‘Tis the Season to not sabotage your credit

Several weeks before the holiday season sets in, we begin to see those commercials I absolute dread. You know, the luxury cars with giant red bows on them…the recipient gushes, “you shouldn’t have!”… and they’re right, the gift giver probably should not have – especially if they’re considering buying or refinancing a home.

It can be so exciting to give what we consider to be desirable presents to our loved ones – or even to splurge on ourselves. However, a new car or even that spendy exercise equipment that will help you obtain your goals for the new year, will impact your credit if you’re financing it and/or impact your debt to income ratios for qualifying.

A salesperson who says that your credit will just take a quick dip is probably on Santa’s naughty list. They are just interested in making a sale.

When you obtain a new debt, there will be a credit inquiry. How this impacts your score depends on how many inquiries have been made. Credit inquiries may stay on your credit record up to two years and you’ll have the opportunity to explain each individual inquiry to your mortgage lender, including whether or not new debt was obtained.

Credit scores are also impacted by new credit. New credit can be a significant ding. Credit scoring favors older, established credit. That new car or new financed whatever will lower your score for months.

Not only is it a new addition of debt to your credit record, it’s also showing as a debt at 100% of the debt limit – which is another whammo. Even if you put 50% down on a car, if the car loan is $40,000 and you owe $40,000, then it’s treated as a new debt with 100% of the credit limit balance. Ideally, you want to have your accounts at 30% or lower of the credit limit.

Let’s talk payments! Using rates last quoted by Freddie Mac, a $500 car payment may reduce your qualifying power by $108,000 in a mortgage. A $58 indoor bicycle payment is about $13,000 for a mortgage. By the way, it doesn’t matter if your new debt has zero interest or no payments due for a while – lenders still have to factor the payment.

It’s not only new debts that can set back your home buying (or refinancing) goals… overusing your credit cards can be damaging as well. Going over your credit limit, or using more than 50% of your credit limit can drop your scores. Of course having a late payment will also hurt your scores and may cause your transaction to be delayed.

Even if you’re not thinking of buying or refinancing a home, I encourage you to really consider what your spending for the holidays and try to keep it in check. It feels wonderful during the holidays to splurge however, the financial hang-over when the party is over simply isn’t worth it!

If you’re considering buying a home or refinancing your home located anywhere in Washington state, I’m happy to help you!

2019 Property Taxes for King County

King County will unveil how much your property taxes are for 2019 on February 15, the day after Valentines Day. <3

If you recall last year, many were stunned to see just how much their property taxes jumped. Our property taxes increased roughly 27% just last year alone!

If you are in the process of buying or refinancing a home, you need to be aware of changes to the property taxes if the transaction is closing around February 15, 2018 as this could potentially impact qualifying for the mortgage since it will most likely mean an increase to the total mortgage payment. This is especially true if your debt-to-income (DTI) ratios are anywhere near the limits for qualifying. [Read more…]

Updates to Fannie Mae Guidelines

Last week, Fannie Mae released Selling Guide Announcement SEL-2017-04 with underwriting updates, including the special pricing for when home owners refinance their home to pay off student loans. Fannie Mae is the Federal National Mortgage Association and basically provides funding for conventional “conforming” loans. [Read more…]

Are you buying a new home? WAIT to buy new furniture!

iStock_000008143756_MediumI have been working with a couple of clients who are buying homes and who’ve recently asked if it’s okay for them to buy furniture before closing on their new home. It must be all the “Fourth of July blow-out” sales going on that’s causing this question to come up recently.

[Read more…]

Coming Soon: 2015 Property Tax Bills

detctiveIn a couple weeks, King County along with others, will begin posting property tax bills for 2015. This may be a non-event for most…unless you’re in the process of buying a home and your debt-to-income ratios are tight. It’s possible that should the tax assessor decide the home you have a contract on now or during the next month has a higher value, and therefore a higher tax bill, that this may jeopardize some loan approvals and/or transactions.

[Read more…]

How much income do you need to buy a home in Seattle?

Young Couple With New HouseAn article (hat tip to Julie Hall) caught my eye in my Facebook stream regarding how much income a household needs in order to be able to buy a home in various metropolitan cities. According to New York Smash, if you’re going to buy a home in Seattle, you’re going to need an annual income of at least $63,145.41.  There’s more to just how much income one makes when it comes to determining “how much” home someone can qualify for. The article does not mention how much down payment a person will need. Let’s run some figures to see just how much income one needs to buy a home in Seattle.

[Read more…]

The ABC’s of Preparing to Buy Your First Home

iStock_000020110629XSmallBorrowers getting ready to buy their first home are often surprised…for different reasons. I find that some are surprised to learn that they do qualify for a home in their price range and some are disappointed to learn that they have a little work to do before they can buy a home. Getting preapproved with a mortgage professional helps take some of the “surprise” out of the process.

[Read more…]

What Determines How Much Home You Qualify to Buy: Part 1 – Your Payment

seesawPreapproval letters typically begin stating that a home buyer has been qualified or preapproved to buy a home priced at specific amount.  What it really boils down to is how much mortgage payment the home buyer qualifies for based on the borrowers monthly income and the debt to income ratio that is being allowed by the program guidelines.   Your proposed mortgage payment determines the loan amount that you’re qualified for.   Add the funds to cover your down payment less the closing cost and you’ll have the sales price.

[Read more…]