How to Prepare Your Credit for Buying a Home

Like many Americans, this is the year you plan to buy a house. But while you’ve been saving your pennies, checking out neighborhoods you are interested in living in and searching houses online, you may not have considered the important role your credit score plays in your ability to secure a loan. For example, a conventional mortgage loan typically requires an average FICO score of at least 720, and people with scores at 580 may qualify for an FHA loan.

Here’s some information from a realtor in Alpine, TX for how to prepare your credit for buying a home:

  • Review your credit report: The first thing you need to do is check your credit report for any issues a few months before you plan to apply for a mortgage. For those who pay their bills on time, checking your credit for mistakes two to three months in advance should suffice. However, if you know you have late payments or other negative things that stand out on any of your accounts, you might want to start your review six to nine months in advance to allow enough time to remedy any issues.
  • Take care of inaccuracies: You may look at your credit report and find errors like an account you didn’t open, an account that’s not yours or an “unpaid item” that is actually paid off. File a dispute with the credit reporting agency immediately. It’s not unusual for someone to discover an inaccuracy on their credit report, so be thorough.
  • Have several tradelines: You will need at least three tradelines—such as credit cards, car loans, student loans, etc.—that have been active within the past 12 to 24 months to apply for a conventional loan; you need two tradelines for an FHA loan. Talk to you realtor about opening additional tradelines if you need them.
  • Don’t close old credit: Don’t close older credit cards—they can actually help boost your credit score. To keep old cards active, use them every few months and pay them off in full.
  • Don’t open new credit: New credit, meanwhile, can temporarily lower your score. For this reason, avoid opening new credit lines at least six months out from applying for a mortgage.
  • Avoid using credit: You’re excited about purchasing a house, and now you’re in escrow. This may lead you to buy new things for your new house on credit—like furniture, appliances and more—but you should avoid buying on credit (or applying for other loans, like a car loan) before closing. Being in escrow doesn’t mean you’ve got the house; in fact, if you have a debt utilization ratio above 30 percent right before closing, this could disqualify your home loan.
  • Leave money accounts alone: A mortgage lender will ask you to provide several months of bank statements, so don’t close accounts or make large money transfers. To create less paperwork, leave accounts as stable as possible for at least three months.

Are you in the market for a realtor in Alpine, TX? Then call Carpenter Real Estate today!

Is Mortgage Insurance Worth It? Info from a Realtor in Alpine, TX

Whenever you decide to take out a new mortgage, you’ll be offered mortgage protection insurance (MPI). There are several variations of this insurance available, but in general it is used to protect your loan payments in the event you lose your job, have sudden unexpected medical bills or experience a life-changing disability.

But is mortgage insurance actually worth it, or is it just another way for the mortgage company to get more money out of you? The answer primarily depends on your age, health and financial situation. Here’s some information from a realtor in Alpine, TX about whether mortgage insurance is right for you.

Benefits of mortgage protection insurance

Perhaps the most valuable benefit of MPI is that it is handed out on a “guaranteed acceptance” basis. There are very few, if any, questions on an application for MPI that will prevent you from getting the coverage you need, which is especially important for people who have health issues and who often have problems getting other kinds of insurance at a reasonable rate.

If you are someone who works in a high-risk occupation, this is also another way for you to protect your investment and your estate. People in the construction industry, for example, are more susceptible to injury and death on the job, and often have a hard time getting disability insurance. Mortgage protection insurance is an easier policy to get that will provide you with some protection for your home.

Drawbacks of mortgage protection insurance

If you already own your home outright, then MPI doesn’t do anything for you.

In other circumstances, keep in mind that MPI is a declining-benefit policy. You’ll pay a set premium for the entire life of the mortgage, but the payoff amount decreases as you continue to make your mortgage payments.

In addition, it might not always be the best decision to pay off most of your mortgage in the event of your death. Depending on the monthly amount of the mortgage payments, it might make more sense for you to leave behind lump sums to your beneficiaries and allow that money to collect interest while continuing to make the mortgage payments as outlined in your original loan agreement.

If you do decide to go with MPI, make sure you have a plan for how you’ll choose your policy. You shouldn’t automatically go through the same bank or lender providing your mortgage—you should do some shopping around to make sure you can get the best available rates and benefits.

There are also some alternative options you can choose. For example, if you’re considering an MPI plan that would be payable upon your death, you might consider a life insurance policy instead, as the policy would not decline in value over time and would, depending on the value of the policy, cover more than just your mortgage in the event of your death.

For more information about mortgage protection insurance, contact Carpenter Real Estate to speak with an experienced and knowledgeable realtor in Alpine, TX.

