Your Low Credit Score Could Cost You $45,000

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Your credit score is one of the primary items that lenders check when they consider loaning you money. A lower score means greater risk, and lenders will charge you a higher interest rate because of that difference – but how much could it cost you over the lifetime of a loan?

According to a new study from LendingTree, if you have only fair credit instead of very good credit, the difference can cost you over $45,000.

LendingTree analyzed loan data from their database to assess the costs of a lower credit score as applied to five different sources of borrowing (credit card debt, personal loans, auto loans, student loans, and mortgages). Interest was calculated based on the average loan amount for each type of credit. Combined, the loans totaled $310,263 – dominated by the average mortgage loan of $234,437.

At interest rates available with very good credit (740-799), the total interest payment over the lifetime of all five credit sources was $212,498. At t…

Why Millennials Aren’t Buying Homes

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Waiting to Buy

According to a new study by the Urban Institute, millennials are waiting longer than previous generations to enter the housing market. Approximately 8% fewer millennials of ages 25-34 own homes as compared to baby boomers and generation Xers at the same point in their lives.

Why are millennials late to homeownership? The Urban Institute provided several reasons:

External Factors

The study found three primary external factors keeping millennials from entering the market.

1. Lack of Supply – Affordable housing is rare in more popular urban areas that millennials prefer (and where jobs are located). Housing starts are at approximately 1.2 million – an improvement from the post-housing crisis 550,000 units in 2009, but still below levels from the 1960s. Low supply leads to high prices even for modest homes.

2. Tight Cred…

Trump Changing Use Of Credit Scores In Home Loans

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Are you having trouble getting a home loan because you have no suitable credit history? Has your credit activity been dormant for a long enough time that lenders can’t properly evaluate your risk?

The FICO credit-scoring standard used by Fannie Mae and Freddie Mac requires that potential borrowers have a credit account open for at least six months to be able to assess credit risk properly. Without that background, you are “credit invisible.” You may be responsible with money and pay rent, utilities, and cell phone bills on time – but those aren’t considered in evaluating mortgage loan applications.

According to data from the Consumer Financial Protection Bureau (CFPB), approximately 26 million people are considered to be credit invisible. Nearly 19 million people are similarly shut out of mortgages because they have “stale credit” – their credit history hasn’t had enough rece…

Top 3 Mortgage Rejection Reasons

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Have you been denied a mortgage loan recently? Rejections usually don’t come down to a single reason, because lenders look at your overall financial status.

However, some factors increase your risk of rejection. According to NerdWallet’s 2018 Home Buyer Report, three issues stand out as primary reasons for mortgage denials based on the most recent available data (2016). The top two are fundamental to the Ability-to-Repay rules outlined by the Consumer Financial Protection Bureau (CFPB) in the wake of the financial crisis. The third is more related to the home than the borrower.

1. Debt-to-Income ratio (DTI) – Your DTI ratio is your total monthly debt obligations divided by your gross monthly income. NerdWallet found that 28% of mortgage loans were rejected primarily for a poor DTI, the highest percentage of any factor evaluated.

DTI limits may vary, but the upper limit has generally been in the 43% to 45% range for a loan to be consider…

Mortgage Deduction Claims Will Drop More Than 50%

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Who wants simpler taxes? Most of us do, assuming we also keep more money in the process.

Starting in 2018, homeowners are more likely to have simpler tax returns – but they may need to make similar tax calculations to ensure a lower tax bill.

Tax simplification was part of the pitch to sell the 2017 Tax Cuts and Jobs Act (TCJA) to the American public. To help achieve this goal, Congress raised standard deductions and reduced or eliminated several itemized deductions with the TCJA to encourage filers to take the standard deduction. Taxes are much simpler if you don’t itemize, and there’s no reason to itemize if your standard deduction is greater than your collective itemized deductions.

The TCJA raised the standard deduction for married couples filing jointly to $24,000 (almost double the previous deduction of $12,700). The standard deduction for single filers rose…

The Easy Way To Save Thousands On Your Mortgage

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You probably comparison-shop for most of your purchases, especially the high-dollar ones. If you’re going to spend money on a new appliance or an automobile, you want to review options to make sure you’re getting the best deal.

According to the Consumer Financial Protection Bureau (CFPB), there’s a big exception to this rule – mortgages. Almost one-third of homebuyers don’t bother shopping around with different lenders to find the best mortgage rate offer for their home purchase. In fact, over three-quarters of homebuyers applied for a mortgage with only one lender!

Why would you not shop around for the mortgage rate on your new home – the largest purchase that most Americans will ever make in their lifetime?

The CFPB suggests several reasons, topped by the assumption that shopping makes no tangible difference. A previous survey by the CFPB and the Federal Housing Finance Agency found that most consumers assume all mortgage lenders offer roughly the sam…

All About Real Estate Disclosures

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You want to know exactly what you are getting when you make any large purchase, especially when you are buying a home – the largest purchase that many Americans will ever make in their life. That’s why a real estate disclosure statement is a fundamental part of any real estate transaction.

By law, home sellers must provide a disclosure statement in writing regarding the condition of their home. The contents of disclosure statements vary by state and municipality, but they must disclose known hazards and defects of the home, as well as any important information that may affect the seller’s decision.

As a seller, you must make sure that you compile a thorough list of disclosure items. Your agent should be able to help you determine if each item must be disclosed.

Sellers are not required to search for any unknown defects, but failing to disclose a reasonab…

Millennials Have More Home Buying Regrets

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Living the Dream

Homeownership is one of the classic measures of “the American Dream.” According to a recent Bank of the West Millennial Study, over half of respondents (58%) say they’ve either attained the American Dream or that the American Dream is still attainable. A similar percentage (59%) says that owning a home is a top ingredient in the American Dream – surpassing retiring comfortably (56%), being debt-free (53%), and even having children (41%).

Millennials show approximately the same numbers in all of these categories, but they break sharply from other generations in one aspect. Over two-thirds of millennials (68%) say they have regrets about their home purchase – almost twice as many as baby boomers and thirteen percentage points above members of Generation X.

Perhaps millennials are expecting too much out of homeownership, ignoring the old axiom – “The secret to happiness is low expectations.” The study suggests rose-colored glasses ma…

There’s No Correlation Between Interest Rates And Home Sales

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It just makes sense. When mortgage interest rates rise, fewer people can afford to buy homes. Home sales go down as a result. Conversely, when interest rates drop, homes become more affordable and home sales will go up.

There’s only one problem with this premise. It isn’t necessarily true.

According to Sam Khater, a deputy chief economist with CoreLogic, “the relationship is almost zero” between mortgage rates and home sales. At the very least, it’s difficult to determine the relationship because there are many other factors affecting home sales – some of which are far more likely to affect your likelihood of buying a home. Supply and demand, jobs, wages and inflation, and the availability of credit can all swamp the effect of interest rates. You can check your credit score and read your credit report for free within minutes using