You will come to find out that there are many things to consider before you jump in and buy a home. There are many legal aspects as well as worrying about qualifying, credit issues, and moving in general. Unfortunately you cannot just pick a house pick up and move. There is much decision and planning to do and without all that, you find yourself in a load of stress and problems.

With this in mind we decided to whip up some things that you absolutely need to know before you jump head first into buying the home of your dreams. You will find that nothing on this list will discourage you; it will only make sure that you are more prepared and have a better plan to ensure that you get the home you want for the price you can afford.

As with all my articles remember, if you need any help or have any questions- I am at your disposal, to answer any questions on a no obligation basis. We are here for you!

Having said all that, it’s time to get down to the info…

 

How do I find out if I can even qualify for a home loan?

Like everyone you are probably nervous. Buying a home is a big decision. I know I was nervous when I considered buying our home. Everyone wants to know if they will qualify and for how much. This is perfectly normal and was definitely a smart thing to ask.

Thanks to the age of computer technology you can find out if you qualify from the comfort of your own home, providing you have a computer. There are many sites that you can go to and after a few minutes of information input, you are ready to find out if you qualify and generally for how much.

You can many mortgage sites online that will tell you how to qualify and what information you need. One of these sites is www.mortgage101.com.

If you do not have internet access you can always contact nearly any mortgage loan officer and they will be more than willing to help you on your quest to get pre-qualified.

 

How do I find out my credit score?

Like I mentioned above, if you have access to an internet, finding out just about anything is a piece of cake. Many websites that offer credit scores will allow you to receive this information free of charge. You should be able to find this free, so do not think you have to pay for it. If worse comes to worse you can call the credit reporting companies and request a report free of charge- you are allowed one free report per year from each agency.

If you are online give www.homestore.com a try. They should be able to help you find your credit report and best of all it will be free of charge.

 

What is a FICO score?

You may or may not have ever heard of the term a FICO score. If you are wondering what it is, I’m going to explain it to you.

Credit scores are often called FICO scores before a large majority of credit bureaus use software that was developed by Fair, Isaac, and Company. Hence the term FICO, these scores are a combination of the reports from the top three credit bureau agencies. These agencies, Equifax, Experian, and Trans Union all provide what will become your FICO score. It is basically a mix of your credit reports in number form.

Unlike a credit report, FICO scores are something different and used by lenders quite often to help determine loan eligibility. FICO scores allow the lender to see the potential risk in giving you a loan. The best way to figure it out is the higher the score you have, the lower the risk for the lender.

You need not worry though, every lender is different. They all consider high risk, something different and you will generally always be able to find someone to work with you. There is no cut off FICO score.

If you are interested in finding out your FICO score you should be able to do so online. www.myfico.com is one place where you can get it. They currently charge a fee for $12.95 for that service.

 

Is it possible to have more than one score?

Although it may be quite confusing often you will hear people talking about “your score” and you will come to realize that there is more than one score that you can have. There are four basic things to remember when you are wonder what score they are talking about.

• FICO scores are not the only scores used - Actually many lenders will use their own scores that they actually make based on your FICO scores and other information that they have obtained about you. This is quite normal and many companies do this.
  
• FICO scores are not the only credit bureau scores - Regardless of the fact that FICO is the most commonly used credit bureau score, there are others. The reason for these other, lesser known scores, are that they may evaluate your credit in a totally different way. While FICO scores say the higher the score the better, other reporting scores may say just the opposite.
  
• Your score could be different at every single credit bureau - Your FICO score is comprised of data from your credit report. If each bureau has different information listed about you, then it is quite possible that each bureau will have a different FICO score.
  
• Your FICO score will change as time progresses - Your data has the ability to be constantly changing at each credit bureau. Your score will change as you get more credit and as you pay things off. As this happens, based on your credit report, your score will change as well. It is very possible to say that the score you got today may not be the score a lender gets one month from now.

 

I have my FICO score now but I don’t know what it means!

It’s amazing how hard all this can seem isn’t it? That’s why I am here to try and explain as much as possible to you. I know how confusing it was for me when I started, so I like to try and extend my knowledge to others when I can.

Please see the small set of numbers below for a reference on your score.

620 or above	Excellent Score!
550 to 620	Fair Score
550 or below	Poor Score

 

What is making my FICO score low?

Though many do not know this, when your FICO scores are received they can come with up to four score reason codes. These one to four scores will explain why your score was not higher than it was. If your lender decides to reject your application on the basis of the FICO scores, these scores can allow the lender to tell you why your score was not higher.

The reasons for the scores can be very insightful for you. In fact they will tell you if your credit may have certain errors or blemishes that you need repaired. On the other hand, if you have a high credit score than you will find it unlikely that these scores will tell you much of anything that you do not already know.

Generally you will come across one of the following ten score reasons. These are the top ten most handed out credit score reasons.

