Credit 301: What is Bad Credit and How do I fix it?

In our last post, Credit 201: FICO Credit Scores and Improving Credit, we went over what a FICO score is, what impacts it, and started exploring how to improve your credit score. This final mini-course will go into much more detail about the term “bad credit” and how to improve your credit score. Welcome to Credit 301! What is Bad Credit? The short answer is there is no such thing. A bad credit score is only as bad as what it keeps you from doing. If a lender decides to grant you a home loan despite your low credit score, you probably won’t feel like you have “bad” credit after all. We at Academy Mortgage can do FHA loans with a FICO score as low as 580. Even so, there are some general ranges you can refer to when figuring out where your credit score falls on the spectrum. 750+ …

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Credit 201: FICO Credit Scores and Improving Credit

In our last post, Credit 101: Understanding Credit for Home Buyers, we discussed some basics about your credit and where to find your credit reports for the purpose of understanding why having good credit is so important when applying for a home loan. This next mini educational course will go over what a FICO score is, what impacts it, and start exploring how to improve your credit score. Welcome to Credit 201! What is a FICO credit score? FICO stands for Fair Isaac Corporation, who developed the first credit scoring system back in the 1950s. FICO is now the official name of the company, but they still generate THE credit score lenders refer to when deciding on your eligibility for a loan. Conversationally, “FICO score” is synonymous with “credit score.” However while all FICO scores are credit scores, not all credit scores are FICO scores. It is important to make…

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Credit 101: Understanding Credit for Home Buyers

It’s not uncommon for people to start caring about their credit score when they are looking into making a big purchase, such as their first house. And if you discover that your credit isn’t as good as you thought it was, it can make your home-buying process that much more of a challenge. Lucky for you, I have more than 25 years of experience as a lender guiding new home buyers through the brambles of credit towards their goal of owning a home. However in order for me to help you improve your credit, you need to understand it. My plan is to give you a mini educational course. Welcome to Credit 101!   What is credit? Credit is the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. There are four types of credit that…

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5 Differences between FHA and Conventional Home Loans

There are many different types of home loans out there these days. It’s hard to figure out where to start. I’d like to save you hours of scanning the Internet by breaking down the fundamental differences between the two most common types of home loans: FHA and Conventional. 1. The Basics Let’s start with some basic information. By definition, A Federal Housing Administration (FHA) loan is government-backed, while a conventional home loan is not. This means that if you default on a conventional loan, your lender has no guarantee for repayment. If you default on an FHA loan, the FHA insures that the lender will be repaid in full. Because of the FHA home loan’s guarantee, the underwriting process may take longer and there are additional FHA requirements, such as a health and safety inspection. The wait and additional requirements can be worth it, though, if an FHA home loan…

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VA Home Loan – Am I Eligible?

The goal of a Veteran’s Administration (VA) home loan is to help Service members, Veterans and their spouses, and eligible surviving spouses become homeowners. It is our goal to help guide you through the VA home loan process to find your dream home. VA home loans offer many excellent benefits, including: Low interest rates. No down payment needed up to the loan limit of $417,000. No mortgage insurance required – there is a one time funding fee which is added into the loan Strict limits on closing costs Flexible credit standards for qualifying No prepayment penalty if you pay off your mortgage ahead of schedule VA loans are assumable, that is, a new buyer can take them on under the same terms. If rates go up when you decide to sell, this may make your home more valuable.   Do I qualify for a VA home loan? If you are…

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The Benefits of Having a Larger Down Payment

Consumers face many decisions when looking to purchase a home. One of these many decisions include how large of a down payment to put down. Their down payment is the sale price less the loan amount. In the vast majority of cases, the potential home buyers must have their financial assets, at a bare minimum, be as large as the down payment they will make. Many consumers, despite having the capacity to put down more, put down as little as they can because they view a down payment as a loss instead of looking at it as the investment that it is. The nice thing about down payments is that the return on investment is 100 percent risk free. It is an investment that yields a return far surpassing anything else available to consumers. For Example: If Bob is planning on purchasing a home for $200,000 financed, a mortgage of…

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Should you Include your Spouse on an Application?

When deciding whether or not to include a spouse on an application for a mortgage there are a few things you need to take into consideration. Let’s say that you are looking to purchase a $450,000 home and you make $84,000 a year and have a credit score around 800. Your spouse, on the other hand, has a credit score around 680. You also have about $25,000 of financial assets in your name and no debts. Your spouse has $32,000 and zero debt and both of you plan on residing in the home for about 7 years. When applying for a mortgage jointly, both of your incomes are combined as well as any financial assets you may have as individuals. When combining both assets and incomes, it strengthens your application thus making it more probable that you’ll qualify for the mortgage you’re wanting. On the flip side, filing jointly will…

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Average U.S. Mortgage Rate Drops This Week

The average rate for a fixed mortgage in the U.S. fell, yet again, this week making it the fifth week in a row for the drop. Although the home-buying season for spring has gotten off to a slow start, the low rates might just help. On Thursday this week, Freddie Mac said that the “average rate for a 30 year loan came down to 4.12 percent from 4.14 percent last week. On a 15-year mortgage, the average rate dropped to 3.21 percent from 3.25. With Spring in full swing, the warmer weather actually has yet to increase home sales as it usually does. The higher interest rates and rising prices that began mid-2012 made home sales an unattractive market for potential home buyers. However, we find that there are actually less homes with available to purchase with new construction redirecting their focus from single-family homes to rentals. The price of…

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New Welcome Home Illinois Program for First Time Chicago Area Homebuyers

Govenor Quinn came to Aurora Friday May 16th, 2014 to the recently purchased home of Ryan and Jessica Chrisman-Denegri to announce his newly launched “Welcome Home Illinois” mortgage loan program for first time homebuyers and to congratulate the new homeowners. Ryan and Jessica were among the first buyers to close under the new program. This new program from the Illinois Housing Development Authority is being rolled out just in time for the spring market. The Welcome Home Illinois program provides homebuyers with a $7,500 grant to use toward their down payment, and a below market rate on a 30 year fixed loan. The program assists buyers with the cash needed to become homeowners. You must be a first-time homebuyer to qualify. The home must be purchased in the state of Illinois, must be a primary residence purchase only(no refinances), must contribute 1% or $1,000 of the purchase price(whichever is greater),…

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Do the Benefits of Buying Outweigh Renting?

According to the first quarter Zillow breakeven horizon analysis, in over half of the metros areas in the U.S., purchasing a home is a better decision financially than renting for those homebuyers who plan on residing in their home at least two years. During this first quarter 35 of the largest metro areas where analyzed.  The following cities had the shortest breakeven horizon: Miami –Fort Lauderdale (1.2 years), Tampa (1.1 years), Orlando (one year), and Riverside (less than one year). The cities with the longest breakeven horizon included: Minneapolis and Baltimore (both 3.1 years), San Diego (3.2 years) Phoenix (3.3 years), Boston (four years), and Washington D.C. (4.2 years). Since there are many varying factors for buyers within the same city, Zillow makes breakeven horizons down to the neighborhood in order to give potential homebuyers as well as renters the most accurate information in regards to the specific area in…

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