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Happy Thanksgiving from Coastal Design Builders!

We hope you have a safe and wonderful holiday!!!

Raising Your Credit Score

Continuing with our home buying series, this week’s post is all about building that credit score before getting a loan. Building your credit score does not have to be hard. Often it seems to be more trouble than it actually is. There are few tips you can put in practice to move you credit score to a more attractive number for lenders. Follow the steps and you’ll find yourself in a good spot when you go to apply for a loan for your new home.

Timing is an important factor in this process. You CAN NOT change your credit score overnight. It will take several months of consistent action to start moving the dial in the right direction, so it is a good idea to start as soon as you can. Not that starting late is a kiss of death, but the earlier you start, the more change you can make before you buy.

First, get an overlook of your credit situation (monthly bills, your actual score, total credit used/available, interest rates, etc.) Your first order of business is to get rid of “nuisance” debt. Nuisance debt is defined as any small balance on a random credit card. Usually these cards have smaller limits or might be a retail store card—basically any card you don’t use on a regular basis. Eliminating these will not only ease the strain on your wallet, but help raise your score by a few points. Generally, the best way to approach this is to pick the lest used card with the highest interest rate and pay that one off, then proceed to the next, and so on.

Another method you can try actually seems like it would work against you, but, in reality, it is a very smart practice. Leave past, settled debts on your credit score. Most want these off their score report because some people think showing any sign of debt (past or present) on your score report is bad. This is not true. It’s very beneficial to leave that old, already paid debt on your debt report. Lenders want to see you are good for the money they lend you. John Ulzheimer, president of consumer education at CreditSesame, compares trying to remove old, settled debt off your report to, “making straight A’s in high school and trying to expunge the record 20 years later.” You worked hard to pay off that debt, so wear that paid debt record proudly! The debt will eventually fall off after a set amount of time, but you should leave those debts on your score as long as possible.

Paying bills on time should be of major importance to you. This is the best way to see movement with your credit score. Try to pay them around the same time each month as well. Lenders want consistency, so seeing your consistency with your past bills will make you look a little more desirable. Additionally, you get to move your debt totals down, and move one step closer to the house you’re dreaming for.

Lastly, when planning to buy a home, it is beneficial to avoid as much risk as possible. It would be wise to avoid any lavishes purchases, excess credit card usage, or paying less on bills. Try to be careful of purchases that might indicate future financial issues as well (payday advances, divorce attorneys, etc.) Seems crazy that you must have such vigilance over your own life, but lenders will use any reason to up rates or lower the amount you can borrow, so don’t give them the ammunition in the first place.

Raising your credit score isn’t as instantaneous as we would like, but with careful planning and execution, you can reach the highest scores on the spectrum. So don’t get defeated when your efforts don’t seem to bear fruit immediately. If you follow all the steps above, you will see that score rise. The journey to your new home is starting to take shape, and we’re excited to help you get there!

Financing And You

Buying a new home is one of the most exciting points in one’s life, but can appear to be an overwhelming task. Having knowledge of the process is key, and getting familiar with all the procedures, rules, and lingo takes time but is not impossible to figure out. Become familiar with terms that are associated with financing (binder, earnest money, graduated payment mortgage, etc.) The National Association of Home Builders has a great resource known as the “Home Buyer’s Dictionary” that includes those terms and many more. Not all will apply to your situation, but most you will find relevant and will allow you understand exactly what the numerous legal papers in your future are saying.

It can’t be stressed enough for you to determine exactly how much you can afford to pay on a monthly basis. A home has numerous fees involved on top of living expenses such as water, food, gas, etc. In addition to monthly insurance and property taxes, you will have monthly interest and principal to pay. It is important to realistically estimate what you can afford and stick to it. Don’t let anyone sway you from you determined amount either. There will be temptations, but hold fast and refuse to buy anything above what you can afford. Another important tip that falls in this category has to do with monthly debts. At this point, you have already taken into account your monthly expenses. Before you close on your home, try and reduce those monthly bill payments. This will not only look better for lenders, but will also give you more reserve cash for when you need it.

Once you’ve got a good grasp of the finance process, it is time to get preapproved for a loan. This preapproval doesn’t guarantee you’ll get financed, but will give you a good idea as to whether or not you will be approved and is a major step on the road to home ownership!

Buying A Home

There are many things to consider when it comes to buying a new home. So much so, that buying a home has become a very daunting task that not only requires critical attention to detail but also the ability to manage a multitude of tasks at once. Whether it’s deciding on where to put what furniture or something on a grander scale (ie. what style of kitchen to install), building a new home is all about decisions. And without proper knowledge, some of those decisions can be very costly or not beneficial to the family overall. In lieu of the sheer mountain of information that is involved with building a home, we’ve decided to spend a number of our upcoming posts pertaining to all sorts of information that one should know before the set out to buy a home. Use this checklist to make sure you’re 100% ready for whatever home ownership has to throw at you, we will be emphasize one point on the checklist each week to give you tips and tricks to get you in the right place before you buy:

1.     Get Pre-Approved For Financing – Before even stepping into your first Open House, get preapproval for a loan from a lender. There is no point in house searching if you won’t get approved so reach out to a lender to review what you have to offer. Additionally, make sure they give you a true preapproval and not a pre-qualification. Pre-qualifications solely assess information readily available to them (such as credit scores and payment histories.) A preapproval will actual put you through the review process of getting a loan before you actually get one, so you know up front exactly if you’ll get approved and what you have to work with.

2.     Build Your Credit Score – a strong credit score ensures low mortgage rates and reaffirms to lenders that you are good for the money you borrow. The magic number falls within the 700-720 range. This will net you low interest rates, and manageable monthly payments. 750+ will score the best rates in the market, and the general consensus is <650 is largely the cutoff for most lenders.

3.     Determine Your Budget – This is a large key to figuring out the puzzle that is homebuilding. It is important to plan out what payments you’ll be making, how much they’ll be, and when they’ll be due. A good rule of thumb to follow is to not have your monthly house expenses (including utilities) equal no less that 30% of your monthly income. This will allow you to still save, live, and will also offer insights on where you can help conserve energy to keep bills down. (Don’t forget taxes, closing fees, and saving for the down payment)

4.     SAVE! SAVE! SAVE! – Having a nest egg for lenders to see reassures them that you will be able to pay your loans back and will often give you more lee-way the more you have saved. In addition to the security, having that savings will ease the trouble of unexpected house mishaps. Common things that can go wrong could have dire consequences on a family whose nest egg is not where it should be.

Each week we’ll be giving some detail on each of the points on the checklist to give you a good idea of what buying a house entails. Using these steps as a guideline will not only help you navigate the process but also set you up for successful home ownership and ensure your family is secured for years to come. Check back in the coming weeks to review our in depth discussion of home buying and maybe you’ll pull a few tips and tricks that will make it a bit easier to get your family in the home they deserve!