Here’s how credit scores affect your mortgage rate

NEW YORK – Oct. 11, 2017 – Without a high credit score, you won’t qualify for the best mortgage rates available, which could mean you’ll end up paying more money over the term of your mortgage. Even with rates near historic lows now, the difference between 4 percent and 4.25 percent can add up, especially if you’re applying for a 30-year fixed-rate mortgage.

Why does your credit score matter to lenders?

Along with a low debt-to-income ratio and a strong financial history, you’ll need a high credit score for the lowest mortgage rates. Why?

You’d probably hesitate to lend money to a friend who usually takes forever to pay you back or doesn’t pay you back at all. Lenders feel the same way about mortgages. They want to lend to people who have a record of on-time payments to creditors.

“If somebody has a high credit score, what that shows us is that they’ve been good on meeting their obligations, whether it be credit cards, car loans or other home loans in the past,” says Brian Hoovler, a loan production partner with People’s Home Equity in San Francisco. ‘It means we’re more likely to want to give you a loan, because we know you’re going to pay us back.’

Your credit score is calculated most often with the FICO scoring model and is derived from the information on your credit reports, which are compiled by credit reporting companies. Your reports include a history of your payment habits with borrowed money.

Your credit score is “one of the most important parts to qualify, but it is a part,” says Michelle Chmelar, vice president of mortgage lending with Guaranteed Rate in New York. “You have to have the whole package: income, sufficient assets and credit.”

Best scores for conventional loans

“Typically, when you have a score of 700-plus, you’ll get a pretty good interest rate,” says David Lin, former director of risk management for consumer credit at Barclays and Citibank. He says that while you can still qualify for certain loans if your score is under 680, the 700s are where you want to aim to pay the lowest rates.

If you’re at the top of the scale, say 720 or above, you’re in the territory known as excellent. As you move down toward 700, your score is considered good. Once you get to 680, you’re heading toward average, and if you’re closer to 640, you might have trouble getting a conventional mortgage from a bank or online lender, Chmelar says.

The lending industry carves up the credit score scale into 20-point increments and adjusts the rates it offers borrowers each time a credit score moves up or down by about 20 points. For instance, if your score drops to 740 from 760, you’re likely to see a small bump up in the rate you’ll be offered. In the industry, this is called ‘loan-level pricing,’ and every time you go down a level, there’s an increase in costs, Hoovler says.

“If you have a score of 760 or above, you’re pretty much golden,” he says. “From there down, every 20 points you’ll start seeing small hits here and there.”

How much do rates differ by credit score?

Let’s see how a 100-point difference in credit scores affects one woman’s mortgage payment.

Suppose a borrower looking to buy a home worth $300,000 has a 20 percent downpayment and applies for a 30-year, fixed-rate loan of $240,000. She has a 780 FICO credit score, which gets her a 3.875 percent rate. That’s around $1,129 a month, not including taxes, insurance or homeowners association fees.

If this borrower’s score dropped by about 100 points to between 680-699, her rate would increase to about 4.125 percent. At that interest rate, her monthly payment would increase to about $1,163, an extra $34 a month, or $408 per year.

The effect of the difference in the rates may not seem significant at first, but added up over years, it could be a lot. In this example, a 100-point-drop has the borrower paying an additional $12,240 over 30 years.

If your score is already good, you should consider taking the rate you qualify for.

At the same time, it’s important not to go crazy gaming your mortgage rate. “The difference between a 710 and a 750 score is not so huge that you should wait to raise it,” Hoovler says. If mortgage rates go up while you’re fine-tuning your credit score, “the increase is in all likelihood going to offset any benefit the higher credit score gives you.”

Mortgages where credit score matters less

With conventional loans – those backed by Fannie Mae and Freddie Mac – a lot of focus is put on your credit score, says Dan Keller, a mortgage advisor at New American Funding in Seattle.

The impact of a lower score won’t be as substantial on some types of loans as it would be with a conventional loan, Keller notes. For the best interest rates on a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan, the focus isn’t on a 760 score as it is with conventional loans, he says; it’s on 700-plus.

For a government-insured FHA mortgage, you may be able to have a score as low as 500. VA mortgages don’t require a minimum FICO score, although lenders making the loans usually want a score of 620 or more. Loans backed by the Agriculture Department usually require a minimum score of 640.

