When you’re looking to finance something (a car, home, furniture, etc.) the odds are pretty high that the lender will do a credit check. But what does that mean and does that affect your score? Here’s what you need to know about your credit report and the differences between hard and soft credit checks.

What Are Soft Credit Checks?

Your credit report is one of the most important aspects of buying a home. It will tell the lender how much debt you carry and whether you’ve ever foreclosed on a home. It also includes some information such as name, address, and social security number. Your credit score is determined by taking into account all the information provided by your credit report. The higher your credit score, the lower the interest rates available to you.

Do Credit Checks Affect Your Credit Score?

Yes, hard credit checks could potentially lower you credit score a few points. Losing those few points may not seem like a big deal, but when you’re aiming to buy a home with the highest score, every point counts. No one wants to see that their score could have been improved by something as small as a credit inquiry.

Soft Credit Checks

Fortunately there’s a way for lenders to see your score without it hitting your credit score. This process involves a lender to get a general assessment of how credit worthy you will be going forward. If everything looks good, you can move to get pre-qualified with a lender and indicates that your score is favorable and you have a pretty good chance of getting approved for a loan.

By using a soft credit check, lenders can likely tell if a borrower is approved for credit before they do a hard pull. This helps eliminate an unnecessary hard inquiry. Another perk of soft credit checks is that you can pull a general score at anytime using free online credit monitoring apps. Many of these services also alert you if something suspicious happens on your credit report so you can take action immediately. Additionally, these apps break down areas of strength and areas of opportunity with your score. It will let you know if credit utilization could use some improvement, and if you have already hit your max hard inquiry count for this year. Frequently checking your score with one of the apps can help you improve your score to help prepare you to buy a home.

You may also like: 4 Simple Steps to Repair Your Credit Score

Credit score is a large part in buying a home and improving your score could mean qualifying for lower interest rates and better terms. Unfortunately, most people only think about credit repair when it matters and are not proactive in repairing it ahead of time. Here are 4 simple steps to repair your credit score so you can qualify for the best home with the lowest rate.

4 Simple Steps to Repair Your Credit Score

Review your credit reports

The first step in repairing your score is examining it. The credit bureaus are required to give you a free copy of your credit report once a year, you just need to request it. Another way to check is to use a free online tool that gives you a breakdown of your scores. Using these tools you can see the areas of your credit in which you are excelling and the areas which could use some improvement.

Increase credit limits

Credit card utilization holds a lot of weight in determining your score and therefore increasing your limits is one of the best steps to repair your credit score. Generally speaking, carrying a balance of 50% of your available credit to will negatively impact your score. And maxing out your cards will definitely hurt your overall score. If you owe $2,500 on a card with a $5,000 limit, and you increase your credit limit to $7,500, your score will improve immediately. This drops your utilization percentage down which helps your overall score.

Pay down outstanding balances

Decreasing your percentage of available credit can make a significant impact on your score. Similar to increasing your credit limit, paying down outstanding balances helps your credit card utilization percentage. Paying off balances may be tough as a short-term improvement to increase your score, but it should be a long-term financial goal. Over time your credit score will increase and you won’t pay as much interest.

Pay off high interest “new” cards first

Since age of credit matters to your credit score and interest rates matter to your bank account, it’s a smart financial move to pay off high interest new cards first. Paying off high interest cards will help you save money over time since you will be saving the interest on those payments. And paying off new cards first will help increase the average length of credit, which will help your score. Using the saved money from these cards toward paying off other account will help you continue to lift your score (snowball effect), without really changing your spending mindset.

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The Seattle-Tacoma housing market continues to be attractive for home buyers. However, you need to consider if now is the right time for you to jump into home ownership. Just because your friends and family all own homes, doesn’t necessarily mean it’s a financially smart decision for you to. Here are 4 signs you’re ready to buy a home.

4 Signs You’re Ready to Buy a Home

No more debt

One of the top signs you’re ready to buy a home is that you no longer have debt. You have eliminated credit card debt as well as your car payment and you’re now banking more each month. The extra cash flow that is no longer going toward your monthly debt can cover home owner expenses such as property tax, homeowner’s insurance, repairs, and furnishings. Considering the down payment is the top hurdle for most home buyers, the extra cash can cover that expense as well.

Credit score

If you’ve been watching your credit report and taking actions to improve your score, now could be the time to buy a home. Since your credit score is one of the most important factors in qualifying for a home loan, a higher score could land you a higher loan amount. With a higher credit score comes a lower interest rate, which ultimately means a lower monthly mortgage payment and less money over time.

