Buying a home in Dallas Understanding Your Credit Score
If you are buying a home, a new car or you need a personal loan, your credit will determine if you will be able to accomplish those goals or not. The state of your credit comes down to a three-digit number called your credit score. The higher your credit score, the better your chances are for accomplishing your dreams.
Your credit score is based on your credit history, such as how you paid your bills and anything else pertaining to your credit. This number allows lenders to identify the status of your credit so they can determine the level of risk they are taking, if any. Although the lender can view your credit report for the same results, the credit score saves the lender time by narrowing down the results into a three-digit number. Your credit score tells the lender how well you manage your money and pay your bills.
Periodically check your credit report, especially before you decide to buy a home or apply for a personal loan. For example, you may have paid off a balance that the creditor had not yet reported, and therefore was still showing on your credit report as unpaid. By keeping up with your credit report, you can prevent such mistakes from occurring while protecting your credit score.
Knowing how your credit report and credit score work can improve your understanding as well as your attentiveness to managing your credit. The more you understand the importance of your credit score, the better your credit score will be.
Dallas Home Buyers in 2009: What’s the $8,000 First-Time Home Buyer Tax Credit all about?
What do we know about the $8,000 Tax Credit for this year’s first time home buyers — Part of the new $787 Billion Stimulus Plan? Here, we’ll shed some light on the bill that has house hunters talking.
What’s different about this year’s first-time home buyer’s tax credit?
Well, let’s talk about the obvious difference. Last year’s tax credit for first-time home buyers was for $7,500, so this year’s $8,000 credit will give you an additional $500 or up to 10% of the purchase price of your home (whichever is less). But the biggest difference between the two in the eyes of a home buyer is probably this: Last year’s tax credit had to be paid back over the following 15 years. In essence, it was an interest-free loan. But this year’s tax credit is exactly that, a credit. The $8,000 does not have to be paid back at any time.
Who can qualify for the $8,000 first-time home buyer’s tax credit?
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At this point in time, those who purchased their first home in 2008 under the provisions of the former $7,500 credit won’t qualify for the upgraded plan. House hunters who buy their homes between Jan. 1 and Dec. 1 of 2009 could qualify for the $8,000 (true) credit. There are, of course, particular criterion for qualifying:
- To qualify as a “first-time home buyer” you must have not owned or co-owned a home within the three years prior to this year’s closing date.
- Household income is a factor as well. To be eligible, adjusted gross income for single taxpayers can be up to $75,000, and $150,000 for dual-income families filing jointly.
- The new $8,000 tax program also allows purchases financed with state and local tax-exempt mortgage-revenue-bond programs — different from last year’s tax incentive.
- As a first-time home buyer, you should know that your new home must be used as your principal residence (not a second home or investment property).
How will the $8,000 first-time buyers tax credit help?
Good question. There’s no telling for sure, but the National Association of Realtors projects that 300,000 more houses will sell during 2009 as a direct result of the new $8,000 credit. If you’re considering buying a home, there’s no better time. So get your real estate agent from In-House Realty and your pre-approval and hop to home shopping.
If you’ve owned a home previously, you’ll only get the tax credit if your last home purchase was 3 or more years ago. Also, keep in mind this tax credit is only good through the end of 2009. Happy house hunting!
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Is This the Right Time to Refinance?
Mortgage rates are down and you’re not going to bother trying to sell your home anytime soon. Should you spend the money to refinance and lower your payments? Can you qualify?
Those two questions can have very different answers in the current lending environment, say mortgage bankers who are fielding an increasing number of queries. Mortgage rates fell below 6 percent earlier this month, a drop tied to the government’s bailout of Fannie Mae and Freddie Mac.
Certainly, a lot of people think they should refinance. For the week ending Sept. 12, 2008, applications for refinancing accounted for more than half of the mortgage activity, from just 36 percent of applications a week earlier.
The old formula was the 2-2-2 rule: If a homeowner owned the property for two years, planned to be there at least another two years and the new interest rate was 2 percent below the old rate, refinancing was considered practical.
Today, lenders recommend refinancing if homeowners can save $100 or more a month and break even within a year on their closings costs, which can run $1,000 to $2,000. Homeowners also should consider refinancing to a shorter-term note, even if the payments are the same or a littler higher, because it saves money over the term of the loan.
That’s the easy part to figure out. The trickier part is dealing with the new realities of the mortgage market that include:
- You won’t necessarily get the same rate as a neighbor. Rates today are more like airline tickets where everybody has their own deal.
- Drive-by appraisals are no more. With home values continuing to fall, lenders want to see a detailed appraisal of your home inside and out and you’ll be footing the bill.
- Don’t be shocked when you see the comparable sales figures an appraiser has included. They are using sales data from the past three to six months and some of those transactions are short sales or foreclosures.
- Cash-out refinancings have become near impossible because it further depletes the equity in your home.
- Even if you don’t need private mortgage insurance now, you may need it in a new mortgage because falling home values are weakening some equity positions below the 20 percent threshold.
The best candidates for refinancing are property owners who’ve been in their homes for at least three or four years and have never refinanced before. The worst are those who bought within the last two years and with very little down payment, or who secured a subprime loan with little verification of income and credit-worthiness. In a depreciating market, they just haven’t amassed enough equity and may find the rate they qualify for is, in fact, higher than the current rate, lenders say.
Lenders say an increasing number of people who can’t meet Fannie and Freddie’s guidelines are considering an FHA refinance, but condo owners have to make sure that their building is FHA-approved.
More than ever, refinancing is a numbers game that revolves around the equity amassed in a home and a borrower’s credit score. And just because you easily qualified to buy the home or refinance a few years ago, you may not qualify under the standards now in place.
“Credit scoring has become such a huge deal with the rates [consumers] can get,” said Steve Molitor, vice president of PHH Home Loans, Evanston. “The most important thing someone can do now is be monitoring their credit score.”
Molitor recently had a customer refinancing his home with a very respectable credit score of 739, and found that his rate inched up ¼ percentage point because his score was not 740.
Lenders also advise customers to consider refinancing their adjustable-rate mortgages into conventional, fixed-rate products since rates have dropped.
If you refinance now [but] have five years to go under the current rate, it may not be worth it,” said Kathe Doremus, senior mortgage loan consultant at Community Bank of Wheaton/Glen Ellyn. “If you’ve got two years left, I tell people to get out right now. Take the payment and run. With the current economic environment, I think the days of these rates aren’t long-lived.”
Mortgage bankers also recommend that consumers shop for a lender, starting first with the company that holds the current mortgage. Some lenders are eager to keep their existing portfolio; some aren’t.