Understanding Your Credit Score

Making Income Changes While in the Process of Obtaining a Mortgage

                  What happens if you have to change jobs while you are in the middle of getting a mortgage? Lenders typically recommend that you do not make major changes if you are in the middle of trying to get a mortgage, because lenders look for continuity, and will have to re-verify information if major changes are made. However, many folks do not have a choice: sometimes a new opportunity comes up, or are forced to change jobs. The good news is that lenders can work with you, and use the new information (income, salary, etc.) from your new position for your qualifying. This process can be started with just an offer letter, so the terms (salary, start date, etc.) are known to get the process started. Typically, at least one pay stub will be required before closing to show that you have…

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Down Payment: Where Are The Funds Coming From?

                  One of the issues we see arise during the loan process happen while verifying down payment.  Down payment funds may come from several sources, and all of them have their own unique documentation requirements.  If the underwriter is unable to easily see where the money came from it can cause a huge headache for everybody, including you. Luckily, there are things you can do to help ensure that this part of the process is as smooth as possible.  When reviewing the bank/investment account from which the Down Payment will be coming from, the underwriter is looking over the most current 60 days in the transaction history.  Any deposits into the account, besides payroll direct deposits, will need to be explained. This makes the easiest way to avoid frustration is to have your down payment funds already in a separate account with…

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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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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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How to Keep Your Credit Score Up

Most of us know that skipping payments, paying late, or filing for bankruptcy are some obvious ways to destroy your credit. On the flip side of this, there are also some much more subtle and often overlooked things that borrower’s do that can damage their credit scores just the same. These things can in turn trigger a downward spiral of financial consequences that range from loan rejection, to higher interest and insurance premiums, to having to shell out a much higher security deposit.   One of these subtleties is when shoppers are drawn in by too many in-store credit offers. Like the ones that would make a promise of 10 percent or more off of your purchase just for signing up. First of all, creditors may view these people who are opening so many accounts in such a short time frame as being in financial trouble. Subsequently, opening up that…

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10 Things all Naperville First Time Home Buyers Should Know

1. Visit a housing counselor at a nonprofit organization Because owning a home requires a substantial investment of money, time, and energy, this decision should not be made quickly. A housing counselor would be able to provide objective unbiased advice and recommendations to specifically meet your needs of being a first time homebuyer in the Chicago area. 2. Get your finances in order Find out what your credit report and credit score is and correct any issues. A credit score will show how often you use credit, how timely your bills and paid, and how much money you owe so this will determine your ability to borrow money. Lenders look at four factors called the four Cs of credit. Credit history, (timely bill paying), capital (money available for a down-payment), capacity (income versus debt), and collateral (the value and condition of the house). You need to make sure that you…

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Some Things to Avoid Before Closing on a Mortgage

Once you’ve been pre-approved, you are ready to buy as long as there are no major changes in your financial situation. These are some things you need to avoid before you’ve closed on your new home. Don’t buy or lease a car – Unless you have to, it’s better to put off any big purchases until after you’ve closed on your new home. A large increase in your debt-to-income ratio could be a problem. If you have to buy something, call your loan officer before making any major purchase so they can see how this will affect your mortgage approval. Don’t move assets from one bank account to another – If you do, we will need to have a paper trail to document the source of funds for each new account or large deposit. If you want to consolidate accounts, it’s better to wait until after you have closed. Either…

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Using a Monetary Gift as a Down Payment

Gifts are a special case, and if you are expecting that some of your money will be from a gift, a little planning ahead of time will make your experience much easier. First of all, gifts aren’t allowed on every program. With some conventional programs, unless you are putting at least 20% down, 5% of the down payment needs to be from your own funds. All the rest can come from a gift. With FHA loans all your cash can come from gift. Gifts also have to be documented in a particular way. We have to be able to show that this truly is a gift, not a loan. To show this, we use what is called a gift letter. This is a form (we will provide it to you) that is filled out by you and the person giving the gift. It states how much the gift will be,…

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