Thought about all the monthly expenses

With owning a home comes many monthly expenses outside of your mortgage. Utilities, property taxes, HOA fees, and insurance bills are all costs you have to budget for. If you have done the research to include a ballpark estimate of all of these expenses and you’re comfortable with the outflow, it’s one of the best signs you are ready to buy a home.

Ready to settle down

Unless you’re in the house flipping business, your home is a long term investment. It’s best to plan to stay in a home for at least five years. If you’re just starting a family and need a certain number of bedrooms and outdoor space, it may be a wise decision to look into buying a home since renting an apartment of that size could cost as much or more. Additionally, if you have dreams of making your house a home, with personalized renovations and décor, owning a home may be right for you.

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The VA home loan offers some unbeatable benefits for active military members and veterans. From $0 down, to no mortgage insurance, to relaxed credit requirements, the VA home loan is definitely worth exploring while searching for a home. Here are the top 4 benefits of the VA home loan.

Top Benefits of the VA Home Loan

$0 Down Payment

The down payment is typically the most challenging hurdle for prospective home buyers, especially first-time home buyers. Qualified veterans can obtain a VA home loan without making any down payment at all. Compared to Conventional and FHA home loans, this translates to significant savings upfront. Conventional home loans typically require at least 10 if not 20 percent down, while FHA home loans require at least 3.5 percent down. The amazing benefit of being able to purchase a home with $0 down is that veterans get to fulfill the American Dream without having to spend years saving up for a down payment.

No Mortgage Insurance

A lot of first-time home buyers are going with an FHA loan since the down payment required is 3.5% (as opposed to the conventional 10 or 20 percent). The down side to paying 3.5% down is that it comes with mortgage insurance of a few hundred dollars a month (depending on the loan amount). The VA home loan doesn’t require monthly mortgage insurance. Skipping the monthly mortgage insurance will help veteran home buyers save hundreds of dollars per month.

Low Interest Rates

Typically, the VA home loan offer the lowest interest rate of all loan types. Since the VA guarantees a portion of every VA loan, financial institutions can offer lower interest rates than other loan types (0.5 to 1 percent lower than conventional rates). On a 30 year $250,000 loans, the difference between paying 4 percent and 4.75 percent equates to $40,000 in savings over the life of the loan. This is one of the top benefits of the VA Home Loan.

Flexible Credit Requirements

Veterans don’t need a perfect score to secure home financing. In fact, the flexibility of credit score allows more veterans to secure a home loan than if they went with a conventional loan. Some lenders allow scores as low as 580 which is significantly lower than the 620 minimum score for other loan types. The flexibility of credit requirements allows veterans to buy a home faster as they don’t need to spend years on credit repair.

You may also like: Financial Benefits of Owning a Home

Buying a home is 38% cheaper than renting a home. This is especially true if you plan on living in one space for at least seven years. As mortgage loans are more affordable now with down payment assistance and different loan options, let’s take a look at the financial benefits of owning a home.

Financial Benefits of Owning a Home

Building equity

One of the largest financial benefits of owning a home is building home equity. When you pay rent to your landlord, you’re setting aside a chunk of money that you’ll never see again. Additionally, landlords have the right to raise your monthly rent yearly, so what you pay today could differ than what you pay monthly next year. When you sign a mortgage loan, you are agreeing to the monthly payment for the life of the loan (likely 15/30 years). So, you can accurately budget your spending every month on your mortgage. When you pay your mortgage, you are building equity as you are paying off your loan. This means that unlike renting, you will see these funds applied directly toward what you own.

Tax benefits

Another one of the biggest financial benefits of owning a home is the mortgage interest deduction. Most of your monthly mortgage payments will go towards interest in your first few years of homeownership. You are able to deduct that interest from your taxes, if your loan is $1 million or less. Additionally, any taxes you pay to the government on your property are deductible from federal income tax.

No longer moving every year

Homeownership increases sustainability and stability. While moving every year from rental to rental may be necessary for your lifestyle, it is a major inconvenience and a financial and emotional burden. Renting can mean you may never know where you are going to live in a year, or how much you’ll be paying. Owning a home allows a financial and emotional investment in both your physical home and your community.

Use your home investment toward another investment

The equity that comes from paying a mortgage is what allows many individuals make future investments in the same home (refinancing, renovations), a higher-valued home (using the equity toward a down payment), a second home (using equity toward a second down payment), or additional financial goals (paying off debt, buying an RV). A home equity line of credit helps homeowners use that part of their home that’s already paid off to obtain financing for additional investments.

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It’s true that anyone can shop for a house, without formally signing on with a real estate agent. But, unless you have time to make home shopping your part time job, an agent will help match you with a compatible property much faster. Here are 4 benefits of using a real estate agent as you search for a new home.

