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6 Ways Your Credit Score Impacts Your Life

By | Credit Scores

If you’re like most people, you won’t know your credit score until you suddenly realize it’s important. Normally, this happens when you apply for a mortgage or another large loan.

You see, you might be ignoring your credit score, but banks, businesses and other lenders aren’t. For these users, your credit score is a vital snapshot of your financial well-being and trustworthiness, and it enables them to manage their risk when lending to you, hiring you or selling you their services. It’s the culmination of every large financial decision you’ve ever made — and it can have a significant impact on your future decisions.

Let’s take a look at some of the significant ways in which your credit score impacts you.

1. The Interest Rate on Your Mortgage

Your mortgage is likely to be the biggest loan you take out in your life, and your credit score plays a significant role in determining which mortgage you can get and how much it is going to cost you. Applicants with a low credit score, indicating potentially risky financial behavior, are likely to have to pay a higher interest rate on their loan and, in some cases, may be rejected outright.

A small change in the percentage of interest you pay might not seem like much, but with many mortgages stretching from 25 to 35 years, it represents thousands of dollars of extra spending.

2. Whether You Get the Rental Property You Want

Not bought a house yet? Your credit rate still affects your choice of home. After your earnings-to-rent ratio, your credit score is the most important factor in deciding whether your rental application is accepted. Given the choice of two applicants with similar earnings, the one with the higher credit score will always win — landlords know that by reducing their risk, they save money.

3. The Car You Drive

In 2017, the average auto financing loan had an APR of 4.21 percent, with most loans falling between 3 percent and 10 percent APR. The difference between a great credit score and a very poor one is even bigger: Someone with a very bad record might receive as much as 20 percent, while some users with a great record can still get zero percent APR. The difference between the two can easily amount to hundreds or even thousands of dollars per year.

4. Your Refinancing Options

As interest rates change, what seemed like a good deal a few years ago can quickly become expensive; by refinancing your mortgage or student loan, you can save a lot of money. Unfortunately, if you have poor credit your ability to do this may be limited or nonexistent.

It doesn’t matter what your credit score looked like when you first got the loan, either. Many borrowers have a good score when they get their mortgage, then fall into bad practices. When they try to refinance, their now-reduced credit score limits their options and gives them a nasty shock.

5. Your Employment Opportunities

Many employers like to credit-check job applicants before making a hire, particularly if the role comes with a large amount of financial responsibility. Although they’re not lending you money, the business is exposing themselves to risk of another kind by putting their finances and reputation in your hands. By screening out applicants with a poor credit score, businesses aim to reduce workplace theft and fraud.

6. Taking Out a Student Loan

If you’ve already borrowed the maximum federal student loan amount, it’s likely you’ll need to turn to a private loan to make up the difference to cover your tuition. These private loans (issued by a bank, credit union or school) are affected by your credit score, just like a mortgage or auto loan. This can come as a shock to students who have only dealt with federal loans before (which aren’t affected by credit score).

You’ll probably be paying off your student loan for years to come — a poor credit score could add thousands of dollars to the amount.

The Impact Can Be Positive or Negative

We’ve primarily focused on the negatives of having a poor credit score in this article, but at the other end of the spectrum are a bunch of people who get great deals on everything. Their above average credit score enables them to get better mortgages, cheaper loans, and superior work and housing opportunities. And because their interest rates are lower, maintaining their score is easier — it’s an unfortunate fact that the high interest rates those with a low score receive make it harder for them to improve that score.

Achieving Your Desired Credit Score

There’s no such thing as an irredeemable credit score; with time, effort and discipline, anyone can improve their score and access better rates. But, it doesn’t happen overnight — it takes time. Which means that the best time to improve your score is always now. You need to start preparing your credit score in advance if you want to get the best deals on a mortgage.

Unfortunately, the information on your credit profile doesn’t always tell the whole story — through no fault of your own, this information can be incomplete or even inaccurate. When that happens, your best bet it to repair your credit profile.

Ovation Credit Services helps the 79 percent of consumers whose credit reports contain a mistake of some kind. Sign up today and take the first step toward repairing your reputation!

Build, Grow & Repair Credit

By | Your Credit

Whether you’re new to having credit or you’ve had credit cards for years, growing your credit, protecting it and repairing your credit takes work. This guide can help you manage all of your debts and improve your credit score.

Topics in This Guide:

Build or Rebuild Credit at Any Age:

  • Access and Review Your Credit Reports
  • How High Balances Affect Your Credit
  • How Long Does it Take to Repair Credit?
  • How to Avoid Paying Credit Card Interest
  • How to Improve My Credit Score
  • How to Repair Credit Mistakes
  • How to Repair Credit When You Don’t Have a Job
  • Identity Theft and Your Credit
  • Using Your Tax Refund to Pay Off Credit Cards

Credit and Mortgages/Refinancing a Home:

  • How to Pick the Best Type of Mortgage
  • Refinancing a Home and How it Affects Your Credit

Let’s begin!

