07
Sep
By First Rate Financial Group
Mortgage

Should You Buy Mortgage Points?

Should You Buy Mortgage Points?When you take out a home loan, you might have the option to purchase mortgage points. Essentially, this is money that you pay to the lender upfront in exchange for getting a lower interest rate over the life of the loan. If you got a great deal on the house, you might have some extra cash on hand. Should you use that money to buy down the interest rate? This is a math problem that you need to calculate for yourself.

How To Do The Math

If you want to figure out if the mortgage points are worth it, you need to do some math. For example, you may need to pay an extra $3,000 at closing to qualify for a lower interest rate. You need to figure out how long it will take you to get that $3,000 back in terms of interest savings. So, if you save $30 per month on interest in exchange for that $3,000 upfront, it will take you 100 months to get that $3,000 back. After that, you will come out ahead. That is about eight years. So, if you plan on staying in the home for eight years (or more), then it might be worth it. If you sell the house before that point, or if you decide to refinance your home loan, then you will lose that money.

Other Factors To Consider

There are other factors to consider as well. For example, if you decide to buy discount points, it might be tax deductible, but this is something that you need to talk about with an accountant. Furthermore, if you are not getting the lowest interest rate because of a low credit score, you might want to buy discount points as well. Finally, if you want to reduce your monthly payment, mortgage points might be a smart way to get a lower payment.

Do not forget that you need to think about other options for that cash. There is a chance that you might need that cash for another bill, such as tuition or a car repair, so think carefully before buying discount points. 

02
Sep
By First Rate Financial Group
Home Mortgage Tips

Understanding Your FICO Score and Why Small Credit Mistakes Can Cause Huge Headaches

Understanding Your FICO Score and Why Small Credit Mistakes Can Cause Huge HeadachesMany people all over the world are dealing with issues involving debt or poor credit history, but most aren’t necessarily aware of what exactly makes up their credit score. Unfortunately, it might seem like it’s the big stuff that counts when it comes to credit, but little things can have a significant impact on your financial health. If you’re looking to improve your understanding and your finances, here’s what you need to know about small mistakes and your FICO score.

Making Late Payments

The due date on your bills might seem like an advisory, but whether we’re talking about a student loan, a credit card payment or your telephone bill, late payments can add up. Your payment history constitutes 35% of your total FICO score, which means that even a couple of late payments can have a marked impact on your overall credit. Instead of leaving this to chance, set aside a day each month before your bills are due to ensure they’re all paid off.

Applying For New Credit

It’s often the case that a store will offer special deals if you sign up for their own in-house credit card, but this can cost you big since the amounts you owe make up 30% of your credit score. Also, because lenders will often assume that you’ve run out of credit if you apply for a new card, applying for new credit can be a red mark against your FICO score. 

Forgetting Credit Altogether

It might seem like the best possible option for avoiding credit issues is to avoid using credit altogether, but your credit history constitutes 15% of your FICO score. This means that you should have at least one credit card in your possession so that you can use it to build a history of lending success. While you won’t want to use more than 30% of your credit limit, it’s important to show proven experience in paying back your lenders.

Many people think that bad credit is the result of overspending and huge debt amounts, but your FICO score is largely determined by your payment history and your available credit. If you’re trying to buy a home in the near future, contact your local real estate professional for more information.

01
Sep
By First Rate Financial Group
Mortgage

Consider A Home Renovation Loan To Navigate A Challenging Housing Market

Consider A Home Renovation Loan To Navigate A Challenging Housing MarketToday, there are many people who are having a difficult time purchasing a house. Even though interest rates have gone up, sales are still happening quickly. Therefore, it can be difficult for people to qualify for a mortgage, purchase a house, and get to the closing table before the property is sold. One potential way to get around the hot housing market is to consider a home renovation mortgage. How can a home renovation mortgage help you? 

A Renovation Loan Can Help People Buy A Less Desirable Home

If you want to close on a home, you might be interested in a house that is not as desirable as some of the others. That way, you don’t have to worry about a bidding war. A renovation loan can help you purchase a less desirable home. If you are interested in buying a home that requires some repairs, but you do not have a lot of cash available for repairs, a renovation mortgage is a special loan that gives you the money you need to repair the house.

How Does A Renovation Loan Work?

Typically, the amount of money you can borrow for a renovation loan will depend on the value of the home after the renovations are completed. Therefore, the appraisal process is a bit different. This is the only type of mortgage that will give a homeowner credit for the future value of the property. Therefore, you can borrow more than you would be able to with a traditional mortgage. You can use the extra cash to perform repairs, which can increase the value of the home.

How Many Renovation Loans Are There?

Just as there are different types of conventional loans, there are different types of renovation loans as well. Each has a different set of requirements, but all of them require you to use the extra money to repair the home. Furthermore, all the work you do on the house has to add to the value of the property. If you have questions about how you can use the money that comes with a renovation loan, you should reach out to a professional who can help you.