How does my credit score affect my ability to buy a home?
Dottie Spitaleri • April 6, 2022
The short answer, the better the credit score the lower the interest rate. A lower interest rate allows you to qualify for a larger loan amount or pay less each month.
Here’s what you need to know and what you need to do to insure your credit score is accurate and you have the best score.
Your credit score is calculated off of the FICO scoring model and is derived from the information on your credit reports, which are compiled by credit reporting companies.
The scoring model consists of 35% payment history, 30% amount of debt relative to credit limits, 15% age of credit, 10% inquiries, 10% whether you have more than one type of credit such as revolving credit and installment credit.
It is a good idea to make sure everything is reporting correctly before you have it pulled for a mortgage application. You can access your free credit report at
www.annualcreditreport.com.
Review the personal information section, public records section and finally your credit accounts. Make sure that the creditors are reporting your payment history correctly and correct any misinformation such as late payments, outstanding collections, liens and judgements. It’s a good idea to discuss any concerns with your lender prior to having your credit report pulled. Sometimes paying off a collection will negatively affect your credit score.
Reviewing the data for accuracy will ensure that you will get the best possible rate and loan program with the score you have.
Please call me for a free consultation at
727-543-1753 or visit
ddamortgage.com/Dottie for more information.
Dottie Spitaleri
NMLS# 224169
Interest rates are certainly on the rise and from the looks of the current market, they are rising faster than we would like. An adjustable-rate mortgage may make sense if you are trying to buy with the lowest possible rate without having to pay discount points. This product may keep you in the same purchase price bracket since the fixed rates have gone up quite a bit just in the past few months. Before you make any decisions, you need to further understand how the adjustable-rate mortgage works and if this is the best product for you. What is the difference between an ARM and a fixed rate? A fixed-rate mortgage can offer more certainty because it retains the same interest rate for the life of the loan. That means that your monthly mortgage payment will stay constant for the life of the loan. On the other hand, an ARM may charge less interest during the introductory period, thus offering a lower initial monthly payment. But after that initial period, changing interest rates will impact your payments. If interest rates go down, ARMs can become less expensive than fixed-rate mortgages; but an ARM can become relatively more expensive if rates go up. How does the adjustable-rate mortgage work? ARMs are long-term home loans with two different periods, called the fixed period and the adjustable period. Fixed period: First, there’s an initial fixed-rate period (typically the first 3, 5, 7, or 10 years of the loan) in which your interest rate won’t change. Adjustment period: Then, there’s a period in which your interest rate can go up or down based on changes in the benchmark. Mortgage rates are determined by a variety of factors. These include personal factors like your credit score and the broader impacts of economic conditions. Your rate is fixed at its introductory rate in this example, 3.33 percent. After five years, your rate can reset once a year. The new rate depends on several factors such as the index on which your rate is based, the margin the bank adds to your index, and your loan caps. So, if your loan caps limit your increase to two percent, the highest rate you can get in Year 6 is 5.33 percent. In the real estate industry, you may see the term 5/1 (2/2/5) used to refer to a 5/1 ARM. The second set of numbers - 2/2/5 - refers to details of the rate caps. These include: Initial adjustment cap: The first “2” is the cap, or limit, on how much your first reset can adjust your interest rate. In other words, at the first reset, after the 5-year introductory period, your ARM may reset your interest rate by 2% in Year 6. Subsequent adjustment cap: The second “2” is the limit on how much your subsequent rate resets can increase your interest rate. Generally, 2% is the standard subsequent adjustment cap. That means that in Year 7, your interest rate may rise again by as much as 2%. Lifetime adjustment cap: This is the cap that tells you how much the interest rate may increase in total over the lifetime of the loan. In our example, in Year 8 and thereafter, the interest rate can only increase by 1% total: 5% (total lifetime cap) - 2% (Year 1 adjustment) - 2% (Year 2 adjustment) = 1% Most ARMs offer a 5% lifetime adjustment cap, but there are higher lifetime caps that