Nearly 3 out of 10 Americans have a credit score of 620 or lower, and are unlikely to qualify for a conventional mortgage loan.
And the lowest mortgage rates usually go to people with credit scores of 740 or higher. According to myFICO.com, in September 2010, 47% of Americans had a credit score over 720, but as of September 2013, that number is 40.3 percent.
When you’re ready to buy a home, you want to avoid any unpleasant surprises, so it’s important to make sure your credit is in good standing.
At least 6 months before trying to purchase a home, check your credit score. Fix any mistakes, and make sure you keep paying all your bills on time. Also, don’t take out any loans or new credit before closing on your new home.
Also, if you’re shopping for a new home in Florida, check out the tips and powerful search engine at Rosemary Sells Tampa!
In January, loan limits for popular mortgages will drop. The Federal Housing Finance Administration currently allows mortgages backed by Fannie Mae and Freddie Mac to be as high as $417,000 in most places and up to $625,000 in higher-priced places like New York City. But that number is going to go down.
Also in January, there will be new rules by the Consumer Financial Protection Bureau going into effect. These rules will limit the types of mortgages available, and make those available more expensive.
With many applicants getting shut out of Fannie Mae and Freddie Mac backed loans, they’ll find themselves left with only private mortgage options. And many will find their only option to be that of an adjustable rate mortgage.
The new rules from the Consumer Financial Protection Bureau will also offer more protection against lawsuits for lenders that avoid low-income documentation mortgages and interest-only mortgages. But only if they stop approving mortgages for customers with a debt-to-income ratio higher than 43% of their monthly pre-tax income.
The short version? If you can lock in a mortgage with decent rates before the end of the year, then take it.
Read more at Market Watch.
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