So, there’s some leniency on credit scores and underwriting guidelines with government loans. But the loan fees are more expensive: You’ll have to pay private mortgage insurance as well as an upfront and an annual mortgage insurance premium.

Jumbo loans – loans that exceed conforming limits imposed by Fannie and Freddie – have stricter credit score requirements. “Ideally you’d want to be at 760 or above for a jumbo loan,” Hoovler says.

But those credit score guidelines don’t tell the whole story. Most lenders have “overlays,” which are extra requirements or standards that allow them to require higher credit scores as a precaution, regardless of loan type.

Hoovler says these overlays vary widely from company to company, and if a borrower fails to meet overlay requirements with one lender, it doesn’t mean a mortgage is out of reach.

“Just because one lender says you’re not qualified doesn’t mean you can’t get a loan,” he says. “It just means you may have to do some more digging to find somebody who’s willing to work either with your credit situation as is or is willing to help you find someone who can put you into a better credit situation.”

How to build your credit score

Here are some of the best ways to build your credit score:

Make payments, including rent, credit cards and car loans, on time
Keep your spending to no more than 30 percent of your limit on credit cards
Pay down high-balance credit cards and consider balance transfers to free up credit.
Check for any errors on your credit report and work toward fixing them.
Shop for mortgage rates within a 30-day period. Too many spread-out inquiries can lower your score.

Work with a credit counselor or a lender to build your credit.
The best way to build your credit score is to look at your balance-to-limit ratio, Keller says. “For example, if you had a credit card with a $10,000 limit, and I pull your credit and you’ve got $8,000 charged on that and your credit score is a 726, if I can get you to pay down that credit card to 30 percent or less – down to $3,000 – your credit score would jump substantially.”

Copyright © 2017 Newton Press Mentor, Michael Burge. All rights reserved.

5 Ways To Make Your Listing Look Bigger

CHICAGO – Oct. 11, 2017 – Décor choices can have a big impact on a home’s appearance, making it seem bigger or smaller. Professional home stagers chime in with some tips on how to show off square footage, even when space is tight.

Remove heavy drapes

Leave windows bare or hang sheer linen curtains. The space will feel brighter, and “you’ll extend the view to the outdoors, which will automatically make your space feel larger,” home staging expert Lori Matzke told

Go monochrome
Painting every single room in the same color can help lengthen a smaller space. It “prevents your space from feeling choppy and gives it more of a continuous feel,” Matzke says. Furnishings and accessories should also be monochrome. Reduce contrasting colors whenever possible, says Justin M. Riordan, founder of Portland, Ore., and Seattle-based Spade and Archer Design Agency. “If you have a room with taupe walls, walnut floors, a brown sofa, and milk-chocolate pillows – all various names for medium brown – the edges of each item will be less defined and, in turn, be perceived as taking up less space,” Riordan says.

Remove rugs

“The more you break up the flow of your flooring, the smaller your space will feel,” Matzke says. Limit rugs to only one or two main areas, such as under the dining table. Also, small rugs can dwarf a space, so when you do use them, make sure they aren’t too tiny.

Add mirrors to rooms

Mirrors can help make a small room appear larger by reflecting more natural light, Bee Heinemann, marketing director and interior decorating expert at Vänt Wall Panels told Consider placing a mirror next to or directly across from a window to add more depth to the room.
Raise the bar (in the bathroom)
Place shower curtains and window treatments higher up on the wall. “Hang it as high as you can,” Heinemann says. “Doing so gives the illusion of higher ceilings and greater space.”


© Copyright 2017 INFORMATION INC., Bethesda, MD (301) 215-4688

What’s in your homeowners policy?

NEW YORK – Oct. 2, 2017 – So do you really know if you’ll be insured in the event of a hurricane, flood, tornado or any other natural disaster? You might think so, because why would you buy insurance if it doesn’t protect you from catastrophic losses to your property. One thing we know: more weather events are on the horizon, so this a good time to find out where the gaps are in your coverage and if what you think you’re paying for is really what you’re getting in terms of value.