4 Benefits of Using a Real Estate Agent

Expert in the Field

For most large projects, you feel more confident in reaching the end goal with a solid and hard working team. When you hire a real estate agent, they are in your corner 100% of the time. Remember, this is their job, and they have dealt with many situations similar to your in the past. Additionally, real estate agents are able to use their resources to find solutions for you if they don’t have the answer right away. Using a real estate agent will give you the confidence and peace of mind that everything that needs to happen is happening.

Pricing Pro

Most agents can set a price on a home the minute they walk in the door. If they have a lot of expertise in a market, they know how well a neighborhood holds its value too. Agents have the experience to know whether a house is overpriced or underpriced, and can give you the best advice accordingly. An agent will have such a good idea of what you’re looking for so that he/she won’t even waste your time touring houses that won’t work for you. Additionally, real estate agents are market experts, so they know market trends, and can help direct you in the most beneficial direction for you and your wants/needs for your new home.

Trusted Vendor Recommendations

A big part of buying a home is having a home inspector come out to look at it before you buy it. This helps protect you from having to pay for any large fixes that are found along the inspection, or gives you leverage for negotiating a lower sale price. Using a real estate agent opens up their recommendations for home inspectors and other vendors needed along the way. Wouldn’t you feel the most comfortable hiring someone who comes highly recommended?

Negotiation

One of the top benefits of using a real estate agent is negotiation. It’s uncomfortable to negotiate, especially as a first time home buyer.. So let your agent take care of all of that! Having an agent write the requests objectively and forward them to the seller, saves you from getting emotional about the deal. It’s best to let your agent take the heat in difficult negotiations so you don’t get upset about the property, or say something you wish you hadn’t.

You may also like: Tips to Finding the Perfect Western Washington Neighborhood

A large part of what makes a house a home is the neighborhood that surround the house. Amid the excitement of searching for the perfect house for you and your family, don’t forget to pay attention to its surroundings. After all, a neighborhood you love, may be worth sacrificing an extra bathroom or white cabinets. Here are 4 tips to finding the perfect Western Washington Neighborhood.

Tips to Finding the Perfect Western Washington Neighborhood

Note Your Most Frequent Stops

Make a list of all the places you visit on the regular so you know how far the western Washington neighborhood would be from your frequently traveled locations. These places include your gym, church, grocery store, relative’s house, or shopping mall. For each neighborhood you’re considering moving to, list how many miles and how many minutes it would take to drive there. The gas money alone may steer you toward a closer neighborhood. The last thing you want is to regret purchasing a house because it’s too far from your amenities.

School District

Even if you don’t have school age children, buying. A home in a Western Washington neighborhood within a good school district will lift the overall neighborhood safety as well as make your home easier to resell in the future. If you do have school age children, visit each school the home in question is zoned for and make sure it’s to your liking. It’s frequently difficult to opt in to a certain district if you are out of bounds, so make sure you’re setting up your kids for success.

Take a Stroll

Before signing your closing paperwork, make sure to walk round the community on a weekend. Are there a lot of families out and about doing the same thing? Or are most people sticking indoors with the blinds shut? Are people friendly who you pass? Are the parks and common areas well taken care of? Answering these questions will give you a good idea of the sense of community and can also be an indicator of safety. You want to know what to expect when you move into your new home.

Trust Your Gut

The Western Washington neighborhood may be safe and in a good school district, but none of that matters if you don’t feel comfortable there. Can you see yourself spending time on the front porch? Do you see yourself building lasting relationships with your neighbors? Do you think your kids will get along with the neighborhood kids? Your neighborhood can have a huge impact on your daily life. It’s worth the time and effort to research, to make sure you’re moving into the perfect place for you and your family.

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Your credit score is a tool that lenders use to measure to risk of doing business with you. Your credit score is one of the largest pieces that determines if you qualify for a home loan. Here are the factors that make up a credit score.

Factors That Make Up a Credit Score

Payment History

Payment history is the most influential category of your credit score. Simply, if you have a track record of paying all of your bills on time, you are set in this category. The presence of negative information on your credit report will result in a lesser number of credit score points awarded. If you are looking to work on improving your credit history, consider focusing your efforts on this category first as it plays a major role in your overall score.

Amounts Owed

This category looks at the amount of your total debt. This section makes up 30% of your total credit score. Revolving utilization, or the debt to limit ratio on your credit account, is the most important factor considered within this category. Generally, the fewer number of accounts with balances on your reports, the better.

Age of Credit

Did you know that the age of credit also matters? This category makes up 15% of your credit score. Age of credit is comprised of the average age of accounts, how long accounts have been open, and the age of the oldest account. Because of this, it’s not always a good idea to terminate retail lines that you opened in high school/college. These accounts show longevity in your credit account.

