5 THINGS JUST AS IMPORTANT AS INTEREST RATE

Interest rates have made headlines all through 2020 and 2021. These historically low interest rates have caused many families to consider buying their first home. Making this decision will help benefit your future long term, but it’s important to remember that there are more factors than the interest rate when shopping for your home. Here are five things just as important as rate when shopping for your home.

Monthly Payment

Your monthly Payment is an incredibly important factor in picking the right lender and loan product. While you may be able to qualify for a certain amount with a great interest rate, if you are struggling to make your mortgage payment every month, it is not worth having a low-interest rate.

The Right Loan Product

Picking the right loan product is just as important as securing a lower interest rate. Your loan product will help determine:

  • Your loan term
  • How often/if your interest rate adjusts
  • If you pay monthly mortgage insurance
  • How much you need to put down

Your loan officer will look at your current situation and see what specific loan product makes sense for you and your family.

A Smooth & Timely Process

We built Summit on the concept of delivering industry-leading customer service. During the loan process, there are so many chances for it to go sideways. When you shop based on the cheapest interest rate, you are also going to get the bottom of the barrel when it comes to service.

Using an inexperienced lender could cost you both your home and hard-earned money.

The Cost Of The Loan

A common tactic in the mortgage industry is to display lower and enticing interest rates while disclosing it tiny at the bottom of the marketing collateral. While this is legal, at Summit, we are highly against it and label it as immoral. Consumers deserve to know exactly how they are paying for their mortgage.

If you are being offered a lower interest rate than most, make sure to ask if you are paying points to discount your interest rate. This will help you determine exactly how much you are paying to have your loan and compare apples to apples.

Your Future Mortgage Plan

Depending on how long you will be staying in the home and your future financial plans, you will want to make decisions differently. It is the responsibility of your loan officer to take these plans into consideration and build a mortgage strategy that takes care of your family long term.

If you are going to be refinancing soon, the interest rate may not be as important right now. Make sure you use a loan officer that works by referral only. They will be much more likely to worry about your financial future and want to be your lender for life.

Curious about the home loan process and want to get started? Click here and speak with one of our experienced loan officers. They will help you determine what you need to get started, all while educating you along the way.

Buying a home with a poor credit history

Having a great credit score and a super clean payment history are obviously preferred by most lenders. 

If you’re a homebuyer that is financially ready to purchase a home, but lack a robust credit history then check out these helpful tips.

Tip 1 – Don’t assume you can’t qualify for a mortgage if you have a low credit score because of a limited credit profile — or even no credit score at all. Some lenders are willing to work with borrowers to establish a nontraditional credit profile or to find ways to improve a low credit score.

Tip 2 – A larger down payment, higher levels of cash reserves, and a verifiable income that can easily cover your mortgage payment can help compensate for credit issues.

Tip 3 – Applying for a credit card and using it responsibly can boost your credit score, but you can also rely on other sources to establish your financial history, such as your rent payment and other bills.

Tip 4 – It’s a good idea to talk to your lender about their programs and know your options BEFORE you look at homes. You don’t want to get your hopes set on a home, and then not be able to afford it. 

Are you ready for a no obligation home consultation? Contact your home loan experts today!

DO CREDIT PULLS LOWER MY SCORE?

It’s a common misconception among borrowers that multiple credit pulls will drop their credit score. However, the three big credit bureaus (Experian, TransUnion, and Equifax) state it plainly: a borrower’s score will not drop when a mortgage lender pulls their credit more than once in a two-week period. So, why is this the case?

Not all credit checks are weighted equally. A credit card application carries more weight on credit than a mortgage loan. Credit card debts have a tendency to increase over time, make for larger risk which lowers credit. Mortgage debt, by contrast, eventually pays down to $0, so mortgage loan checks don’t have as much weight on overall credit score.

