1. Does checking my own credit report affect my credit score?
When shopping for a car, a home, or even applying for a new job, the worst thing that can happen is that you realize there is a mistake on your credit report. It is important to note that your credit report and your credit score are two different things. The credit report is all the information credit reporting agencies have about you while your credit score is the quantitative assessment of that information to rate your likelihood of paying back debt. Therefore, your credit score is based on the content of your credit report. Because employers and lenders use your credit score to judge your character, it is extremely important to check your credit report annually to ensure there are no mistakes and correct errors before they cause you problems. The law entitles you to one free credit report every 12 months from each credit reporting agency (Equifax, TransUnion, and Experian.) Despite common myths, checking your credit report does not affect your credit score. If you identify an error in your report, the Federal Trade Commission has very detailed checklists on how to correct your report.
2. I plan to buy a new house; should I sell or rent my current house?
When determining whether to rent your current house and buy a new house, you should consider many factors. Will you have enough for a downpayment on the new house without having to sell your existing house? Is your income sufficient to support two mortgage payments if you cannot find a tenant? Insurance on a rental property is higher than typical homeowners insurance. Unless you are a real estate professional, you should pay close attention to the IRS limits on rental losses, especially if your income (Modified Adjusted Gross Income) exceeds $150,000. Beyond the financials, do not underestimate the work involved in becoming a landlord. Things breakdown when you least expect it and often when it’s inconvenient for you. If your tenant calls about a broken light fixture, would you go fix it yourself or hire a handyman? A property management company can take care of all of that for you, but be prepared to pay at least 7-8 percent of your gross rent as well as one months rent to engage their services.
3. Are there special home mortgage programs for doctors?
Yes and no. Many bankers report that the once widely available mortgage loans with favorable rates and conditions for doctors are no longer available. However, despite the credit tightening standards, some banks still offer other incentives for doctors seeking a home loan. Other incentives may include higher loan to value ratios so that you do not have to put down 20 percent; more lenient income standards; and not counting student loans against you. If you are interested in buying or refinancing a home and want an introduction to one of these lenders who can assist you with loans specifically for doctors, contact us and we will gladly put you in touch.
Have a financial question? Contact ACap Asset Management at info@acapam.com or 818-272-8511.
Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com
