revolving credit accounts, etc. Unfortunately, this category remains shrouded in mystery. Fair, Isaac won’t disclose how the various types of accounts are weighted.

 

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Credit bureaus give your score to lenders along with “reason codes” which explain why your score is what it is. Examine these reason codes; they’re the keys to improving your credit score.

Deciphering the Credit Report Code

With your credit report in hand, give it a thorough review. Check these items for timeliness and accuracy:

Check that all items included in the credit report are factually correct. If there are incorrect entries, notify the credit bureau in writing. Include copies (never originals) of documents that dispute the incorrect entries. Send the whole packet by certified mail to provide proof that the credit bureau received the information. They have 30 days from receipt to adjust or verify the incorrect data.

Check that all items are yours. If you have a name or Social Security number like someone else, it’s possible that his or her information will be attributed to you. Remember that even if that person’s credit is better than yours, you still have an obligation to correct the information.

Look for inactive accounts that remain open. Close any accounts you don’t use.

Check for late payments. Those from more than seven years ago can be removed from your record at your request.

Look over the list of your accounts and verify the numbers.

Verify correct address information and Social Security number.

How to Improve Your Score

First, pay your bills on time. Reduce outstanding debt, especially high-interest credit cards. Build up your savings.

Don’t fall for schemes that help you create a new credit identity. It’s illegal, and purveyors of these schemes incorrectly tell you that they’re invisible to creditors.

Wait to Buy Big Ticket Items Until you Buy Your Home

If you plan on purchasing a home wait until you buy it before buying big ticket items on credit because this can negatively affect your credit big time.

There is no quick fix to improving your credit; stay the course and you will see improvement.

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Closing Costs When Selling or Buying a Home

As a rule of thumb you should set aside 5% – 10% for closing costs and other minor charges, if you are selling you can help pay some of the buyer closing costs if you are buying you may ask in your offer to purchase that the seller pay some or all of your closing costs specially if you are not asking for much of a discount from the asking purchase price.

Non-Recurring Closing Costs Associated with the Lender

l Appraisal fee: The property being appraised is collateral for your mortgage (you’re borrowing money against the value of the property you’re borrowing money to buy) so the lender will want to verify that the property’s value is comparable to similar property based on recent sales in your area. l Credit Report l Flood certification fee: The certification verifies whether your property is in a federally designated flood zone. l Flood monitoring: Monitors remapping of flood zones. l Lender’s Inspection fee: for newly constructed property to verify that construction is complete with carpeting and flooring installed. l Loan discount: AKA points, each point equal to 1 percent of the loan amount. l Loan origination fee l Mortgage broker fee l Tax service fee: For monitoring your payment of property tax.

Other Lender Fees

l Administration fee l Appraisal review fee: Usually done on higher-valued properties. l Document preparation l Underwriting fee l Warehousing fee: The cost of a “warehouse” line of credit. l Wire transfer fee: This is the cost to transfer funds from one account to another.

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Items required to be paid in advance

l Homeowner’s insurance: You are usually required to pay the entire first year’s insurance at closing. l Mortgage insurance: Some first-time homebuyer programs still require the first year’s mortgage insurance to be paid in advance. l Pre-paid interest: The interest that accumulates between closing day and the first payment due date. l Up front mortgage insurance premium l VA funding fee: This is paid to the Veterans Administration for guaranteeing your loan.

Reserves Deposited with Lender

l Homeowners insurance impounds: You will need to deposit two months’ worth of premiums into the impound account to start it up. l Mortgage insurance impounds: Usually two months’ worth of premiums. l Property tax impounds

Non-recurring closing costs

l Closing/escrow/settlement fee l

Courier fee: This is the charge for sending documents back and forth between lender and borrower. l Home inspection: This is an optional, but recommended, cost. l Home warranty l

Homeowner’s association transfer fee l Loan tie-in fee: Usually charged by the closing agent, this is for services they provide in dealing with the lender.

l Notary fees l Pest inspection l Recording fees: To record documents with county recorder. l Sub-escrow fee: The title insurance company charges this for dealing with the closing agent.

l Title insurance: You pay this to make sure you have clear title to the property.

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Visit our Website:  www.SouthBrowardHomesbyTony.com

Antonio Ortega LLC Licensed Real Estate Professional

Text or Call 954-648-6095

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Broward Homes for Sale PQ letter or Prequalification letter Plantation, Davie, Cooper City, Tamarac, Sunrise, Weston, Fort Lauderdale, Pembroke Pines, Hollywood, Miramar.

Difference Between Prequalification Preapproval

It is important to at the very least get a PQ letter or "Pre-qualification Letter" so that when you submit an offer to purchase a home the seller will seriously consider it I have partnered with an excellent Mortgage Broker / Lender he is in my website my contact information is at the end of this article.

