Sec 14 Unit 6 Getting CA buyers ready for Financing

Credit score

-Number ranging from 300 to 850 that signifies credit risk -Calculated based on information provided by credit bureaus -Ex: FICO

Credit report

-more than just a number. It tells you how the credit bureaus—and there are three primary credit bureaus that provide information to lenders—arrived at that score -if u don't paay student debt, u get dinged

What factors does a FICO score consider?

-payment history -amounts owed -length of credit history -new credit -types of credit in use

Most lenders like to see at least _______ months of cash reserves in addition to the buyers' down payment

2

What is the best-case scenario with a debt-to-income ratio?

20% debt-to-income

Which organization establishes relationships with financial institutions to offer home ownership programs that include down payment assistance through grants and favorable terms?

NHF

Paying down your credit cards is a great idea to reduce debt, but it can backfire. In the eyes of the lender, which action is the least damaging to loan qualification?

Several open cards with available credit on them

Buyers who intend to finance should understand that the higher their credit score, ______________

The better interest rates they will qualify for

Some first-time homebuyers tap into the bank of mom and dad. In what circumstance would the parents' contribution be acceptable for loan qualification?

The money is given as a gift with no expectation of repayment.

credit bereau

TransUnion, Experian, and Equifax

How much may qualified consumers borrow from their Roth IRA to obtain funds for the down payment of a home purchase?

Up to $10,000

When your clients improve their credit score, they _____________.

better rates

You're working with buyers who are close to being financially ready to buy. To prepare themselves for loan approval, they should _________

pay down credit card balances

Loan-to-value ratio

the amount of a loan expressed as a percentage of the value of the real estate that's being offered as collateral is the loan to value ratio

borrowing from a Roth IRA is one of the least desirable ways to obtain down payment money.

true

Who may borrow money from a Roth IRA to obtain down payment funds?

Five-year or more qualified Roth IRA holders

Roth IRA rules state that a first-time homebuyer can withdraw funds from a Roth IRA under which of the following conditions?

Funds are used directly toward home acquisition (down payment, closing costs, etc.)As a real estate licensee, you should ______.

Credit Report

History of credit-related actions and inquiries compiled based on information provided by credit bureaus

Improving credit scores can also ____________________

Increase how much house the borrower can afford

What effect does a pre-approval letter have on an offer?

It assures the seller that the buyer's financial information has been verified.

Buyers who want to look good to lenders prior to financing should employ which of the following strategies?

Reduce credit, but retain cash reserves

What are the four basic actions buyers can take to prepare for financing a home. What are these actions?

Reduce debt Improve credit Raise down payment Research first-time homebuyer programs

Pre-approval letter

This letter is created after a borrower submits information about their income and debts, which is verified by the lender, who then estimates how much a borrower qualifies for.

As a real estate licensee, you should ______.

Understand what helps your buyer qualify for a mortgage

A credit score

a number that, to lenders, signifies your credit risk. That number is calculated from information in your credit file, and it's used by lenders to assess your credit risk at a given moment in time.

A borrower's ability to repay a loan is which C of credit?

capacity

A borrower's credit history and willingness and desire to repay a loan are elements of which C of credit?

character

Obtained free (annually) through AnnualCreditReport.com

credit report

Which of these provides a number that signifies your credit risk to lenders?

credit score

From a lender's perspective, what does a credit score on the low end indicate?

higher risk

What is one way to improve your debt-to-income ratio without reducing your debt?

increase income

What is the best way to reduce debt while maintaining cash reserves?

increase tax deductions

Why do lenders care so much about their borrowers' debt reduction?

it makes it easier for borrorwers to pay their mortgage

Lenders look at a HELOC balance of less than $50,000 as if ______________

it were a credit card