With September’s back-to-school vibe hanging in the air, I thought it might be best to leave rate talk to pundits, data drivers, and decision makers, instead focusing this month’s article on easy rules and reminders for mortgage financing success. My hope is that these simple tactics will help you win.
Always Track the Last Action
Mortgage underwriting is like connecting the dots of the past and present to predict the future — that’s the concept of “Ability to Repay,” put forth via the Dodd–Frank Act. Thus, it’s good to save the last of anything, paperwork wise. Maybe you earn variable income and were only on a job for 90 days — save the last pay stub you got. Maybe you are moving money and closing out an account — save the last statement you get. Maybe it’s the last payment you made on your student loan — save it and store it. These little pieces can help connect the dots with less headaches in the future.
You Can Easily Juggle Your Credit Score
Delinquency is the primary factor in credit history evaluation, and debt load is the second. The balance of debt you carry on credit in relation to its credit limit is super-impactful to credit scoring – and it’s also the easiest piece to manipulate for quick credit score bumps.
From best to worst, the credit ranking scale for the percentage of balance to limit ratio goes: 19 percent, 25 percent, 33 percent, 50 percent, 75 percent, 90 percent, 100 percent, +100 percent. Example: If you owe $1,900 on your Apple credit card with a $10,000 limit, then you have a balance-to-limit ratio of 19 percent and your credit is probably great. This is why deferring even just $1 over your original student loan balance messes with your credit score so much: You are in the +100 percent bucket of balance-to-limit ratio. (And no, they didn’t tell you that when you signed up for deferment in COVID.) This wide range of scoring impact is also why your score can change day to day — so don’t worry about it juggling around, unless you are about to apply for significant credit.
Super-Simple Math Hacks
Your closing costs when buying a new home is around 2 percent of the purchase price without consideration to commissions.
$100,000 in real estate purchased costs around $650 each month.
If you are in the 24 percent tax bracket, the tax benefit you get on a primary residence at the federal level is, approximately, the property tax cost on a new home in California.
While we wait for whatever the Fed will announce this month, combined with however the markets will react, I hope these tips, tricks, and tidbits give some digestible, implementable tactics for success this September and beyond. Go, you!
Austin Lampson is a licensed mortgage professional and branch manager of Origin Point Mortgage. She has spent the last quarter-century helping her clients balance math and emotion to achieve their financial goals. Reach Austin at (805) 869-7100, austin@austinlampson.com, or visit austinlampson.com.