Build or Rebuild Credit at Any Age

If you’re in college, you might ask yourself, am I “too young” to start building credit? The best time for credit-building is when you have a reliable job and pay your bills on time every month.

Your credit report is the history of your credit payments, and items stay on your reports for up to 10 years, or longer for student loans. Typically, you’ll have credit cards, lines of credit, student loans and installment loans. To build credit, use credit moderately and pay the balances quickly.

Access and Review Your Credit Reports

You can receive a free credit report annually from AnnualCreditReport.com using a secure, private computer. You need to enter your social-security number, address and date of birth. Then you can view credit reports from Experian, TransUnion and Equifax and make copies of your report. Remember never to save it on a public computer.

Familiarize yourself with your credit report. It shows accounts that are open, closed, paid-off and in collections. It also gives your payment dates. It may include student loans, installment loans, bankruptcies or other accounts.

Tip: You can access a free credit report from AnnualCreditReport.com.

How High Balances Affect Your Credit

When you carry high debts, you can damage your credit score even if you pay minimum balances on time. High balances let creditors know that you might be struggling to make payments.

How Long Does it Take to Repair Credit?

To repair your credit, businesses have 30 to 45 days to respond to disputes. After that, disputed items like collection accounts are removable.

How to Avoid Paying Credit Card Interest

If you pay your full balance each month, then you won’t have to pay interest. Always pay on time to avoid late fees.

How to Improve My Credit Score

Your credit-card payment history makes up 35 percent of your credit score. To improve your score, keep your balances low. Pay on time and never let accounts go into collections or charge-offs that are 180-days past due. If you fall behind, then make the payment as soon as you can.

How to Repair Credit Mistakes

Maybe you’ve done a search online for “how to fix my credit.” First, review your credit reports and flag anything that you don’t recognize or anything older than seven years. To dispute credit mistakes, select the option “dispute” when your credit report is open and give the reason. For example, maybe you don’t recognize the account, or it’s older than seven years.

Creditors have 30 to 45 days to respond, but you might hear back from them sooner. If they don’t respond, then you can often remove disputed items from your account’s report.

How to Repair Credit When You Don’t Have a Job

If you’ve lost your job and fallen behind on payments, talk to the collection agencies about making smaller payments. You may be able to remove collection accounts older than seven years if you dispute them on your report. Never discuss bills older than seven years with collection agencies because any correspondence reopens the account.

For further help, check with Ovation Credit for credit-repair assistance.

Identity Theft and Your Credit

If you want to know how to dispute credit report charges you don’t recognize when you’re on a credit-report site viewing your report, then select the option to “dispute” on your screen and give further details.

If anyone has stolen your identity, then contact the credit-reporting bureau and your credit-card company. You may need to file a police report to block any further fraudulent transactions on your account. Having a company that monitors your credit is very beneficial to avoid situations like this.

Using Your Tax Refund to Pay off Credit Cards

Use tax refunds to pay off credit-card debts. The average refund is $3,000, and you’ll improve your credit score. With better credit, you can get lower interest rates.

Credit and Mortgages/Refinancing a Home

How to Pick the Best Type of Mortgage

To pick the best mortgage, talk to your bank about mortgage options. FHA mortgages or those by the United States Department of Veterans Affairs can be more-affordable options. U.S. Department of Agriculture mortgages and the first-time buyers program are also worth considering.

Refinancing a Home and How it Affects your Credit

Refinancing your mortgage is taking out a new loan to replace your current loan. People take this step to lock in lower interest rates. When banks run a credit report, it can lower your score slightly. If it’s only one inquiry, then it may not affect your credit that much.

Bottom Line

Credit cards often lead to debts and huge responsibilities. By paying your credit-card bills on time, you can have a good credit score and better interest rates for years to come!

References:

www.nerdwallet.com/blog/mortgages/how-to-choose-the-best-mortgage/

http://blog.credit.com/2017/10/my-debt-was-charged-off-what-does-that-mean-120856/

 

Financial Milestones – Roadmap For Success

By | Personal Finance

While there are many financial milestones to celebrate at every age, some of the most significant milestones could be life-changing.

From getting that first paying job to putting a college degree into practice, these milestones can form some of the greatest memories and set a financial foundation for success later in life.

Knowing what financial milestones are important will help you get a head start on planning and be able to work toward a successful financial life.

