865 Real Estate

East Tennessee Real Estate & Neighborhood Source

Will Multiple Lenders Pulling My Credit Lower My Credit Score?

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If you are thinking of buying a home or a car, most of us will be using credit.  Our credit score can not only effect whether or not we will be approved but also if we get the best terms. A big question I hear is, “will multiple lenders pulling my credit lower my credit score?”. The answer is a conditional no.  Watch the video as Jordan Goldberg from Credit Plus explains why.  For answers to other real estate related questions contact me, Troy Stavros with Gables & Gates, REALTORS and I’ll be happy to assist in anyway that I can.

What Will A 1% Difference In Your Mortgage Rate Save You?

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If you are in the process of buying a home in Knoxville or at least thinking about it, financing is also on your mind.   Unless you are planning to pay cash, you’re going to want to find the best deal and the lowest mortgage rate.  Knoxville mortgage rates can vary from lender to lender and also vary widely according to the type of mortgage and the length of the term.

“Although the difference in monthly payment between a 4.5 percent interest rate and a 5.5 percent interest is not as dramatic, your savings in interest paid over the life of the loan is significant,” said Erin Lantz, director of Zillow Mortgage Marketplace. “Mortgage rates will likely rise to 5 percent by the end of 2014 due to an improving economy and policy changes by the Federal Reserve. By buying a house while interest rates are still incredibly low, you could end up saving more than $52,000 over the course of 30 years.”

Image by Zillow Mortgage Marketplace

5 Factors That Make Up Your Credit Score

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Credit ScoreCredit scoring can often be confusing and overwhelming.  Here is a quick guide to the 5 factors that impact your credit score.

Payment History is the largest factor in how your score is calculated.  How you pay your bills accounts for 35% of your total score.  This includes not just collections, judgments and other negative items that will be reported, but whether or not you pay on time each month.  You can be reported as 30 days, 60 days or 90 days late.  The more delinquent the account, the more negative impact on your score. Even one 30 day late payment, if it is recent, can significantly lower your score.  Make sure you make at least the minimum payment by the due date on all your accounts.

Credit Usage/Capacity is often the biggest mystery and accounts for 30% of your total score.  This is calculated by assessing how much you currently owe vs your total available credit.  From month to month, your balances may fluctuate on your revolving or credit card accounts, and your score can change significantly based on those balances.  A good rule of thumb is to limit your balance at any given time to 30% or less.  This means if you have a card with a $10K limit – you probably want the balance to be under $3K.  Keep in mind that while revolving credit is what changes most frequently, this factor also calculates loans such as mortgages and auto loans.  Best advice – pay down as much as possible to increase your score.

Credit History or how long you have had credit, makes up 15% of your total score.  Best advice here?  Keep those cards you opened when you were in college.  Use them sparingly, paying off balances every month, but keep some activity on those older cards.  When you close an account, you actually shorten the “credit history” and will likely see a decrease in your score.

Credit Mix and New Credit each account for 10% of your score.  This means that you want to have a good mix of revolving credit (credit cards, lines of credit) and installment credit (auto, mortgage).  But because “new” credit can impact your score negatively, you want to be careful when opening new accounts.  Those new accounts can actually decrease the score initially, so my advice is to be cautious and intentional when considering new credit.

(Guest post and great advice by Betsie Hughes, Senior Mortgage Consultant at Movement Mortgage, a preferred lending partner of 865RealEstate.com and Troy Stavros).

SOURCE: http://www.ehow.com/info_7953861_key-factors-impact-credit-score.html

Knoxville Real Estate: Top 3 Things Lenders Love

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Knoxville Real Estate Top 3 Things Lenders LoveSo you see that the prices on Knoxville homes for sale are rising and you have made the decision to take advantage of the historically low interest rates being offered by banks on Knoxville real estate.  Although the uber-strict lending standards that were suffocating the market are letting up a bit, there are still distinct criteria which you will have to meet to be found credit worthy.

The Top 3 buyer traits that lenders love are:

  • #1  Top Notch Credit History – The very first thing a lender will do is pull your credit report and look for a good, solid credit history.  While perfection isn’t needed, you need to know that should you be approved your credit history will ultimately have an impact on the interest rate you receive.  The better the credit history, the lower the interest rate and vice versa.  Lenders we spoke with said a score of 750 and above will get you the best possible rate and conditions.  720 and above will still get you close the best rate, but other conditions may not be the same.  Scores below 640 will find it difficult to get approved for a loan.
  • #2 Low LTV or Loan to Value Ratio – Because the risk of default is always at the forefront of a bank’s lending decisions, Loan To Value Ratio is a huge part of that equation.  It is one of the key risk factors that lenders assess when qualifying a potential buyer for a loan.  The Loan to Value Ratio is the ratio of the loan amount compared to the appraised value of the home.  For example if you were obtaining a loan of $300,000 on a home appraised for $350,000 the LTV would be 86% ($300,000/$350,000).  You may have heard that most lenders want a 20% down payment.  This is because lenders like to keep the Loan to Value Ratio at about 80%.   Similar to having a above average credit score, if you are able to lower your Loan to Value Ratio, it can improve your interest rate and conditions.
  • #3 Stable Income – This important aspect that lenders look closely at encompasses both your income and debt levels.  They will want to know about your income.  How much it is and how steady it is.  How long have you been working at this particular job.  Once they know what your income situation looks like every month they will look at your debt.  Then they calculate what is called your “Debt to Income Ratio”.  This ratio calculates two different things.  First it takes your average monthly income and compares it to your housing expenses (mortgage payment, homeowner’s insurance, property taxes, homeowners association dues, mortgage insurance).  The second calculates your average monthly income and compares it to your total recurring monthly debt payments (credit cards, car payments, student loans, etc.)  Most conventional financing requires a Debt to Income Ratio of 28/36 (28% of your monthly income for housing expenses/36% of your monthly income for total expenses).

Here is an example:

In order to qualify for a mortgage for which the lender requires a debt-to-income ratio of 28/36:

  • Yearly Gross Income = $48,000 / Divided by 12 = $4,000 per month income.
  • $4,000 Monthly Income x .28 = $1,120 allowed for housing expense.
  • $4,000 Monthly Income x .36 = $1,440 allowed for housing expense plus recurring debt.

Judging from the example above, if you make $4,000 per month, it means that a lender would be unlikely to approve an amount that resulted in your housing expenses exceeding $1120 per month or your total debt payments adding up to more than $1,440 each month.

Knowing these Top 3 Traits before speaking with a lender or looking at Knoxville homes for sale can give you a pretty clear road map of what you can expect.  The key to a smooth Knoxville real estate transaction is eliminating surprises.   The moral of this story is, before you jump into the home buying process, you should have these things squared away: 1) Fix any issues with your credit  2) Save up for your down payment  3) Reduce your debt.

For information on Knoxville Real Estate or for a referral to one of our trusted lenders contact us at 865-999-0925 or EMAIL US HERE.

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