Articles Tagged "credit score"

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Homeownership | 7 Posts
October
25

Save Up for a Down Payment with These Tips

Down Payment Tips

If you're planning to use a mortgage to finance the purchase of your home, it's essential to have enough money in savings for your down payment. Depending on the type of mortgage you choose, you'll typically need anywhere from 3.5 to 20 percent of the home's purchase price.

Our real estate agents recommend creating a plan to help you save the money for your down payment. Start by opening a savings account specifically for your down payment and follow these tips.

  1. Develop a Timeline for Your Homebuying Plans
    Before you can calculate how much you'll need to save, you need to decide when you want to purchase a home. This will allow you to make adjustments to your budget and income that match your buying timeline. For example, assume that you want to start the process of purchasing a home in six months. You want to have a down payment of $7,000. Over the next six months, you'll need to put away $1,167 each month to meet your goal. Or, if you want to buy a home in a year, this means you need to save $584 every month. 
  1. Look at Your Budget
    Once you know how much you need to save, it's time to write down all your expenses and income. Be thorough and realistic; while it's wise to reduce your discretionary spending, it isn't realistic for most people to go an extended period with absolutely no money devoted to outings and "fun" expenses. Assume that each month, you spend $400 on eating out, $200 on shopping, and $250 on vacations, for a total of $850. If you can reduce this amount to $450, you'll have $400 each month to put in your savings account. Over six months, this is $2,400. 
  1. Track Your Spending
    A budget is of little assistance if you don't stick to it. Monitor your spending (either via an app, a bank service, or keeping track of your expenses with a spreadsheet or even a pen and paper). If you overspend, try to reduce your expenses somewhere else to cover the overage. For example, if you spend $200 more than you budgeted on gifts, cut back on dining out, activities, and grocery budget by that amount. 
  1. Increase Your Income
    Increasing your income is another way to meet your monthly savings goal. Assume that you work an additional 6 hours a week and clear $15 an hour after taxes. This is an extra $90 a week or $360 a month. After 6 months, you'll have saved approximately $2,160. 
  1. Save Any Unanticipated Money
    Most people receive at least a little bit of money each month that they didn't anticipate. You might get a bonus at work, receive a cash gift, sell items you no longer use, or collect a refund. Save any and all unanticipated money in your savings account. If you can save $100 a month in unanticipated money, this is $600 over 6 months. 
  1. Adjust Your Tax Withholding
    For the 2020 tax year, the average tax refund was $2,800. If you adjust your tax withholding to have less withheld, this is an extra $234 a month. Over 6 months, this is $1,404. Or, if you're not able to adjust your withholding, your tax refund is an excellent windfall for your savings account. 

Ready to start touring Round Rock homes for sale? Contact us to start your search!

August
16

What First-Time Buyers Need to Know About Credit Scores

Round Rock Credit Score

Your credit score is an important piece of financial information that influences your ability to purchase a home. Credit scores range from 300 to 850, with 850 being the best possible score. 

Our real estate agents know that lenders will use your credit score when determining whether to approve your mortgage application. Here are a few things you should know about your credit score and homeownership as you prepare to buy your first home. 

  1. There's a Wide Variation in Acceptable Credit Scores
    The required credit score to purchase a home depends on the mortgage that you intend to use. For example, if you're applying for a conventional home loan, you'll likely need a credit score of at least 620. However, if you're interested in a jumbo home loan (a mortgage that exceeds conforming loan limits), it's best to have a credit score of 700 or higher. Some loans are ideal for buyers with less than stellar credit. An FHA loan has a minimum credit score requirement of 500. You'll need to make a 10 percent down payment if your credit score is between 500 and 579. For borrowers with credit scores of 580 or higher, FHA loans permit a down payment as low as 3.5 percent of the home's purchase price. USDA and VA mortgage programs don't have a specified minimum credit score. Instead, the lenders who issue these loans are permitted to set their own requirements. Generally, to qualify for a USDA or VA mortgage, you'll want a minimum credit score of 640. 
  1. Your Credit Score Affects Your Interest Rate and Loan Costs
    Your lender will use your credit score (along with other financial information, like your debt to income ratio and employment status) to decide what interest rate to offer for your loan. The higher your credit score, the lower your interest rate. A lower interest rate can save you thousands of dollars over the life of your mortgage. Many lenders also use your credit score when determining the costs associated with a mortgage. For example, buyers with higher credit scores are offered lower PMI (private mortgage insurance) rates. They may also qualify for mortgage programs with minimal mortgage points or lower loan costs. 
  1. There are Steps You Can Take to Improve Your Credit
    Before you start attending showings for Round Rock homes for sale, it's best to take steps to ensure your credit is at its best. Start by making all of your loan payments on time. If you've had late payments in the past, the effects of those late payments will decrease over time. Check the balances on your credit cards. If you're utilizing more than 30 percent of your available credit, pay them down, so your utilization is under the 30 percent mark. Ideally, do this for each card and for your credit card balance as a whole. For example, if you have a $4,000 balance on one card with a $10,000 limit, pay the balance down, so it's less than $3,000. If you have a card with a $2,000 balance and $10,000 credit limit and another with a $5,000 balance with a $10,000 limit, focus on paying the second card down, so it's less $3,000. Thoroughly review your credit reports and dispute any information that's incorrect. If you only have one type of debt on your credit report, consider opening another product to diversify your credit usage. For example, if you only have credit cards, take out an installment loan (and vice versa). 

Are you ready to buy your first home? Contact us today to start your search!

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