could ultimately cost you much more. If you’re considering an ARM, make sure you completely understand how rate cap quotes are formatted and how high your monthly payments could get if interest rates climb. Advantages Of an Adjustable-Rate Mortgage Adjustable-rate mortgages can be the right move for borrowers hoping to enjoy the lowest possible interest rate. Many lenders are willing to provide relatively low rates for the initial period. And you can tap into those savings. Although it may feel like a teaser rate, your budget will enjoy the initial low monthly payments. With that, you may be able to put more toward your principal each month. First-time homebuyers can also enjoy these benefits because you are planning to upgrade to a larger home when you can. If those plans allow you to sell the original home before the interest rate begins to fluctuate, then the risks of an ARM are relatively minimal. The flexibility you can build into your budget with the initial lower monthly payments offered by an ARM gives you the chance to build your savings and work toward other financial goals. Although there is the looming chance of an interest rate hike after the initial period, you can build savings along the way to safeguard your finances against this possibility. Of course, there is always the risk that you won’t be able to sell the house before your rate adjusts. If that happens, you may want to consider refinancing into a fixed rate or a new adjustable-rate mortgage. However, you’re still running the risk that interest rates will have increased at that point. If you are considering an adjustable-rate mortgage you will need to get with me so we can take a deeper look into your finances to make sure that this is the right product for your needs. Please call me for a free consultation at 727-543-1753 . Dottie Spitaleri NMLS# 224169
Fannie Mae and Freddie Mac are both government sponsored enterprises that buy and sell home loans on the secondary market. They are both regulated by the Federal Housing Finance Agency. Fannie Mae buys from larger commercial banks whereas Freddie Mac buys their loans from much smaller banks. The two helps make affordable financing available to home buyers by providing mortgage lenders with liquidity. Both entities must be conforming loans meaning they must meet certain criteria standards for it to be eligible for purchase by Fannie Mae and Freddie Mac. These requirements include credit scores, debt to income ratios, loan to value and several other factors. The loan amount must meet the conforming loan limit set forth by the agencies. These loan limits do change year to year. The limit for 2022 is set at $647,200.00 and are higher in certain high-cost areas. If your loan amount is higher than what is set, then your loan will fall into a Jumbo loan which is not a conforming loan and has different guidelines that need to be met. What does this mean for you? They both create affordable financing options. They promote competition in the market meaning competitive rates and competitive loan requirements. One or the other may have more leniency in one area or the other which makes it possible to obtain financing depending on your needs. No one buyer is “cookie cutter”, everyone has a unique financial footprint, and this is where the differences in these two enterprises come into play. Please call me for a free consultation at 727-543-1753 or visit ddamortgage.com/Dottie for more information. Dottie Spitaleri NMLS# 224169
The short answer is yes you can, but you will need to provide a little more documentation than the average W-2 buyer. Here’s what you need to know to ensure you have sufficient documentation to support income and income stability. Self-employed mortgage borrowers can apply for all the same loans “traditionally” employed borrowers can. There are no extra requirements for self-employed mortgage loans. You’re held to the same standards for credit, debt, down payment, and income as other applicants. The part that can be tough is documenting your income. Most mortgage lenders require at least two years of steady self-employment before you can qualify for a home loan. Lenders define “self-employed” as a borrower who has an ownership interest of 25% or more in a business, or one who is not a W-2 employee. However, there are exceptions to the two-year rule. You might qualify with just one year of self-employment if you can show a two-year track record in a similar line of work. You’ll need to document an equal or greater income in the new role compared to the W2 position. Or if you have owned the same business for the past 5 years and show consistent income. If you’ve been self-employed for less than one year, you’re not likely to qualify for a home loan. Documents required for income review are two years of personal and business tax returns, YTD Profit and Loss statement, balance sheet, and