Is It Normal to See a Credit Dip After Buying a House?

If you recently purchased a new house, you’ve probably been carefully watching the progress of your credit score, as your rating affects your ability to get a mortgage with lower interest rates. After the purchase of your home goes through, it’s not uncommon for you to experience a credit dip.

Here’s some information from a realtor in Alpine, TX about how you can expect your purchase of a new home to affect your credit score.

Certain factors give a hit to your credit score

You’ll probably start seeing some minor hits to your credit score as soon as you start applying for mortgages with different lenders. Whenever you apply for pre-approval for a mortgage, lenders will perform a credit inquiry to see if your credit is sufficient for them to give you a loan. A hard credit pull essentially tells the algorithm you are actively looking for a new source of credit, which will cause a slight dip in your credit score.

If you want to limit the effect these hard credit pulls can have on your credit score, you should apply for pre-approval with several different companies in a single two-week span. With some credit scoring models you might be able to get away with drawing them out over a longer period of time, but by limiting them to a shorter time period you also limit the hit that your credit score has on you.

Actually opening up a new mortgage will cost you even more points in your credit rating, especially if it’s the first mortgage you’ve ever taken out. There will be a massive increase in debt, which will cause your score to drop. However, by making your mortgage payments on time, you’ll slowly build that credit score back up.

Debt can be a good thing

Keep in mind that adding to your credit mix can actually help your credit profile in the long run. About 10 percent of your credit score is determined by your credit mix, so if you have a greater variety, you’ll actually help your score.

And again, by paying your mortgage on time every month, you’ll start to build your credit score up again relatively quickly. In fact, for many people, it will only take a few months before your score is even higher than it was before you actually started applying for loans!

So, if you see your credit score decrease during and immediately after the home buying process, don’t fret. In the long run, you’ll actually help your credit score so long as you’re able to continue making your monthly payments in full and on time.

If you have any further questions about how purchasing a new home can impact your credit rating, or questions about any other financial issues that might arise as you seek a mortgage, feel free to contact a realtor in Alpine, TX. Get in touch with Carpenter Real Estate today, and we’ll be happy to provide you with any further information you want or need.

What Is a VA-Guaranteed Home Loan?

If you’re a veteran, you’re well familiar with many of the programs designed to get you up and running as a private civilian. From benefits that help you get back to school, to programs designed for work placement and community leadership, there are many systems set up to make life just a little bit easier. One of the biggest is access to a VA-guaranteed home loan.

If you’re unfamiliar with a VA-guaranteed loan, it’s something your realtor in Alpine, TX can tell you a lot about. Not only is this a common type of home loan, it’s one that virtually any veteran can take advantage of to establish their homestead after active duty.

All About VA Loans

This type of loan is typically issued by a private lender and covers much more than a conventional home loan—including eliminating the need for a down payment when it comes time to close a sale. You’re also guaranteed an exceptional interest rate with a VA loan, which is often close to the current market lows. Plus, there’s no monthly mortgage insurance premium to pay! Finally, there are no prepayment penalties to worry about.

Many lenders are more than willing to give VA-guaranteed home loans because the lenders themselves are protected from loss. In the event that something happens and you can’t pay back your loan, there are protections in place that mitigate liability. The U.S. Veterans Administration will actually provide oversight in foreclosure situations to find alternatives that are beneficial for everyone involved.

Is a VA Loan Right for You?

It goes without saying, but you have to be a military veteran (honorably discharged) to apply for a VA-guaranteed home loan. This is the chief stipulation—alongside the idea that the veteran in question must also live on the premises in the home the loan is being applied to.

In addition to the veteran aspect of the loan, anyone applying for a VA-guaranteed loan must have acceptable credit worthiness and sufficient income when it comes to being able to afford mortgage obligations in addition to other financial demands. VA-backed loans are determined on a case-by-case basis, but most veterans are eligible as long as they have available entitlement.

The other critical thing to remember about VA-guaranteed loans is that they’re made through third-party lenders, who may have their own stipulations for who qualifies. This could mean different credit score worthiness or income demands. It’s important to remember this when pursuing an application.

Learn More About VA-Backed Loans

If you’re a veteran thinking about a VA-guaranteed loan, be sure to speak with a qualified realtor in Alpine, TX. They’ll be able to provide you with the information you need to apply for this type of loan and can help guide you through the steps of finding a home that meets your criteria, as well as those of a lender. In many cases, this type of loan can trump even FHA or other housing authority-backed mortgages, making it a smart opportunity for those who have previously served.


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