Your Financial Milestones Roadmap

Financial Milestones

Becoming an Adult (18-29)

What many people don’t realize is that between the ages of 18 and 29, you should be working on your first financial milestones. On top of landing your first job and buying a new car, you may take out student loans to attend college. To qualify for good interest rates, you’ll need to start building your credit. You could take out a line of credit or get your first credit card, as long as you use it responsibly. If you’ve already made some mistakes with credit, don’t stress too much, you are still fresh in the financial path so use this time to invest in credit repair to get yourself back on track.

Pay any loans or student debt on time each month, and be mindful that any debt you obtain will need to be paid back in the end. You may also plan to move out of your parents’ house and want to start looking for a home to rent or buy. Having good credit will make these goals easier to obtain. A great way to build credit while paying rent, is to use a rent-reporting service to get your rent payments on your credit report.

You should also start planning a budget and learn about investing. You may have the opportunity to start a 401(k) — especially if it is available through your employer and sometimes they will match a certain percentage, you should definitely take advantage of this. If a 401(k) is not provided through your employer you can look into a Roth IRA for your investments, if you have the option to do both, you should. This will give you a solid financial foundation that will carry you far later in life.

In Your 30s

By your 30s, you should be enjoying a comfortable place to live and perhaps owning your own home. You may have several retirement accounts, whether you have a 401(k) or a Roth IRA, continue making contributions to those funds and increasing that amount when you can in order to get the most return. If I said I would give you free money wouldn’t you take it? Keep improve your knowledge of investing by studying up on exchange-traded funds, stocks and bonds, as well as funds that can be matched by your employer. If you are fortunate enough to work for a company that has matching 401(k) make sure you are maxing out that opportunity.

This may be a good time to diversify your investments, choosing from a variety of stock options and markets, such as real estate or commodities. You should also be investing in yourself, pursuing an advanced degree or professional development that will accelerate your career.

In Your 40s

By your 40s, your retirement accounts will continue to accrue, and you should have started investing or saving money for your children’s college expenses. Look into a 529 plan or other college savings plans to see which one suits you best. Max out your retirement funds so that you can leverage them later in life, and contribute up to 6-8 percent of your earnings to get the most out of employer matches.

Reward yourself for achieving financial stability, make sure to make a “vacation” savings account so you can be enjoying this hard work you have been doing. Discuss health care needs with your parents in order to avoid surprises later on. Also it may be a good idea to start an investment account that is separate from other accounts, and set it up to automatically draw funds. With the help of a financial advisor, you can turn these funds into moderate-risk investments that you’ll benefit from down the road.



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In Your 50s

By your 50s, you may have started thinking about retirement and be counting down the years to the big day. Sit down and make some calculations to determine your family’s current financial needs, how much you will need in your retirement, and what your goals are for this stage and on in your life.

For your financial milestones, consider buying a vacation home, timeshare or rental property, which you can lease out in order to generate extra income. Learn about financial options available, such as Social Security, Medicare and pension benefits. Resist the urge to withdraw funds from your retirement accounts prematurely, unless you are prepared to pay large penalties.

In Your 60s

By your 60s, you may decide to retire. Your golden years can also be a time of resilience or unpredictable life changes, so each individual will face something different at this stage. You can start collecting Social Security and planning for the long term, so your retirement and health care funds last as long as you need them. Make sure your will is filed and updated. You may also want to consider changes at home, whether that means modifying your house to age in place or moving to a retirement home or supported community.

In Your 70s and Older

By your 70s, you will likely be well into your retirement years. It might even be beneficial to produce hobby work on the side and sell it at community fairs. This is a crucial time to look at your finances to decide if you need to cut back on spending or if you can be generous with charitable gifts. Ensure that any withdrawals follow a predictable, stable plan, and use your money wisely. By your 80s or 90s, your life will have changed more than you ever imagined it could. This might be a good time to downsize and move into a smaller home that suits your life as it is now. If your retirement funds have made it this far and you can still afford some degree of charitable giving, you’ve done well.

Tracking your financial milestones and setting goals, will help relieve the financial stress that pursues when you have not prepared yourself. With careful planning, saving and investing, you can ensure that both you and your family will be cared for well into the future.

Resources:
Reuters
Money
The Balance
Clark

How Will Trump Affect Mortgage Rates?

By | Mortgage

Donald Trump could start a war with a tweet. All jokes aside, though, his policies are sometimes revolutionary. He has the power to move markets and influence mortgage rates.

There are hundreds of sites covering what his policy changes might mean for mortgage rates. You might get some misinformation along the way, so we’re going to explain what might really happen now that he’s in office.