 

Serious Delinquency

Serious Delinquency with a public record of collection filed

Derogatory public record or collection filed

Time since delinquency is too recent or unknown

Level of delinquency on all counts

Number of accounts with delinquency

Amount owed on accounts

Debt ratio is too high. The Proportion of balances to credit limits is too high

Too much money going out for credit, too much owed

Length of time on accounts has yet to be established

As you can see some of those are because you do not have enough money going in, some detail that you have too much going out, and the final that you are just not paying your bills or haven’t in the past. These are usually your top three reasons for a denial.

 

If I have a low FICO score does that mean I will not get a loan?

No that’s not what it means. If you have a low score you will not be able to qualify for the lowest interest rates because your loan will be a high risk loan. A high risk loan is for someone that has a lower score.

Other than your credit score, your income will also be a prime consideration. If you are curious about exactly what information is looked at you should check with a mortgage lender in your area, or one you are considering using. Each company tends to look at certain things, so it will vary to each place that you go.

 

Is there anything I can do to improve my FICO score?

Unfortunately you will come to find that where fixing your credit is concerned there may be no easy fix. Many times you will just have to pay everything religiously and wait it out. Time will eventually be on your side. We realize how hard that can be though. Patience is hard, especially when dealing with something as important as a home.

With that in mind, even though this may not significantly raise your score, there are a few things you may be able to do to improve it.

Examine your credit report with a fine tooth comb - If you see any errors now would be the time to fix them. It is possible that errors are made and these could affect your score drastically. If you find something incorrect you need to contact the company that made the mistake and ask them to fix the problem. They then will need to mail you a copy, along with each credit company, and you could have them send one to your mortgage company as well. You will also want to keep your copy in a safe place. You will want it for your records so you don’t have to worry about the same problem happening twice.

Cancel the cards that you do not need - If you have numerous cards in your wallet that have no balance it would be in your best interest to consider canceling those cards. Call the credit card establishment and let them know you wish to cancel. Once you have done this you should ask them to mail a notice of the cancellation to you, the three credit bureaus, and to your mortgage company.

Judgments or Liens - If you have any against you, you need to pay them off immediately if you can afford to.

This is just a small sample of what you can do to improve your rating. Your mortgage lender should also be able to give you more advice on ways to raise your credit score.

 

If I have filed bankruptcy can I still buy a home?

A mortgage lender will definitely have more up to date knowledge about this question. As stated before every mortgage company is different, though they should be able to answer any question pertaining to a mortgage that you may have.

I will say this though; it largely depends on the reason and the circumstances for the bankruptcy. Do not automatically rule yourself out. A mortgage is still possible after bankruptcy.

 

What is a mortgage loan?

That can be a pretty loaded question but I am going to try and use the simplest definition possible. A mortgage loan is a loan that you use to purchase a home or piece of property. The reason they give you so much money is because the home or property is the collateral in the loan.

Now it could get more complicated, but I am going to explain it easily and I’m sure you’ll have no problem understanding.

Mortgages come in a variety of terms. When you get a mortgage you can get one for as short a time as ten years or as long as thirty years. The average amount is fifteen to thirty years. Over time you can get more than one mortgage on the same home. The one you get to buy your home initially is known as your first mortgage. What this means for them is that if for some reason no payments are made, they are first in line to collect their debt.

There are three common mortgage types. They are known as a fixed rate mortgage, an adjustable rate mortgage, and a convertible rate mortgage.

Fixed Rate Mortgages are loans that have an interested rate that remains the same the whole time you have the loan. This would explain the name fixed rate. These loans are the best for people who are planning to keep their home for an extended period of time because you don’t know how much interest will go up or down. Keeping the same interest rate is a safe choice if you’re planning to stay put.

Adjustable Rate Mortgages are loans that have interests rates that occasionally adjust based on the current interest rates. These loans will usually have the lowest interest rates to start out with. They will also have the lowest payment to start out with. These are most recommended for people that are planning to sell their home rather quickly and not stay in it. The usual time we say, is about three years. If you are staying less than that, this loan would be a good option for you. You may qualify for a larger loan with adjustable rates, so if you are planning to get a better job, have more money in your future, or you expect rates to drop you should go with adjustable rates. If you decide to stay you can always refinance down the road.

Convertible Rate Mortgages are a combination of both fixed rate and adjustable rate mortgages. Generally for the first few years the loan is at a fixed rate. After that time it converts to an adjustable rate for the remainder of the loan time. The starting rate is usually higher than your adjustable rate will be but it will be lower than the fixed rate loan.

 

I don’t have any money for a down payment. Can I still buy a home?

Anything is possible so I will not tell you no. I will say that there are various programs that can help you with a down payment, though your mortgage company would be more familiar with them than I would. The mortgage company will also be able to look at your finances and credit and see what options you have in order to make a decision with you that will work the best.

I sincerely hope that this helped you in some way. If you have any questions, and a lot of times people do, you can feel free to contact me. No obligation is required. I just wish to be friendly and offer a helping hand for those in need.