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Your Credit is More Important Than Ever

by Allyson Hoffman

We are hearing that lenders want to make loans in Northern Illinois, but in distressed economy, could it be that only those with great credit will get approved?  While many Americans are struggling to make payments and hang on to their good credit scores, mortgage companies and other institutions are tightening their standards and credit qualifications more than ever before.

Most buyers are wanting to know how they can secure the rock bottom interest rates. The truth is, they may be reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than they did

If you're buying a new home or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750).

Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.

In addition to stellar credit history lenders look for:

•Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
•Self-employment – Be prepared to give up  two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
•Rental income - You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.


Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you'll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.

The bottom line – take good care of your credit. It can be very challenging in this recession but your credit history and credit score are more important than ever. Bad lending practices have resulted in tight standards that will give credit only to the top tier borrowers who have enough cash and income that they may not even need to borrow money in the first place.

Contact me today to learn how you can improve your credit and buy the perfect home for your family.

Image courtesy of www.gotcredit.com/Flickr.com 

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Credit Scores: Important!

by Allyson Hoffman

Although lenders want to make loans for those in the market for a Northern Illinois home, this difficult economy has made it where only the best credit scores will be approved. While many Americans are struggling to make their monthly payments and hang onto their high credit scores, mortgage companies and other lending institutions are being forced to tighten their belts and credit qualifications are more important than ever before.

Those rock bottom interest rates? They are reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than they did

If you're buying a new Chicago North Shore home or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750).

Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.

In addition to stellar credit history lenders look for:

  • Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
  • Self-employment – Be prepared to give up  two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
  • Rental income - You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.

Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you'll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.

The long and the short of it is this: take care of your credit! It can be very challenging in this economy, but your credit history and score are more important than ever!  Bad lending practices have resulted in extremely tight standards that will give credit only to the highest scores. Those who have enough cash and income that they may not even have the need to borrow the money to begin with. 

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Image courtesy of StockMonkeys.com/Flickr.com

Your Credit Score-More Important Than Ever

by Allyson Hoffman

Lenders are telling us that they want to make loans, but in this difficult economy, those with the best credit will be approved. While many Americans are struggling to make payments and hang on to their good credit scores, mortgage companies and other institutions are tightening their standards and credit qualifications more than ever before.

Those rock bottom interest rates? They are reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than they did

If you're buying a new home or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750).

Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.

In addition to stellar credit history lenders look for:

  • Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
  • Self-employment – Be prepared to give up  two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
  • Rental income - You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.

Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you'll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.

The bottom line – take good care of your credit. It can be very challenging in this recession but your credit history and credit score are more important than ever. Bad lending practices have resulted in tight standards that will give credit only to the top tier borrowers who have enough cash and income that they may not even need to borrow money in the first place.

 

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The Key to Your Credit Score

by Allyson Hoffman

When it comes to purchasing a home there are few people that can afford to buy it outright while the rest of us are forced to rely on banks and lending institutions for some sort of mortgage. There are a number of factors lender's consider when qualifying you for a mortgage and one of the more important factor's is your credit score.

Your credit score is a three digit number between 300 and 850 derived from a point or scoring system called FICO. Ultimately the higher your credit score the better your credit and the more likely you will qualify for your purchase. Your FICO score is determined by a formula that factors in the following information.

  • 35% of your score is determined by your payment history.
    Are you paying your bills and are your payments on time? How many times have you paid your bills late and how late were they? Have any of your bills been sent to collections?

 

  • 30% of your score is based on the amount of outstanding debt you have. The more debt you have the lower your score will be.

 

  • 15% of your score is determined by the length of time of you have had the credit.

 

  • 10% of your score is based on the number of times people have inquired about your credit

 

  • 10% of your score is determined by the types of credit you have

Before applying for credit it is important that you are aware of what is in your credit report on the chance that there are any inaccuracies that might affect your score. You want your credit report to reflect the most recent credit activity available. There are currently three national credit bureaus that have their own scoring system based on the FICO system and you can pull your credit report from any/all of the following:

  1. Equifax
  2. Transunion
  3. Experian

All credit bureau websites have extensive information about how the scoring system works, how to read your report and identify any inaccuracies.

It's a good idea if you plan to purchase a home, or make any large purchase, to stay on top of your credit and review your report regularly.

Image courtesy of StockMonkeys.com/Flickr.com

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview IL 60025
847-310-5300
Fax: 847-400-0881

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview, IL, 60025

(847) 310-5300
[email protected]

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