business license. Underwriters will use the tax returns as a tool to determine your monthly income and to review for income inconsistencies. They will look to make sure that the income is not declining which will cause concern. Underwriters use a somewhat complicated formula to come up with “qualifying” income for self-employed borrowers. They start with your taxable income and add back certain deductions like depreciation since that is not an actual expense that comes out of your bank account. Business owners and other self-employed workers often take as many deductions as they can. While this can save you a lot of money with income tax, it can also hurt you when it comes to your mortgage application. There are some alternate types of financing programs that may help increase your monthly qualifying income such as a bank statement program. Some lenders offer a 12-month and 24-month program. This is typically calculated from the business accounts and can help increase your buying power. As you can see this can be rather complicated and should be reviewed with a mortgage professional prior to shopping or going into a contract for a home. Please call me for a free consultation at 727-543-1753 or visit ddamortgage.com/Dottie for more information. Dottie Spitaleri NMLS# 224169
Do you owe the IRS? Will this affect your ability to buy a home? The answer is No provided you either pay the IRS in full or request the payment program through the IRS. Once you are in the program, you will need to make 3 consecutive months payments on-time. This will allow you to move forward with the home purchase provided your debt to income ratios support the payment and guidelines. If you need help understanding your options, please give me a call (727) 543-1753 or visit ddamortgage.com/Dottie for more information.
When you sell your home, there may be a lien on the title for your solar panels. If the panels are not paid for, you need to pay them off. The amount is based on what you owe. Pay at time of closing. If you have a loan for the panels, you will have to pay off the loan. You can do this yourself or transfer it to the new owners. However, buyers are rarely willing to take over payments prior to owning the house. Unfortunately, to close on the home, you need a clear title, therefore, the buyers would need to take over the loan prior to buying the home. You can see the catch-22 here. Solar panels will have a lien on your house. All solar systems have a lien against them because they are part of the house. This means that if you do not pay for your system in full before attempting to sell it; there will be a lien against your house until it is paid off. Lender won't close on a house with a lien All solar systems require legal paperwork and filing with the title company. Your lender may not allow you to close on a home with an unpaid solar system due to this lien as they need a clear title to close. The added value of solar panels Some buyers might prefer a home with solar panels. However, they do not add apprised value to your home. Much like nice landscaping, panels are a preference not an asset. If you are buying a home with Solar Panels, or are in marketing for a new home. Contact me, (727) 543-1753 . Or visit https://www.ddamortgage.com/dottie for more information.
Getting a mortgage requires some cash on hand. How much you spend is going to depend on knowing the difference between closing costs, your down payment, and how you want to allocate your funds. Closing costs and down payments play a different role in getting a mortgage loan. Here is the difference;
If you are in the market for a townhouse, you need to know how to tell the difference between a condo and a townhouse. Most people think of high-rise buildings on the beach when they think of a condo. However, any attached home could potentially be zoned as a condominium. If you think you are bidding on a townhouse and the property is zoned as a condo, it will change your financing. Here’s what you need to know.
Many of my clients are surprised that they are required to pay an extra expense included into their mortgage payment known as mortgage insurance. Fortunately, you don’t always need to carry mortgage insurance. Below we discuss when you need it, the different types of insurance, and how to drop mortgage insurance. If you are trying to lower your monthly payments or are planning to buy a house, you need to know this information before making a down payment decision! Let’s start with the basics .
You know a higher interest rate means a higher interest payment. That is a given. However, as a buyer, higher interest rates do three things. They push investors out of the housing market, they stabilize home prices, and they push uneducated buyers out of the market. And for sellers higher interest rates shift the market away from a seller’s market back to a buyer’s market. Here’s how.
