Improving Your Credit to Qualify for a Mortgage Loan
An incredible number of Americans have suffered damaged to their credit scores in the last few years while lending standards for home loans have become increasingly tougher. This doesn’t mean that you should give up on buying a new home by any means. Begin rebuilding your credit now and you could see your credit scores rebound and be able to buy a new home and get a mortgage sooner than you think.
There may be nothing you can do about recent bruises to your credit but what you do from here on out can make all the difference in your financial future and that of your loved ones. Love it or hate it, your credit is likely the most valuable asset you have.
Good credit isn’t just about the negative items you have. Often it is a matter of not having enough good credit to outweigh the bad. Negative credit will eventually fall off your report but rebuilding your credit is likely going to require establishing new lines of credit.
The good news is that banks have recently reported relaxing credit standards for consumer loans and credit cards. Those who have been hit the worst may find applying for secured credit cards and loans or in-store financing the easiest route. Just make sure that you manage it wisely and don’t get further in the hole.
To establish enough new credit to qualify for a mortgage loan you will need at least 3-5 accounts. The length of time they are open and high credit limit are important too. Just don’t apply for too much credit or you’ll lower your credit score further.
If you are still coming up short know that some select mortgage programs will accept alternative credit. This means carefully documenting your rental payments and utility bills, not just with receipts but a paper trail showing how you paid them.
When it comes to buying and selling homes, locking mortgage rates and the like, people who have zero financial credentials and can barely balance their checkbooks seem, for some strange reason, to believe that they can and should make moves timed to always sell at the top and buy and lock in their interest rates at the very bottom.
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
Seriously though, weren’t loose credit standards a big part of why we were in this recession to begin with?
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One of Dave Ramsey’s callers (Debbie) says her elderly parents bought a lake house 30 years ago and are planning on selling it. Debbie doesn’t want it to leave the family and is interested in buying it. Debbie doesn’t have the cash to buy it outright. Dave says they can’t afford this house…
I’m not going to tell you to buy a house on the lake no matter what the story when you’re borrowing money to do it—not on this show
However he goes on to say that he would look at buying the house — but only if the couple can do so while sticking with their debt-free principles.
If I’m you, I’m going to try to keep it. I’m not discounting the fact that while I called this an emotional decision, emotions in these situations are a fair part of the equation as long as they don’t cloud your judgment to the point you put your family in a mess. You have a real reason to be very motivated to try to find a way to do this deal without it being debt. I would not borrow the money from a mortgage company to buy a lake house. Pay cash for toys—even family toys you’re very emotional about.
I could’ve huffed and Puffed, but the price dropped so much I just decided to buy it…
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How to Stay Motivated to Buy a House with Cash
One of Dave Ramsey’s “followers” asks how you stay motivated to save and pay cash for a house when their goal is $200,000 and they’ve saved $75,000, which took them three years.
First of all, let’s say it’s hard. You can’t stay motivated if the target doesn’t have an end date… That’s one way to stay motivated is to set a deadline. There’s got to be a light at the end of the tunnel that’s not an oncoming train.
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Co-signing is a Dumb Idea
Celeste in Minnesota and her husband are close with her brother. He called them to ask about co-signing on a home loan. How do they lovingly and respectfully tell him no? Not doing the deal is an act of great love, as Dave explains.
The truth is that co-signing is a dumb idea because if any little thing happens, it could put a strain on an otherwise great relationship.
Virginia & Tennessee among 40 states signing onto Foreclosure ‘Robo’ Settlement
The five largest banks in the U.S. (Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and Ally Financial ) agreed to a $26 billion settlement for the roles they played in the mortgage meltdown. More than 2 million Americans could reap financial benefits from the settlement, the largest of its kind in history and the biggest civil-action suit ever against the housing industry. All 50 state attorneys general started working on the deal in late 2010 amid outrage over the corrupt mortgages. Though billions are laid out in the agreement, the money will likely help only a relatively small portion of borrowers facing foreclosure, depending on how effectively Washington manages the deal.
Some $17 billion of that would go toward writing down mortgage principal for an estimated 850,000 troubled borrowers, $3 billion could go toward restitution payments of $1,500 each to borrowers who lost their homes to foreclosure, and the rest could go to state funds for foreclosure relief
According to sources, Virginia & Tennessee are among those states signing onto the deal.
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Why Should I Pay Off The Mortgage?
Laura on Twitter asks Dave to explain paying off the mortgage versus keeping it for the tax deduction.
If you have the opportunity to pay off your home and you don’t pay off your home in order to keep the tax deduction, that would be an indication that you are poor at mathematics. It’s a nice way of saying you’re stupid and you believe cultural lies that are out there. The cultural lie is never pay off your mortgage because you’ll lose the tax deduction …
Now if you’ve got a mortgage, until you get it paid off, for goodness’ sake, take the tax deduction. But don’t stay in debt telling everybody how smart you are.