Mix of Existing and New Credit

The mixture of accounts on your credit reports is also examined. Both existing and new credit is worth 10% of your credit score. It can help your credit score to have a variety of different account types on your reports. These account types include revolving credit account like credit cards, installment payments like student loans, auto loans, and mortgages. The mixture of loan types positively effects your score. Be cautious of applying for credit too often. When a lender pulls your credit it shows as an inquiry. Too many inquiries and it can negatively affect your credit. The good news is that any harm an inquiry has on your report only lasts for 12 months’ maximum. Additionally, if you’re shopping for credit, like a mortgage or auto loan, multiple inquiries within a short amount of time may only be counted once for scoring purposes.

You may also like: Helpful Real Estate Terms to Know

Purchasing a new home is a very exciting process but can seem like a daunting task especially for first time home buyers. Researching key terms ahead of time will help your home buying process go as smooth as possible. Here are six helpful real estate terms to know.

Helpful Real Estate Terms to Know

Multiple Listing Service

The Multiple Listing Service (MLS) is a database of past and current relate estate listings in a given area. Each region has their own MLS and only licensed real estate agents have access to the listings. However, real estate agents can research listing in the MLS, and can send buyers direct links for listings.

Pre-Qualification vs. Pre-Approval

Two of the most helpful real estate terms to know are pre-qualification and pre-approval. A pre-qualification gives you a financial overview of the mortgage you may qualify for. When a lender takes a look at your credit, income and assets, and other key pieces of documentation, you are pre-qualified. While pre-qualification sounds like pre-approval, they are two different terms. A pre-approval is an official statement from the lender stating which specific mortgage you qualify for. Going to open houses with a pre-approval letter is a good idea as it tells the seller you are serious about buying at this time.

Closing Costs

Closing costs are in addition to the down payment and final sale price of the home. Because of this, closing costs should be considered when making your home decision. These costs usually make up 2 to 5 percent of the home price. Closing costs may include loan processing costs, title insurance, excise tax, and other forms of local taxes.

Escrow

The primary purpose of an escrow for a real estate title transfer is to have a trusted third party hold the seller’s deed to the property, which will be delivered to the buyer upon closing. Escrow offers protection for home buyer with funds being held until the deal is closed.

Earnest Money

Once you select a home, you put down a deposit, known as earnest money. This shows the seller you are committed to buying this specific home. Once deposited, earnest money is held in escrow while final contracts are finalized. When you do close on your home, these funds are applied toward your down payment and closing costs.

Fixed Rate vs. Adjustable Rate Mortgage

In a fixed rate mortgage, the interest stays the same for the life of the loan. In an adjustable rate mortgage, the interest rate can change over the course of the five, seven, or ten-year intervals (depending on the specific adjustable rate loan type).

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2019 has officially begun, and with the new year comes New Year’s Resolutions. Being more active, saving more money, and organizing your life are common resolutions, but what about goals for your home? Here are 4 essential New Year’s resolutions for home owners.

4 New Year’s Resolutions for Home Owners

Start an emergency fund

One of the most essential New Year’s resolutions for home owners is to start an emergency fund. The idea of setting aside $100 cash every month to put in an emergency fund sounds doable, but often falls on people’s “will do later” list. But what happens if you’re faced with a life changing event where you need access to cash? This year, look at your finances and pick a monthly amount to set aside for your emergency fund. You could save over $1,000 in just one year by staying consistent in putting money aside. You’ll be so happy you did if/when the time comes.

Create a disaster kit

Your home is your castle, but it’s not indestructible. If you haven’t already, create a disaster kit to store in your garage so you’re ready to grab it and go should an emergency happen. A disaster kit that includes financial documents, copies of passports, and a home inventory will speed up recovery if disaster hits. Additionally, it’s a good idea to place at least 3 days of canned food in your disaster kit, along with emergency medical supplies so you’re set for a few days.

Budget for home improvements

Most homeowners have goals of what they want to improve in their home, even those who buy brand new homes. This year budget for one or two large projects so you’re able to make progress on this goal list. These large projects may be replacing roofing, kitchen appliances, or adding a living space onto the back of your home. By achieving one or two of these this year, you’ll stay motivated to keep finishing projects throughout the next few years, and with the right budget to do so.

De-clutter

If you feel like you’re running out of storage in your home, it is time to go through each room and de-clutter. Spend a day in each room and create 3 piles: keep, donate, and sell. Once you’ve made your way through your home, combine all the donate items and drive them to a Goodwill or Salvation Army. Once you have all your sell items in a pile, host a garage sale, or sell online via Facebook Marketplace or Craigslist. You’ll find your life less stressful when you get rid of all the unwanted clutter!

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