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Credit Cards and Home Purchases |
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Now a day everyone prefers to have a plastic credit card in his/her
pocket instead of having a heavy wallet with hard cash. Credit card
has been attached with the sentiments of American. Whether it is
buying online or preparing for a home purchase, credit card can
play a vital role in every case.
During purchasing a house you will definitely get favor from your
credit card. If you would have maintained your credit card payment
regularly it can help you build a strong credit history and enhancing
your credit score. Now a higher credit score can help you secure
a loan for purchasing your dream home.
If we consider the negative side then if you have lower credit score
or credit history, it can limit your options during purchasing a
home. You may be maintaining your credit card payment on time these
days but your previous history also effect when go to buy a home.
If you are a defaulter in paying your credit card bills indication
of financial crunch could stop your approval of a home loan. To
overcome this problem you should lower your credit card utilization
below 50% and don’t apply for additional credit card. A new
credit card issuance and high utilization ratio can decrease the
ratio of credit card balances to credit limits.
On the other hand your credit card uses prove that you have the
ability to qualify the loan you are seeking. Your credit card can
impact the ability to qualify for the loan you are seeking because
the required payments are added to the payments associated with
the mortgage in determining how much you can afford. The “total
expense ratio” calculated by lenders and used in qualifying
borrowers is the sum of the mortgage payment, property taxes, homeowners’
insurance premium and other debt service. The entire amounts including
credit card expense will bee divided by the borrower’s gross
income.
While buying a home you need to pay some cash for down payment and
settlement cost. As much as you pay for down payment mortgage cost
will be lower accordingly. Lets have an example if you pay 3%, as
your down payment the cost of the mortgage will decline and if you
go up to 20% then cost of the mortgage will be declined accordingly.
If you have any query regarding credit cards and home purchase please
feel free to contact us.
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