President Affect Mortgage Rates

Trump’s Potential Impact on Mortgage Rates

The primary indicator of mortgage rates is the Fed funds rate. This means the stance of the Federal Reserve will dictate what mortgage rates will be. Trump already receives mainstream credit for today’s $20-trillion stock market.

The higher businesses go, the more innovation can happen. Automation and artificial intelligence have promise. More and more Americans are becoming self-employed and working online from home.

Pair the two and you can start to see a different type of workforce – but what’s under the surface? It’s a stronger US economy with better-paying jobs and plenty of good, long-term investment opportunities.

If all this plays out, the US will be performing sufficiently for the Federal Reserve to raise interest rates back to the five-percent and higher range. This would increase mortgage rates enough to boost premiums by hundreds of dollars a month.

Trump Has Already Made an Impact

Only a few weeks into the new administration and the market is already off to a rocky start: the new President has quickly made homeownership more expensive. Within hours of taking office, he suspended President Obama’s FHA rate cut for average credit borrowers. This reversal effectively means FHA-backed mortgage insurance premiums will be flat or increasing in the near future.

Homeowners are now missing out on approximately $20 a month in savings on every $100,000 in FHA home loans. This impacts anyone shopping for a home as well because the premiums after you buy will not be as cheap as you thought. Premiums could increase in price and it’s even possible for the previous rate reduction to be recalled too.

Retracting the FHA insurance premium rate cut was a move which signaled further increases in US house prices. There’s now more pressure on buyers to enter the market before rates start increasing continuously.

The Federal Reserve is already anxious to increase rates and wants to do so multiple times before the year’s end. Each time a rate hike occurs, it means your mortgage payment goes up.

FHA Loan

FHA Loan Applications Falling

The month of January saw a 14-percent drop from its 2016 high. FHA refinancing applications rose seven percent from the previous year, showing the stigma surrounding expectations over higher home buying costs.

This impacts borrowers and homeowners planning to refinance the most. It’s particularly damaging to those with credit scores below 680, as they were the ones who received the rate cut.

Where Homeowners Have It Good

The US housing market is rising to new heights. As of February 2017, refinanced mortgages made up 59 percent of all home loans. This is because a rising market unlocks the doors to favorable terms sooner for recent home buyers looking to refinance or fix in rates. You’ll have access to better mortgage rates after gaining equity in your home, even if it’s just due to the market going up it will benefit you.

The upward pressure makes it a lucrative opportunity for home buyers with less-than-perfect credit. You can actually use your home mortgage as a credit-building mechanism too.

Furthermore, with an FHA loan (which requires a 580 FICO score), it’s possible to finance a home for you and your family. However, keep in mind that most lenders still want at least a 620 credit score.

Trump’s Impact on the US Economy

It’s imperative to look at the full picture. The US economy running strong is justification for the Fed to increase rates. When operations aren’t in lockstep, the current low-interest rates could hold steady or even drop. Negative interest rates are even possible in the worst of circumstances.

Leading into Trump’s inauguration, the Federal Reserve’s intention was to hike interest rates three or four times this year. Forecasts put the Fed funds rate at as much as three percent when 2017 ends. Such a move would result in a premium increase of $125 or more on a $100,000 25-year mortgage.

Trump’s perspective on the US economy casts a different light from the rhetoric of recent Federal Reserve meetings. The President believes the American dollar is too strong and currently supports the demise of the strong dollar policy. Such a move could devalue the greenback and result in a change in conditions for the Federal Reserve.

His unpredictability is what makes everything so hard. Notwithstanding damage to the strengthening greenback, outside of currency speculation, he has plans for a trillion-dollar investment in America. This could go boom or bust, for if things prosper, the US will have its economy running on all cylinders.

Conclusion

It’s not Trump that’s leading mortgage rates. However, he can have an indirect influence based on how his policies impact the economy. You’ll want to pay attention to the Federal Reserve’s statements. They influence mortgage rates the most, and any time interest rates rise, you can expect home lenders to follow suit.

Sources:

http://www.cnbc.com/2017/02/13/us-markets.html

http://realtormag.realtor.org/daily-news/2017/01/23/trump-puts-halt-fha-mortgage-cuts

http://www.cnbc.com/2017/01/17/trump-just-signaled-death-of-clinton-era-strong-dollar-policy.html

7 Must-Do’s Before Shopping for a Mortgage

By | Mortgage

Mortgage-Ovation-Credit

Owning your own house is a hallmark of independence as well as a major investment. It is one of the most exciting milestones in your life. However, shopping for a mortgage is decidedly less invigorating. You have your credit score to think about and whether you even qualify. It can be a lot of work, so start early. Take care of the following before you start shopping for a mortgage.

