A Qualified Mortgage Consultant Can Help Boost Credit ScoresWritten by Mical Johnson
Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back loan. The borrower’s income and debt ratios are taken into consideration by lender, as well as predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get best interest rate possible. Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as consumer’s credit score goes down, interest rates will go up. A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time. Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans. If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though B-paper loan is still considered sub-prime. A qualified mortgage consultant will guide you through nuances of process of improving your credit score to refinance and save money. First and foremost, he or she will want to review terms of existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell home or try to refinance before pre-payment penalty expires and you have not already paid off 20 percent of original loan amount, you will most likely have to pay a 3 percent fee back to lender to compensate for high risk and high costs incurred to provide that financing.
| | Renters Have Much to Gain by Pursuing Home OwnershipWritten by Mical Johnson
Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.Yes, there are certain responsibilities associated with owning a home. Landlords will often argue benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment. The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when property value goes up! However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have option of refinancing to a lower interest rate at some point in future should interest rates drop, and this would cause your monthly mortgage commitment to go down. In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.
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