Credit Scores and Home Loans

Did you know that the great Real Estate Bubble that we experienced over the last several years was littered with people buying Investment Properties and 2nd Homes? About 45% of all the home loans written between 2003 and 2007 were rentals and 2nd homes. Another 23% came in the form of Sub-Prime loans for people with bruised and severely damaged credit.

Today, foreclosures are rising at record levels, with a large number of the loans in default coming from the Sub-Prime market and the investment arena. As a result, lenders are in a position of raising their rates to offset their risk associated with the loan requests.

If your credit is damaged, expect to pay more for your home loan. Please look at these examples:

Brother A and Brother B both work for the same company in the same job with the same salary. Brother A did a great job of managing his credit and maintains a 720+ credit score. Brother B on the other hand carries high credit card balances in relation to his credit limits causing his score to be 640.

These two brothers want to live in the same neighborhood and actually like the same model home. they are both purchasing a $200,000 home with a 5% down payment. So how does the difference in their credit affect their cash flow?

Brother A
$190,000 loan amount 7.0% $1,264 Principal/Interest Payment $106 PMI

Brother B
$190,000 loan amount 7.5% $1,329 Principal/Interest Payment $143 PMI

Brother B will pay $101 per month more than Brother A and will pay $6,974 more in the first 5 years of the loan.

As you can see, managing your credit can save thousands over time. It has never been more important than it is today as lenders are pricing their loans based on their risk.

If your credit score is below 720, you may pay a premium for different loan types, credit cards, and insurance products. I recommend you take the time to Repair your Credit to save yourself thousands of dollars in all areas of your financial portfolio. Click on the link Fix Credit Now to get started.

In 90 days or less, you can be on your way to much better financing and saving thousands of dollars in unnecessary interest charges.