said on October 5th, 2011 categorized under: Financing
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We’ve all heard how important your credit score is when buying a duplex.
After all, the way the bank sees it, the higher your score, the more likely you are to pay off the loan.
In other words, you’re low risk. And that, to them, is worth rewarding with a lower interest rate.
So how do they come up with your credit score anyway?
According to Waterstone Mortgage, the credit bureaus consider five factors. In order of importance they are:
- Payment History – 35% Impact. Late payments, delinquencies and charge offs indicate that you’re a risk to a lender. Especially if they’ve occurred in the last two years.
- Outstanding Credit Card Balances – 30% Impact. The important component here is the ratio between your outstanding balance and the amount of credit you have available on your account. While the ideal scenario includes credit balances at or near zero, you should at least owe less than 30 percent of the available credit; especially if you’re planning on buying a duplex in the next few months.
- Credit History – 15% Impact. This component considers the length of time you’ve had a credit line. The longer its been open, the more likely you are to be a strong borrower.
- Type of Credit – 10% Impact. It’s not only the amount of money you owe, but it’s also the kinds of payments you make. For example, if you have a mixture of car loans, mortgages and credit cards, you’re viewed more favorably than if you just have credit card debt. Waterstone also suggests you should always have one or two major credit card accounts.
- Inquiries – 10% Impact. Did you know if you go around having people pull your credit, each time they do so it can cost you between 2 and 25 points on your credit score? Credit bureaus can ding you up to 10 times in a year for doing this. A better strategy might be to pull your credit yourself, which will have no impact in your credit score.
You must have, at minimum, a credit score of 620 before any lender will consider giving you a loan.
Again, the higher your credit score, the lower the interest rate you’re likely to be charged, which may save you hundreds of dollars a month on your payments, not to mention thousands over the life of your duplex loan.
Comment
With many mortgage interest rates below 4 percent, it’s a great time to think about refinancing your duplex.
But there’s a catch to refinancing; beyond the requirements of having a job and good credit.
The duplex needs to be worth more than you owe on it.
For some duplex owners, this is a real problem.
So how do you find out what it’s worth? Well, the bank’s going to hire an appraiser on your behalf to offer a professional opinion of the duplex’s value.
And you have to pay for that appraisal whether you get the loan or not.
Yes, I suppose you can go to Zillow and get a Zestimate. The trouble is, they’re usually not very accurate.
But guess who can give you an accurate measure of value — absolutely free of charge?
A Realtor.
Now, I do like to be paid for what I do, and my time, like everyone else’s, is spread pretty thin.
However, I’m always happy to do what I can for a duplex owner thinking of refinancing.
Most of the time, I actually want to see the property. This helps me become further acquainted with inventory, which makes me a stronger resource for my clients.
It also helps me get a read on the challenges and opportunities duplex owners are facing, and an early read on rental market conditions.
If you want to know what your duplex is worth, call me. Even if I’m not in your area, I’d be happy to refer you to an agent who can lend a hand.
said on December 4th, 2008 categorized under: Financing
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I’m beginning to think the economists charged with leading out of this economic abyss are like a bunch of little kids. Every day, they have a new idea; almost as if they’re making it up as they go along.
This morning, nearly every media outlet carried the news of a rumoured
Treasury Department plan that would decrease mortgage rates on 30 year fixed loans for home buyers to as low as 4.5 percent.
In the plan, the Treasury would allegedly offer to buy securities that finance the newly issued home loans. These securities would be purchased primarily from
Fannie Mae and
Freddie Mac, which are the Government Sponsored Entities (GSEs) that buy most mortgages from U.S. lenders.
Of course, the plan would have to be paid for somehow. It is believed one possibility would be to issue bonds to the public at 3 percent interest, which would allow the government to turn a profit by buying securities that pay 4.5 percent.
There is no word as to whether this approach would be extended to refinances or investment properties.
Would this work? Well, last week, when interest rates on 30 year fixed conventional loans briefly dropped to 5.25 percent, the Mortgage Banker’s Association reported the applications for loans (both new and refinances) were up 112.1 percent; the largest jump on record.
Some economists are concerned just the rumour of low, long-term fixed interest rates may cause some prospective home buyers to postpone a purchase. That “wait and see” attitude would further slow an already sluggish economy.
While I believe this is a possibility, I am also well aware of the laws of supply and demand. Anyone think an abundant supply of mortgage money at 4.5 percent would stimulate the housing market? I do. And when demand increases, so too do prices.
