Breakdown All Mortgage Pricing Before You Sign

Buy a house and you probably just made the largest purchase of your life, a decision that will impact you daily. Buy the right house and you can finally start to feel rooted, as if you found the place where you feel balanced and centered. You can make this house your own, hanging original art pieces and pictures on the walls and filling the space with furniture and knick knacks that showcase your remarkable personality, your amazing style.

Stop guessing how much house you can afford

If you let yourself develop your creative muscle, there’s a strong likelihood that you created those original art pieces yourself. Clearly, buying a house is about more than the base price of the house. It’s about stepping into new experiences. Allow those experiences to be rewarding, certainly financially stress free. But, that won’t happen like magic. It takes thought, action and understanding. You can do it.

You must know everything that you’ll be responsible to pay for before you buy a house. It could keep you out of foreclosure should you or your spouse get laid off. It could keep you from taking on debt that will put your finances in a gripping headlock. Specific fees that you may incur when you buy a house vary, depending on the lender. However, general fees and costs you can expect to be responsible for include:

  • Base price of the house (It’s easy to think that the base mortgage is all you’ll have to repay when you buy a house. But, although it’s the largest chunk of what goes into a mortgage, the base price or principal of a house is only one piece of the costs.)
  • Interest or adjustable rate mortgage (Adjustable interest rates may start lower, but they can shift upwards and put your mortgage out of reach. Research lenders. Make sure you’re not working with a predatory lender.)
  • Property taxes
  • Down payment (The bigger the down payment you can put on your new house, the better. It can lower your monthly mortgage payments significantly.)
  • Closing costs (Try to negotiate a deal that splits closing costs with sellers. You might even get a deal where house sellers pay all of the closing costs.)
  • Homeowner’s association fees
  • Mortgage insurance
  • Homeowners insurance (This is separate from the mortgage insurance. Homeowners insurance covers the costs of damages the house may incur during natural and human-made disasters. This insurance is similar to car insurance.)
  • House inspection fees

Eliminating mortgage fee surprises helps you enjoy your home

There is more than one way to become a homeowner. Options include rent-to-own, a newly built house and buying an old house that you restore. Housing communities also vary, giving you the chance to move into communal housing neighborhoods, single family homes, tiny houses, mobile homes and elegant Victorian houses. You could also make the land more a priority than your living space, especially if you aim to start a farm or another outdoor business.

Go with the housing option that best matches your personal needs. You’re probably going to be spending a lot of time in your new home. But, don’t just fall in love with your house. Set yourself up for financial success. Be aware of all costs that go into your mortgage before you buy a house. Also, understand additional costs that you are responsible for paying a lender that aren’t built into your monthly mortgage payments. Shop for and buy a house with your eyes wide open.

How Your Credit Score Can Get You a Better Mortgage Rate

Everyone knows that their credit score will affect the mortgage they qualify for and the interest rate they receive. The details of how exactly those numbers are arrived at, however, are a bit hazy for the average prospective homeowner.

This confusion is due to a number of reasons. Chief among them is the fact that your average person isn’t well-versed in credit terminology or the variables that go into determining their credit scores.

In this article, I’m going to break down credit scores and credit bureaus, then discuss how each of them affects the mortgage rate you could receive. Then, we’ll talk about some ways you can boost your score to qualify for a better rate.

Anatomy of a credit score

Credit scores are determined by five main variables. In order of importance, they are:

  • 35%: your payment history on loans, bills, credit cards, etc.

  • 30%: your total debt amount for all of your accounts

  • 15%: length of your credit history (how long you’ve had open accounts for loans, credit cards, etc.)

  • 10%: types of credit you have used (auto loan, student loan, credit card… diversity of loans matters)

  • 10%: recent credit inquiries (such as taking out new loans or opening new credit cards)

To have a “good” (over 700) or “excellent” (over 750) credit score, you’ll need to focus on each of these factors. For most people, paying their bills on time over a long enough timeline is enough to get them into the excellent range.

But things happen in life. People forget to pay an important bill, they have financial emergencies, or they have to take out a loan for an unforeseeable expense.

The credit bureaus

So, who are the people that determine your credit score?

There are three main credit bureaus: Experian, TransUnion, and Equifax. Lenders will look at reports from all three bureaus to determine your rate. Due to the Fair and Accurate Credit Transactions Act of 2003, consumers are able to receive a free copy of their credit report from each bureau once per year.

Since then, companies like Credit Karma have made credit reports even more accessible. Users are able to check in on their credit as often as they want free of charge.

Since much of your credit score is out of your hands, at least in the short-term, what can you do to help boost your score over the next few months to increase your chances of getting a good interest rate on your loan? Two things.

Credit and mortgages

So, just how much of an impact does your credit score have on your mortgage rate? Having an excellent score can give you a full percentage point lower on your monthly interest rate.

One percent doesn’t seem like much, but over the period of a 30-year loan that can amount to tens of thousands of dollars that you could have saved if you had a better credit score. As you can imagine, having an extra $2,000 per year can be quite helpful to a new homeowner.

So, what can you do to boost your score?

Make corrections

Since you have access to free credit reports be sure to go through your detailed report a few months before you plan to apply for a mortgage. Report any harmful errors to help you increase your score.

Don’t apply for new credit

The period from now until you apply for a mortgage is an important one. If you make new credit inquiries (i.e., open up new credit cards, take out new loans, etc.), your score will temporarily decrease. Wait until after you sign on your mortgage to take out other loans.

Your First Mortgage


Buying your first home can be confusing. Securing a mortgage is one of the most important parts of the home buying process. Making sure that you have the right loan and have chosen the right loan officer are among the things a first time buyer has to do to start the process. Here are some more tips on how to ensure a successful purchase:

1. Make sure your deposit is in order. Talk to your loan officer about what amount of a deposit is required for the purchase and type of loan. You will also want to make sure the funds are accounted for and readily available. You can expect deposits to run anywhere between 3 and 20 percent of the purchase price.

2. Plan to have a cash reserve in addition to your deposit. You may want to have a reserve of at least two months mortgage payments.

3. Ask your lender to go over all the fees that apply to the purchase. It is better to be prepared and know how much the actual purchase will cost. These costs are typically added into your loan but there may be some out of pocket expenses too.

4. Consider how much you can comfortably afford not how much you have been approved for. These numbers may vary considerably. Your mortgage costs should not be more than 30% of your household income.

5. The lowest rate is not always the best deal. You will want to look at not only the rate but also the terms and fees associated with the loan.

 

 

 

How to Use Gift Money For a Down Payment

If you are looking to buy a home you may be wondering how you will be able to come up with the down payment. One way that many buyers come up with down payment money is from gifts.  If you are planning on using gift money to help buy a home there are some guidelines you will need to follow.

Here are some simple rules:

1. Get a Gift Letter

If you are getting gift money to help you buy a house you will need a gift letter. The letter has a few requirements:

  • Have the letter hand-signed by you and the gift-giver
  • State the relationship between the buyer and the gift-giver.
  • State the amount of the gift.
  • State the address of the home being purchased.
  • A statement that the money is a gift and not a loan that must be paid back.
  • A statement that says: “Will wire the gift directly to escrow at time of closing.”

2. Document a paper trail

Mortgage underwriters want proof of where the money came from and where it went. Get copies of transactions showing the withdrawals and deposits. You will also need to make sure that the transaction is for the exact amount of the gift.

Following these simple guidelines will get you to the closing table hassle free.