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Is Refinancing Right for You? Unlocking Cash & Financial Freedom Feeling squeezed? Juggling multiple debts with varying interest rates? Dreaming of that kitchen remodel you've been putting off? Or maybe you just need a little extra breathing room in your monthly budget? You're not alone. Many homeowners find themselves in situations where they need access to cash, and for a significant portion of them, the answer is refinancing their mortgage. In fact, last year, a whopping 40% of all mortgage activity was refinances! But what exactly is driving this trend, and could refinancing be the right move for you ? Refinancing to Unlock Cash: Home Improvements, Debt Consolidation, and More One of the primary drivers behind the refinance boom is the desire to tap into home equity. Your home is likely your largest asset, and as you pay down your mortgage and your property value increases, you build equity. A cash-out refinance allows you to borrow against that equity, receiving the difference in cash at closing. Home Renovations and Upgrades Imagine finally getting that dream kitchen! Or adding a much-needed bathroom. Home improvements not only enhance your living space, but they can also significantly increase your home's value. Instead of relying on high-interest credit cards or personal loans, a cash-out refinance provides a more affordable way to finance these projects. Debt Consolidation: Streamline Your Finances Are you overwhelmed by multiple credit card bills, student loans, or other high-interest debts? A cash-out refinance can be a powerful tool for debt consolidation. By using the cash from your refinance to pay off these debts, you can simplify your finances, potentially lower your overall interest rate, and reduce your monthly payments. This can free up cash flow and make it easier to manage your finances. Unexpected Expenses and Opportunities Life throws curveballs. Unexpected medical bills, job loss, or even a fantastic investment opportunity can create a need for immediate cash. A cash-out refinance can provide a financial safety net, allowing you to address these situations without resorting to high-interest options. Beyond Lower Rates: Other Reasons to Refinance While a lower interest rate is often the primary motivation for refinancing, it's important to recognize that it's not the only reason homeowners choose to refinance. Many factors contribute to the decision, and sometimes, a lower rate isn't even the main goal. Switching Loan Types: From ARM to Fixed-Rate Adjustable-rate mortgages (ARMs) can be attractive with their initially lower interest rates. However, as the name suggests, the rate can adjust over time, potentially leading to higher monthly payments. Refinancing from an ARM to a fixed-rate mortgage provides peace of mind by locking in a stable interest rate for the life of the loan. This can be especially appealing in a rising interest rate environment. Shortening Your Loan Term Refinancing to a shorter loan term, such as from a 30-year mortgage to a 15-year mortgage, can save you a significant amount of money in interest over the life of the loan. While your monthly payments will likely be higher, you'll pay off your mortgage much faster and build equity more quickly. This is a great option for homeowners who are financially secure and want to accelerate their path to homeownership. Removing Private Mortgage Insurance (PMI) If you initially put down less than 20% when you purchased your home, you're likely paying private mortgage insurance (PMI). PMI protects the lender in case you default on your loan. However, once you've built up enough equity in your home (typically 20%), you can request to have PMI removed. Refinancing can be a way to get a new appraisal and demonstrate that you've reached the required equity threshold, allowing you to eliminate this extra monthly expense. You can reach out to us through our contact page to learn more about your specific scenario. The Rise of Cash-Out Refinancing: A 2023 Trend As we mentioned earlier, a substantial portion of 2023 refinance volume was cash-out refinancing. This indicates a shift in homeowner priorities. While securing lower interest rates remains important, the need for accessing equity for various financial needs is becoming increasingly prevalent. Economic Factors Influencing Refinance Decisions Several economic factors contribute to the popularity of cash-out refinancing. Rising home values have created more equity for homeowners to tap into. Additionally, inflation and rising costs of living are putting pressure on household budgets, making debt consolidation and access to cash more appealing. Economic uncertainly may lead homeowners to consolidate their debts and protect against future economic shock. Weighing the Pros and Cons: Is Cash-Out Refinancing Right for You? While cash-out refinancing can be a valuable tool, it's crucial to carefully consider the pros and cons before making a decision. On the positive side, it can provide access