Upcoming free (& non-promotional) Home Buyer Education Classes
Saturday, June 6, from 9am-12pm
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
Monday night, June 15, from 5pm-8pm
Marshall Community Center, conference room
1009 E McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
Saturday, June 27, from 11am-2pm
Vancouver YMCA, conference room
11324 NE 51st Circle, Vancouver WA (corner of SR500 & Gher Road/112th Ave
…if these dates/times don’t work for you, we have others. Check out the website for more class dates, times, and locations. PLEASE always check the web site www.learningtobuyahome.com ; for any changes regarding the classes!
Remember…with reservation…we will throw in lunch, or dinner! 😀
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Happy Monday morning!
We have our semi-annual Client Appreciation Night coming up. 🙂 Chris Berg (cberg@pcmloan.com & 503-320-0925) and I would like to invite you, your family & friends to come watch a movie with us! Saturday, June 27th from 3pm-6pm for the new Pixar movie, Inside Out.
Just let me or Chris Berg know how many tickets you will need. 😀
This week some credit issues came up with some clients, and I have been getting quite a few inquiries from people regarding credit…so….let’s spend a couple of weeks going over credit.
I know that ‘sometimes’ I can go a bit long (sorry!) so I am trying to keep it shorter for you.
Credit Basics…
Your credit score is a 3 digit number that lenders and institutions use to predict how you will pay your bills, or debts. The score ranges from 300-850, and the average US citizen score is in the mid 600’s. This score is calculated using your credit payment history from those companies that report to a credit agency and go on your report.
There are several versions of the credit score, and each entity may look at something different, but most entities in your life will look at your credit score….your insurance company, a prospective employer, your bank, a car lender, a mortgage lender, etc. The most commonly used version for your credit score is the FICO score (Fair Isaac Company). Lenders and creditors look at this score to decide if you are a safe risk, or not.
How is it calculated?
Some parts of your bill paying history are more important than others, and are given different weights when calculating your score. Now, please remember that while Fair Isaac owns all the details of the exact information on how a score is calculated, we do know what information is used.
Paying Your Bills ON TIME = 35%
Remember that, with banks and creditors, it is all about risk so they are most concerned about whether or not you pay your bills. The best indicator of this is how you’ve paid your bills in the past. Late payments and collections will affect your credit score and the more recent the delinquencies, the more they hurt the credit score. If they are older, and you can show that you haven’t had any recently (at least a year), this is better.
How Much Debt You Have = 30%
Credit utilization is the amount of debt you have in comparison to your credit limits. The creditors and lenders use this to see how you manage your debt…..the closer you are to your limits equals the lower your credit score will be. Lenders and creditors want to see you about 30% or less because it shows 1) you can manage your debt and your income
2) you aren’t using credit to live on
3) in case something does happen you do have some credit to fall back on until you get on your feet.
Length of Credit History = 15%
How long have you had your loans? Your credit card(s)? The longer your credit history goes back, the better your score because you have something that creditors and lenders can track. It gives them more information on your spending habits, and your potential for risk. Don’t close a long standing account for a new one with a lower interest rate….it will hurt your credit score more than keeping that old card open.
Inquiries = 10%
To a creditor/lender, too many applications for credit can mean that you are taking on a lot of debt, or that you could be in some kind of financial trouble….and that you are a ‘high risk’. Any inquiry made on your credit (yes, even those “would you like to apply for our credit card to receive 25% off of your purchase”), can remain on your credit report for 2 years. Of course, your credit score calculation only considers applications made within the last year, but creditors and lenders can see everything….
Every inquiry is a ‘ding’ on your credit score, but if you are searching for a large loan, such as a car loan, or a home loan, you can make so many inquiries within a specified time and it will only count as one ding. The credit bureaus do understand that you aren’t trying to buy 3 homes, but shopping around. You only have a short window for this though…and remember, if a lender sees that you have been shopping for a car loan previous to searching for home loan that this could be a red flag.
What Kind of Credit Do You Have? = 10%
You need to have a good mix of credit on your account…some long term debt, like a car loan, and some short term debt, like a credit card. This shows you have experience managing a mix of credit. Most car, student, and home loans are known as installment debt as these are fixed payments. Credit cards are revolving debt as the payments are in direct relation to how you have used it. High debt is an issue in relation to how much income you have….but that is a different blog…
Having different types of debt is only 10%, so it isn’t a real big deal….unless you have no other information.
No Credit?
I understand the dream is to live debt free, and with no credit, but the problem with this is that if you have NO credit then creditors/lenders, etc., have nothing to base your history, and your credit worthiness (aka: risk) on. Most folks have to get credit, or a loan at some time….whether you want a home, or a car, but without credit this is very difficult. At this point, your lender may have you open some credit lines for 6 months or more to grow your credit history before they can give you a loan. It is harder to get a loan with NO credit than it is with BAD credit. Bad credit can be fixed, but no credit has to be earned. I know…bizarre, but there you are.
Should you pay off all your debt first…before talking with a lender?
Not necessarily. Why? For example, one of my recent clients had 3 old debts from a divorce, and a bad split up. He had 2, and she had one. My clients wanted to pay them off, but the lender told them to wait as they had a mid-score of 630 already which is fine to purchase a home. Now, at closing, the underwriters made it a condition of the financing to have those 3 bills paid off by bringing in a check at signing for those. My clients asked why they couldn’t have just paid it off at beginning like they wanted to. Their lender told them that had they paid those off first it would have been a ‘hit’ on their credit that would have taken them under the 620 needed to buy a home, but by waiting it wasn’t an issue.
I know, I know…crazy! There is it though. Answer is to wait! Sit down and talk with a lender like Chris Berg at Pinnacle Home Mortgage and talk about your credit report FIRST….before you do anything. Get a game plan and then go from there educated on your options, choices, and your next steps. We are, as always…here to help YOU!
One last thing you need to remember is that a real estate agent is not a sales person. It is not our job to ‘sell’ you anything. We are assistants, advisers , guidance, and help. You should not feel as if your agent is trying to sell you a home, or anything else, our job should be to help you in getting the home you want. This being said remember that you do not get T-Bone steaks for the price of hamburger…Look ONLY at homes within your budget. ALWAYS ask questions, and expect answers without a lot of lingo. I was always told that if you can’t explain something in a way that the other person can understand clearly, it is because you don’t understand it yourself. 🙂
Information is power, and I hope that I am able to help you. Good luck, and as always…May the odds be ever in your favor out there…. If you are looking for a real estate agent, I would love to be able to help you.
As always….this is just a quick overview…. please remember that your agent, and your lender work for YOU. You drive the bus…we are merely GPS to help you get to your goals. Like the classes, this weekly blog email is to help you with your homebuying adventure. The goal is to be informative and non-promotional. 🙂 We are, however, hoping you will call and want us to help with your adventure.
If you have any questions about this, or something you have heard…or if you would like me to help you with your homebuying adventure, please call, email, text, or facebook me anytime. I am, as always, happy to help!
Thank you again for your business and your referrals!! …and thank you for referring these classes to your friends, family, and co-workers.
. ..disclaimer…if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings…
Next Week: Mortgage vs Rent…How does that work?
Credit 101 … Part 2
Last Week: Appraisals…the good, the bad, and the ugly
Have a great day, and I will talk to you soon,
;-D
