credit scores

What Drives a Lending Decision?

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Mortgage Lending
When someone is ready to buy, they often hop in their car and start browsing the local housing stock for their new home. It can be an exciting venture, especially when you’ve found a few in your price range.

But what is your “price range,” really? Do you know what that corner dream house with the covered patio and finished basement will cost you each month? The truth is, the sticker price in the homebuyers guide is just a part of the total housing cost and doesn’t take into account all the other costs and criteria that a lender will be considering when you apply for a mortgage loan.

There are distinct questions a lender has to answer before they can determine what a mortgage payment is going to look like. We’ll discuss these elements over the next couple installments, but for now… we will start at the beginning.

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8 Tips for Improving Your Credit Score to Become Mortgage Ready

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Homes are in short supply, which has made the local market very competitive. As such, it’s imperative that homebuyers, especially first-time homebuyers, do everything they can to improve their ability to get a loan. One of the biggest pieces of the puzzle is your credit score.

Your credit score can make or break your chances of being approved for a mortgage loan. And when you find a house you want, you need to be able to move fast in this market. Here are eight ways you can improve your credit score to have a better chance at getting approved quickly.

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Payment Ratios – Funds to Close

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mortgage payments
In my last post, I discussed what drives a lending decision. I also want to take a look at payment ratios/formulas and how they impact the total monthly payment for a home. The dirt is in the details…let’s consider buying a house.

Whenever my team works with a client, maybe the most frequently asked question is, “How much will this house cost me every month?” It’s understandable….a necessary question. Buying a home is a huge financial investment. Not to mention one of the most important financial decisions a person will make. I find many clients are under informed about what home ownership truly costs.

The mortgage loan is simply one variable in the grand scheme of things. Instilling confidence by providing “how to” details is important…with financial clarity comes less anxiety.

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All Eyes on Proposed Home Loan Fee Increases

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If you’re a prospective homebuyer/homeowner seeking mortgage financing using ‘conventional loans’, you could end up paying more come April 2014.

‘Conventional loans’ = Fannie Mae and Freddie Mac, aka Government-sponsored enterprise (GSE) loans.

Earlier this month, the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to increase charges called “guarantee fees,” or g-fees, that are embedded in the cost of home loans to protect investors from losses. Theoretically, raising these fees would bring private capital back into the mortgage market and better reflect a borrower’s credit risk.

For loan officers, this will likely make it more difficult to determine whether a borrower is a better candidate for a GSE loan or a loan through the Federal Housing Administration (FHA). But for borrowers, the potential impact is much more significant: adding thousands of dollars to closing costs.

Starting March 2014, the Loan-Level Price Adjustment fees, or LLPA fees, of GSE loans may be raised for borrowers with credit scores above 660 and a down payment of less than 30%. Borrowers with scores between 680 and 760 who are making a 5% to 10% down payment could see an interest rate that is 3/8 of a percent higher.

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