The Tomaiolo Realty Group's Blog
Preparing to buy a home is a long and stressful process for many. You’ve spent months, or even years, saving for a down payment, planning your future, and building your credit to ensure you get the best possible interest rate on your loan.
Then you find out, when getting preapproved for a mortgage, that your credit score dropped by a few points. So, what gives?
There’s a lot to understand about how credit scores affect mortgages and vice versa. In today’s post, I’m going to attempt to cover everything you need to know about how applying for a mortgage can affect your credit score so you’ll be prepared when it comes time to buy a home.
Prequalification, preapproval, and credit checks
There are a lot of misconceptions about what it means to be preapproved or prequalified for a loan. Some of it is due to the jargon that is used in real estate transactions, and some of it is just a marketing technique on the part of lenders.
So, what does it mean to be prequalified vs preapproved?
The short version is that getting prequalified is a quick and easy process to determine whether you’re eligible to lend to and how much you’re likely to receive. It involves a quick review of your finances, and often includes either a self-reported or soft credit inquiry.
A “soft inquiry” is the type of credit check that employers typically use for a background check. It doesn’t affect your credit score, as you are not applying to open a new line of credit. In fact, many lenders’ process for prequalification is a simple online form that doesn’t even require a credit check. We’ll talk more about the difference between soft inquiries and hard inquiries later.
The simplicity of prequalification makes it a simple and easy way to get started. But, it isn’t always accurate in how well it predicts the type of mortgage and loan amount you can receive. That’s where preapproval comes in.
When you get preapproved for a loan you fill out an official application (you often have to pay for these). This will request documentation for your finances and assets, and will ask your approval to run a detailed credit report.
These credit reports are considered “hard inquiries” and are a vital step in getting approved or preapproved for a mortgage. However, they also, at least temporarily, lower your credit score.
Why hard inquiries lower your credit score
When any creditor, be it a bank or credit card company, is determining whether to lend to you, they want to know that you are a safe investment. To determine this, they want to know how frequently you pay your bills on time, how much you owe to other creditors, and how financially stable you are right now.
When you make multiple inquiries in a short period of time, it’s a red flag to lenders that you might be in trouble financially. Thus, hard inquiries will lower your credit score for 1 to 2 months.
Applying to multiple lenders: the silver lining
When borrowers apply for a mortgage, they often shop around and apply to multiple lenders. While it may seem that all of these hard inquiries will add up and drastically lower their credit score, this isn’t the case.
Credit bureaus take into account the source of the inquiries. If they realize that you are applying for mortgages, they will typically recognize this as rate shopping and group these applications together on your credit report, counting them only as a single inquiry. This means your score shouldn’t drop multiple times for multiple mortgage preapprovals that were made within a small time frame.
Now that you know more about how mortgage applications affect your credit score, you can confidently shop around for the best mortgage for you and your family.
For those who love reading, the right nook with the perfect amount of light is a dream come true. Often times, these areas are found in a quaint coffee house or an old library. But what about in your home? Here are a few things to think about when creating your dream, reading corner.
• Space: You may need several shelves for your books, but your nooks only need a little bit of space. It should be somewhere quiet and inviting either inside your home or even in your back yard. No matter your decorum, reading nooks generally take up a small fraction of a room or outdoor area.
• Lighting: Make use of any lighting you find comfortable. You may opt for natural lighting by using a sunlight, large window, skylight or simply setting your nook up outside. If you want to get that quiet, somber, library feel, try using a small, free-standing light with a soft bulb or fix a little lamp to the wall close to your seat. Try to avoid using candles or dimly lit bulbs unless they’re supplemental to your main light source. This will make sure you avoid eyestrain so you can keep enjoying your space without the headache!
• Chairs and Tables: The seating in your nook should be comfortable and cozy. Smaller seating options may be your best bet when looking to unwind and relax. Adding wood or wood-like side tables with a dark stain can help give you that rustic feel. If you’d prefer a simpler, more modern corner, try sleek neutral colors for your table. These can be found in almost any material.
• Sound: For those that love reading while listening to soft music, you could use a nice set of earbuds or headphones. If you’d prefer to have your ears free, a quality sound system with small “hotspot” speakers may do just the trick.
A reading corner doesn’t need a lot of space, but placement strategy is key. Here are a few ideas to get you started.
• Armchair Plus Floor Lamp: One way to get the perfect lighting without windows is to place a floor lamp and an armchair in a corner. You’ll have a perfect corner for reading – simple, well-lit, and classic. Some floor lamps come with a built-in table, which can save you space if you want to keep everything consolidated.
• Children's Reading Corner: The youngest household members can also have a corner of the room designed to encourage reading. Only a small armchair or even a beanbag or poof is needed and can be placed in the most illuminated part of the room.
• Chair by the Window: A chair by the window is the simplest way to put together a corner for reading. Complement it with a few shelves and decorations, and you’ll have a modern and neat cove for your reading time.
• Built-ins: If you have more space, install a window seat or bench in front of a window. Top it with a comfortable cushion and throw pillows. Use shelving below as an organizer that can be used to store books or other objects. The shelving can also be used as a neat table, too!
Now that you have a few tips and tricks under your belt, go set up your reading nook! If you’re in the market for a new home with little areas that can be used as your own, personal escape, give me a call. I’d love to help you find your perfect nook in your perfect home.
Are you a productive homebuyer? If not, you may miss out on an opportunity to acquire your dream residence.
A productive homebuyer understands the ins and outs of the real estate market. As such, this individual may be better equipped than others to purchase a top-notch residence at a budget-friendly price.
Ultimately, operating as a productive homebuyer may be easier than you think – here are three tips to ensure that you can become a productive homebuyer in no time at all.