1. Your Credit Score

The first step is your credit score. How high or low it is will have a big effect on the mortgage you receive. In general, a higher number translates into lower payments. According to the Seattle Times, getting a mortgage when your credit score is less than 660 (or for some lenders, less than 680) means that you are going to need to put more money down and you could have to pay additional fees. In general, to get the best rate, you will need a credit score of more than 750.

2. Qualifying for Credit

Further, you may need a minimum credit score to even qualify for a home loan. “While there are many qualified borrowers in the 580 range, the market today is probably (looking for) 640 to 660, at a minimum,” says former U.S. Department of Housing and Urban Development official Vicki Bott. In other words, it doesn’t matter how much money you make, how little you owe or how much you can put down — you could still be denied a mortgage.

3. Deciding on a Mortgage Budget

Would-be homeowners should also decide on a budget. Any loan from the Federal Housing Administration will require that your mortgage payment not exceed 31 percent of your income except under specific circumstances — and even that could be on the high side. The Credit Union National Association advises that your mortgage payment not be more than 28 percent of your gross pay, and Dave Ramsey suggests a maximum of 25 percent of your take-home pay. Being more conservative with your budget means that you have extra cash available for the type of expenses homeowners have to endure, such as a new roof or maintaining your furnace.

4. Pay Off Debt

One top suggestion is to pay off any debts you have before you begin the mortgage application process. Credit card debt can be a real hindrance to getting approved, but other debts play a role as well. Car loans, medical bills and student loans can eat away at your monthly cash flow. Aside from impacting your credit score, it may also play into the amount that the bank is willing to approve and the amount of payment you can comfortably make each month. You will need to keep debt payments in mind as you decide on a budget. Making a plan to pay them off before applying for a mortgage means one less thing to think about.

5. Save Money

Remember that buying a home requires certain upfront costs. You will need to cover closing costs as well as a down payment. Many conventional loans are going to require 20 percent down. Even if you have enough in your bank account to cover that lump sum payment, will you have enough left over to weather a storm if a worst-case scenario happens and you lose your job or the home requires extensive work before you have time to rebuild your savings? These are important issues to consider.

6. Credit Report Review

Before you attempt to purchase a home, you should also have someone review your credit report. This way, you can identify any potential issues BEFORE you begin applying for loans. At Ovation Credit Services, we review your report to see if there’s anything affecting your score before you start the mortgage process and can advise you on the next steps to take to improve your odds of getting the best home loan rates and terms possible.



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7. Credit Repair Is Possible

If your credit report needs some work or you aren’t happy with the interest rates and terms your credit score will garner you, remember that credit repair is possible. Working with an established company like Ovation helps ensure that you aren’t penalized for debts that have already been paid or settled. We can also help you identify areas you could target to improve your credit score.

It’s tough to take a hard look at whether you can actually afford to buy a house and what your price range really gets you. Having an outside party take a look at your credit report gives you a more objective perspective into what lenders like to see and the factors that play into your credit score as well as the impact your credit score has on the terms and interest rate you receive for your mortgage.

Sources:

HGTV: What to Know Before Buying Your First Home
http://www.hgtv.com/design/real-estate/what-to-know-before-buying-your-first-home

Dave Ramsey: 5 Must-Dos Before You Buy a Home
https://www.daveramsey.com/blog/5-must-dos-before-buy-home

Seattle Times: 6 Must-Dos Before Buying a Home
http://www.seattletimes.com/business/6-must-dos-before-buying-a-home/

U.S. News & World Report: 7 Things to Always Do Before Buying a Home
http://money.usnews.com/money/blogs/my-money/2014/06/25/7-things-to-always-do-before-buying-a-home

How Credit Scores Impact Mortgage Loans

By | Credit Repair, Credit Scores, Home Buying, Loan, Mortgage, Your Credit

Credit Scores Impact Mortgage Loans

Are you working towards financing a home? You probably know how your credit rating will impact your loan qualification. You pretty much need the minimum credit rating for FHA home loans, which is a 580 FICO score. If you cannot qualify for FHA insurance, you will be hard-pressed to find any lender until you fix your credit.

There are many implications that your credit rating can have on your prospective home loan, such as whether you actually qualify for the mortgage, how low of an interest rate you will get and what type of lender will work with you.
Now, there’s also an unspoken factor: how much your mortgage will cost in total.

How Your Mortgage Could Cost More

When you apply for home financing with a bad credit score, it is unlikely that a major bank will approve you. Since it is the major banks that get the best borrowing rates in the first place, your alternatives will be more costly. In the worst case scenario, only a private lender would consider you.

You might be somewhere in the middle and can get a home loan through a financial institution that accommodates bad credit borrowers. There are many reputable lenders in this area, but you still face the issue of a higher interest rate. This is because the banks know you are a higher risk.

