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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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Interest Rates At Record Lows-Should You Refinance?

by Allyson Hoffman

Mortgage rates have plummeted over the past year, in fact, we have seen the lowest 30 year fixed mortgage rates in history – 4.5% or lower, with 15 year fixed at 3.9%. With these rates so low many homeowners are tempted to refinance. If you are considering refinancing your current mortgage, look a little closer and look at all the facts.

Many are unaware that the lowest of the low rates are reserved for premium borrowers – those with strong credit and a low debt-to-income ratio. Many homeowners won't be able to qualify for the lowest available rate so be sure to discuss that with your lender before starting the refinance process.

It is important to understand the refinancing process as well. There are significant costs, including application fees, appraisals, credit reports, inspections, insurance, title insurance, surveys, points and other fees specific to the lender. There may also be hidden costs, like prepayment penalties, that can wipe out the monthly savings gained.

Do you intend to stay in this home long enough to reap the rewards of the savings?  For example, if you are only saving $100 a month and you intend to sell your current home in 18 months, you probably won’t realize the actual savings after costs.

What about points? Lower points produce a higher interest rate. Again, it probably depends on how low you plan to stay in your current home. Balancing points vs. rates should be considered with how long you are giving yourself to recoup costs.

Start by doing your homework and shop around for current refinance packages from your lender and other lenders. Many may choose to offer special deals or no-cost packages, especially if you have not refinanced previously. Your put a lot of time and effort into purchasing your home – take the same care with your mortgage plan.

 

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How to Look for the Most Affordable Mortgage

by Allyson Hoffman

 

With lenders quoting a wide variety of interest rates and points, smart mortgage shoppers take a close look when comparing borrowing costs. Sometimes it turns out that the lowest interest rate isn’t necessarily the best buy. Here are some tips: 

  • Compare borrowing costs.
  • Count the points.
  •  The simplest way to compare borrowing costs is to ask the lender for the actual annual percentage rate (APR) – the true interest on the loan. The APR consists of the simple interest rate, plus all other charges imposed by the lender. It’s not at all unusual for the APR to be substantially higher than the rate quoted by the lender. What’s more, a simple rate quoted by one lender, although higher than another lender’s advertised simple interest rate, may turn out to have the lower APR.  For the shopper who wants to take into account the cost of points (each point is equal to 1% of the loan amount), an simplified rule of thumb comes in handy: Each point is roughly equal to an interest rate increase of 1/8th of 1% over a payback period of 30 years. Thus, a lender offering a 10% rate with no extra points is offering a better deal than the lender offering, say, a loan at 9 7/8% plus two points. Which is best for you depends on how long you plan to live in the house.

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

Displaying blog entries 1-4 of 4

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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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