Tips to Improve Credit Score and Save on Mortgage Interest

Having good credit is essential to getting a mortgage and getting one at the lowest rate.

You know you should use credit cards wisely, but did you know that closing an account is not one of the things to do to improve credit score? It is good for credit history to keep an old card and use it rarely – just pay it off right away. Don’t max cards out – keep your ratio of balances to credit limits lower than 30% ideally, and don’t charge up huge amounts even if you do pay them off.  It is absolutely essential to always pay on time, but if you do have one “oops,” call customer service and ask for a “goodwill” adjustment based on your good record. An installment loan like an auto loan is good for your credit, and by all means, keep student loans paid up.

Don’t open any new accounts when you start thinking about buying a house. Stop and think whether opening any kind of credit card or line of credit will cause the bank or retailer to check your credit.  That might be a ding against your score. Also do not open new accounts after going under contract, even if you need furniture or a refrigerator for the new house. The underwriter will be re-checking up to time of closing and this could hold up closing or increase your interest rate.

There are 3 agencies which keep track of all credit scores: Equifax, Experian and TransUnion, and your mortgage banker will check all three. Lenders will use a borrower’s middle score as an indicator. You can write ahead of time to each credit agency and get a full report or call 1-877-322-8228. Check your credit scores by going online to www.annualcreditreport.com, NOT Freecreditreport.com.

Check all 3 reports for errors and outstanding account balances that you believe have been paid.  Call or write to the creditors if necessary to ask to correct errors. Write to the credit agencies to explain the errors and try to get the problems cleaned up. You don’t need to pay to have this done unless you really are too busy. A credit score above 700 is preferable, but 600 may be acceptable with some lenders if you pay a little more in interest. With conventional loans a score of 740+ gets you a preferred rate, 740-720 will get you the regular rate, and it gets a bit worse each 20 points below that.

If you’ve had a major credit issue such as bankruptcy, foreclosure, short sale, repossession or a judgment, it is vital to work to reestablish some credit after the event as soon as possible. Credit scores will improve after 6-12 months with no late payments. A big difference can be seen after 24 months, so go ahead and talk to a mortgage lender by then. Remember, people who rent rarely establish as much wealth as people who own homes!

Ask your bank or mortgage company if you have any other questions. If you need a couple of mortgage banker recommendations, your real estate agent will provide some contacts.

Article by:

Woods,-Linda-CasualLinda Woods
Broker/REALTOR
Intracoastal Realty
910-233-8900
lindawoods@intracoastalrealty.com


Linda Woods: What Buyers and Sellers should know about Homeowners Association (HOA) Disclosures

When listing a home, the Seller must fill out the HOA addendum accurately and disclose the name and number of the HOA contact and the amount of fees.  This document tells what is covered under the HOA fees and whether there are any pending assessments, unsatisfied judgments or pending legal action.  Often law suits are filed against Homeowners Associations by disgruntled owners, or by the HOA against owners for delinquent fees or non-compliance with rules. The HOA should have a line item in the budget to allow for all such expenses.

When a Buyer purchases a home that has an HOA, he is automatically obligated under the law to pay the fees and comply with the rules.  He should ask the Seller’s agent for all the Covenants, Restrictions and By-Laws and review them to avoid surprises such as finding out he can’t store his boat in his back yard or have a commercial truck with signage in the driveway. HOAs for condos and town houses usually have exterior building maintenance and repair covered in the fees. The Buyer should ask if there are any exceptions such as replacing windows and doors.

The HOA disclosure must be obtained from the Seller’s agent and attached to the contract.  The Seller has a duty to deliver any documents to the Buyer that are “in his possession or reasonably available to the Seller.”  However, the Seller is not warranting that the documents are accurate or complete.  The Buyer is expected to look out for his own best interests and conduct a reasonably thorough investigation of the property before making a decision to proceed with the purchase. The County Register of Deeds and the HOA management company are resources.  The closing attorney should double check for any liens or judgments of record against the HOA as well as against the home.

The Buyer should review the most recent budget.  Ideally there should be a reserve for major improvements such as roofs, fences and driveways if a condo, or if it is a single family planned community, any private streets, common areas and fences.  If a Buyer contemplates making any exterior changes, there may be an Architectural Review Board who will approve or disapprove any additions or even a change of exterior door paint color.  If buying pre-construction, the builder/developer may still be in control of the HOA and only turn it over to the owners after all homes and lots are sold.  Even a lot is subject to the HOA fees.  Homeowners should attend the meetings, which are held at least annually, to have a voice in what decisions are made.

Some neighborhoods have dual associations, so both of them should be in the HOA disclosure.  For example, Landfall and Porters Neck have a blanket association to take care of common areas, ponds, storm water runoff, private streets and security gates.  Since there are several sub-communities of different lot sizes and home sizes within those large plantations, some owners take care of their own yard work and others have a separate association to maintain the yards or at least the front yard.  Regular landscape maintenance regimes will help maintain the value of the homes in a community.

This summary is a general guideline only, is to the best of our knowledge, and the Buyer should not rely solely on this but should consult his closing attorney with any questions.

Woods, Linda Intracoastal RealtyLinda Woods
Broker Associate/REALTOR at Intracoastal Realty
Michelle Clark Team
lindawoods@intracoastalrealty.com
Direct: 910-233-8900