Financial Tips for Getting a Mortgage

I recently listened to a webcast on mortgages that had some tips that would be good for everyone.  So let me share those here.

While sites like Credit Karma are good for keeping tabs on your credit score, the model and, therefore, the range that Credit Karma uses is different than the one the credit bureaus use.  They are using an older model – Vantage 2.  This will change over time.  But as it stands now, their range goes to 990 versus the 850 of the credit bureaus.  So the score will come out different.  While it will still give you a very good idea of where you are generally with your credit score, you need to know exactly when it comes time to get a mortgage.  Everyone is entitled to one pull of their credit report from the bureaus at no charge, without it affecting your credit.  That can be done at www.annualcreditreport.com.  You will be asked for your SSN but this is a secure site.

  1. Why is this so important?  Before there are specific scores that determine what interest rate you will get on your loan.  So if you are thinking of buying any time in the next year, pull your credit report and work on improving your score if needed.
    1. 580 – the lowest score you can have to get an FHA loan. (you’ll need to put more down for a loan at this score – 10-20%
    2. 620 – the lowest score you can have to get a conventional loan or an FHA loan with the minimum of 3.5% down. However, anything up to 640 is considered a fair score so you will likely pay a higher interest rate.
    3. 640-719 is considered good and will get you a good rate.  But likely about 1/2 point more than an excellent score would give you. 
    4. 720 and above are considered excellent. But most banks consider 740  the minimum to be considered excellent and to get prime rate.  The rates you see advertised by lenders are typically for prime rate.   You also have to put down at least 20% to get prime rate.  
  2. As part of this, make sure you are not the victim of identity theft.  It can take a very long time to correct damage to your credit from identity theft. Some things to do on this front:
    1. Opt out of getting credit card offers.  You’ll save some trees but, more important, you will be eliminating one of the top ways your identity is stolen.  Visit https://www.optoutprescreen.com/?rf=t to do this.  In the meantime, shred or burn these offers.
    2. It goes without saying, don’t fall for email messages that tell you your account has been compromised and you need to follow the link to reset your credentials.  Your bank or credit card company would not alert you of fraud through email.  They also would not ask for your SSN over the phone.  Neither would the IRS – that’s another scam for another post.  At most, they will ask for the last 4 digits of your SSN.  Never give anyone your SSN over the phone.  If you are in doubt, tell whomever calls you that them you will call them back. Then look up the official phone number and call that.  
    3. Share your SSN with as few people as humanly possible.  Sometimes the identity theft is someone in the victim’s family. 
    4. When you sign up for things online, don’t use the same password you use for your bank, credit card and other financial accounts.  Come up with a password for those things that has nothing to do with any of your other passwords.

Even if you are not buying a house, you may refinance in the future, so it would serve everyone to protect your credit and credit score.   

If you are looking to buy or sell, even if it is down the road, contact me.  It’s never too early to prepare.

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904