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Homebuyers who have a better credit history over a longer stretch of time than a shorter one may benefit by a change to the credit-scoring model used by Experian.

Up until about 2016, mortgage lenders didnt use trended credit data and didnt differentiate between types of credit usage.

What is trended credit data?” It’s the information that credit bureaus gather on how consumers manage their credit card balances, and it goes beyond paying your credit card bills on time each month.

The updated model”Trended 3D”uses trended credit data to provide information on borrowers balances and credit lines over the past 24 months. Thats a longer view of consumers’ behavior than traditional credit reports provide.

Lenders prefer transactors who pay off their credit card balances every month over revolvers who carry balances from month to month. The change is that Trended 3D makes a distinction between those types of borrowers, giving transactors a credit-scoring advantage.

Mortgage lenders prefer borrowers who pay off their credit cards each month. If not, they like to at least see borrowers carry shrinking balances because theyre paying more than the minimum payment each month. What they dont want to see is someone making the minimum payment on their credit cards and to have credit balances growing.

The number of borrowers who are eligible for the lowest mortgage rates could increase through the use of trended credit data if theyve paid off their credit card balances each month for most of the past two years.

Fannie Mae started using Trended 3D in 2016 with its automated underwriting software. The government-backed home loans are used by more than 1,800 lenders. The extra data is supposed to give some borrowers more access to credit than they would have under the old scoring models.

Fannie Mae only uses trended credit data for conventional loans. It doesnt use that information when making approval recommendations for FHA-insured or VA-backed mortgages.

Published with permission from RISMedia.

If you’re looking to lower the interest rate on your existing loan, you may be thinking of refinancing your mortgage. And if you currently have an adjustable-rate mortgage, you may be considering switching gears entirely and taking advantage of a fixed-rate mortgage.

While an adjustable-rate mortgage typically has a low interest rate for the first several years, the interest rate will periodically adjust based on market conditions after that time period has elapsed. This can cause mortgage payments to change dramatically, sometimes with little or no warning.

Further, the rate at the beginning of an adjustable-rate mortgage repayment period is often lower than the rate on a fixed-rate mortgage. This makes them a viable option for homebuyers who plan to move in a few years”or for people who have limited funds for a mortgage now, but expect to have more income or lower expenses in the future.

Pros and Cons of Switching to a Fixed-Rate Mortgage
Some homeowners choose an adjustable-rate mortgage because of the initial low interest rate, but they’re often worried that their payments could skyrocket down the road. If you currently have an adjustable-rate mortgage and your interest rate is scheduled to adjust in the near future, it might make sense to refinance to a fixed-rate loan.

Refinancing your mortgage means that you would be replacing your old loan with a new one subject to different terms. In order to refinance your mortgage and switch to a fixed rate, you would need to meet your lenders equity and credit score requirements. The interest rate on a fixed-rate mortgage could be lower, but the repayment period might also be different, which could affect your monthly payments.

If you refinanced your mortgage, you would also have to pay closing costs. And it could take years for your lower monthly payments to offset the amount of the closing costs paid to obtain the new mortgage. Furthermore, some mortgage lenders charge prepayment penalties if borrowers refinance before the mortgage expires.

Depending on your lenders terms, the terms of a new fixed-rate mortgage and how much longer you stay in your house, you might save a lot of money, or little or none, in the long run.

Is Changing Mortgages the Right Move for You?
Switching from an adjustable- to a fixed-rate mortgage could help you avoid the uncertainty and stress of not knowing whether your mortgage payments will fluctuate and by how much, but there are additional costs to consider. Talk to your current lender, research fixed-rate mortgages and get specific figures so that you can decide if changing to a fixed-rate loan or sticking with an adjustable rate makes sense for you.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

Saving for a down payment can be a challenge. But its not impossible.

While a 20 percent down payment isnt necessarily the norm anymore, most loans require some money down from buyers.

Coming up with these funds can be a sticking point on the path to homeownership, especially when you consider that a 10 percent down payment on a $230,000 home requires having $23,000 in cash.

If a home purchase is on the horizon, here are a few ways you can begin saving for a down payment before crunch time sets in.

Automatic Savings
While you may already be doing this for your retirement account, a college savings account for your child, or any other savings account for a long-term goal, set up a separate automatic savings account at your bank specifically for a down payment. This will ensure that money is automatically transferred from your checking account on a regular basis.

If youre buying a home with your spouse, be sure to put the new account in both of your names”and require that both of you need to approve any withdrawals. Alternatively, you could set up a brokerage or investment account and buy low-risk investments for a year or so to truly make your money work for you.

