The 5 C’s of Credit

Applying for a mortgage can be a nerve-wracking experience when you’re not sure what to expect. Before you go looking for credit, take a few minutes to understand what lenders are looking for:

How might you stack up in a lender’s analysis of the five C’s of credit?

CAPACITY

Be prepared to show that you can afford your payments. The lender will look at your income from all sources, and compare that with your monthly financial obligations.

CAPITAL

Your downpayment demonstrates that you can save and accumulate assets, and that you are more likely to do all you can to keep up with your mortgage payments.

COLLATERAL

This is the lender’s assurance that the mortgaged property is marketable and can be re-sold to recover the investment.

CREDIT

Your habits in meeting your debt obligations will be evaluated. Do you consistently pay your debts on time?

CHARACTER

Are you sufficiently trustworthy to meet your obligations? Your education and work experience will be factors, along with length of time at your current residence and job.

Tips for Moving During the Holidays!

 

 

Moving during the holidays is not the most convenient time, but moving disrupts routines any time of the year. If you’re scheduled to move over the holidays, celebrating will definitely be different than other years. It may take some extra effort, but you can still make it memorable. No matter which end of the move it falls for you—in your old place or settling into the new house—here are some moving tips:

  • Acknowledge the sentiment. The holidays trigger all kinds of emotions for people and when you add moving to the mix, there’s a large emotional component to the process. Leaving your old home with its memories can be tough. If you have children, you want to acknowledge that they will be missing their “usual” holiday, but keep an upbeat attitude. You can set the tone.
  • Maintain some traditions. Involve the whole family in planning some holiday activities. If you normally bake cookies, find a way to make that happen even if you forgot where you packed the cookie sheets! Locate holiday decorations when packing your old house and be sure to set aside a box, including ornaments, wrapping paper, etc. If you normally put up a tree, make room for a small one with a few decorations.
  • Plan some outings. Plan some time away from those moving boxes. Drive around the neighborhood to look at lights and decorations, go to a holiday craft fair or have a holiday meal at a favorite restaurant. If you have extended family you’ll be leaving, make sure to schedule some time with them.
  • Confirm moving plans. Things get rushed and busy during the holiday season. People take vacations and may be hard to reach. Be sure to call and confirm your move date with the movers or rental truck company. Make sure your utility companies know when to turn off or turn on your utilities.

 

Don’t forget to sit down, take a few deep breaths and make time to enjoy the holidays!
Merry Christmas and Happy Holidays!
(306) 244-7755

Pros & Cons of a 5 Year Fixed Mortgage

The shorter the amortization the larger the monthly payments. Under the right circumstances, a five-year fixed can be an excellent product that brings very favorable interest rates with it.

Fixed-Rate Mortgage Basics
 
One of the best things about fixed-rate mortgages is that you can count on your interest rate. Borrowers of variable-rate, or adjustable-rate, mortgages (ARMs) are vulnerable to potential increases in rates. The downside to a fixed-rate product is that if market rates drop your rate still remains the same.
Larger Monthly Payments
 
Monthly payments with a five-year mortgage are larger than for the same loan amount spread out over a longer period of time. If you had a loan for $150,000 at 5 percent, each monthly payment would be about $2,830. The same loan spread out over a 15-year term would have monthly payments of $1,182, and over a 25-year term you’d pay just $872 each month. The big question is whether or not you can really afford that larger payment. The lender will require that you have a higher income in order to qualify to make larger payments.
Lower Interest Rates
 
When it comes to mortgages, the lowest rates usually come for the shortest loan terms. This is probably the single best thing about a five-year mortgage. The difference could be 1 percent or more for a five-year as compared to a 15- or 25-year product. It’s a matter of simple math: the lower your interest rate, the less you pay in the end.
Life-of-Loan Costs
 
Over the life of the loan the savings for a five-year loan are great. That $150,000 mortgage at five percent would cost you a total of $289,883 in principal and interest if you took 25 years to pay it. That’s nearly double the original home cost. Paid over 15 years the total cost would add up to $213,514. If you paid it off in five years, the total cost would be $169,841, not that much more than the original loan amount.
Who Should Get a Five Year Mortgage
 
For anyone who can afford to make the higher monthly payments, a five-year fixed mortgage is an excellent option. Refinancing to a shorter term is a great option for someone who’s been in a house a few years already. Shorter mortgages are also a good product for someone who is a conservative investor and would prefer to pay off his home rather than to use the extra cash toward other investments.
Who Should Not Get a Five Year Mortgage
 
Many people argue that if you can secure a low rate mortgage, you’re better off with a longer term that will free up more money every month to invest elsewhere. A disciplined investor who will actually follow through with the alternative investing plan may be able to rationalize this strategy, but if you’re prone to temptation and might just spend the extra money on foolish things, you’re better off paying the mortgage down. Few investments come with any guarantees, but you can count on the lower mortgage interest rate that comes with a shorter term.

What Comes First the Mortgage or the House?

Many people get it backwards. They shop for a home, and then make an emotional decision without knowing what they are able to afford. And then are surprised and disappointed to find out that they cannot get the financing. Thankfully, mortgage brokers do the homework for the applicant to see whether they have the ability to repay the loan while in the lifestyle they are accustomed to.

Something’s to consider about your lifestyle:

  • Are you single or a family of six? Costs for food and clothing alone are very different.
  • Do you take annual vacations?
  • How often do you like to eat out?
  • Are you involved in costly sporting activities?
  • Would you be willing to sacrifice these things for a bigger or nicer home?

Also take into consideration the following:

  • Do you have car payments?
  • Do you have to repay student loans?
  • How much do you owe on your credit cards?
  • Do you have bad debts?

Falling in love with a home without considering the REAL impact on your lifestyle is a recipe for unhappiness….either in re-adjusting to a “lesser” home or disappointment over the lack of vacations or entertainment.

Our advice is to focus on your financing. Find out what you can afford from a lender’s perspective, but then, spend some time considering the cash flow realities of your choice.

Additionally, we can advise you on ways to properly represent and transfer your assets, how to explain and document your income, as well as, assist you to get your optimum credit score. This process will help smooth out some of the bumps during the mortgage process, giving you the best change to the best mortgage rates available. All your prep-work will pay off in the end.

The choice is clear get the mortgage before the house!