If the Coronavirus (COVID-19) Pandemic has taught us anything it’s that everything can change very quickly. Everything from the way we work, learn, dine, clean, entertain, and even socialize was turned upside down and the world learned how to adapt in new, creative ways. During times of uncertainty, it’s more important than ever to evaluate and assess our bills, and probably the most important bill you have is your mortgage, but do you know how the process works? If you answered no you are not alone. Here are some things to consider from Freddie Mac when it comes to navigating the ins and outs of the mortgage process.
Homeownership is still valuable
● A fixed-rate mortgage and building equity over the long term offers stability
● Potential homebuyers who are self-employed won’t be a disadvantage when applying for a mortgage.
● Being cost-burdened prohibits people from building up an emergency fund to get through unexpected hard times. A Freddie Mac survey shows 84% of renters believe renting is more affordable than owning, yet 42% of renters paid more than a third of their household income on rent compared to 24% of owners on their mortgage.
Mortgage options
There are many options available to homeowners and today many homeowners are educated on the options and have a myriad of tools available at their fingertips.
● There are low down-payment loans for qualified borrowers and factory-built housing.
● Use a mortgage calculator to check current rates based on how much you are using for a down payment, your credit score, the term, and the area.
Work on improving your credit if you have a low score
According to Freddy Mac challenges with financial understanding and preparedness affect future homebuyers from all walks of life, as well as their families and communities. Increasing affordability issues like inadequate savings for down payment requirements, increasing housing prices not keeping pace with income, and housing stock shortages can frustrate a potential borrower’s home search. One of these issues is poor credit scores. Low credit scores can prevent you from owning a home but there are ways to improve it. Here are some tips from badcredit.org to help improve your score and get you on the fast track of purchasing a home.
Improve your payment history
Late payments can lead to all kinds of problems that can hurt a credit score, including:
● Collection accounts
● Repossessions
● Foreclosure
● Bankruptcy
Enlist the Help of a Credit Repair Service
A credit repair service can address errors and negative items on your credit reports by disputing inaccurate or expired information and can help fix identity theft problems.
Pay off credit card debt
If you can keep your credit balances low while you’re shopping for a house, it will show lenders that you’re not relying on credit cards to get by each month. One way to do this is by not using your credit cards much, if at all, while shopping for a home loan. Then use whatever extra money you have to pay the balances off.
Check and Fix Your Credit Reports
Checking your credit reports is something you can do yourself for free, or you can hire a credit repair service, as we discussed above, to do it for you. The main thing you’re looking for are errors.
Check your three credit reports with Equifax, TransUnion, and Experian once a year and look for:
● Incorrect accounts
● Duplicate accounts
● Fraudulent accounts, such as from identity theft
● Name misspellings
● Incorrect payment statuses
● Information or accounts from an ex-spouse
● Outdated information, such as negative accounts more than seven years old
● Incorrect date of first delinquency on a collection account
Financial Literacy
At Richmond Neighborhood Housing Services our Financial Counseling programs are designed to support and assist individuals in understanding and mastering the “basic” financial habits of budgeting, managing credit, and homeownership. We serve residents through education programs that include financial literacy, home loan programs, foreclosure prevention, and affordable rental counseling.
Although we are living in uncertain times, the dream of owning a home is still a possibility and starts with a clear understanding of the process. Richmond Neighborhood Housing Services offers programs that are designed to support and assist individuals in budgeting, money management, and homeownership. For additional information on our programs, contact us at info@eastbaynhs.org, call (510) 237-6459, or visit our programs page.
Sources:
https://sf.freddiemac.com/articles/insights/three-ways-to-help-borrowers-understand-the-mortgage-process-during-turbulent-times
https://sf.freddiemac.com/working-with-us/creditsmart/overview
https://sf.freddiemac.com/articles/insights/how-modern-financial-education-empowers-homebuyers-with-relevant-knowledge
https://www.badcredit.org/how-to/ways-to-fix-your-credit-to-buy-a-house/