Rising satisfaction, confusion

J.D. Power released the results of its 2017 U.S. Home Insurance Satisfaction Survey this week, and the results tell the story. Although overall satisfaction with homeowners policies is at an all-time high score of 808 points out of 1,000 this year, certain areas continue to be a big problem. The lack of understanding about what is covered in a typical homeowners policy is chief among them.

The other big issue that the survey revealed was poor customer service, which stems directly from a lack of understanding about coverage. Customers who believe they have enough coverage may be very unhappy with their insurer’s customer service if the unexpected happens and they actually do not have enough because they didn’t understand what they were buying in the first place.

Because this year’s survey was conducted in June and July, well before Harvey, next year’s survey could indicate a higher level of customer frustration because insurers are only just now being tested by Hurricanes Harvey and Irma.

J.D. Power also found that, despite the high overall level of satisfaction with homeowners’ policies, only 48 percent of customers said that they completely understood their policies. And that’s a problem because you can’t wait until the last minute to buy hurricane insurance.

You might not have what you need

The best way to avoid the shock of learning your insurance won’t cover your losses in a disaster is to take some time to get up to speed about your policy, starting with what types of coverage and how much you need for the region you live in. It’s not only the threat of floods, high winds or earthquakes. There are other common threats to your home, such as mold, termites or even plumbing problems, that most likely require extra insurance protection and higher premiums.

The over-and-above coverage for plumbing issues might only cost an extra $100 a year, but the damage could easily run into the thousands if a problem occurs. Ever thought about a sinkhole? If you live in Florida, you should know that your home policy probably won’t cover damage caused by a sinkhole. That’s because anything that could be considered earthquake-related is excluded.

Let’s look at hurricane-prone regions of the U.S. No matter where you live, a homeowners policy won’t pay for all types of hurricane damage, although each individual policy probably covers some of them. These guidelines are generalizations of what financial advisors would say are often the case, but every single policy in every single city or town is different. That’s why, as a homeowner, you really have to become your own insurance investigator and inspect each policy’s ins and outs in order to find the gaps.

As outrageous as it sounds, it’s quite possible that your standard homeowners policy may explicitly exclude hurricane damage from your standard policy. Or the insurer might require a much higher deductible for this type of damage, so make sure you check every single bit of fine print. In the case of a super-high deductible, you’ll need to plan to sock away extra emergency savings as a sort of self-insurance to cover that high deductible.

Flooding and high winds do most of the damage in a hurricane, so it’s vital to know you will probably need to pay for separate coverage in the form of a rider on your existing insurance policy to make sure you’re adequately covered for both. Maybe your policy covers wind damage, but don’t make that assumption if you live in an area that’s especially at risk for wind damage to property. Flood insurance is especially important because it almost always requires a separate policy or rider on your current policy, and generally it takes 30 days to take effect, according to

What about high winds? In that case, your insurer will probably pay for the damage caused directly by wind, so you might not need to buy separate insurance. But if you live on or near the coastline, then you might need specific windstorm coverage. And again, you’re on your own for all the damage caused by floodwaters in the aftermath of the storm. Often it’s the flooding that causes far more damage than wind in a hurricane, especially when homeowners board up their homes to protect them, and this is why insurers try to sidle out of covering it. But you can buy flood insurance no matter where you live through the National Flood Insurance Program.

Audit your insurance objectively

What you’re doing right now, which is researching and reading about it, is a good start to understanding exactly what is and isn’t covered when it comes to protecting your property. However, as you probably noticed, insurance is intended to be confusing, a fact made even truer by the reality that every single policy is different.

The good news is that, because property insurance is part of your overall financial picture, financial advisors are knowledgeable about it. The kind of financial advisor I’m referring to is an independent fiduciary advisor who doesn’t work for any insurance company or brokerage firm. This type of advisor works only for fees paid by clients and doesn’t pitch insurance, because he/she does not take kickbacks or commissions from selling you policies. A fiduciary advisor or financial planner will make it a priority to make sure you’re covered, whether it’s by insurance for the unexpected or by a strong plan for retirement saving and investing.

Copyright © 2017 The Barnstable Patriot. All rights reserved. Pam Krueger is the founder of “WealthRamp,” co-host of “MoneyTrack” on PBS and national spokesperson for The Institute for the Fiduciary Standard.


