Spouse Has Good Credit, But I Have Bad Credit
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My wife has good credit, but I have bad credit. What options are available? Do the both of us need to have good credit?
This is a very common scenario when one spouse has good credit and the other has bad credit. One possible solution is to have your mortgage professional or mortgage broker look into doing the loan in only the name of the spouse with the good credit. This may help qualify you for the best mortgage available by doing the financing in the name of only one spouse. Both husband and wife will still be on title to the home and have ownership interest in the home, except only one person will be on the actual mortgage loan. Ask a mortgage consultant (mortgage professional) about this option to see if it may be an option for you.
When a lender looks at your credit scores they will take the middle score of the three bureaus. Typically lenders will require the person who makes the most income to be the primary borrower. This can work against them if that person is also the one with the lower scores. One option is to look for what they call a best score program. With the best score program the lender will take the better of the 2 middle scores no matter who makes the most money and you can still use both incomes to qualify for the mortgage.
There are some lenders that will do an average score of both borowers to qualify the loan, this eliminates the traditional Primary Wage earner problems.
If you have bad credit and your spouse has good credit be sure too look over your credit report closely for errors. Many people have incorrect derogatory on their credit reports that will negatively affect their credit score. If you find errors on your credit report be sure to ask your preferred mortgage professional the proper steps to remove the incorrect entries.
Some lenders only care about the credit of the main borrower. If the person making the most is the one with the high score, you would be able to use the income of both borrowers and still get a good interest rate.
There are a number of different options available – some lenders will use the credit score of the primary wage earner, the one who earns the most. Other lenders have programs that allow the highest credit score to be used if not all of the income from the other spouse is needed to qualify. Consult with your mortgage professional to determine what options you have.
Lower Mortgage Rates By Raising Credit Scores
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Credit card management can become complicated the more that you have. Securing the lowest mortgage rates depends on proper credit card management. Keeping track of each can prove to be a daunting task because the balances are all different. You can sometimes take the balance from one card and place it onto another credit card. You may be looking to have your limit raised on one card while you are paying off another, or closing one account all together.
In order to keep your credit cards at a manageable place, keep all balances to less than 50% of what your credit limit has been set at. If you go beyond this then you could run into problems paying back the money and also this could adversely affect your credit score. To improve your credit score further if you pay off a credit card and decide to not use it again then keep it open as the zero balance on a current account looks good on your credit report.
If you have a number of credit cards you might want to downsize. It is better to keep the cards with the lowest interest rates and the ones that have the longest histories. Remember that many things play a role in regards to your credit score including the balances you carry, your payment history and how long you have been a cardholder.
If you would like your balance to be on par with your credit limit ratio within the acceptable 50% mark then you can ask the credit card company if they would be willing to raises your credit limit. This can have a positive impact on your credit score but does not mean that you should start charging up a storm with the extra credit you have been extended. Common sense and smart money savvy are very important here.
One way that you can decrease your utilization ratio is by reducing your balance. You can also do the same thing by increasing your balance. If you have an excellent record of paying your card on time then having your balance increased should be something that the creditor is willing to accommodate.
In order to increase your credit score, you should use your credit card on a regular basis but then pay it off in full every month. This establishes a good payment record which is what you want.
In order to maximize your credit score, having anywhere from two to four credit cards in your possession should suffice. Make sure the balances of each are 20 to 39% of what your maximum ideal is.
Be responsible with your credit cards. Don’t use your credit card for any frivolous purchases but instead save for emergencies. You wouldn’t want to use your card for a night on the town only to encounter a family emergency and have no credit left to help you cope with the emergency!
Speak to your mortgage consultant in order to figure out the most appropriate ways for you to bring your credit score up. You can improve your score by paying your credit card bill on time every month, paying more than the minimum, paying off the card as soon as possible and not constantly applying for new cards. While most creditors do not report late payments to the credit bureaus until the payment has been in default for 30 days, you may then end up with a late fee. If you have a history of late payments this can serve to damage your credit score even more.
One thing that you might want to do is to get a hold of the free annual credit report offered at Annual Credit Report and from there begin to improve your credit score. Be aware that this is the only FTC approved credit reporting site.
If you don’t know the interest rates on your credit cards then find out right away. Every six months or thereabouts give your credit card company a call to inquire about getting a lower interest rate. This can save you money on a monthly basis.
The most open accounts you should have to benefit your credit score is five. This includes not only credit cards but also personal loans, student loans, car loans, etc.
To manage your credit cards to the best of your ability, you should pay them off as quickly as possible. You can always refinance your mortgage and then take the money and use it to pay off a loan if you like.
FICO Scores and (LTV) Loan-to-Value
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The FICO score you have is used by most lenders (whether they be subprime or conforming) in order to figure out what your loan-to-value ratio (LTV) is when you wish to borrow money to buy a home. There are some lenders that will consider higher loan-to-values but most go by the standard. If you are looking for 100 percent financing then you need to have a credit score of 580.
In some cases a lender will use a credit score to determine how high the loan-to-value will be. Yet others will take an average of three credit scores. This varies from lender to lender. In the case of two people such as a married couple who are looking to take out a mortgage, the lender will add up three credit scores for both people and then will take an average from these scores. This helps to determine what the loan-to-value ratio will be. This works well if the financial and credit situation is different for each person. One person’s poor credit can be balanced out with the other’s good credit. This also works for income level as well.
While most mortgage lenders will use the middle score of the three, some are a little more forgiving and are willing to use the highest of these scores. Speak to a variety of mortgage lenders to find the one that best suits your needs and your spouse’s.
