The Accunet Mortgage Show (1/19/20 Episode)

David and Brian outline best practices for boosting your credit score, encourage you to make moves on buying a home (sooner rather than later!), and explain how Accunet makes it easy to land your dream home.

This week’s highlights:

  • Having cash in the bank can help your credit score — but not how you think. 
  • Waiting to buy could cost you. Find out how Accunet can help you buy a home
  • Upgrading your home is expensive. Read more on how Accunet’s finance wizards helped a client into their dream condo.

Does having money in the bank directly help your credit score?

This week, Brian and David discuss the dilemma of two of David’s friends, who want to help their son purchase a home with a $40,000-$50,000 gift. However, their son’s credit score is on the lower side, around 575. Shouldn’t putting this large cash gift in the bank help him buy a home right away? In reality, there is only a loose connection between money in the bank and your credit score. Having money in your account insinuates you are able to pay your bills on time, which indirectly and positively affects your credit score. Mortgage lenders typically look for a credit score of 740 or higher. Your credit score, along with the amount of your down payment, impacts your rate and closing costs. If you’re under 620, Fannie Mae and Freddie Mac will not buy your loan. However, you are then eligible for an FHA, government direct loan. Accunet Mortgage can help you apply. The typical consumer has 3 credit scores, each pulling from the 3 main credit bureaus:
  1. Equifax
  2. Experian
  3. TransUnion. 
Whichever lender you end up borrowing from might be reporting to 1, 2, or all 3 of those bureaus. Lenders are looking at the middle (NOT the average) of your 3 credit scores, and if there are 2 homebuyers- such as a buyer and their spouse- the lower of the 2 scores is used.  Since David’s friend’s son is starting with a 575 credit score, the gift money in the bank won’t fix it. But his best first step is to start paying down his higher credit card debts. Getting his percentages below 50% utilization will make an immediate credit score boost. Second only to paying off balances is the mere passage of time. Time helps your score by extending your track record of good payments and burying any delinquencies in the past.
Accunet Mortgage provides a free online calculator to help predict how much you can afford based on your annual income and monthly expenses.

What impact does your credit score have on your interest rate and monthly payment?

David ran through a scenario with varying credit scores: In 2019, a median-priced home in Milwaukee the metro area was $240,000. With 5% down ($12,000) at a 740 credit score, Accunet can offer a rate of 3.75%, $888 in closing costs, and 4.48% APR, making your monthly payment only $1,609. With a 700 credit score, the rate is around 4%. PMI jumps up to make your payment $96 per month higher, around $1,700. In the 660-679 range, monthly payment will be $225 per month higher, at $1,834 with closing costs around $2,700. Accunet can help you apply for an FHA loan if your credit score is below 700.
A licensed Accunet Loan Consultant can provide you with a side-by-side comparison of an FHA loan to other options. Click here to get started.

What’s the cost of waiting to buy a home?

Brian outlined the 2019 home sale statistics provided by the Greater Milwaukee Association of Realtors. In the 5-county metro Milwaukee area, 21,654 homes and condos changed hands. The median price of all sales was $228,000; only 88 fewer units were sold than in 2018. Median price for all home sales were up 8.5%, or $18,000. Single-family detached homes were up 1%, with a median price up 8%, and the median price rose 10% for condo sales.  If you’re thinking, “I’m going to wait another year and save up a little bit more money for my down payment…”, you need to consider the rising trend of home prices, and factor in being able to pay for your first year of homeowners’ insurance, the home inspection, and putting some money towards your property tax escrow account (you’ll need at least an extra $3,600 for all of this). If you wait two years, your home will now be 14.5% more expensive, and your payment goes up around $185/month, and that’s IF rates stay the same.
Accunet Mortgage recommends buying a home now, because prices aren’t going down.

Client story: A bigger and better condo

Brian and David discuss the fortunate situation of their repeat clients: These clients owned a primary residence in Wisconsin, and were just looking to remodel their condo in Florida when they noticed a bigger, better, already remodeled condo in their same building had recently come on the market.  Accunet helped them score the bigger condo by first refinancing their Wisconsin home (on which they had a 1st mortgage and a home equity line of credit above 4.25 interest rate) within 3 weeks. Once the mortgage and home equity line were paid off, Accunet used that to extract $175,000 in cash at 3.75% on a 30-year fixed rate, and because these condo owners had good credit, Accunet was able to do so with zero loan costs. This all afforded them a nice down payment for the condo in Florida. Then, since their mortgage in Florida was equal to 70% of the value of the purchase price at 3.75% they were able to chip in $3,500 towards the closing costs. Even more fortunately for these homeowners, tax code states that home acquisition debt (mortgage money they took out to make a purchase) and home equity debt (the $175,000 down payment, in this case) is 100% tax-deductible.

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