Standard Bank Blog

With the current condition of the economy, interest rates are at an all time low. Homes are more affordable and readily available. While it’s a buyers market, the largest obstacle with any first time home buyer is having enough cash for a down payment. If you’re stuck wondering whether or not you have the available funds, your bank can help. 

Going through my own first home buying experience I can assure you I had plenty of questions and doubts about what I could do on my own. Our expert mortgage team answered my questions and helped in every way they could. I’m in the final stages now and I couldn’t be more confident and excited.

Purchasing your first home is a very important and exciting step.  It takes a lot of hard work and research to buy a home.  Sadly, the excitement fades away when you start to look at the financial side.  This is perhaps the most important part to understand.

Mortgage calculators are a good place to start, as they will show you some potential costs involved with home ownership.  A trusted financial advisor is your next step as they can inform you of other costs and perhaps use a budget calculator so you can see the bigger picture.

Today it is becoming increasingly difficult to either earn an excellent credit score or maintain one. Having a good credit score has so many benefits, including obtaining a lower interest rate on loans, such as your mortgage. Let us take a look at some straightforward tips to improve that credit score. 

• Paying the bills on time - Paying on time will help your credit score. Delinquencies have a negative impact on your credit score

As homeowners, we often dread the first of the month when that large payment is due.  Then we hear how some people voluntarily make that payment bigger by, gasp, paying extra to principal!  While paying extra to principal may pinch your pocket a little further it does pay dividends down the road.

First things first, if you have a low interest mortgage and have outstanding high interest debt you should probably pay those down first.  It is always a numbers game and your debt, whatever it might be, with the highest rate should usually be your first priority.

Some out there recommend against paying your mortgage early because you get the tax benefits of claiming interest.  While this is true, the benefits are often not as good as they seem.  Standard deductions for married folks are 11,400.  Therefore, unless you can claim more interest than that you are not receiving any benefit.  Also, keep in mind the amount of interest you pay decreases each year...

You need to view paying the mortgage down early as part of your overall investment portfolio.  You are essentially going to receive a percentage of growth in your portfolio for each year you cut off your mortgage.  The growth is due to not spending the money on interest!  That growth percentage is whatever your rate is.  The great part about it is this is a no risk investment unlike the stock market.  As always talk to your financial advisor about where you should be investing your money, but investing in your house might be a good choice for the stable piece of your portfolio.

Some advanced investors will bring up that you are sinking your money into a source that is not liquid.  This is very true and you should not use your home as the only savings plan, you should always have liquid piece of your portfolio ready for emergencies.  Provided you have that cushion in place, then paying extra to principal might be right for you.

There are many ways to pay extra to principal and a popular option is send a little extra with every payment but you can also send it yearly if that makes you more comfortable.  One easy way to see if this is right for you is to use a mortgage calculator.  Then talk to a trusted financial advisor to get you on the right track!

So you want to improve your credit score?  We all do and while it is not the easiest thing, it is not hard to do.  First, you need to find out what your score is.  Thankfully, you can go get your reports free once every 12 months from each of the three agencies. 

Now that you know where you stand let us talk about a credit score.  Two items account for about a third of your credit score.

1 - Your payment history, if you have a history of making payments on time your score will go up, but if you are delinquent, you are going to get your score reduced.  

2 - Owed versus Available Credit - compares how much credit you have available and how much you have used.  Your goal should be to stay below 50 percent utilization, or lower if possible.  Lenders view high utilization as a high risk and therefore it is reflected with a lower FICO score.

The final third of your credit score is determined by three other factors.

1 - Credit History Length - Opening and closing accounts is not good for your score.  You want to stick with accounts for at least 10 years.  Your FICO factors in your oldest active account as well as the average of all of them.

2 - New Credit - When obtaining new credit do not open multiple accounts in a short period because multiple inquiries wave a red flag as a risky behavior.  The exception to this rule is soft inquiries, which are also known as pre-approvals and pre-screens.  These soft hits have little to no impact.  Another exception is when rate shopping from various lenders.  Multiple inquiries within a 30-day period count as one for a home or car loan, which usually do not hurt your score.

3 - Credit Types - Yes what you use matters.  A home loan or student loan with good payment history will help your score whereas only having credit cards from the local department stores can have a negative effect.  Diversity always helps but that does not mean you should go out and open credit whenever the offer is presented to you.

Your credit score does not take into account your age, how much money you have, where you are from, or if your dad is Donald Trump.

Here is an example to increase your credit score.  Thirteen percent of people have scores over 800.  Generally, their profile would look something like this:

Acronyms are everywhere!  There are plenty you use and many more you do not, but before you buy a home you should probably know these.

APR – Annual Percentage Rate is the yearly interest percentage of a loan, as expressed by the actual rate of interest paid.

ARM – Adjustable Rate Mortgage is a loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender

CMA - competitive market analysis is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.

EMD – Earnest Money Deposit is a good faith deposit of funds given by a potential buyer who is offering on a property.

FPM – A Flexible-Payment Mortgage is a loan that allows the borrower to pay only the interest for the first few years of the loan.

FRM – Fixed-Rate Mortgage is a mortgage loan first developed by the Federal Housing Administration  where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float.”

HEL – A Home Equity Loan is a mortgage loan first developed by the Federal Housing Administration  where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float.”