WHAT YOU NEED TO KNOW FOR MORTGAGES:
How Your Credit Score Affects How Much House You'll Be Able To Buy...
Your credit score is now the most important factor in determining how much house you can buy, so if you are in the market for a new home, you need to understand how it affects you.
In order to make it easy for mortgage companies to determine the risk of lending to you, they are using a system called credit scoring (also called "FICO" scores).
When lenders look at your credit report, they can instantly see how much debt you have, how reliable you are with bill payments, and if you've had any bankruptcies within the last several years.
With your credit report, lenders get a "credit score" which takes all of this information and boils it down to a number between 300 and 900. The higher the number, the less of a credit risk you are seen to be, and this is how lenders decide which types of loans you will be eligible for.
As with all new things, there is controversy over credit scores.
To be elligible for some types of loans, you require a minimum credit score without any exceptions. And credit scores fluctuate over time. In fact, the mere act of applying for credit can lower your credit score.
How to make sure you have the highest credit score possible
To maximize your credit score, you should avoid applying for any new credit cards or consumer loans.
Don't go to the discount store and take them up on the "No interest, no payments for one year" offer -- and avoid financing a car!
After you buy your home and get your mortgage you can do all of these things, but before then it's a bad idea. Buying things on credit hurts your credit score, and leaves less money for your downpayment.
Lenders also look at this figure to decide how much money they will lend you, and how much interest they will charge you on the loan.
That's why it's best to wait until after you've bought your home to go shopping for furniture and appliances. There is also another reason to wait.
Once you've bought your home, you can get a loan for up to 100% of your home's value to buy anything you want.
If you learn to play by the rules of the lenders' game, you can get the best credit score possible, which improves the odds that you can get the home of your dreams.
How to Save Thousands of Dollars in Interest and Pay Your Mortgage off Faster
There are a few easy ways to make extra principle payments that can save you a ton of money in interest expenses and get you mortgage-free sooner than you thought possible. Here are a few simple strategies you can use:
1. Round your monthly payment up
The results of this simple strategy can save you a fortune and drastically reduce the length of your mortgage.
As an example, if your monthly mortgage payments were $734 dollars a month, but you rounded it up to $800 per month, you would save more than $48,000 in interest payments, and reduce the length of your mortgage by 7.5 years!
2. Make One Time Pre-Payments Using Your Income Tax Refund
This is an easy way to save money and shorten your mortgage. For example, if you have a $100,000 mortgage, and you have a $1000 tax refund this year, you take apply that refund to your mortgage. Over time, this will save you more than $8600 and shave 1 year and 1 month off your mortgage! That's another amazing result from a simple strategy.
3. Choose a 15 Year Mortgage
If you can afford it, you are far better off getting a 15 year mortgage instead of 30. It won't cost you much more, and the interest savings are truly incredible.
If you have a mortgage of $100,000 at 8% interest over 15 years, your monthly payment would be about $200 more, but you'd end up saving $92,083 in interest over the life of your mortgage!
Using these strategies is the easiest way to reduce your interest expenses and shorten your mortgage period.