A Look at VA Streamline Refinance

By Chris Birk of Veterans United Home Loans
Mortgage » VA Loans

Veterans United

The VA loan program offers two major refinance options. One is available only to current VA homeowners and focuses solely on getting veterans into lower-rate loans. Formally known as an Interest Rate Reduction Refinance Loan (IRRRL), veterans will often hear this powerful refinance product referred to as a VA Streamline.

The “streamline” moniker is well earned. These stripped-down refinance loans tend to feature significantly less paperwork and processing than a standard refinance. The VA backed nearly 195,000 of these loans in fiscal year 2015, a whopping 107 percent increase from the year prior.

Let’s take a closer look at some of the benefits and guidelines regarding VA Streamlines.

VETERAN HOMEBUYER CENTRAL: Find out what your service can do for you.

VA Streamline Features
Streamlines exist to trim housing costs for current VA homeowners. Unless you’re refinancing an adjustable-rate loan into a fixed one, a VA Streamline must result in a lower interest rate for the borrower.

Some lenders may offer VA Streamlines without instituting a credit score requirement or requiring an appraisal. Different lenders will often take differing approaches and may have their own guidelines.

Qualified borrowers can finance all closing costs on a VA Streamline or look to take a higher interest rate and have the lender pay them.

These loans don’t allow homeowners to extract cash from their home’s equity. Streamlines are vehicles for getting VA borrowers into a cheaper monthly mortgage payment or out of an adjustable-rate loan.

Eligibility & Guidelines
Streamlines are open only to eligible borrowers with a VA mortgage. Homeowners may need to be current on their loan and have no late payments in the past 12 months. Credit and underwriting guidelines will vary by lender.

Borrowers don’t need to obtain a Certificate of Eligibility for these loans. But you may need to have obtained your current mortgage at least six months before the Streamline refinance would close.

VA loans come with occupancy requirements, because the program is focused on helping veterans finance primary residences, not investment properties or second homes. But those guidelines are a little looser for VA Streamlines.

For these refinance loans, borrowers simply need to show they occupied the home as their primary residence at one point in time.

Funding Fee
VA loans come with an upfront funding fee that helps sustain this historic benefit program. The fee varies depending on the type of loan, the nature of your service and other factors. For a VA Streamline refinance, the funding fee is currently 0.5 percent of the loan amount. The fee can be financed into the loan.

VA borrowers who receive compensation for a service-connected disability are exempt from paying the funding fee. So are qualified surviving spouses.


5 biggest benefits of VA loans

By Chris Birk of Veterans United Home Loans
Mortgage » VA Loans »

Boy holding the American flag | Veterans United
Veterans United

Tight credit, tougher mortgage lending and flat-lining wages have all breathed new life into the historic VA loan program. Veterans and military families are turning to these flexible, no-down payment loans like never before.

The Department of Veterans Affairs backed a record number of loans in fiscal year 2015, with volume expected to increase 36 percent over the next five years. Created originally to help World War II veterans get a foothold in the housing market, this hard-earned benefit has evolved into one of the most powerful mortgage options on the market.

A handful of key benefits have spurred the program’s emergence as a lifeline for today’s military homebuyers.

VETERAN HOMEBUYER CENTRAL: Find out what your service can do for you.

Here’s a look at five of the biggest.

No Down Payment
This is the signature benefit of VA home loans. Qualified buyers can purchase up to $424,100 in most parts of the country before needing to put money down. That figure is even higher in costlier housing markets.

Conventional loans often require a 5 percent down payment, while FHA loans require a minimum 3.5 percent down payment. On a $244,000 loan, which was the average VA loan amount last year, buyers would need $12,200 for a conventional down payment or $8,540 for FHA. It can take years for veterans and military families to save that upfront cost.

No Mortgage Insurance
This is another big expense that VA buyers don’t face. Conventional borrowers who can’t muster a 20 percent down payment often get stuck paying for private mortgage insurance. FHA buyers pay both an upfront and an annual form of mortgage insurance. These expenses can add $100 or more to your monthly mortgage payment and linger until you’ve built sufficient equity in the home. FHA buyers now pay mortgage insurance fees for the life of their loans.

VA buyers don’t pay for mortgage insurance, but they do have an upfront funding fee that most choose to roll into the loan. The VA Funding Fee is paid to the VA and helps keep the loan program running. Buyers who receive compensation for a service-connected disability are exempt from this cost.

