Ellen McLaughlin - Coldwell Banker Residential Brokerage



Posted by Ellen McLaughlin on 8/7/2016

Credit is tied to most big financial decisions you will make in your life. From things as little as opening up a store card at the mall to buying your first home, your credit score is going to play a factor. When it comes to mortgages, lenders take your credit score, particularly your FICO score, into consideration in determining the interest rate that you will likely be stuck with for years. How is your credit score determined and what can you do to use it to get a better rate on your mortgage? We'll cover all of that and more in this article.

Deciphering credit scores

Most major lenders assign your credit score based on the information provided by three national credit bureaus: Equifax, Experian, and TransUnion. These companies report your credit history to FICO, who give you a score from 300 to 850 (850 being the best your score can get). When applying for a mortgage (or attempting to be pre-approved for a home loan), the lender you choose will weight several aspects to determine if they will lend money to you and under what terms they will lend you the money. Among these are your employment status, current salary, your savings and assets, and your credit score. Lenders use this data to attempt to determine how likely you are to pay off your debt. To be considered a "safe" person to lend money to it will require a combination of things, including good credit. What is good credit? Credit scores are based on five components:
  • 35%: your payment history
  • 30%: your debt amount
  • 15%: length of your credit history
  • 10%: types of credit you have used
  • 10%: recent credit inquiries (such as taking out new loans or opening new credit cards)
As you can see, paying your bills and loans on time each month is the key factor in determining your credit score. Also important, however, is keeping your total amount of debt low. Most aspects of your credit score are in your control. Only 10% of your score is determined by the length of your credit history (i.e., when you opened your first card or took out your first loan). To build your credit score, you'll need to focus on lowering your balances, making on-time payments, and giving yourself time to diversify your credit.

What does this mean for taking out mortgages?

A higher credit score will get you a lower interest rate. By the time you pay off your mortgage, just a hundred points on your credit score could save you thousands on your mortgage, and that's not including the money you might save by getting lower interest rates on other loans as well. If you would like to buy a home within the next few years, take this time to focus on building your credit score:
  • If you have high balances, do your best to lower them
  • If you have a tendency to miss payments, set recurring reminders in your phone to make sure you pay on time
  • If you don't have diverse credit, it could be a good time to take out a loan or open your first credit card
When it comes time to apply for a mortgage, you'll thank yourself for focusing more on your credit score.




Tags: mortgage   credit score   loan   home loan   credit  
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Posted by Ellen McLaughlin on 7/5/2015

Who wouldn't like to pay off the mortgage early? Getting rid of mortgage debt will allow you the security and the psychological benefit of owning your home free and clear. There are lots of ways to accomplish these goals. Here are some suggestions on ways to get rid of your mortgage debt. Compare the options and do what works best for you. 1. Add more money to your monthly payment. This will help pay down the principal balance shortening the length of your loan. When you pay more on your principal is gets lower, and the lower your principal gets, the more every payment from then on is applied to principal, as less goes to cover interest expense. 2. Refinance. Refinance your mortgage to 10, 15 or 20 years. Your payments will be higher on a 15-year loan, but often the rate is lower and the loan is paid off much quicker. If you are afraid to take out a 15- year loan take out a 30-year loan, but make payments as if you had a 15-year loan. 3. Make biweekly payments. Most banks have a biweekly payment plan. Since there are 52 weeks in the year if you pay half your regular mortgage payment every other week, you'll have made 26 half-payments, or 13 payments. There are options when it comes to owning your home free and clear. Just decide which one works for you and be on your way to being mortgage free.





Posted by Ellen McLaughlin on 6/14/2015

You might have seen the ads on TV about reverse mortgages, but what is a reverse mortgage? It is a loan for older homeowners that uses a portion of the home’s equity as collateral. Instead of the homeowner paying the lender, it is the lender that pays the homeowner based on the equity in the home. How much can be borrowed? The amount that can be borrowed in a reverse mortgage is determined by an Federal Housing Authority (FHA formula).  The formula considers age, the current interest rate, and the appraised value of the home. What are the requirements for a reverse mortgage? You must be at least age 62 The home must be owned free and clear or all existing liens. Any mortgage balance must be paid off with the proceeds of the reverse mortgage loan at the closing. There are usually no income or credit score requirements. How is the loan repaid? The loan cannot become due as long as at least one homeowner lives in the home as their primary residence and maintains the home in accordance with FHA requirements (keeping taxes and insurance current). The must be repaid when the last surviving homeowner permanently moves out of the property or passes away. The estate will have approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance.  





Posted by Ellen McLaughlin on 12/22/2013

Trying to decide what type of mortgage is right for you can be tricky business. So you may be wondering what is an adjustable rate mortgage? An adjustable rate mortgage or ARM, has an interest rate that is linked to an economic index. This means the interest rate, and your payments, adjust up or down as the index changes. There are three things to know about adjustable rate mortgages: index, margin and adjustment period. What is the index? The index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities. Each adjustable rate mortgage is linked to a specific index. The margin is the lender's cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. The adjustment period is the period between potential interest rate adjustments. For example, you may see a loan described as a 5-1. The first figure (5) refers to the initial period of the loan, or how long the rate will stay the same. The second number (1) is the adjustment period. This is how often adjustments can be made to the rate after the initial period has ended. In this case, one year or annually. An adjustable rate mortgage might be a good choice if you are looking to qualify for a larger loan. The rate of an ARM is typically lower than a fixed rate mortgage. Remember, when the adjustment period is up the rate and payment can increase. Another reason to consider an ARM is if you are planning to sell the home within a few years. If this is the case you may end up selling before the adjustment period is up. Federal law provides that all lenders provide a federal Truth in Lending Disclosure Statement before consummating a consumer credit transaction. This will be given to you in writing. It is designed to help you compare and select a mortgage.





Posted by Ellen McLaughlin on 10/21/2012

Paying off your mortgage early and having no bills sounds like a no brainer. The answer however is not so simple. The answer really is; it depends. First you need to ask yourself a few questions. 1. Have you capitalized your employer’s match to your retirement savings? If the answer is no and you are not contributing the maximum than you are throwing away free money. You may want to consider putting your money here before paying down your mortgage. 2. Do you have other debt other than your mortgage? Pay off high interest credit card debit first. It makes no sense to pay off a lower interest loan and carry high interest debt. 3. Do you have an emergency fund? Experts suggest at least a three month supply of living expenses. Some even go as much as twenty four months of living expenses after the turn in the economy and job market. It makes more sense to have money set aside for a sudden loss of income before you pay off your mortgage. 4. Do you owe more than your house is worth? If you are upside down you are more susceptible to foreclosure. Ask yourself how much how much you enjoy living there. Would you be willing to buy it again for more than it is worth now? 5. Do you have life, health and disability insurance? If you are the main source of income in your household what would happen if you were no longer able to make the payments? Putting safety nets in place first is a wise idea. 6. Do you believe you can get better return investing elsewhere? Paying off your mortgage is an investment decision. Ask how does paying off my mortgage stack up with other investment options? 7. Are you thinking of retiring and want to live with the worry of a payment? The thought of living on a fixed income can be scary. Paying off your mortgage may give you peace of mind. There is no right or wrong answer to this question. It really comes down to what is most important to you. Sometimes, the answer is not based just on dollars and sense and more on what works for you, your life, your family situation and just plain old personal preference.