Tip: Get your mortgage through a highly legitimate financial institute that works with bad credit borrowers while also offering traditional home loans. That way, you can repair your credit while holding the costlier loan and refinance under the same lender after your credit score improves.

Your credit score does not have to hold you back from a mortgage. You just need to make sure it’s not unexpectedly costing you extra.

What Will Your Credit Score Cost You?

When applying for a home loan, your decided interest rate is mainly calculated based on your credit score. So if you were to apply for a mortgage right now, what would this mean to you?

It all depends on where you live …

Let’s use Manhattan, New York as an example, seeing as how even a one-bedroom will easily set you back $400,000 or more.

Say you are buying an apartment for $400,000 and you give the minimum of 10 percent down. This leaves you with a $360,000 principal to finance through a mortgage provider. Let’s say the mortgage will run for 30 years and it’s a fixed-rate loan.

Below shows your total interest cost for the lifetime of the mortgage. These calculations come from MyFICO.com’s Loan Savings Calculator, which estimates your interest rate based on your FICO score range.

  • 620 to 639 FICO score: $319,418 total interest (4.793% APR)
  • 640 to 659 FICO score: $277,706 total interest (4.252% APR)
  • 660 to 679 FICO score: $245,727 total interest (3.825% APR)
  • 680 to 699 FICO score: $230,167 total interest (3.613% APR)
  • 700 to 759 FICO score: $217,414 total interest (3.437% APR)
  • 760 to 850 FICO score: $201,683 total interest (3.217% APR)

To put it into context, you are looking at saving $117,735 over 30 years by financing with perfect credit instead of below-average credit. From another perspective: your monthly payment will be about $327 less!

How to Make Your Mortgage Cost Less

There are some tricks that can help you qualify for a more affordable mortgage. Four simple ways to do this include:

1. Refinance Your Mortgage After You Buy

Your mortgage payments go through on time for half a decade, and suddenly the huge debt does not keep your credit score suppressed. The result could be seeing your credit rating go up by a considerable amount since when you first qualified for the mortgage. If this is the case, you could refinance the mortgage to lower your interest rate and ultimately make the rest of the mortgage term cheaper for you.

2. Rent-to-Own the Place First

If you are repairing your credit, but you want your new home now, you could try to buy through a rent-to-own agreement. You will be able to guarantee the seller gets the asking price as long as you follow through with financing at the end of the term. While the rent-to-own contract will set you back a little in equity, the much lower interest rate will create much more savings.

3. Wait a Little Before Buying

While this is not the most exciting solution, sometimes it makes a lot of sense. Say you have a bad debt in collections from six years ago. If that’s the case, waiting roughly a year will cause the negative item to leave your credit report and thus it will not hold back your FICO score. The end result could be a huge boost in your credit rating, or at least enough to score you a better interest rate.

4. Purchase Under Owner Financing

If you want your new home now, but rent-to-own will not work, you might be able to purchase via owner financing. This means the seller holds the mortgage for you for so long (usually 1 to 3 years), and then you can get your mortgage and make a balloon payment to buy it out. You can use the in-between time to repair your credit and this will help you secure a good interest rate. In the meantime, you will be paying on the home under the current mortgage conditions and your bad credit status will not cost you more.

Owner financing is really the only cost-effective and sound way to approach buying a home with bad credit. Otherwise, you could be throwing well over $100,000 out the window. That’s a lot of extra money to pay, especially if you are actually eyeing a one-bedroom apartment.

To conclude, get your credit repaired before applying for a mortgage because the cost of doing so is minuscule in comparison to what you will save on interest payments.

Sources:

  • http://www.fha.com/fha_credit_requirements
  • http://www.myfico.com/crediteducation/calculators/loanrates.aspx
  • http://www.investopedia.com/articles/mortgages-real-estate/10/should-you-use-seller-financing.asp

Getting Your Credit Score in Order Before Buying a Home Can Save You Headaches and Money

By | Ask a Credit Expert, Credit Scores, Mortgage

Buying a home is a major life event and one that can bring great joy, but it can also create its share of anxiety. Preparation should begin long before the first visit to an open house. Your credit score is one of the most important things to look at before trying to buy a home. That one three-digit number will be a factor in pretty much every facet of the process. Consider the following:

  • Loan qualifications—Your credit score is the first number that lenders consider when they review your loan application.
  • Lenders—While you may want to borrow from the bank that you’ve had your checking account with for the last five years, not all lenders work with all borrowers. Once again, your credit score will be a determining factor in whether you’ll be able to work with a traditional bank or if you’ll have to turn to a specialty lender.
  • Down payment—This is often the scariest number for home buyers because they will have to put down thousands of dollars to buy a house. Your credit score can impact the minimum down payment that lenders require. For example, Federal Housing Administration-backed loans only require a 3.5 percent down payment if your credit score is above 580. If your credit score is below this magic number, you may need to put down 10 percent or more.
  • Interest rate—Lenders determine the interest rate that you’ll pay based on your credit score and other factors. A $200,000 mortgage at 5 percent will result in a payment of more than $100 a month compared to a loan at 4 percent. That equates to more than $6,000 in extra interest over the first five years of a mortgage.

