Nelson Zide
ERA Key Realty Services | 508-277-7794 |

Posted by Nelson Zide on 3/7/2018

If you’re hoping to buy a home in the near future, there are a number of financial factors you’ll need to consider.

One of the factors that all lenders will consider when determining whether or not to approve you for a mortgage is credit score.

In this article, we’ll lay out the minimum and ideal credit scores that are needed for getting approved for a home loan.

Determining Your Score

As you may guess, credit reporting is a complicated business. There are three main reporting companies that lenders use to determine your credit: Experian, TransUnion, and Equifax. These companies largely collect the same data about your finances, but can have minor variations. Lenders will take these scores and use the median or middle score to determine your credit rating.

Thanks to the Fair Credit Reporting Act, Americans have the ability to confirm the accuracy of their reports.

If you want to find your credit score, there are a number of online reporting agencies that will show you your report for free on an annual or monthly basis.

Minimum credit scores

Depending on the type of loan you’re applying for and which lender you are pursuing, minimum credit scores vary.

For those seeking first-time homeowner (FHA) loans, you’ll need a credit score of at least 580 to qualify for a 3.5% down payment. A score lower than this amount and you will need to put at least 10% down.

Since FHA loans are insured by the government, you are more likely to be approved if you have a low or “poor” or “bad” credit score (usually anywhere from 300 to 650).

Another type of loan that could help people with low credit is offered by the Department of Veteran’s Affairs. These loans, known as VA loans, are guaranteed, in part, by the government. However, the loans are still approved and distributed by lenders who all have varying minimum credit requirements. A good benchmark is that you’ll need a score of at least 620 to be approved.

Minimum isn’t ideal

While you may get approved for a loan with a low credit, this isn’t always a reason to celebrate.

Lenders use your credit score, among other things, to help determine the interest rate of your loan. A lower score often means a higher interest rate.

While 1 or 2 percent can seem like a small number, it can mean paying tens of thousands of dollars more in interest over the span of a thirty-year loan.

To illustrate the importance of one percent, consider the following. If you owe $200,000 on a home and intend to pay it over 30 years, you will pay $103,000 in interest at 3% and $143,000 at 4% - that’s a difference of $40,000.

Rather than shooting for the minimum credit score, a better approach would be to build credit while saving for a down payment. Someone with a credit score of 740 or higher will be seen by most mortgage lenders as an ideal person to lend to.

Of course, life doesn’t always allow for the ideal situation. So, do your best to save and build credit, and be sure to shop around for the best rates when you’re ready.

Posted by Nelson Zide on 12/14/2016

>Having a baby can be a very expensive venture. A 2012 report from the U.S. Department of Agriculture says raising a child from birth through age 17 will cost a typical middle-income family a whopping $235,000. That is a lot of money so it is important to plan for your financial future, prepare for your new baby and protect your growing family. Here are some tips to get you and your family on the right track: 1. Purchase life insurance. You will need life insurance to protect your family. It is not as expensive as you think and you will get better rates when you're young. Talk to your life insurance company about what amount of insurance you will need to protect your family. 2. Start planning for college. It may seems years away but you need to start college planning right away. According to the College Board, the average cost of tuition and fees for the 2011-12 school year was $8,244 for a public college and $28,500 for a private one, 3. Update your will. If you have a will you will need to update it and appoint a guardian for your child. If you do not gave a will now is the time to get one. 4. Prepare your baby budget. Babies are expensive, from diapers to child care you will need to look at how your baby will affect everyday expenses. Go to the store and price out diapers and other baby items, consider if you will be living on one income or paying for child care, this will help you figure out if you need to cut spending to afford your new baby. 5. Use a flexible spending account. If your employer offers a flexible spending account, you may be able to use it to pay up to $5,000 in child-care expenses a year. You can also use flexible spending account for health care costs. Money in a flexible spending account is exempt from income taxes. While having a baby is expensive it is also exciting. It may also be a time when you are considering a housing change.