to cash for important needs, consolidate debt, and potentially lower your overall interest rate. However, it also means taking on a larger mortgage, potentially extending your loan term, and paying closing costs. A recent [Housing Wire article]( "") discussed the importance of working with an expert to determine what option is best for each homeowner. Important Considerations Before You Refinance Assess Your Financial Situation: Carefully evaluate your current debt obligations, income, and expenses. Compare Interest Rates and Fees: Shop around for the best refinance rates and terms. Don't just focus on the interest rate; consider all associated fees. Calculate the Break-Even Point: Determine how long it will take to recoup the closing costs associated with refinancing. Understand the Tax Implications: Consult with a tax advisor to understand any potential tax implications of refinancing. Does Refinancing Make Sense to Consolidate Debt? Let's Talk! Refinancing can be a powerful tool for achieving your financial goals, whether it's consolidating debt, funding home improvements, or simply gaining more financial flexibility. But it's not a one-size-fits-all solution. That's why it's essential to work with a trusted mortgage professional who can assess your individual needs and help you determine if refinancing is the right choice for you. At DDA Mortgage, we're committed to providing personalized guidance and helping you navigate the complexities of the mortgage process. If you're considering refinancing, we encourage you to contact us today for a free consultation. Let us help you explore your options and find the best solution for your unique situation. Check out our Refinancing page to learn more, and then reach out to one of our team members! Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult with a qualified financial advisor before making any financial decisions. Interest rates and loan terms are subject to change without notice.
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a large share of the refinances in 2025 were indeed driven by homeowners taking cash out of their home equity to consolidate debt or tap housing wealth, not just refinancing to get a lower interest rate. The data available on refinance activity in early and mid-2025 show this clearly: 🏠 1. Cash-Out (Equity Extraction) Was a Big Part of Refinances When mortgage rates stayed relatively high (often above ~6.5%), fewer borrowers could refinance purely to lower their rate or monthly payment. In that environment, lenders and borrowers often shifted toward cash-out refinances — where you borrow more than your existing mortgage and receive the difference in cash. According to Federal Housing Finance Agency (FHFA) data: In early 2025, cash-out refinances made up a majority of refinance activity — rising from about 56 % of refinances to roughly 64 % in the first quarter of the year. That means most refinance borrowers were actually pulling equity out. 💳 2. Cash-Out Often Leads to Debt Consolidation Borrowers commonly use the cash from a cash-out refinance to pay down higher-interest personal debt, like credit cards or auto loans. A Consumer Financial Protection Bureau report (covering broader refinance behavior) found that the most frequent stated reason for cash-out refinancing was to “pay off other bills or debts.” This happens because: Mortgage interest rates on large balances may still be lower than credit card or personal loan interest rates. Consolidating high-interest debt into a mortgage can simplify payments and reduce total interest costs — as long as the homeowner plans correctly and understands the risks of converting unsecured debt into home-secured debt. 📉 3. Rate-Reduction Refinancing Was Less Dominant Compared with past refinance cycles (especially when rates plunged), rate-and-term refinances — where the main goal is lowering your interest rate and monthly payment — were less dominant in 2025. The FHFA reports suggest that because average mortgage rates stayed relatively elevated during the first part of 2025, cash-out refinances became a bigger share — not just refinance for rate savings. 📊 What This Means in Simple Terms Not all refinance activity is about getting a lower rate. A substantial chunk of 2025 refinance volume was cash-out refinancing. Many homeowners took some of that cash to consolidate other debt, meaning part of the high refinance share reflects debt consolidation activity, not solely traditional mortgage refinancing for rate/term improvement. So yes — while refinancing to lower the rate still happened, a lot of the refinance volume in 2025 was linked to cash-out and debt consolidation purposes. This helps explain why refinance activity remained relatively strong even when interest rates weren’t plummeting. Let me know if you want some numbers or examples of how much debt consolidation affected total refinancing! 3 messages remaining. Start a free Business trial to keep the conversation going Try Business free tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