Soft Inquiries

Soft credit inquiries usually happen when a person who is not a potential lender, looks at someone’s credit score. This happens when you check your own credit score, an employer looks at your credit for a background check, or a lender pre-approves you for a credit card or loan offers. However, there may be instances where your lender will need to do a soft inquiry at the end of your loan transaction. (Ask your lender for more information about this.)

These credit checks can be done without permission and are not customer driven so they will not affect the credit score.

Hard Inquiries

A hard credit inquiry is when a financial institution, such as a lender or credit card company checks a person’s credit while deciding whether or not to extend an offer of credit. They most often take place when a person is making a large financial decision such as applying for a mortgage, loan, or credit card.

Typically, a person must authorize the third party to do this, so you should always be aware of any record of hard inquiry on your credit report. Hard inquiries can lower a credit score and can remain on the credit report for two years. But with time, the damage to the credit score decreases or disappears altogether.

A hard inquiry will happen when you apply for:

A mortgage

Credit cards

Auto loans

Student loans

Business loans

If you’re going through the home buying process, but still shopping around for the right lender for you, avoid hard inquiries at all costs. You’ll want your credit to be as high as possible when you decide on your lender, and credit inquiries make up 10% of your credit score.

It’s also important to sort out your mortgage shopping within a 14-day timeframe. If the inquiries are properly managed, the credit bureaus will acknowledge the first credit pull but will ignore each following check.

Another Credit Myth

Credit pulls aren’t the only misconception when it comes to how your credit score impacts your home loan. Some borrowers assume they won’t qualify for a home loan if they don’t have an outstanding score. Although your score is a factor in the approval process, there are loan options specifically for homebuyers with a lower credit score.

The truth is this, you might have more loan options than you think. Each person’s financial situation is different, so it’s important to speak with a Mortgage Advisor about your specific needs. However, The Polder Group at Summit Funding has multiple resources that can help get you started on your journey toward homeownership.

Let’s start with the minimum FICO credit score needed for our low credit score loans:

FHA Loan: 580

USDA Loan*: 600

VA Loan: 580

Government-backed loans remove the risk of default off of the mortgage company because the government insures or guarantees the loan, which in turn allows the minimum credit score to be lower.

Now, what about your down payment? Chances are, if you’re working toward paying off debt, you don’t want to front the traditional down payment amount. Thankfully, loan options that require a lower credit score usually require a lower down payment as well.

FHA Loan: minimum 3.5% down payment required

USDA Loan*: 100% financing

VA Loan: 100% financing

The opportunity to buy a home, despite a low credit score, is a dream come true for many homebuyers. At TPG, our Mortgage Advisors are here to make this dream a reality.

Contact us today to learn more.

FICO’s New Credit Score Making It Easier To Get Home Loan

FICO released a new way to score credit: UltraFICO. Potential borrowers – especially those in the 500 to 600 FICO score range or who have little to no credit history – may be able to qualify for mortgages they previously didn’t qualify for. UltraFICO does this by helping to establish credit based on banking and savings activity, rather than credit cards, loans, and other debt.

How may this affect getting a mortgage?

Here’s how:

For potential borrowers, enhancing credit scores with UltraFICO may help them qualify for a mortgage they previously did not qualify for. It may even improve the terms of a loan or open up new financial opportunities when it comes to the details of a loan. UltraFICO may act like a “second-chance score” to benefit two main groups of consumers:

  • Those with little-to-no credit history.
  • People rebuilding credit after a personal financial breakdown.

For lenders, UltraFICO allows them to enhance a borrower’s traditional FICO credit score by pulling non-traditional financial information. For borrowers in the 500-600 range, this could turn a “no” into a “yes.” Lenders use financial details previously not visible on a traditional credit report:

  • Evidence of saving money
  • Maintaining a bank account over time
  • Avoiding a negative balance in an account
  • Regularly paying bills
  • Making other bank transactions

The new score may impact approximately 15 million consumers. It may help those consumers who currently don’t have the debt history required for a traditional FICO credit score.

The new UltraFICO Score is scheduled for launch as a pilot program in early 2019. It is expected to be available to lenders by mid-2019.