1. Narrow Your Home Search
If you know what you want to find in a dream home, you can maximize the time and resources at your disposal.
For example, if you prefer a home in a big city, you can start searching for houses in the city of your choice. Or, if you enjoy the unparalleled serenity of small town life, you may want to focus exclusively on houses in various towns.
You also should consider your day-to-day activities as you kick off your home search. If you attend college classes every day, you may want to find a house close to school. Comparatively, if you regularly take the bus to work, you may want to consider homes that provide quick, easy access to public transportation.
2. Establish a Price Range
Although you know that you want to buy a home, you may have no idea what it will cost to obtain your dream home. However, if you enter the housing market with a home price range in hand, you can quickly and effortlessly navigate the homebuying process.
Meet with banks and credit unions in your area. That way, you can learn about myriad home financing options and choose a mortgage that complements your finances.
Don't forget to ask bank and credit union professionals for mortgage recommendations and suggestions as well. These mortgage specialists are happy to teach you about many mortgage options and ensure that you can make an informed home financing decision.
3. Work with a Real Estate Agent
A real estate agent is a homebuying expert who will do everything possible to help you optimize your productivity. If you collaborate with a real estate agent throughout the homebuying process, you can increase the likelihood of getting the best possible results.
A real estate agent will set up home showings, negotiate with a home seller's agent on your behalf and help you get the best price on a home. By doing so, this housing market professional will ensure that you can enjoy a seamless homebuying experience.
Let's not forget about the advanced housing market knowledge that a real estate agent possesses, either. A real estate agent understands the challenges of buying a home and will help you identify and overcome these difficulties. He or she will even answer any homebuying questions, at any time.
Become a productive homebuyer today – use the aforementioned tips, and you can maximize your productivity as a homebuyer and reap the benefits of a quick, efficient homebuying journey.
Buying a home may seem like a smart financial move. However, it may not always be the right time or the right move for you. While buying a home is a great investment, you may not be ready to buy a home of your own. The following questions should help you to determine whether or not you are fully ready to buy a house in the near future.
How Much Money Do You Make? How Much Have You Saved?
buying a home is a significant expense. First, you’ll need quite a large sum of money for a downpayment and closing costs on the home. Second, to get approved for a mortgage, the lender will look at every part of your finances from your income to your assets. Once the home is purchased, you’ll also need quite a bit of capital for expenses including insurance, taxes, HOA fees, emergency funds, utilities, and furniture. You don’t want to buy a home only to be overwhelmed with costs. You want enough of a financial cushion to enable you to furnish your home, decorate your home, and not have a completely empty bank account. That’s why you should make sure that you do make enough money to buy a home.
How Much Debt Do You Have?
If you have established that your income is enough to buy a home, the next thing that you need to establish is that your debt isn’t too high. Before you enter into the adventure of homeownership, you’ll need to make sure that your bills are under control. These expenses include things like car loans, student loans, and credit card bills. Your lender will put your debt into consideration as a part of your entire financial picture. Your debt (including your proposed mortgage payment) should be less than around 36% of your gross income. Before you take the leap into buying a home, you’ll need to make sure that your debt is under control. If you need to take a step back and pay your bills down before you start house hunting, you should as it will make buying a home easier for you.
Are You Seasoned At Your Job?
In order to secure a mortgage for a home, you’ll need to show that you have been at the same job for a certain period of time. Your average income will probably be calculated based on how long you have been at the company and your job history. You should be able to explain any income gaps, changes in positions or companies. Otherwise, you’ll appear to be an unstable person to lend to. Lenders want to know that you’ll have a steady, stable income.
How Is Your Credit?
In order to secure a mortgage, you’ll need to have a good credit score. Check on your credit report when you begin thinking about buying a home. If your credit is on the low side, you’ll want to work on bringing that score up.
Color can – and should – be used to decorate your home, but for most of us, too much bright color is more obnoxious than invigorating. Those screaming bright yellow walls may look amazing in the magazine spread, but you may not be prepared to live with that much color in your own space. Opting for colorful accents instead of going all in and painting a room a bright tangerine, violet or apple green can help you create an appealing space that is comfortable but not overwhelming.
5 Ways to Incorporate Bright Colors in your Home
Bright colors can be most appealing and impactful in smaller doses, according to HGTV. Learning how to incorporate them into your home without creating a chaotic and overwhelming space is key to using bold, lively shades in your décor.
Create an accent wall: A single wall painted with bold color or adorned with a bright, patterned wallpaper can become a focal point. It is also an inexpensive way to make a colorful statement without overwhelming your space or your bank account. Best of all, because you are only painting or covering a relatively small space, you can splurge on amazing paper or paint products.
Use textiles: You don’t have to buy brightly colored furniture to make a splash in your space. Use bright throws and accent pillows to liven up the room instead. These accents are easily swapped out if you decide you need a more traditional look and are easy to switch for different seasons or holidays, too.
Invest in art: A striking large canvas or mural can be an amazing focal point for your room and pull things together. Consider one large or several small pieces to light up your space and create an intriguing and appealing look for any room in your home.
Use rugs and flooring: Area rugs in a single bright color or with lots of color and texture can add a punch of color to any room, without overwhelming it. Use a rug to pull the room together with a new color you want to try, without committing to permanent changes.
Choose decorative accents: Home stores and sites abound, so if you want to test out a color, you’ve got many ways to do it. Choose your preferred color or palette then look for accent pieces from candles and picture frames to sculptural elements and tablescapes.
Before you commit to painting a wall or room, test out colors you think you like in smaller, more easily removed items, like the ones described above. This will help you determine your personal comfort level with bold colors and allow you to create a space that is uniquely yours.