Shari Sagan McGuirk's Blog
It’s hard to overstate the importance of credit scores when it comes to buying a home. Along with your down payment, your credit score is a deciding factor of getting approved and securing a low interest rate.
Credit can be complicated. And, if you want to buy a home in the near future, it can seem daunting to try and increase your score while saving for a down payment.
However, it is possible to significantly increase your score in the months leading up to applying for a loan.
In today’s post, we’re going to talk about some ways to give your credit score a quick boost so that you can secure the best rate on your mortgage.
Should I focus on increasing my score or save for a down payment?
If you’re planning on buying a home, you might be faced with a difficult decision: to pay off old debt or to save a larger down payment.
As a general rule, it’s better to pay off smaller loans and debt before taking out larger loans. If you have multiple loans that you’re paying off that are around the same balance, focus on whichever one has the highest interest rate.
If you have low-interest loans that you can easily afford to continue paying while you save, then it’s often worth saving more for a down payment.
Remember that if you are able to save up 20% of your mortgage, you’ll be able to avoid paying PMI (private mortgage insurance). This will save you quite a bit over the span of your loan.
Starting with no credit
If you’ve avoided loans and credit cards thus far in your life but want to save for a home, you might run into the issue of not having a credit history.
To confront this issue, it’s often a good idea to open a credit card that has good rewards and use it for your everyday expenses like groceries. Then, set up the card to auto-pay the balance in full each month to avoid paying interest.
This method allows you to save money (you’d have to buy groceries and gas anyway) while building credit.
Correct credit report errors
Each of the main credit bureaus will have a slightly different method for calculating your credit score. Their information can also vary.
Each year, you’re entitled to one free report from each of the main bureaus. Take advantage of these free reports. They’re different from free credit checks that you can get from websites like Credit Karma because they’re much more detailed.
Go through the report line by line and make sure there aren’t any accounts you don’t recognize. It is not uncommon for people to find out that a scammer or even a family member has taken out a line of credit in their name.
Avoid opening several new accounts
Our final tip for boosting your credit score is to avoid opening up multiple accounts in the 6 months leading up to your mortgage application.
Opening multiple accounts is a red flag to lenders. It can show that you might be in a time of financial hardship and can temporarily lower your score.
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You may have heard that you will need 20 percent of the purchase price of a home to put down in order to buy it. As the prices of homes continue to rise. 20 percent of the purchase price of any home may not seem like a small feat to save up. It’s not impossible to buy a home. You may be able to get around the 20 percent rule in a variety of ways. Keep in mind that putting down as large of a down payment as you can will help you to land the home of your dreams a bit faster.
The 20 percent down rule is sort of a myth. While the more you have saved up, the better your chances of standing out among other buyers are. You can still get a mortgage with less than 20 percent down from most banks. The drawback in not putting down 20 percent on a home is that you will need mortgage insurance (also known as PMI). Mortgage insurance is necessary if you put less than 20 percent down because the lender wants protection in case the home is foreclosed on due to a lack of payments.
All About PMI Payments
If you do put less than 20 percent down on a home, your PMI payments won’t go on forever. Once your loan is paid down a bit, you’ll be free and clear of PMI payments. As a rule, if the loan-to-value-ratio reaches 80 percent, you can ask your lender to cancel the insurance for you. When the loan-to-value ratio reaches 78 percent, the lender will automatically cancel the PMI. This is a welcome decrease in expenses since PMI insurance can add up to be hundreds of dollars per month.
Finding A Way Around 20 Percent Down
Before you even decide to buy a house, you should look at financing options. There are certain programs that are available to you to help. If you know about them ahead of time, you’ll be able to take advantage of them.
Many different government agencies have programs available to help people get a home easier. These programs will provide home loans with a low interest rate and little to no down payment. The downside to these programs is that many of them actually require you to purchase private mortgage insurance as a contingency to get the loan. You’ll need to plan for these extra expenses. There are even grants available to help you with your down payment. Check in your state or local HUD office for details on various programs that can assist you with your down payment on your first home. Through a bit of savings and research, owning your first home can be possible with or without 20 percent down.
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If you've recently sold your house or are preparing to list your residence, now may be the perfect time to cut down on clutter. That way, you can remove excess items from your home and earn extra cash before you move into a new residence.
Of course, selling excess items may prove to be difficult, particularly for those with limited time and resources at their disposal. But individuals who use the web to their advantage should have no trouble selling excess items.
What does it take to effectively promote a wide range of items online to prospective buyers? Here are three tips to help you do just that.
1. Take Excellent Photos
Regardless of whether you're looking to sell an old tennis racquet or a rarely used refrigerator, it is important to take outstanding photos of your items. This will enable potential buyers to get a look at what an item has to offer and decide if it is right for them.
Before you photograph an item, clean this item thoroughly. By doing so, you can ensure the item will look pristine before you post photographs of it online.
Furthermore, take pictures of an item from multiple angles. And be sure there is sufficient lighting when you capture photographs, as this will allow you to showcase the true beauty of any item, at any time.
2. Provide Relevant Information
When it comes to selling excess items online, it pays to be honest. If you provide accurate, relevant information about an item to prospective buyers, you can increase the likelihood of connecting with the right audience.
Also, don't forget to include an engaging headline in your item description. This will help your item listing stand out from others, thereby improving your chances of stirring up substantial interest from dozens of potential buyers.
3. Respond to Buyer Concerns and Questions Immediately
An alert online seller usually is a profitable one. As such, if a buyer has a concern or question about an item listing, it is important to respond as quickly as possible to boost your chances of getting the best possible results.
For example, if you publish an item listing on Craigslist and a potential buyer sends you an email, you should try to respond within the first few hours. This will allow you to connect with the buyer and reduce the risk that the buyer will become impatient and look elsewhere for the same item.
If you need help decluttering your house and listing excess items online, your real estate agent may be able to lend a helping hand. This housing market professional understands the complexities of selling a house and moving into a new residence. Therefore, he or she can help you find innovative ways to declutter and streamline the moving process.
Take advantage of the aforementioned pre-moving tips – you'll be happy you did. Thanks to these tips, anyone can declutter a residence, sell excess items online and earn extra cash at the same time.