In order to purchase a home, you MUST have good credit. Having good credit says a lot about you as a person. Yes, it increases your buying power, but it also reveals your integrity and character. With a changing economy and bank lending guidelines, you have to improve credit scores. It has now become ESSENTIAL!
A couple of years ago, a borrower could get a home loan with a credit score of 550. Please be advised that a 550 is NOT considered a good credit score. However, sub-prime lenders (those that were granting loans to average credit score borrowers in exchange for very high or adjustable interest rates) took advantage of this group of borrowers.
There is SIGNIFICANCE in good credit (or your desire to improve credit scores). You are treated better, you have more options, you are able to make things happen. If your credit is not so good, you have to accept what is offered or accept nothing at all. There are no discounts, special privileges or incentives offered to borrowers with low credit scores.
Your credit score is a reflection of your ability to pay for the item that you want to purchase. It could be financing a home, a business, a car or financing your child’s college tuition. If you think that you can just pay for everything with cash…THINK AGAIN. There are so many people that have great incomes, but have poor credit. Making the money without having good credit still causes borrowers to be denied for loans.
Think of it this way…just because you make the money to afford the monthly mortgage does not mean you will PAY the mortgage. They look at your PAST PAYMENT HISTORY to judge your integrity and willingness to pay. If you were not willing or able to pay past debt obligations and you had the money, why would they trust you to pay this obligation? In most cases they won’t.
In this session, you will learn how to improve credit scores so that you can buy a home. The housing market is excellent for buyers. If you have credit challenges, don’t get down on yourself. This is the season of PREPARATION. Your time will come around and you will be ready to redeem yourself by being able to purchase a home of your own. This is the time to educate and prepare yourself for the upcoming opportunity.
Improve Credit Scores to Improve Your Interest Rates
When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’re taking by loaning money to you. FICO scores are the scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus – Transunion, Equifax, and Experian
Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well.
Your 3 FICO scores affect both how much and what loan terms (interest rate, etc) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.
LOOK AT THESE INTEREST RATE EXAMPLES:
For example, on a $216,000 30-year, fixed-rate mortgage (principal and interest only):
If your scores are between 760-850 your interest rate is 6.01%. Your monthly mortgage payment is $1,296.
If your scores are between 660-679 your interest rate is 6.62%. Your monthly mortgage payment is $1,382.
EXAMPLE THREE: If your scores are 620-639 your interest rate is 7.6%. Your monthly mortgage payment is $1,524.
A person with FICO scores of 760 or better will pay $228 less per month for a $216,000 30-year, fixed-rate mortgage than a person with FICO scores between 620-639.
THAT’S A SAVINGS OF $2,736 A YEAR! You can see that it pays – literally, to improve credit scores.
Your Score Affects…
Your credit scores not only affects whether or not you get a loan; it also affects how much that loan is going to cost you. As your score increases, your credit risk decreases. This means your interest rate decreases (which ultimately means cheaper monthly payments).
SIDEBAR: Your interest rate affects the amount of home you “can afford.” Suppose you could only afford to pay $1,296 and not $1,524. This would take you out of the $216,000 price range down to the $190k’s to the very low $200k’s.
Try your best to maintain and keep your credit in good standing…this will save you thousands each year!