Rounded Citizen Lending Academy
The Complete Guide To Understanding Credit Cards
Credit Cards have exploded over the last decade. With so many different credit card options out there, it can be confusing for consumers to answer the all-important question: Which credit card is best for me? Credit cards present convenience, peace of mind protection, and are a great starter to your credit journey. Our comprehensive guide will address all of your questions and will empower you to make smarter decisions.
Jump Forward To:
Advertiser Disclosure
Tooltip contentBasics of Credit Cards
In this section, we explain what a mortgage is, go over all you need to know regarding the mortgage interview and documents and list out general requirements associated with qualifying for a mortgage.
What is a Credit Card?
gbvsfd
Obtaining a Credit Card
bbdsfgfds
Remember, unlike an auto loan, mortgages require A LOT of paperwork. It is a good practice to have the following documents ready whenever the lender requests it:
- W-2 Employed – Bring TWO most recent paystubs
- Social Security Income – Current year Social Security statement (If it applies to you)
- Retirement Income – Pension statement (If it applies to you)
- Self-Employed – Business Returns (including all schedules)
- Just to be safe, bring copies of the last TWO years (including all schedules)
- W-2’s & 1099’s
- Personal bank statements
- 401(k) statements
- Other investment account statements
- This is the document that outlines the terms of the real estate purchase transaction between you and the seller.
Don’t worry if you don’t have everything that is listed above. By the end of the initial interview, a good lender will go over in great detail what documents you need for your particular mortgage loan. Besides, the lender is NOT allowed to request any documents from you until the “Intent to Proceed” document is signed. Signing the Intent to Proceed document means that after shopping a few lenders, you have finally decided to proceed with one.
Another thing to keep in mind is that if any lender is giving you a hard time, you can always go to another lender. There are hundreds of great lenders out there! Never proceed with a lender if you don’t understand something!
Ten Important Factors to Keep in Mind Before Obtaining Your First Credit Card
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Types of Credit Cards
In this section, we explain what a mortgage is, go over all you need to know regarding the mortgage interview and documents and list out general requirements associated with qualifying for a mortgage.
Starter Credit Cards
How much can I afford? That’s the golden question that every prospective home buyer asks themselves. Use this intuitive calculator to figure out exactly how much home you qualify for!
Secured Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Unsecured Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Student Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Reward Credit Cards
How much can I afford? That’s the golden question that every prospective home buyer asks themselves. Use this intuitive calculator to figure out exactly how much home you qualify for!
Cash Back Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Travel Rewards Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Specific Retailer Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Specific Purpose Credit Cards
How much can I afford? That’s the golden question that every prospective home buyer asks themselves. Use this intuitive calculator to figure out exactly how much home you qualify for!
Low-Interest Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Balance Transer Credit Cards
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Business Credit Cards
How much can I afford? That’s the golden question that every prospective home buyer asks themselves. Use this intuitive calculator to figure out exactly how much home you qualify for!
Proper Credit Card Use
In this section, we explain what a mortgage is, go over all you need to know regarding the mortgage interview and documents and list out general requirements associated with qualifying for a mortgage.
Credit Score Factors
What is my credit score? How does my credit score affect the rate I will receive? These are all important questions that you might be asking yourself.
Lenders consider your credit score to be one of the most important factors when trying to obtain a mortgage. Your credit score can affect the following:
- Annual Percentage Rate (APR)
- Required Downpayment
- Loan Program
- Loan Amount
Before applying for a mortgage, it’s good practice to check your credit score. In today’s market, there is a myriad of free credit score providers! Some of our favorites are credit karma, annual credit report, and Experian. Using one of these free credit score providers or even a combination of all three will help with discovering and resolving any potential credit issues that you might have.
Credit Score Factors
We utilized myFICO.com to showcase how much a borrower can save on their mortgage payment just by having a higher credit score. The below example shows that borrowers with an above 760 credit score save as much as $219 per month on a 30-year fixed, $250,000 mortgage compared with borrowers that carry a score ranging from 620-639. To put that in a perspective, if you make regular monthly payments over a 30-year period, borrowers with a score ranging from 620-639 can expect to pay $78,819 more in interest.
FICO Score | Annual Percentage Rate (APR) | Monthly Payment | Total Interest Paid |
|---|---|---|---|
760-850 | 2.523% | $991 | $106,686 |
700-759 | 2.745% | $1,020 | $117,179 |
680-699 | 2.922% | $1,044 | $125,668 |
660-679 | 3.136% | $1,072 | $136,077 |
640-659 | 3.566% | $1,132 | $157,463 |
620-639 | 4.112% | $1,210 | $185,505 |
Source: myFICO.com, August 31, 2020. National Averages.
Mortgage Options by Credit Score
Anyone with a credit score of 760 and up will enjoy the best available rates, easy terms, and a speedy qualification process. Lenders will not spend a lot of time reviewing these loans. Prepare for:
- Lightning-quick approval process
- Best terms available
Achieving a credit score of 760 takes time. When you get here, do everything you can to stay at this level.
If your score changes to 700-759, you could pay an extra $10,493 (Refer to the table above).
Borrowers with credit scores of 700 and up are considered A-grade to lenders. The benefits of having a score of 700 and up are:
- Lower APR
- Smaller PMI premium
- A large variety of loan programs
- Flexible terms
If your score changes to 680-699, you could pay an extra $18,982 (Refer to the table above).
If your score is at least 680, mortgage terms are far more favorable than at the tiers below. Also, at this credit score range, jumbo loans become available.
If your score changes to 660-679, you could pay an extra $29,391 (Refer to the table above).
If your score changes to 640-659, you could pay an extra $50,777 (Refer to the table above).
If your score changes to 620-639, you could pay an extra $78,819 (Refer to the table above).
Borrowers with a credit score of at least 620 have a lot more options. Lenders will present an array of loan programs, including:
- Conventional Loans (Most Popular)
- USDA Loans (Government Sponsored)
- VA Loans (Active-Duty Military and Veterans)
- FHA Loans
We will always recommend to wait and raise those credit scores. Don’t buy a home with this credit score unless you have no other options.
Having a low score or no score will mean that you are unlikely to obtain a mortgage, at least not one with favorable terms. There are lenders out there that do finance borrowers with scores 619 and below but be prepared to settle for a loan that is insured by the Federal Housing Administration (FHA). We recommend you do the following:
- Try to find a family member that has a great credit score to be on the loan with you
- Find an FHA lender that has a great reputation that will provide clear and concise terms
- Make a 10% downpayment
Rounded Citizen Pro Tip
Credit Unions are known for having low rates and a very hands-on approach! We recommend you find a local credit union and work with them.
