What is the FICO Credit Score? Why do I need good credit?

Tu Casa

By Nathalia Cruz-Edmonds

The best way to obtain anything material or services in life is with cash.  If you don’t have cash, you may be able to obtain them with credit.  Credit by definition means to obtain an item or services before payment based on trust of future payment, but not everyone can get credit.  Some individuals cannot get credit because they are too young, they never had credit before, they have bad payment history, or they don’t make enough money.  But what is credit?  Why do you need it?  Who created credit?  But why is it soo important?

Due to the fact that the majority of individuals do not have $30,000 in cash in the bank or under a mattress to buy a brand new car or $250,000 in cash to buy a home, people rely on banks, investors, family members and other ways to borrow that money so they can obtain stuff and then they will pay whom lend them the money later with or without interest.  Credit is needed for various reasons but mainly to borrow large amounts of money.  Others, such as landlords and employers, use it to see your payment history because when you pay on time it translate that you are responsible and trustworthy.

In 1956 Bill Fair and Earl Isaac founded FICO in San Jose, California.  They started a software company that measures the consumer’s credit risk and worthiness.  The FICO Score which is a given value to the consumer’s credit risk and worthiness was introduced in 1989.  The score ranges from 300 to 850.  Depending on where your FICO score lands will dictate if (1) you will be able to borrow any money (2) How much your security deposit will be, if renting a home (3) How low or high your interest rate will be and (4) How much money you will be able to borrow.

Each individual credit score consists of several items:

• 35% Payment History - As agreed with the lender, do you make your payment before or after the scheduled date?
• 30% Debt Burden - How much money have your borrow and how much do you still owe
• 15% Length of Credit History - How long have you been borrowing?
• 10% Type of Credit Used - Do you have credit cards, personal loans, car loans, mortgage,
• 10% Recent Credit Searches - Are you shopping around to get credit?

Currently there are three companies that provide you with scores, Experian, TransUnion and Equifax.  The majority of banks when pulling your credit will pull all THREE credit score companies and pick the middle score.  Do you know what your credit score is?  By law, each credit score company will provide you with a ONE FREE credit score a year.  It is imperative for you to use this free service because you want to make sure your information is correct.  Meaning, all payments have been reported correctly, no new accounts have been added.  A great free way to monitor your credit is by creating an account with Credit Karma, www.creditkarma.com.  You might not see all three Credit Bureaus but you get a good overview which you can monitor monthly for FREE!

There are some cool tricks to help you keep your credit score high besides paying your debt in time!  If you have a credit card, maintain the balance below 10%.  So, if you have a $1,000 credit card with Bank of America.  You should keep your balance lower than $100 every month.

If you had some issues in the past where you lost your job and couldn’t pay on time, if it has been more than seven years, you are allowed to ask the Credit Bureau to remove that trade line from your credit history!  If you have a trade line that is older than seven years but you paid on time, DO NOT REMOVE IT!

If you do not have savings, having a good credit history is important for others to lend you money!  The internet have instructions and ideas on how to clear your credit BUT if you do not have the time and need your credit score improved in less than 9 months there are companies that can help you.  Max Score Credit (www.maxscorecredit.com) is a minority owned company with offices in Silver Springs and Baltimore who can help.  They will pull your credit and help you contact the Credit Bureaus to correct any incorrect information by not adding information that can potentially harm your credit.  For more information contact Ana Garcia, Senior Credit Advisor at 410-864-8600 or via email at agarcia@maxscorecredit.com.  Their rates are reasonable and their results are life changing.

If you would like to learn how to buy a home and create a plan to achieve it, please give me a call at (410) 350-5848.

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Nathalia N. Cruz-Edmonds is a REALTOR with Berkshire Hathaway HomeService PenFed Realty.  To schedule a meeting call (410) 350-5848, at her office (410) 464-5500 or via email at nathalia.edmonds@penfedrealty.com.  You can follow her on Facebook at http://facebook.com/NathaliaEdmondsRealtor.   

I found the house of my dreams, when can I move in?

I found the house of my dreams, when can I move in?

By Nathalia N. Edmonds

You got your mortgage pre-approval letter and know how much you can spend to buy your new home!  If you qualify, you attended the First Time Homeowner seminar.  You hired an agent and you know what type of home you are going to buy.  Now what?

Is there a limit of how many homes you can see?  No.  Should you see 100 houses versus 10 or 3?  You see as how many houses you want to see.  I tell my clients that the house you want to make yours is the house that made your heart fluttered when you entered.  Or like my mother, she heard bells and felt an overwhelming sense of peace.  A great way to take control of which houses to see is when your agent sends you daily automated emails which will alert you when a new home becomes available!  Those emails are up-to-date and with correct information.  Looking at properties in Zillow, Trulia or Redfin do not have accurate information.  In Maryland, agents pay the Metropolitan Regional Information Systems or MRIS to see all the accurate information of properties that are actively available, under contract, sold even those properties that are withdrawn.  Trust is a very important aspect of your relationship with your Agent.  Remember, if you feel your current agent is not a good fit, you may cancel your business relationship and hire someone else!  Make sure to read your agreement first.  In the state of Maryland it is mandatory to place a contract expiration date as well as instructions on how to cancel your contract with the agent and broker.

