Because of this, monitoring and managing your FICO score is vital, especially if you’re looking to buy or refinance a home anytime in the near future.

The FICO scoring system was created in the 1950s by Fair Isaac Corporation and has been the standard for lenders since the 1980s. FICO credit scores typically range between a low score of 300 and a high score of 850. Under the FICO system, securing credit becomes less expensive for borrowers with higher scores (those who represent the least risk) and more expensive for borrowers with lower scores (those who represent the most risk). In fact, when it comes to a mortgage, a lower credit score could easily cost a consumer hundreds or even thousands of dollars more in interest every month and throughout the life of the loan, compared to the same loan with a higher score.

FICO Scores APR Monthly Payment Total Interest Paid
720-850 5.038% $1,617 $282,278
700-719 5.163% $1,640 $290,574
675-699 5.700% $1,741 $326,832
620-674 6.850% $1.966 $407,680
Below 620 — Typically does not qualify in today’s lending market

The above chart clearly reveals the relationship between higher FICO scores and lower interest rates and monthly mortgage payments. Of course, interest rates are determined by many factors but the bottom line is that individuals with low credit scores will pay nearly three times more in interest than those with strong credit scores.

Now, in todays mortgage market, you mill also be subject to “Loan Level Price Adjustment Fees” (LLPA’s) when applying for a conventional mortgage. In addition to higher interest rates, having less than a 720 in today’s credit environment can also cost you up to 3% in points or an increase in your interest rate! Here’s the chart based on an 80% LTV:
FICO Score Approximate LLPA You Will Pay
Below 640 3.000%
640-659 2.750%
660-679 2.250%
680-699 1.000%
700-719 0.500%

LLPAs are mandatory surcharges based strictly on credit scores. They are additional fees paid to Fannie Mae or Freddie Mac, not your mortgage professional. Analysts suggest that imposing these “penalties” is a blatant effort to recoup – and to help lessen further losses – on foreclosures. The surcharge could mean thousands of dollars for borrowers who do not monitor and maintain a good credit rating. Keep in mind, these LLPA’s only impact conventional mortgage programs. Traditional FHA, VA, and USDA mortgages do not have such significant additional costs/fees.

For people experiencing the worst-case scenario, carrying a middle credit score of less than 620 could cost you an extra $9,000 upfront on a $300,000 loan amount.

If you’re thinking about buying, selling, or refinancing a home, you have to be credit ready. Give us a call today for a free credit consultation. We’ll pull your credit and see where you stand. Remember, effective credit repair, if necessary, could take up to 3-6 months, so act now and be credit ready in no time.

Stay tuned for more great credit tips!

What if I don’t have the money to buy a home right now?
There are many loan programs available that offer low and no down payment options. Some programs permit gift money as a down payment, and often sellers are willing to make a contribution to your purchase if they want to sell the home quickly.

There are many benefits of home ownership to consider, most of all, tax deductions.
Let’s take a look at how advantageous this can be as a homeowner:
How much is tax deductible?
Tax deductions vary, but the IRS has laid out solid rules. They also have several tax publications full of helpful information worth taking the time to read. Publication 530, Tax Information for First-Time Homeowners, is very thorough, as is Publication 936, Home Mortgage Interest Deduction. For quick reference, you can refer to Tax Topics 505, Interest Expense, and 504, Home Mortgage Points.

These publications often refer to local and state guidelines, so you may want to consult a CPA to answer all the questions that arise from reading these materials.

Here are a few tips you should know up front:

Real Estate taxes are deductible on a primary residence. Real Estate taxes are paid at settlement or closing, or through an escrow account.

Mortgage interest is deductible on a loan to purchase, build or improve your home. Your lender will provide you with a Mortgage Interest Statement (Form 1098) to list the total interest paid during the year. This should include any deductible points paid for that year.

Pre-paid interest is deductible in the year it is paid. At the close of a real estate transaction, borrowers usually pay for the interest on their loan that falls between the closing period and the first of the next month. Mortgage payments are made “in arrears” so when a loan is closed mid-month, there is interest due to the new lender which must be paid in advance.

If you are building a home, the interest on the construction loan is deductible. The construction period cannot exceed 24 months prior to the date that you move in if you claim this as your primary residence.

Don’t over-analyze tasks.
Sure you need to think things through, but you can over-think them too. If you worry too much about getting it perfect before implementation, you can lose momentum, lose your window of opportunity, or worst
of all…never do it at all.

A good strategy is to be sure your idea is ethical and legal. Then, if you think your chances of success are at least 70%, implement your idea. Successful people tend to make decisions quickly and change them slowly, where many unsuccessful people make decisions slowly and change them quickly. Be a part of the first group and implement your ideas.

Break a large project in to bite-size pieces – your action steps.
If a project or plan that you know will improve your business just seems too large or overwhelming, break the plan down into manageable steps. Determine what action needs to be taken first, then go ahead and do it. After all, how do you eat an elephant? One bite at a time. And the same concept should apply for large projects.

Don’t procrastinate.
Easier said than done, right? But the truth is, the longer you wait to do something, the less the chance you will ever do it. Rather than putting it on your endless list of “to-dos,” do it right away – right now if possible. You will impress your clients – they will love it! Don’t you love it when you are the customer and you get service right away? You may even impress yourself and start getting into the habit of “doing it right now.”

Believe in yourself and the power of taking action.
Did you ever think of a great idea at night, only to talk yourself out of it in the morning? Worse yet, have others talked you out of it, ultimately denying you your dream? Believe in yourself…take chances…go for it. Sometimes we spend so much time thinking about the task that it becomes daunting. Don’t think about it. Go ahead and get started. Just do it!

It doesn’t matter how many great ideas you hear or see. It doesn’t matter how many great plans you come up with for yourself, your business, or your life. What matters is how many of these ideas, plans and dreams you actually put into action and make a reality. Do you have something that’s been on your to-do list for months? Do you have a great idea you’ve been kicking around? Do you know the next push you need to move forward in your career or your life? Grab it right now – don’t wait another day. Take a step, make a decision, put your plans into motion and enjoy the rewarding feeling of having taken action!

Give me a call. Let’s take action to increase our production and grow our businesses.