The Myth of FICO Scores – Buying a House Is “POSSIBLE”

The Myth of FICO Scores – Buying a House Is “POSSIBLE”

What is the first thing people worry about when they are considering buying a home for sale in West Bloomfield, Michigan? The FICO scores.

In your eyes, what is the perfect score? 800? 850?

When you are saving for the down payment, what is your goal? 15? 20?

All these questions have myths attached to them that stop you from buying your dream house.

You see, most people don’t have thousands of dollars lying around in their bank account. There are other needs such as energy bills, food, etc, that stop you from making a frivolous purchase. However, a house is a totally different matter.

Let’s have a look at John’s life:

John has been working as a supervisor in a departmental store for about three years now. He makes $15,000 in a year. He has been saving for the past 6 years, since he was in the last year of his college. He meets this amazing young woman at the day of his graduation and he falls in love. After 2 years of dating, they decide to get married. They make plans for the wedding and decide that it would be better to spend the money he has saved onto buying a house instead of going to a foreign country for their honeymoon. They look for a home for sale in West Bloomfield, Michigan and after 2 days, find the one they like. Instead of taking out a loan, John decides to spend all his money on the house. Now, his savings account is quite low and he is struggling with the house bills and maintenance. He eventually decided to take out a pay day loan but due to the high interest rates, he ends up in debt.

As you might have guessed, the mistake John made was almost emptying his savings account.

Why did he do this? It’s probably because he thought he wouldn’t be able to get a loan due to his low FICO scores. Let’s get to the main point:

Busting the Myth

Here’s a shocker for you: you do not need a high FICO scores to get a mortgage loan! You will get the loan but to keep himself safe, the lender will probably charge a slightly high interest rate. This is a better option than going broke like John, don’t you think?

FICO Scores for Loans

Year All Loans Conventional FHA
2014 727 755 684
2015 730 757 688
2016 726 753 686
2017 722 751 680
2018 726 753 677

Interest Rates

The good thing about interest rate is that they change very slowly. They either go up by 1% or down by 0.5%. So, you don’t have to worry when going with a variable interest rate loan. Here’s a breakdown of how drastically the interest rates have changed in the past 5 decades:

  • 1970: 8.86%
  • 1980: 12.7%
  • 1990: 8.12%
  • 2000: 6.29%
  • 2010: 5.21%
  • Today: 4.52%

The reason why most people who have saved enough money by living in co-accommodations don’t go for apartments is because landlords keep increasing the rent yearly, which can make you lose all your hard earned money.

So, now that you know you don’t need a high FICO scores for buying a home for sale in West Bloomfield, Michigan, you can start searching for your perfect American Dream. Looking for a house that falls under your budget? Visit Homes2MoveYou and get in touch with me directly at 248-790-5594 to start seeing houses in areas of your liking.

Credit Behaviors – Advice For Potential Farmington Hills Home Buyers

Credit Behaviors – Advice For Potential Farmington Hills Home Buyers

Credit behaviors and credit ratings are generated by three major credit agencies (Experian, Equifax, and Transunion). They all use a differing formulas to generate a numerical rating that reflects your credit risk. The higher the number, the better the credit rating. Certain things may have a adverse effect on your score and could possibly result in you getting turned down for a mortgage. Below are advice for potential Farmington Hills home buyers on credit behaviors that impact the ability to get a loan.
Credit Behaviors - Advice For Potential Farmington Hills Home Buyers

Credit Behaviors That Impact The Ability To Get A Loan

Tardy Payments

Missing payments demonstrate poor credit behavior and therefore will reduce your rating. The number of months you are late (30, 60, or 90+ days) and how many times you are late also play a role. Late payments stay on your credit profile for an extended length of time.

Collections

If you are really behind on payments and a credit provider has given up on their own procedures to retrieve money from you, they may move your debt to a collection company. The collection company notifies the credit agencies. The history will show in your credit file even if you pay off the debt.

Discharges

If a lender is unsuccessful in obtaining the complete balance that you owe to them, they may “charge-off” the the leftover balance. This could occur if you entirely fail to send payments or if you settle for a payoff below the remaining owed. Settlements reflect on your credit file for seven years. Future lenders will see this item and assess whether you will continue with that behavior.

Publicly Recorded Offenses

Bankruptcy, tax liens, judgments, foreclosures, and other legal matters are recorded into public record. Regardless of whether you settle those items, the actual recording is reflected in your credit report. Certain things remain for seven to ten years whereas others (i.e. liens) will never be cleared. Obviously, it is critical to avoid letting accounts get this far.

Advice For Potential Farmington Hills Home Buyers

All of the credit behaviors that impact the ability to get a loan noted above make you a risky client and may cause higher interest rates or completely prevent you from getting approved for loans. Practice conscientious payment patterns and it will save you time, money, and disappointment when it is time to buy a home. These are the best advice for potential Farmington Hills home buyers. Remember that this details only a few typical credit mistakes. Speak with a financial professional for guidance on your specific situation.