Amy and Brad immediately fell in love with the two-story with a brick patio and big backyard. They quickly made an offer and began looking for lenders. Unfortunately, they soon discovered that they couldn’t qualify for the home. They tried to find something else in their price range, but other houses paled in comparison. If only they had shopped for loans before looking at houses…

One surefire way to reduce stress during the process of home buying is to seek pre-approval, applying for a loan before finding a house. The loan agent assembles a credit package that includes a loan application, credit report, income and asset information, and supporting documentation. These documents are then submitted to prospective lenders who underwrite the file, issuing credit approval or denial.

Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts. Pre-qualification is not a loan commitment from a lending institution; it is only a loan agent’s opinion that you will be able to obtain financing. Verifications are not usually made so formal approval is not issued. These days, virtually anyone can achieve pre-qual status.

Pre-approval, on the other hand, signifies that the lender has taken the application through a rigorous procedure. So, buyers with pre-approval status can basically write their own ticket.

Benefits of pre-approval:

1. If you make an offer on a home and then apply for a loan, you are at the lender’s mercy. He sets the interest rate and points, aware that you do not have time to shop around.

2. Understanding the breadth of your financial reach will save the time spent looking at houses you can’t afford.

3. Shopping for a loan allows you to settle on a house payment that fits your lifestyle. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment. Most people can qualify for more than they would feel comfortable paying.

4. Having a pre-approval letter from a lender gives you an edge in a situation where multiple offers have been made on a house.


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5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done.

Remember, neither pre-approval nor pre-qualification are absolute loan commitments. Lenders must still assess property appraisals, verify information, and, in many cases, verify credit before funding the loan.

Extremely Important:

Usually the lender wants some additional information from you, they refer to this as satisfying contingencies, make sue you respond to these inquiries right away, you want the Mortgage completely processed a few days before the expiration of the Mortgage Contingency usually 30 to 35 from Accepted Offer and before the Closing Date.

We have a an Excellent Mortgage Broker / Lender on my team for fast Mortgage Qualification, if you don't have one yet.

Stay Safe and Healthy

                   
        

Visit our Website:  www.SouthBrowardHomesbyTony.com

Antonio Ortega LLC Licensed Real Estate Professional

Text or Call 954-648-6095

Global Luxury Realty, LLC

Click Here to Contact Us

Credit Score Explained How to Build it Up

Credit Score Explained

In this article we’ll explain how your credit score is arrived at, why your credit score is important and how you can improve it, it is very important to have good credit if you are buying a house even employers are looking at credit scores to screen applicants

There are businesses that exist solely to scrutinize your credit history. Credit card companies and other lenders rely on this information, so your credit score determines your chances to borrow money — and how favorable the terms will be.

The three major credit-reporting agencies—Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion (www.tuc.com)—offer reports to you by mail or via the Internet. Order one from each; you should give your credit report a yearly checkup.

Credit scores can range from 200 to above 800. Scores below 620 are considered risky; 720 and above earn excellent rates and terms.

There are five categories used in determining a credit score:

l Payment history (35% of score): Late payments and amount owed are the two areas scrutinized most closely.

l Amount owed (30% of score): Large outstanding balances do not necessarily damage your score. The significant factor is the percentage of total available credit you’re using on your credit cards. Consolidating many small credit card balances onto one card actually causes your score to go down.

l Length of credit history (15% of score): You need credit to get credit, so there’s no way to improve this part of your score other than to wait.

South Broward Homes For Sale By City Or Zip Code from Tony Ortega on Vimeo.

l New credit (10% of score): Applying for too much new credit in a short period of time is a common and costly mistake. Your score drops from too many credit requests in a short time.

l Types of credit (10% of score): This considers the overall mix of credit —loans, mortgages, credit cards, etc. Unfortunately, scoring companies won’t disclose how accounts are weighted.

Lenders receive your score and “reason codes,” so examine these reason codes; they’re the keys to improving your score. When you get your report in the mail, you'll also want to review the following items:

Check that all items are correct. Notify the credit bureau in writing of inaccuracies. Use certified mail to send them copies of documents that dispute the incorrect entries. They have 30 days from receipt to adjust or verify the data.

It’s possible that someone else’s information might be attributed to you. You have an obligation to correct the information.

Look for inactive accounts. Close any accounts you don’t use.

Check for late payments. Request that those older than seven years be removed.

Verify and update your accounts and account numbers.

Verify your address and Social Security number.

Wait to Buy Big Ticket Items Until you Buy Your Home

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If you plan on purchasing a home wait until you buy it before buying big ticket items on credit because this can negatively affect your credit big time.

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Stay Safe and Healthy

                   
        

Visit our Website:  www.SouthBrowardHomesbyTony.com

Antonio Ortega LLC Licensed Real Estate Professional

Text or Call 954-648-6095

Global Luxury Realty, LLC

Click Here to Contact Us

Broward Homes for Sale, Credit Score Plantation, Davie, Cooper City, Tamarac, Sunrise, Weston, Fort Lauderdale, Pembroke Pines, Hollywood, Miramar.