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Improve Your Credit With These 7 Tips Before Applying for a Houston Mortgage
7 Helpful Tips on Improving Your Credit Before Applying for a Houston Mortgage
If you're considering becoming a home owner there are a couple of major points you'll need to consider first. Those are your credit rating and your down payment. The information below will outline some options you may want to consider in your quest to obtain your own home.
7 Credit Tips
1. Remember to always pay bills on time. This is one of the most critical pieces of establishing a good score. Know that a 30-day late from last month will have a significantly negative impact on your score compared to a 90 day late from a couple of years ago. If you have missed payments, get current and stay current.
2. Have credit cards, but manage them responsibly. Keep balances low. The most efficient way to raise your credit score is to pay off (or at least significantly reduce) your revolving credit debt. If you don’t think you can do this, you might consider spreading your debt among multiple existing cards, trying to keep them below 50% of their limit. However… please pay attention to the next point:
3. The only time you should consider opening any new account is if you really need it (do not get lured into point of purchase credit offers just to save a few bucks only to later find that you have too many open lines of credit).
4. Don’t close old or unused credit cards as a short term strategy to help improve your score. In vact, having accounts that are ‘aged’ can be a good thing as it shows you can handle credit and that you’re not totally new to the world of debt managemement. At the same time though, do not open a whole bunch of brand new accounts too fast; it lowers the overall age of your accounts and may appear like you currently need to borrow a lot of money to just get by (that’s not a good thing to have a potential lender think about your situation).
5. If you’re looking of a larger sized loan (for a home or a car, for example), keep your rate shopping to a limited time-frame (ideally within about 14 days window). This will reduce the impact of having multiple inquiries on your credit history, and therefore your credit socore overall.
6. Something else to be aware of is that closing an account that shows a late payment, or paying off a collection account|, won’t remove the info from your credit history.
7. Keep track of your personal credit report without paying anyone to do it for you. Remember that ordering your credit report for yourself will not do any damage to your credit/FICO score as long as you order directly from the credit reporting agencies or from any organization authorized to provide reports directly to consumers, such as www.myFICO.com or www.annualcreditreport.com
Help With Down Payment
One of the elements a lender uses to help identify how much to loan you is your down-payment. A down-payment not only serves as a commitment on a borrower's behalf to follow-through on a mortgage, but acts as a bank's guarantee to reduce risk in the event a borrower defaults on their loan. The more of your own money that you can put down for a loan, the easier it is to be approved for a higher loan amount or a lower motgage payment.
Alternative sources for funding
Since many borrowers don't have giant amounts of money on-hand for a down payment, there are other places to look for funding. Not including drumming into your own saving accounts, other resources may include kin, 401 [ k ] plans, proceeds from selling stocks you might own, appraised assets, even a co-signer. Many towns, looking to grow their communities, even offer their own down-payment subsidy programs for cash-strapped buyers. It is not odd to be presented $5,000 to $10,000 with no expectancy of repayment.
Loan-to-Value (LTV) ratio
A down payment is always shown as a percent of the sales price and regularly referred to by lenders at the loan-to-value ratio (also referred to as LTV). For example, a $200,000 mortgage with a loan to value of 80 percent will need twenty percent. down or $40,000. Employing a down-payment calculator will make it easier for you to see what influence a different down payment can make on your mortgage.
Other down payment options
Some lenders even offer zero-down percentage loans, which need no down payment. These kinds of loans are often aimed at first time home-owners with good credit who are qualified to make the regular monthly payment but can't come up with a down-payment. However, without a deposit the purchaser has no equity in the house and the lender is at bigger risk, so the interest rate might be higher.
Another option to purchasing a home without committing to a large deposit is to consider a lease option to purchase. In this case, as someone who rents, you have an option anytime in the term of the lease to buy the house at a pre-determined on price from the owner. In some instances, the cash you have put toward renting can be fully or partly applied toward the down-payment.
Sellers can also help buyers with their down-payment. By offering a carry back mortgage, sellers can sell their place more quickly in a competitive market place and buyers can buy property they otherwise won't be able to afford.