Another important element of what goes into your LTV is documentation. The more you can submit in terms of documentation the better it is. For example, a Full Doc includes W-2s, pay stubs, bank and/or brokerage statements, and your tax returns if you run your own business. Be aware that a Full Doc loan makes it possible for a higher loan-to-value as opposed to a Stated Doc loan.
If your credit is not stellar then you may find that you will encounter some problems. However do not allow yourself to become despondent. There are some non-conforming mortgage lenders who permit loans which equal approximately 95 percent of the value of a home.
The criteria may be stiffer than for those with very good credit and if you fall into this group then your closing costs would be higher and so would your note rate. There are very seldom any pre-payment penalties on non-conforming loans.
Many mortgage lenders have guidelines that look at credit scores in terms of 20 point intervals. If this scenario exists for you then you might want to have a talk with your mortgage lender- if your credit score is a few mere points off for an even 20 point interval then find out if your allowable LTV could be made higher if you were to make even a small improvement in your credit score. If you are a long way off from an even 20 point interval then you needs to find ways to bring up your score. Start by carefully combing over your credit report for any errors.
Bi-Weekly Mortgage Programs
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Imagine paying your mortgage once every two weeks to pay it down quicker. Better yet, imagine a more desirable scenario- your mortgage is being paid bi-weekly by a company that has advertised a special service for mortgage reduction or a savings program.
Is there such a thing as a company that will pay your home loan bi-weekly in a manner that will help you and give you a more advantageous financial picture?
The straight up answer to this is no. There is no fairy godmother to wave her magic wand, nor is there a magic potion. If you are paying a mortgage then you have to pay it. It is as simple as that. There are no exceptions. If a company professes to be willing to make bi-weekly payments on your home loan for you they are not telling you the whole truth.
Let us take a closer look at what these companies are actually doing instead. The company will deduct money from your bank account on a bi-weekly basis. They will then take this money and put it into an account that is the one from which your mortgage payments come from. Your mortgage payments will then be withdrawn by your financial institution once a month. Instead of the standard 24 deductions in a calendar year, the so-called “mortgage reduction service” will deduct the money 26 times.
What happens with the money that is deducted two more times a year? The company then takes that money and makes another mortgage payment. To put it another way, as a homeowner you then will made 13 payments on your home annually instead of 12.
The worst part about these services is that while they claim to save you money, they are charging you exorbitant fees for the supposed help they are providing to you. Their claim that they will save you money in the long term and that you will pay your mortgage off faster is supposed to make you forget that in the short term you are paying out plenty of your hard earned money to them. In truth they are not helping you at all.
These services try to tell consumers that the only way to make an extra home loan payment in the course of a year is to go through them. This is completely false. If you wish to do this you can make appropriate arrangements with your financial institution. One method of doing this is as follows- Set up automatic withdrawals for your mortgage payments on a monthly basis and ask that an extra 1/12 payment be added to the principal of the loan monthly. By the time a year has passed you will see that you have made the extra payment without the need to look to any type of reduction service or program.
There are other ways that you can make an extra mortgage payment. For example if you have a sizable tax return on its way to you then use this money to lower the principal of your mortgage. This can make a great deal of difference in how long it will take you to pay off your mortgage.
Even if your tax return funds are only enough to make one extra payment annually, if you do this year after year you can knock a 30 year mortgage down to approximately 23 years! This can also save you a lot of money in interest charges.
When you see ads proclaiming to help you reduce your mortgage because of a special service or program, run the other way! Look to more responsible and cost saving ways of bringing down the amount you are paying on your mortgage. Do not let yourself be fooled! Be smart and wise about your money. Learn how you can save money on your home mortgage without costing you money.
Shop Wisely For A Home Mortgage Loan
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When you shop for a home loan you want to get the very best deal that you can. Whether the home loan you are looking for takes the form of a mortgage for a first time homeowner, a home equity loan or a refinancing loan, there is always room for negotiation when it comes to the terms and the price.
Always remember when searching for a home loan that you must be shrewd. Make sure you shop around to a number of different places. As well, compare what different financial institutions have to offer for a home loan and then work your powers of negotiation. Shopping, comparing and negotiating are the name of the game when it comes to a home loan.
There are plenty of lenders from whom you can apply for a home loan. Besides the many commercial banks that exist, there are also credit unions, mortgage companies and thrift institutions (this is a savings and loan institution, or a depository institution that specializes in home loans and saving deposit accounts). Talk to lenders from a variety of places to get home loan quotes. Compare the quotes you are given from company to company in order to find the one that is most suitable for you.
Another option is to speak to a qualified mortgage brokers. A home loan can be arranged for you by this individual although the process is different than it is with banks. Brokers do not lend money for a home loan themselves but they set the transaction up for you. In other words, a broker can find an appropriate lender who can assist you in getting a home loan. The advantage of a mortgage broker is this person often has access to a multitude of lenders and this means that the selection of home loans available to you, as well as the terms, are much greater and leave more room for negotiation.
Be aware when you are shopping for a home loan that a mortgage broker is able to get in touch with a number of different lenders however he/she is not obligated in any way to guarantee you the best deal on a home loan unless you have decided to contract the broker to work as your agent. For this reason, it is wise for you to contact an assortment of mortgage brokers.
Some lenders employed at financial institutions also work as brokers but you will not know this unless you come right out and ask. When looking for the best deal for a home loan, it never hurts to find out if a person is both a lender and a broker. The reason for this is because mortgage brokers are often paid a fee that is separate from all of the other fees associated with a home loan. He or she may be paid what is known as points when the closing costs are completed, or you may have extra money added onto your interest rate for your home loan.