Flexible Credit Guidelines
This loan program’s financial flexibility is matched by common-sense credit underwriting. VA loans were created to boost access to homeownership for those who serve our country, and the government urges lenders to take a more holistic look at a buyer’s credit and financial profile.

In fact, the VA doesn’t set a credit score requirement for these loans. But the private companies actually making these loans typically will have a score cutoff, albeit a lower one than conventional lenders often require.

Would-be buyers can also bounce back faster in the wake of a bankruptcy or foreclosure. Veterans can often obtain a VA loan just a year removed from filing a Chapter 13 bankruptcy and two years following a Chapter 7 discharge or a foreclosure.

For conventional mortgages, the “seasoning period” can be considerably longer – four years following a Chapter 7 discharge, two years after a Chapter 13 discharge and seven years after a foreclosure.

Interest Rates
Veterans and military members also have access to the lowest-rate loan product out there.

VA loans have had a lower average interest rate than both conventional and FHA loans for the past 30 consecutive months and counting, according to data from mortgage software firm Ellie Mae.

That benefit helps boost buying power. Rates will ultimately vary depending on your credit, the lender you’re working with and more.

Closing Costs
VA buyers can ask a seller to pay all of their loan-related closing costs and up to 4 percent of the home’s value in concessions. Those concessions can cover a host of costs, from prepaid property taxes and homeowners insurance to paying a buyer’s funding fee and even paying off collections or judgments at closing.

The VA also limits what costs and fees lenders can charge, and there are a few that buyers aren’t actually allowed to pay.

To be sure, VA loans aren’t the right fit for every military homebuyer. But these flexible government-backed loans continue to make a critical difference for millions of veterans and military families.


Steps and process to get a VA loan

If you’re an honorably discharged veteran, are currently serving on active duty or have completed a total of six years of service in the National Guard or selected reserves, you may be eligible for a loan. Certain surviving spouses of veterans are also eligible.


Obtain a certificate of eligibility: Submit VA form 26-1880 (Request for a Certificate of Eligibility) along with proof of your military service to the VA.
Get preapproved for a mortgage: The lender will determine how much you can afford to borrow, which helps you figure out how much you can spend on a home.
Find a home and sign a purchase contract. To get the VA process moving along, you must have an agreement to purchase a specific home.
Give your VA eligibility certification to the lender when you apply for a mortgage. A lower credit score is not a deal breaker with VA loans.
Get a home appraisal. A VA-approved appraiser will determine the value of the home.
Get the funding fee paid. The VA assesses a funding fee that varies from 1.25 to 3.3 percent of the loan amount. You can add the fee to the loan amount, or you may be able to arrange for the seller to pay these fees. About one-third of VA borrowers do not have to pay the fees because of exemptions related to service-connected disabilities or death.
File the certificate. After the closing, the VA will return your certificate of eligibility with a note stating that you have used your VA mortgage loan entitlement.


The process to obtain a VA loan can take longer than with a conventional loan, mortgage brokers note.

“In the past, many Realtors have steered borrowers away from government loans, including VA and FHA loans, because of the additional documentation required as part of the appraisal and inspection process,” says Steve Jacobson, CEO of Fairway Independent Mortgage Brokers.

“There was a perception that these government-backed loans got more scrutiny and that they take longer to close.”

While the process may take longer than a conventional loan, the more favorable terms are worth it, and there are steps you can take to speed it along, such as obtaining your certificate of eligibility before you sign an agreement to purchase a home and ensuring that your purchase price is comparable with other similar homes in the area.


Advantages of a VA Loan

VA Loan Eligibility

Purchasing Options

Advantages for Military Homebuyers

The VA Loan has many advantages that make it one of the most appealing paths to homeownership – and this great benefit is reserved exclusively to those who bravely served our country and select military spouses.

When combined, the benefits of the VA mortgage allow service member and Veterans to take advantage of substantial cost savings under qualification requirements designed specifically for members of the military and their unique needs.

Competitive interest rates and no private mortgage insurance mean lower monthly payments.

The VA Loan Program provides homeownership opportunities for millions who wouldn’t otherwise qualify for conventional financing.