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To simplify for you an 80/20 is one of many $0 down options. It would probably be recommended to do a $0 down loan instead of taking a loan out on the 401k.
Example- If you were buying a $200k property you would have 2 mortgages:
1st mortgage $160,000 6.625% 30 year fixed based on today's pricing
2nd mortgage $40,000 9.0% fixed or adjusting with prime rate (your choice)
You would make seperate mortgage payments on both-so 2 payments a month. Interest rates above are 'ballpark' based on today's pricing.
You could either pay the closing costs yourself or have the seller pay them. If the seller pays them you will need little to no money to purchase your home.
“Also, do not let anyone but the person you decide to work with pull your credit. The more people that pull you credit, the score goes down.”
According to the article “How credit scores work, how a score is calculated” by Pat Curry on BankRate.com (November 8, 2006), there are five factors that affect your score.
1. How you pay your bills (35 percent of the score)
2. Amount of money you owe and the amount of available credit (30 percent)
3. Length of credit history (15 percent)
4. Mix of credit (10 percent)
5. New credit applications (10 percent)
The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.
"Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for a life preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.
For the complete article, Google the title. You might also Google “Your Credit Scores Explained” for a comprehensive article titled “Online CFA Pamphlet” in .pdf file format from the Consumer Federation of America and Fair Isaac Corporation.
ok mortgage guys and gals, it is my understanding, and I am asking so please correct me if I am wrong. There is a law that mortgage credit hits CANNOT affect your credit or credit score, as a consumer should be allowed to shop their mortgage lender. and that practise (which used to happen) was stopped as it was not in a consumers best interest.
So, in fact a consumer can shop around for a mortgage lender without penalty of getting a credit hit. the hits come only when one is shopping for credit cards, etc. as posted by rwally.
“….it is my understanding…there is a law that mortgage credit hits CANNOT affect your credit or credit score…and that practice…was stopped as it was not in a consumers best interest.”
According to the section “How to Obtain Credit Scores” that begins on page three of the article titled “Consumer Concerns for Older Americans” by the National Consumer Law Center,
“Until 2004, federal law did not require the disclosure of credit scores to consumers. This was changed by the Fair and Accurate Credit Transactions Act (FACTA) of 2003 which amended the Fair Credit Reporting Act (FCRA) to require disclosures of credit scores (effective as of December 1, 2004). Now upon request, credit reporting agencies must disclose the key factors that adversely affected the consumer’s credit score, listed in order of impact. The agency cannot list more than four (4) key factors, unless one of the factors is the number of inquiries, in which case that factor must be included."
For the complete article, go to www.consumerlaw.org/initiatives/seniors_initiative/content/CConcernsCreditScores.pdf (broken link) -
I can only speak for what I have seen in all my years as a mortgage broker, which includes pulling peoples credit reports. I encourage people to shop for a mortgage. If someone comes to me, one of the first questions I ask, is "have you or someone else pulled your credit reports recently?" If yes, I ask for a copy and use that to pre qualify them. I have seen, even recently, a persons credit score has dropped 50 points because they had 3 banks/ brokers pull their credit in one month. I have seen another where they had 5 pulls and score did not drop at all.
The one thing I know for sure about credit reporting is that no matter what you read about how it is supposed to work, it changes from person to person. I spent the better part of a year researching and calling "professionals" in regards to how credit reporting works so I could explain it properly to my clients. I have learned the one truth, that it is never consistent and never seems to make sense!
I have had clients that missed a payment and there score when up 15 points! I have had clients who missed 1 payment 5 years ago, everything else perfect but for no explainable reason their scores dropped every month.
So now, I keep an eye on it, but do not try to understand it, yet always ere on the side of caution and do not pull my clients credit until they know they want me to do their mortgage for them. Why? Almost all lenders pull credit again, the day before closing, which can kill the whole deal if the scores dropped.
“If someone comes to me, one of the first questions I ask, is "have you or someone else pulled your credit reports recently?" If yes, I ask for a copy and use that to pre qualify them.”
I’m not sure I understand your statement. Are the credit reports you use the ones a person gets when they pull their own?
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“I have seen, even recently, a persons credit score has dropped 50 points because they had 3 banks/ brokers pull their credit in one month.”
Again, I’m not sure I understand. Are you saying that you know for certain the applicant’s score dropped due to the three inquiries? If yes, seems that should have been easily rectified by calling the bureau(s).
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“I have had clients who missed 1 payment 5 years ago, everything else perfect but for no explainable reason their scores dropped every month.”
Are you saying that when the bureaus were contacted they couldn’t sufficiently explain why the scores dropped?
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“If someone comes to me, one of the first questions I ask, is "have you or someone else pulled your credit reports recently?" If yes, I ask for a copy and use that to pre qualify them.”
I’m not sure I understand your statement. Are the credit reports you use the ones a person gets when they pull their own?
Yes, for pre qualification. I do have to pull one into my software before I can send it with the other documentation to a lender or lenders to get and lock a rate. Then I try to only use lenders that will use my "reissued" credit report so another is not pulled an no more hits. (some times this is possible, sometimes not) but once the mortgage associated with the pull goes on the persons credit report, the hit points go back up
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“I have seen, even recently, a persons credit score has dropped 50 points because they had 3 banks/ brokers pull their credit in one month.”
Again, I’m not sure I understand. Are you saying that you know for certain the applicant’s score dropped due to the three inquiries? If yes, seems that should have been easily rectified by calling the bureau(s). Yes, I know for certain as I did the first pull for them, then they came back to me showing me the 3rd pull (even though I counseled them against letting others pulling it). The Bureau's( all 3 of them) standard answer is that they have no control over the scores as they are generated from software programs that they can not manipulate or change per gov. requirements, they can only verify the information on a report. Anyone who tells you they can change your score for x amount of dollars can not. It is called a "rapid re score" and it is NOT at the true bureau's level, only on that one piece of paper.
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“I have had clients who missed 1 payment 5 years ago, everything else perfect but for no explainable reason their scores dropped every month.”
Are you saying that when the bureaus were contacted they couldn’t sufficiently explain why the scores dropped?See above
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“So now, I keep an eye on it…”
How is this done?What I meant by that is keep an eye on reports about how credit reporting works, changes in the laws, bulitins I receve about credit reporting etc. Sorry, I guess I didn't explain that one to well, my bad.
I have to add this last line as my message is "to short" because I answered within the quote.
Bottom line is people with good credit with mulitple trade lines and years of history do not need to worry about the "score hit" for inquiries while shopping for a mortgage.
FYI-It is my understanding that if someone is shopping for a mortgage, it only counts as one inquiry even if 5 or 10 mortgage companies inquire. The same is supposed to be true of car dealers. However, credit cards and store cards will impact your score if you are signing up for that 10% off at every store in the mall.
It's been my understanding that hits on your credit report by lenders will ding your credit until you finally close and the loan becomes active. At that point, the credit score goes back up and those inquiries for mortgage purposes fall off then.
Has anybody else heard this? I've had a mortgage broker I work with alot tell me about multiple inquiries (for mortgages) dropping the client's credit score (at least in the short term).
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