Why is a credit score so important?

Lenders use your credit score as a tool to measure risk. The score is based on a number of factors, including past payment history, the outstanding amount on existing loans, and any negative marks against you. Lenders prefer high credit scores because they see the borrower as less of a default risk.

What is a good credit score for buying a home?

BankRate says that a credit score of 740 or more will help home buyers get the best interest rates. The FHA has programs that offer low down payment options for borrowers who have a score of 580 or more. The credit score range to qualify for a mortgage varies significantly, and even if you meet the minimum, it’s recommended that you have the highest credit score possible.

This could be where a credit repair service can help. Even if you have a score that might qualify you for some loans, improving your credit score will help you get better interest rates, avoid having to pay mortgage insurance, and save you money over the duration of your mortgage.

Using a credit repair service can improve your credit score in a number of ways. First, removing incorrect information can help improve a credit score. According to Ovation Credit Services, 79 percent of credit reports contain errors and 54 percent have outdated information. Ovation provides tools for customers to dispute credit report errors and help them improve their credit score.

There’s no doubt that having a healthy credit score can be important in the home buying process. The higher your credit score, the better chance you have of buying the home of your dreams with the best possible terms. You’ll also have multiple lenders that want your business instead of having to work with lenders that prey on customers who have poor credit scores.

Dos and Dont’s to Keep Your Pre-approved Mortgage Loan

By | Home Buying, Mortgage

pre-approved-mortgageAre you pre-approved for a mortgage and getting ready to purchase the home of your dreams? Before you get too excited, keep in mind that a fully approved loan can get denied for funding even after you have signed all the loan documents.

How does this happen? The answer is simple. Before funding, the underwriter pulls a new credit report, and any new findings can be used as justification to kill the loan. This isn’t likely to occur if the timeframe is within 30 days, but you can expect a new credit report to be pulled if the date of the application is more than 60 days out from actual funding.

Losing a loan after approval is very common. To help prevent this from happening to you, follow these dos and don’ts.

Do continue making your mortgage or rent payments

The key element a lender is looking for is responsible payment patterns. Any change in these patterns can affect your credit, thereby affecting whether your approval on a new loan still stands. Even if you have given notice, continue paying rent or your current mortgage until you have signed final loan documents and your loan has been funded.

Do stay current on all accounts

The quickest way to lose funding on a loan is making a late payment. Be sure to stay up to date on all loan obligations.

Don’t make a major purchase

This is what troubles borrowers the most. A large purchase can run up your credit card balance, thus lowering your credit score. The best tip is to avoid that big purchase until after you have signed your final loan documents. This includes buying a car, boat, TV, or (especially) furniture.

Don’t open a new credit card or cell phone account

Opening a new account requires a credit inquiry, which can lower your credit score. If you’re on the border credit-wise, that additional inquiry could lower your score enough to impact a decision from your loan provider.

Don’t close any credit card accounts

Closing an account lowers the amount of credit you have available, which can lower your credit score since your credit-availability-to-use ratio accounts for 30 percent of your score.

Don’t consolidate your debt into one or two cards

Doing this lowers the amount of credit you have available, which, again, can impact your credit score.

Don’t take out a new loan

This includes any type of loan, such as a car or student loan, or new credit card. Any of these obligations can have a negative impact on your credit and will likely not reflect positively to underwriters and investors.

The key takeaway here is to wait until after your loan closes before making any major financial changes, such as obtaining a new loan, consolidating debt, or opening new accounts.

If you’re considering purchasing a home, the first step is to ensure a positive credit score. If you have a poor credit score, it isn’t too late and you might be a good candidate for credit repair solutions. Let us at Ovation help you. We offer a wide range of credit repair solutions, customized to meet your unique needs.

Contact us today to see how we can help.

Mortgage Post-Foreclosure: 3 Steps to New Ownership

By | Home Buying, Homeowner, Mortgage

It’s Saturday morning, and you’re watching your child playing on the playground next to your apartment building. Sure, it’s not the backyard you used to have behind the home you used to own, but there’s plenty now to feel upbeat about — because there’s money in the bank for the first time in a long while. It’s only a matter of time until you’re watching your child play in a yard from your own porch again.