Now, you found your home but not just your new home, you found YOUR DREAM HOME!  With your approval, your agent will write an offer on your behalf.  A contract will be about 47 pages long.  It could be less or it could be more.  In this contract you will let the seller know how much you are willing to pay for their home.  How much deposit you will pay, where you will deposit that money, how you will pay for the home, if you are doing any inspections, what you want to keep from the house, acknowledge the settlement date, amongst other things.  Other things will be acknowledgement of age of the property and possibility of lead, and all kinds of disclosures depending on county and type of home you are buying, especially if the neighborhood has a Home Owner Association.  In your offer, you will have dates of when you are due to do the inspections, when to apply for your mortgage loan, when you are going to settlement!  With the offer you will need to submit your mortgage pre-approval letter and your earnest money deposit.

What is the earnest money deposit?  The EMD or escrow money, how some agents call it, is a “good faith payment” it shows the seller that you are serious about buying their home, soo serious you are willing to put money down.  This amount it is usually 1% of the sales price or 10% if you are buying the home in cash.  So if you are offering $100,000 to buy their home, you need to prove a check or money order in the amount of $1,000.00.  This EMD will only be deposited ONCE your offer is accepted by the seller.  This money will be applied towards what you need to pay to get your home, meaning, you will now have to pay $99,000 plus closing costs.

Once the seller receives the offer, he or she will evaluate the offer or several offers and make a decision.  Do not be alarmed if your agent calls you back with a new offer from the seller.  Your agent will have your best interest and inform you of what are the best choices.  But remember, you are the only person who will make the decision.  Agents are advisors and messengers.  A good agent will email you the instructions you gave them over the phone for both your records.

Immediately after your offer was accepted by the seller you MUST contact your loan officer and start your application process.  If you already got “pre-approved” why do you need to apply?  Well, the loan officer creates your file and starts getting you formally approved and get the house appraised.  They make sure you didn’t go nuts and buy a boat or got into more debt.  The underwriter also schedules the appraisal to make sure the home is good collateral for the loan.  This process could easily take about 30 to 40 days.  It is important that YOU are as responsible to close early.  If you delay giving your loan officer all the documents he/she asks, you will delay the process.  Once the appraiser returns their findings and the home is good collateral, you will get approved or denied for the loan.  BUT BE AWARE, the underwriter will check your credit the day before or the day of the settlement and approve the loan!  Buy furniture AFTER settlement NOT before!

Simultaneously, your agent will schedule all the inspections.  You should ALWAYS do a structural and mechanical inspection.  This inspection MUST be done by a Licensed Home Inspector.  You can go to https://goo.gl/x0Ic5h and search if that person is licensed!  Inspections could run you about $250 up to $500.  You can also do Lead, Mold, Termite, Radon, Chimney and others.  The buyer will ALWAYS be responsible to pay for the inspections!  And don’t forget to go to the inspections!!

Around that same time, you would have to pick a Title company to help you investigate if the property has any issues with the past ownerships or any debts due to unpaid taxes, water bills or any other liens or debts against the property.

After all these things are done, you should expect to close between 45 days or 60 days and this is only if you are asking for money!  If you are paying your future home in cash, closing will happen in about 45 days.  At settlement, you must make sure you bring the check you need to pay, if any.  If you are a first time homeowner you could get $5,000 towards closing cost and you could have ask the seller for 3% closing cost help, which in some cases, you don’t need to bring anything.  Bring your ID!  Your loan officer will have given the title company their bank information to wire the money to which the title company will pay the seller’s mortgage and give him or her the difference in a check.  The sellers will bring the keys to your future home.  After signing the new title, the receipt or HUD1, you get your keys and the seller gets their check and you go home to your new home!

If you would like to learn more about the process in buying your future home, please contact me or your preferred agent!  

Nathalia N. Cruz-Edmonds is a REALTOR with Berkshire Hathaway HomeService PenFed Realty.  To schedule a meeting call (410) 350-5848, at her office (410) 464-5500 or via email at nathaliaedmonds@gmail.com.  She is also the owner of Clearview Real Estate Management LLC a third party real estate management company in Maryland.

 

Getting ready to buy

Getting Ready to Buy

By:  Nathalia N. Cruz-Edmonds

With Daylight Savings starting on March 8 and the first day of Spring being on March 20th, thoughts of a new beginning start to really take shape.  Thoughts of moving is probably the first one specially because it is easier to move in warm weather than cold and it is easier to change school districts once the school year is over.  But, are you financially ready to complete this desire?

