Accountancy Resources
The dream of owning a home is something that millions of Americans work hard to fulfill on a daily basis. But can it actually hurt your credit? Absolutely. Having a home is a huge investment and a huge financial obligation. It is definitely a high-risk proposition that shouldn’t be entered into lightly. When you take a look online, you can use home mortgage calculators to help you determine just how much buying a home is going to cost you over the next 10, 20, or even 30 years.
And not using one can mean that you put yourself at an even higher risk of destroying your credit.
That house you’re looking at maybe the most gorgeous thing you’ve ever seen. You can picture yourself growing old in it. But can you picture yourself being trapped in a money pit? It might be a good idea to do just that. Things go wrong with homes every day; pipes burst, roofs leak, structures weaken. The next thing you know, you could be in debt much farther than you expected to be. Just as with a vehicle, problems with a home can snowball to the point where you may wonder if someone planned it that way.
When considering your mortgage application, banks will look at your history of repayments. Being a responsible person with the money you borrow will mean a lot to the bank. But if you are buying a home for the first time and have so-so credit and no repayment history, it could mean that you are an even bigger risk to the establishment.
The bottom line is that life is unpredictable. Ask yourself whether you have enough cash or credit — some kind of Plan B — to give you enough of a safety net in the event that something does happen which affects your ability to make your payments on time. And don’t contact any bank about buying a house until you have a plan in place.
A lot of homeowners take out a second mortgage on their homes to pay for big expenses, such as college tuition. But many homeowners have become victims of the housing market bust, finding themselves with real estate that is valued at far less than the combined notes on both mortgages.
Should this happen, you should know that your second mortgage will be subordinate to the first, which will mean that nothing will be left for the second mortgage holder should your primary mortgage be foreclosed on. If this is what occurs, you can expect to deal with collection agencies and maybe even spending more money on hiring expensive legal assistance to help you sort through the mess.
Did you know that every inquiry on your credit report can cost you up to 7 points? It’s true, and it can mean that your credit score takes a nasty hit at the beginning of your home buying process. When you fill out a mortgage application, your lender must check your credit, which will count as an inquiry. The good news is that any inquiries in the same 30-day period will count as one. But that’s not-so-good news for your actual credit points, which can decline by as much as fourteen should your lender place an additional inquiry on your credit score following the 30-day period.
Making your payments on time will make your bank happy, as will choosing a particular establishment to do such a large chunk of business with. But it won’t help you with your monthly mortgage payments, which will be a liability to you as long as there is money outstanding on your mortgage loan. Not only that but if your monthly mortgage payments cost you so much that they render you unable to qualify for other loan products, you could be looked down upon by your chosen establishment, regardless of your credit score.
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