One thing worries you though. Is your foreclosure going to keep that yard and porch out of your grasp?

Yes! You can get a mortgage after a foreclosure

It is possible to get a mortgage after a foreclosure, but it will take hard work on your part to repair your credit and establish yourself as a sterling example of financial responsibility. Depending on your circumstances, there may also be a mandated waiting period of one to seven years. However, there are several concrete steps to get you on your way and possibly lessen your wait.

First of all, get a handle on your financial reputation. Get your hands on every official record you can find, including your credit report, and make sure all the information about you—and the details of your foreclosure—is 100% accurate. Be vigilant. Sometimes debts that you thought had fallen off your credit report can be sold to new collection agencies and reopened. Contact anyone presenting inaccurate credit information, and have it corrected.

Yes, there are concrete methods to responsible credit repair

Here is where some hard, day-to-day work comes in. Your credit needs to be squeaky clean from here on out, but if that makes you want to hide and avoid using credit at all, think again. A mortgage broker will want to see that you’ve learned financial responsibility. So, it’s time to start building new credit. For regular use, apply for a secure credit card—and pay it on time! And while this may seem counter-intuitive, consider applying for a high-interest credit card—store cards are a good choice—and carry a balance no more than 30% of its limit. Of course, you’ll need to pay it on time and preferably in full every month.

Next is a big purchase. No, not the house yet. A car, a large appliance, something you could reasonably take out a loan for. Make sure it’s a loan you can manage, and here’s where you will really impress a mortgage broker: Be better than the terms of the loan. Overpayment, extra payments, early payments — be so good that Ebenezer Scrooge couldn’t find fault with you.

Yes, someone can help you

Of course, the best way to get started on repairing your credit and getting a new mortgage after a foreclosure is to speak to a credit repair professional like Ovation. Each of our knowledgeable representatives work with you personally to build a credit repair and credit re-establishment plan that is tailored just for you. Call us today for a free consultation.

A Perfect Credit Score Alone Won’t Get You a Mortgage, but without Good Credit, Homeownership Will Remain a Dream

By | Credit Scores, Home Buying, Homeowner

By the time you sign the papers to buy your new home, you’ll be frazzled, exhausted and wondering if it was all worth it…and you haven’t even moved the heavy boxes yet. Closing day, though, might be a long way off if your credit score isn’t up to par. While your credit score alone will not determine whether or not you can get the house of your dreams, without a healthy credit score, you’ll be handing money over to a landlord for a long, long time.

Your credit score affects almost every aspect of your finances. When you are applying for a loan, it is standard procedure for the lender to check your credit score. This will be a huge factor in determining if your application will be approved and how much interest will be charged. Credit scores vary from one person to another and are dependent on a number of things. If you want to purchase a property but don’t have enough to pay in cash, then it’s important that you start improving your credibility to lenders.

A credit score is used by lenders to determine how credible or risky you are as a borrower. Credit scores range between 300 and 850, and anything that falls under 620 is considered a low score. Each lender has their own standards, but essentially, any score above 700 is considered a good one. If you are hoping to get a housing loan, then you should at least have a score of 620.

Your credit score is calculated using your payment history, the type of accounts you have, the amount of money you owe, any new accounts, and the length of your credit history. The longer you keep your accounts, the more payments you make on time, and the lower you keep your balances, the better.

Although lenders will consider your income for the loan approval, your credit score does not rely on how much you make. A person making $25,000 a year who has a history of responsible credit use and makes every payment on time can have a higher credit score than someone making $80,000 who has a lot of late payments and high credit card balances. Conversely, having a high credit score won’t guarantee that you will be approved for a large home loan. Even if you have perfect credit, if you only make $25,000 a year, you won’t be able to get a loan for a $500,000 home. You need a strong credit score to get a mortgage, but the amount the lender will approve still depends on your income and your ability to pay the loan.

When you apply for a mortgage, lenders will look into your credit score, income, and debt-to-income ratio. Debt-to-income ratio is the proportion of how much debt you already have, compared to how much money you earn. It is used to gauge how much you can set aside for the mortgage payments. Lenders also compute for LTV or loan-to-value ratio, which is used for lending risk assessment. Ideally, you should have a low LTV to avoid any problems. If your LTV is more than 80 percent, lenders may require you to purchase mortgage insurance to protect them from buyer default.

If you are preparing to buy a new home in the near future, do what you can to improve your credit now. Remember, a good credit score can make the difference between a low interest rate and high interest rate loan. Ovation works with prospective homeowners to help reach their home ownership goals. Contact us if we can help you say goodbye to the landlord.

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