Month: January 2017

9 Tips for Improving your Credit Score

Congratulations on beginning the home buying process. You’ve started in the right place by researching how to best prepare yourself for submitting a mortgage application. A major part of that application is the home buyer’s credit score which examines many years of your financial history.

About Credit Scores

Known as FICO scores, credit scores were developed in the late 1990s to serve as an objective method for assessing an individual’s credit management habits. As a portion of the mortgage application process, your credit score allows lenders to determine which type of loan you are eligible for and the pricing tier you qualify for when searching for a new home. Credit scores range from 300 to a high of 850, with most lenders looking for a median score of at least 640.

There are 40 factor codes divided into five main categories that are used to calculate a credit score:

  1. Past Payment Performance (35%) – This indicator shows how often you pay your bills on time. If you let bills and debts slide, thus incurring late fees, this will negatively affect your credit score.
  2. Credit Utilization (30%) – This factor examines how you use credit. In regards to applying for a mortgage, lenders like to see 3-5 credit cards in use for a period of no less than two years to know that you understand credit and utilize it properly.
  3. Credit History (15%) – A look at of the financial accounts in your name and the length of time they have been open.
  4. Type of Credit in Use (10%) – Accounts such as mortgages, auto loans, revolving or installment accounts show the type of credit you’ve used.
  5. Inquiries (10%) – This refers to any formal inquiries made about your credit. Any time a company makes an inquiry about credit score, it impacts said score. Too many inquiries can be the difference between getting a mortgage and not. If you’re planning to buy a home you need to be very judicious about who you give your Social Security Number to.

Improve Credit Score Before Applying for a Mortgage

It might seem like your credit score is chiseled in stone but that’s not true.  A credit report (and a credit score) is a snapshot in time. If you are planning on buying a home soon and are concerned with your credit scores, there are steps you can take to ensure they will be better before submitting a mortgage application.

  1. Speak with a financial professional. Before, you close any accounts or make any changes to your credit profile, speak with a knowledgeable loan officer about the best course of action to take so you can be strategic about your overall mortgage plan. A professional, experienced loan officer will be your guide throughout the home buying process and is there to help you successfully submit your mortgage application.
  2. Pay all of your bills on time. Always. Past Payment Performance accounts for 35 percent of your credit score, so it’s imperative that all bills are paid in a timely manner. A great method for making sure your bills are paid on time is to set up reminders on your cell phone’s calendar. Also, many companies allow users to set up recurring payments to automatically pay bills to eliminate the monthly hassle.
  3. Under-use existing credit cards. While it is important to have credit cards in use, you want to under use them. Try to keep a balance that is no more than 35 percent of your credit limit. Maxed out credit cards reflect poorly on your score.
  4. Don’t pay off your credit cards unless you normally pay them off at the end of every month.  A zero balance has a negative impact on your credit score – leave a small balance.
  5. Review your credit report for any errors. You should not be penalized for errors made by creditors and you are entitled to have these mistakes removed from your credit report. Unfortunately, any mistakes might negatively impact your overall score and thus change the outcome of your mortgage application. Your loan officer will tell you exactly what you need to do to clean up any incorrect information from your report.  It’s not a good idea to formally dispute any charges until you’ve spoken with your loan officer.
  6. Do not apply for unnecessary credit. You want to limit any applications you might make for additional credit, whether you are considering buying a new car or you want to acquire another credit card. Your top priority is your mortgage application. Extra credit lines can absolutely be considered once everything has been settled with your mortgage.
  7. Increase credit limits. Speak with the banks and companies that hold your credit cards, and see if they will extend your credit limits. The increased credit limits reflect well on you but the unnecessary spending of that credit works against you. A word to the wise: be careful not to increase your spending habits if you get additional credit.
  8. Begin the process sooner rather than later. If you think you’ll be buying a home within the next year or so, the time is now to take steps to improve your credit score. Work with a loan officer, organize your bills, and follow the other tips mentioned here so when the time comes to apply for a mortgage, there are no unwanted surprises awaiting you. Believe it or not, you’re probably in much better shape than you realize.
  9. You may get a free credit report once a year from  This will not be reflected as an inquiry on your report.  You will be asked if you would like to pay for an upgrade but that’s not necessary.  You will need to follow the prompts to request your report from each credit reporting repository – Equifax, TransUnion, and Experian.  You should request your free report from all three bureaus – they don’t always report the same information.

