South Orange County Blog from Bob Phillips

How To Improve Your Credit Score For Better Financing Terms

How To Improve Your Credit Score For Better Financing TermsImagine that you’ve found the perfect home and are ready to apply for financing. Your home loan approval amount comes back lower than you would have expected and at an interest rate significantly above what you have heard is available on the market.

This could be because you have an average to poor credit score.

Mortgage lenders base interest rates on many things, but your credit score plays a large part. Anything between 720 and 850 will typically qualify for better interest rates. A mediocre score is usually between 660 and 719, and a low score is 659 and under.

If you have a lower score than you’d like, below are a few traits for you to follow of people who possess higher credit scores and secure the best home financing.

They don’t max out their cards.

It’s better to keep a low revolving balance on a few cards than to spend every dime allotted on one. The ratio of credit card balance to your credit limit is called credit utilization. The higher your credit utilization, the larger affect it can have one your credit score.

They make payments on time.

This is very likely the most important tip for your credit health. If you miss a payment on a term loan, credit card account or monthly home bill, then you could be turned over to collections, which will affect your score negatively.  You will almost surely be reported as late to the credit bureaus, which will in turn drop your credit score precipitously. Absolutely make all of your payments before their due date.

They stay with one card.

Don’t close and open credit card accounts frequently. Each time you make a change to your line of credit, it affects your score. Even if you don’t want to be tempted to use a credit card, keep the account open and leave the card at home. According to the Fair Isaac Corporation (FICO), high credit achievers have accounts that are usually at least 11 years old.

Excellent credit could qualify you for a better interest rate, which might save you thousands of dollars over the life of the loan. So stay on top of your monthly credit bills and keep a low balance on just a few cards to watch your score steadily increase.

If you’re ready to learn more about your ability to purchase a home in South Orange County, call me,  text me, or shoot me an email.  Then, let’s go house shopping!

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Three Tips To Get The Best Financing On Your Second Home Purchase

Three Tips To Get The Best Financing On Your Second HomeAre you buying a property as your second home? Perhaps you are looking for a small cottage or apartment where you can escape to for your vacations, or maybe you want to have another home closer to your relatives?

Maybe you want to rent out your second property and make a steady income from your investment. Whatever the reason, a second piece of real estate can be a fantastic investment. However, sometimes getting a mortgage on your second home can present a challenge.

Generally, a mortgage lender will have tougher standards for vacation home — or second home — loans than primary home loans. This is because usually when you are buying a second home your finances will be stretched thinner and you will have less money to spare due to already paying a mortgage on your primary home.

This additional risk may mean that your second home mortgage can be more difficult to close and likely could carry a higher interest rate.

Here are three tips to keep in mind that will help you to get the best mortgage on your second property:

Build up a decent amount of savings.

Your mortgage lender will want to be able to see that you have a large amount of savings in reserve so that you will have enough to pay for the mortgage even if you were to lose your job or other income source.

Pay off any credit card or installment debt.

Many lenders will be hesitant to approve your second home mortgage if they see that you have a lot of debt on your credit card. They will want to see that you have a low debt to income ratio so that you will be able to pay back the loan.

Use your primary home as a resource.

If you have always made your payments on time and you are well on your way through paying off your first house, you may have equity to borrow against for some or all of your second home purchase. Be careful here though.  There is a little known IRS regulation that requires the second home be financed under it’s own home loan within 90 days of closing to get the best tax advantages.

These are just a few tips to keep in mind in order to make getting a mortgage for your second property as easy as possible.

To find out more about investing in a second home or vacation property, give me a call or text – 949-887-5305 – or shoot me an email: BobPhillipsRE@gmail.com.

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Why Buying Real Estate Can Be A Smart Financial Move

Posted in Personal Finance by southorangecounty on February 15, 2013

Owning Real Estate Can Be A Smart Financial MoveBuying South Orange County real estate doesn’t just give you a place to live; it can also be a very smart financial move.

This is because owning a home can be like having a forced savings account, which you are committed to for the long term.

Consistent Saving On Autopilot

Sometimes saving money on our own each month is difficult. It takes a lot of discipline to maintain a consistent savings plan.

However, paying your mortgage every month means that you are paying down the principal and working toward eventually owning the property outright.

In the early years of the mortgage, the payments will go primarily to the interest on the loan.

But over time, the portion of your payment dedicated to principle increases, which accelerates paying off the entire mortgage.

Make Yourself Wealthy Instead Of Your Landlord

In the long term, owning your own home may be a much better financial arrangement than renting a home. No matter how long you pay monthly rent, you will never own the real estate that you are living in.

When you are renting your home, it may also be possible for your landlord to increase your rent every year.

On the other hand, paying a mortgage on your real estate means that every month you get closer to owning the home.

In fact, most home mortgage lenders offer a fixed interest rate mortgage. This gives you a sense of control over how much you are paying every month, year to year. 

In a fixed rate mortgage, every mortgage payment pays down a portion of the principle on your mortgage loan.  In many cases this builds equity in your property and increases your net worth.

It’s a good idea to check with a professional mortgage lender to get an idea of the most up-to-date programs available.

Real Estate May Increase In Value Over Time

Over the years, your home might appreciate in value. Many experts say that the average home value increase each year over longer stretches of time, although this will vary according to the area you live in, the current economy and other factors.

Your home’s value may very well fluctuate throughout the years, but history has shown that over the long term, buying a home can be a very beneficial financial decision.

Understanding the benefits of home ownership, including the potential financial upside of purchasing your own home, can be an excellent way to further your overall personal financial plan. 

 

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When Can You Buy Real Estate After Foreclosure?

Posted in Personal Finance by southorangecounty on February 8, 2013

Waiting Periods After ForeclosureIf you lost your South Orange County home due to foreclosure, you probably haven’t given up on the dream of owning a new home. The good news is that a number of guidelines have changed which may allow  you an opportunity to buy that new home sooner than you think.  

There are a few guidelines that lenders follow to determine when you’ll qualify for financing after foreclosure. Arming yourself with this information may help you qualify again for a mortgage.

Foreclosure With Extenuating Circumstances

Generally, lenders will take into consideration any extenuating circumstances surrounding the foreclosure on your California real estate.

Was there a death or illness that prevented you from earning money to pay your mortgage? Did you have a job transfer that came with a steep pay cut? Were you severely injured and temporarily disabled as a result?

You can add a memo that explains any lapses in credit worthiness to potential lenders. This report can be as long or as short as needed.

Many lenders will shorten the waiting period for documented extenuating circumstances. Traditionally the waiting period after a foreclosure is seven years. However, these waiting period guidelines may change and you would be best served by getting up to date information from a qualified mortgage professional.

Deed-in-Lieu of Foreclosure and Short Sale

You may be wondering what the waiting period for financing is if you have exercised a deed-in-lieu of foreclosure or successfully negotiated a short sale. Fortunately many lenders offer options if you were able to avoid an actual foreclosure.

Traditionally the waiting period for a deed-in-lieu of foreclosure can be four to seven years. If there were special circumstances surrounding the deal, you might be able to qualify in as little as two years. The lender may have certain down payment or credit score requirements as a condition of approval.

Getting financing after a short sale generally has the shortest waiting time before qualifying for a new home loan. Generally the lender will only require a two-year waiting period before they’ll approve financing. Once again, a call to a licensed mortgage professional will give you the most up-to-date information.

The good news about financing after foreclosure is that it is possible. Your dreams of owning a home can be fulfilled even if  you have experienced a foreclosure in your past.

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