Credit History Credit Scoring Lenders Require a Three

Understanding Credit • Credit Scores – Under 585=Low – 585 -700= Normal – 700

Maximizing Affordability • Debt Reconstruction – Auto Loans: Reduce Rate and/or extend them –

Ratios and Your Qualifications • Ratios are guidelines Lenders use in determining what you

PITI (Your Total Monthly Payment) • “P” stands for “Principal” – the portion of

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Credit History • Credit Scoring • Lenders Require a Three bureau merged Report – Experian, Trans Union, Equifax • Alternative Credit – Rental History • Credit Standards

Understanding Credit • Credit Scores – Under 585=Low – 585 -700= Normal – 700 & up =High • • Credit History Collections / Judgments / Inquiries Correcting Reporting Errors Know Your Rights

Maximizing Affordability • Debt Reconstruction – Auto Loans: Reduce Rate and/or extend them – Consolidate Credit Card Debt • Student Loans – Extend them up to 25 years • Explore Financing options – Fixed Rate vs. Adjustable Rate Mortgages (ARM) • Consider other Income Sources

Ratios and Your Qualifications • Ratios are guidelines Lenders use in determining what you can qualify for • Ratios vary based on Loan Programs • Front Ratio – Your Total house payment divided by your gross monthly income – usually 28% - 38% • Back Ratio – Your Total house payment and revolving or installment debt divided by your gross monthly income – usually no more than 38% - 45% • *Installment debt with less than 10 months remaining until they are paid off DON’T COUNT!! • Example --

PITI (Your Total Monthly Payment) • “P” stands for “Principal” – the portion of your payment that goes to reducing the loan balance • “I” stands for “Interest” – that portion of your payment that is interest • “T” stands for “Taxes” – 1/12 th of your annual property tax (prepaid) payment goes into your reserve account so the lender can pay your property taxes when they are due. • “I” stands for “Insurance” – 1/12 th of your annual insurance (prepaid) bill goes into your reserve account so the lender can pay your hazard insurance when it is due • “MI” stands for “Mortgage Insurance” – Required by law if you finance more than 80% of the value of your home. Protects the lender if you default.