In the United States, having large amounts of cash stacked under the mattress only works in the movies like Scarface.  The reality is that cash needs to be in the bank not only because it is secured from being stolen(*) but because the Government demands it for tax purposes.  If your income is predominantly cash, you must start by opening a checking account and a savings account.  If you have an ITIN number, you are still able to open a bank account.  Usually to open a checking account, you need a government issued ID, and proof of residency whether is a copy of your lease agreement or a bill for cable, phone or utility.  Call your bank for more details.

Another big obstacle that you might be facing is lack of credit.  By definition credit is an arrangement for deferred payment of a loan or purchase.  This loan needs to be paid back, usually in monthly installments, until the balance is paid in full and sometimes you need to pay interest.  In the United States, credit is the second most important item in your financial health.  The easiest way to get credit is with a Secured Credit Card.  This credit card borrows money from an initial deposit you make when opening the account.  You can open this particular credit card with just $300.00, all banks have individual restrictions, therefore, you must call them directly to learn more about their product.  The purpose of this card is for you to use it no more than 15% of your available balance every month.  Meaning, if your available balance is $300.00 you cannot exceed $45.00 in purchases every month and then paid this used balance in full on the day your payment is due.  After a year the bank will return your initial deposit and the secure credit will convert into a regular credit.  The bank will be able to increase your credit and it will be easier to access more credit such as a mortgage!

Other ways of obtaining credit is by buying furniture, opening a credit card a major store like BestBuy, WalMart, Target, Macy’s or buy a car.  Please, do not go crazy.  Too much open credit will lower your credit score and if you do not pay your debts on time as agreed in the contract it will harm your financial credibility for SEVEN YEARS!  This means that once you start making late payments, have too many credits cards with high balances you will not be able to buy a home for SEVEN YEARS even if you paid your until your balances in full.

Finally, the first most important item of your financial health is a savings account!  You will need up to two months rent in order to move to a new place or minimum of $5,000.00 deposit if you are buying a home.  These amounts do not include the cost of moving from one home to the other.  When opening an checking account, make sure you are able to open a savings account.  Every time you get paid you should apply the 80/20 rule.  Ten (10) percent to save, Ten (10) percent to give to charity and Eighty (80) percent to pay your expenses  Having savings will also help you in a time of need such as losing a job due to weather, your car breaking down, or God forbid, paying a medical bill for yourself or a loved one.

Financial freedom is the ultimate goal which can be achieved by buying your home but in order to buy your home you must must have good financial health by having savings and good credit.  There is no better time than now to start!

Coming Soon!  PS International Team of Berkshire Hathaway Homesale Service will be representing the owners of newly remodelled houses in Essex (11 Helena Ave, Essex MD 21221) and in Dundalk.  Information will be soon available on www.pitinastucky.com.  If this is your first time buying a home, you must register to attend the First Time Homeowner Seminar at Southeast CDC on Eastern Avenue.  Visit http://goo.gl/28veRx to learn the next available date and register to attend the seminar.

Nathalia Cruz-Edmonds is a REALTOR with PS International Team of Berkshire Hathaway Homesale Realty and she is also the owner of Clearview Real Estate Management LLC.  To speak to her you can email her at nathaliaedmonds@gmail.com or call her directly at (410) 350-5848 or the office (410) 583-0400.  Visit her website at www.clearviewrem.com.

(*)To learn more about how banks in United States guarantee to secure your money please visit https://www.fdic.gov/deposit/deposits/

I want to buy a house - Now What? - Five steps to follow to get ready to buy your new home!

You want to buy a home.  Great!  Now what?

First thing:  How much can you afford?

It doesn't matter if you know the location, or how many baths you have, or which school district your kid must stay in, but how much can you afford?

If you don't already know here are some tips:

1) You MUST make a budget!  Rachel Cruze not only is she pretty but she explains stuff very easy!  Here is her video Let's Break Down a Monthly Budget!

2) Start saving and DO NOT get in additional debt!  So closing cost will be about 7% ADDITIONAL to what you will be paying for the house.  That doesn't include if your loan needs for you to put any money down.  Do not buy a car, spend more money on the credit card.  Be strong!  The Force is with you!

3) Check your credit!  Every year you get a free credit report!  Get it and make sure the stuff in there is accurate!  If it is not go online and find a way to report a discrepancy BUT mail your complaints!!  By law Credit Companies have to reply to you within 30 days because if they fail they will have to erase that inquiry!!

4) Talk to A bank!  I always get 3 quotes.  You should do the same WITHOUT them doing a hard inquiry on your credit.  See what the best options are for your with interest rates and discounts on doing automated payments!

5) Always go under 28% of your income.  The magic number that banks use to qualify you for a mortgage is that your debts cannot exceed 28% of your net monthly income.  This is not because the banks are greedy but it's because YOU need to have fun.  YOU need to eat.  YOU need to save for retirement.

I want you as much as anyone for you to buy a home but you must do it wisely.  If you already know you checklist is on point and you are ready to see some homes, please call me at (410) 350-5848 or email me at nathaliaedmonds@gmail.com.  Our website is coming up soon!