Buying a home is an exciting yet nuanced process, with many moving parts. To make sure you move into the home of your dreams, you want to work with a trusted and tested expert who will walk you through the process and answer each and every one of your questions. With 24 years of experience as a loan officer and 10 years of experience as a realtor, Dorothy Erminger has the expertise every homebuyer needs to successfully submit a mortgage application. Contact Dorothy today to start taking steps to improve your credit score.

How Donald Trump’s Presidency Will Affect Interest Rates

Throughout his campaign and following his win in the November election, President-elect Donald Trump has had a massive impact on our nation and around the world. Once he is sworn is as Commander-in-chief, President-elect Trump will continue to influence many aspects of everyday life, including buying and selling real estate. As we look ahead to what the next four years of a Trump presidency holds, our nation is pondering what to expect from his administration.

A few weeks after the November election, the Los Angeles Times reported that, “Long-term U.S. mortgage rates continued to surge this week in the aftermath of the election of Donald Trump as president.” Rates increased by approximately .25% after the election.

Put in proper perspective, it’s important to understand that the Fed has kept rates artificially low for many years in an effort to keep our fragile economy from imploding. As we finally move forward into a more healthy economy it’s only fair to expect these controls to give way to a normal market and a more sound fiscal policy. (You can’t kick the can down the road forever!) Even though mortgage rates have increased, they are still very close to historical lows and they are not expected to increase much more in the near future.

Admittedly, the prospect of higher interest rates isn’t what one wants to hear if they are considering buying a new home. Higher interest rates have a negative impact on the amount a home a person can qualify for but at the same time, an increase in interest rates could potentially drive down the overall price of homes. Higher interest rates can make refinancing less feasible for homeowners who are looking to refinance their homes because the savings won’t be as great and as home values decline, so does their equity.

The silver lining is that the prospects of a Trump presidency is having a significant >positive effect on our economy. More jobs and higher paying jobs that are expected from a Trump presidency will almost certainly bode well for would-be homebuyers and home sellers.

Positive and Negative Outlooks are Both Impacting Interest Rates

In anticipation of Trump’s ascension to the most powerful job in the world, investors have been putting as much capital as possible into the US stock market in hopes that Trump’s presidency will yield the economic boom that analysts are predicting. In order to put their put their funds into stocks, a lot of investors have withdrawn money from the US bond market.

As the strength of Treasury bonds decreases, the interest rates that accompany mortgages rise in comparison. As the stock market rises, the mortgage bond market dips which causes mortgage rates to rise. This is normal. There have always been and will always be ups and downs in both markets.

Either way, the result is the same. Whether investors are excited or downtrodden about a Trump victory, it’s a given that the housing market – as well as other segments of our economy – will feel some repercussions while we adjust to the policies of the new Administration.

What Does This Mean For You?

The ability for an average person to buy a home is slightly more difficult than it was a few months ago. However, a new home is not out of reach for most prospective home buyers. It might take a little more time and patience but in most cases your efforts will be rewarded. Home buyers might need to expand the scope of their search parameters. Keep in mind that your first home is not likely to be your forever home. It may not be exactly where you want it to be and it may not the home of your dreams – it’s a stepping stone.

The key is to get into the home as soon as you can. Chances are that you’ll be able to earn some equity and sell for a profit in a few years. The money you earn from appreciation on your first home is what you will use to buy your second home and you will get closer to meeting your ultimate housing goals then.

In today’s environment, it’s more important than ever to work with a knowledgeable, dedicated loan officer to help you navigate through the home buying process. If you live anywhere in Texas, Dorothy Erminger is a great resource for potential homebuyers. Dorothy will guide you through the loan process and you can rest assured that your home buying experience will be straightforward, pleasant and easy-to-follow.

Dorothy and her colleagues work tirelessly to ensure their clients lock down the best loan program for their unique needs at very competitive interest rates while minimizing unnecessary costs. She is known by her clients as well as industry professionals as a stickler for detail – which translates to smooth closings – on time, every time! Owning a home is part of the American Dream, and it’s Dorothy’s goal to help you turn your dream into a reality.