Cut Expenses
This may be an obvious move that youre already taking advantage of, but it cant hurt to double check what youve done and see if you can cut anything else out of the picture.

To get started, take a look at your finances and see what you can cut back on”or eliminate entirely. Also, work on paying off high-interest credit cards first.

Borrowing From Relatives, Retirement
If youre still struggling to save, you may want to consider asking relatives for help.

Whether your parents are willing to gift you money so that you have enough to cover the down payment on your dream home, or relatives offer to step in and provide a zero-interest loan that you can pay back over the course of a few years, be sure to understand everything that borrowing from the family entails.

Another option includes borrowing against your retirement plan. Some 401(k) retirement plans have penalty-free withdrawals, while others allow employees to borrow against their savings to purchase a home. Youre basically repaying yourself for the loan, but its critical to pay it back in a timely manner, as waiting too long could hurt the balance of your retirement account.

These options can be tricky, so dont commit to them unless youre 100-percent comfortable with everything that comes along with them.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

Mortgage rates have been relatively low for years. Seeing them inch up can cause home shoppers to panic and possibly put their home purchase on hold.

The good news is that there are options when mortgage rates are rising.

First, it’s worthwhile knowing that small increases in mortgage interest rates shouldn’t affect buyers too much ” a one-half percent rise in mortgage rates is only about $28 more per month on a $100,000 loan.

A 30-year fixed-rate mortgage is the most common type of home loan. There are other types of home loans and other options that can make buying a home easier, though they often come with the caveat that a low interest rate now may mean a higher one later. Here are some options:

Get an ARM: An adjustable rate mortgage, or ARM, will have a lower interest rate than a fixed loan, but only for a certain number of years before it changes.

The interest rate will be fixed for three, five, seven or 10 years, then may go up if interest rates are rising. The longer the fixed-rate period, the less savings you’ll see in the interest rate.

Pay More Points: Paying discount points can lower your interest rate. Each point costs 1 percent of the loan rate to lower your rate by one-eighth to one-quarter percent. Paying two points, or $2,000 on a $100,000 loan, to lower a 4.25 percent loan to 4 percent equals $15 per month in savings.

You’ll have to calculate how many months it would take to make up that savings. In the above case, it would take 133 months of saving $15 per month to make up the $2,000 paid for the lower interest rate. That’s about 11 years of living in a home.

Make a Bigger Down Payment: Coming up with a bigger down payment is another way to afford higher interest rates on a loan. The more money you put down, the less money you’ll need to borrow”and, sometimes, it can help you get a lower interest rate.

Do the Floatdown Option: Pay a fee of one-quarter to one-half of a point to get a floatdown option to protect you if mortgage rates drop by the time you close on the loan. If rates fall during the typical 45 days it takes to close a home loan, you’ll get the lower rate.

Those are just some of the options borrowers have when interest rates are rising. Ask your mortgage provider for more.

I hope you found this helpful. Contact me for more home and real estate insights and info.

Published with permission from RISMedia.

Financially, theres more to buying a home than the purchase price”sometimes much more.

After the down payment, and once your closing costs and monthly mortgage payments are added up, it can be easy to forget some of the costly and hidden costs of owning a home. Take these added charges into consideration:

Property Taxes
Property taxes are set and collected by the state, county and local agencies. Sometimes multiple agencies collect funds through a property tax for services such as water, sewer, schools and fire and police departments.

The taxes can go up annually in some areas, depending on a citys services, so the following year’s cost may be difficult to predict. You’ll still want to find out what the current property taxes are on a home before buying. A real estate agent should be able to help you calculate estimated taxes for the following year.

Home Insurance
Since home insurance is required by mortgage lenders, this is one cost that youll be reminded of quickly. It can protect your home from natural disasters, accidents and thefts. Extra insurance for natural disasters, such as floods and earthquakes, can cost more but may be worthwhile.

Maintenance and Remodeling
A leaky roof, cracked foundation or other home problem can be found during the inspection or long after youve moved in. Home repairs can be expensive and something you dont want to put off. Experts recommend putting aside 1 percent of your homes value for maintenance each year.

Along with repairs, take into account any remodeling you want to take on. Kitchens, bathrooms and bedrooms are the most common areas for remodeling, which can cost thousands of dollars. Put some money aside each month in a savings account dedicated to maintenance and remodeling to make your life easier.

The same goes for home insurance, property taxes and other costs you may not think of when buying a home. Contribute regularly to a bank account to pay for the costs of owning a home, and youll be ahead of the game when the bills come due.

Published with permission from RISMedia.