Good credit is important in qualifying for a mortgage, but potential homebuyers with less-than-perfect credit can still get a mortgage. No matter what your score, these seven financial habits will make buying a home much easier:
- Paying your bills on time or early. This means paying all of your bills on time, not just the ones on your credit report. In addition to credit cards and loan payments, this means utility bills, rent and other regular payments that show you are a responsible adult. Ideally, pay your bills early. This is much easier now that we can access our credit card and loan accounts online.
- Pay more than the minimum balance due. If your minimum payment on your Target card is $50 a month, pay $75 or $100. This will reduce your total debt faster as well as the amount of total interest you are paying.
- Use less than 30 percent of your available credit. While it is helpful to have credit cards for emergencies, you want to keep your total balances under 30 percent of your total credit limit. For example, let’s say you have a Visa card with a $1,000 credit card limit. Don’t charge more than $300 on that card.
- Review your credit report for errors. This is a good habit to get into no matter how good your credit is. If you check your credit report annually, you’ll be able to identify mistakes and get them corrected before it is time to apply for a mortgage loan. See a mistake? Contact the original creditor right away and contact the credit bureau to dispute the information. It could take several months to clear a mistake, so staying on top of your credit report is helpful.
- Start building a credit history early. If you are in your early 20s, you ideally have established some credit already, whether it is an introductory credit card or a student loan. Start small by applying for a low limit credit card or getting a car loan with a parent as a co-signer.
- Keep paid off accounts open. The length of your credit history is important to a mortgage lender. Even if you don’t use that Visa card you got in 2010, and the balance is zero, keep the account open. It shows a seven-year credit history, and it will help lower your total debt-to-credt ratio (see #3 above).
- Set a budget and stick to it. With credit cards so readily accessible, it is easy to treat yourself with a nice dinner, a manicure/pedicure or furnishings for your man cave. But is this the best use of your money? Probably not – unless you budget for it. Set a monthly budget and only indulge in those little luxuries when you have the money to do so without charging it to a credit card.
These good money habits will help you position yourself to qualify for a mortgage loan when you are ready to buy your first – or next – home!
You and your family are thinking of buying a new home – or your next one – in 2018. There are things you can do now to prepare yourself. Here are seven steps to get you ready for this exciting move!
- Check your credit score. Target a credit score of 740 or higher to get the best mortgage rate. See mistakes on your credit report? Because this process can sometimes take months, you’ll want to start doing that now.
- Follow the real estate market and interest rates. What is the market doing in your area? Is inventory low? What about interest rates – are they inching up? You’ll want to lock in the lowest interest rate you can to lower your monthly mortgage payments and long-term financial outlay.
- Save, save, save. We can’t stress this enough. Make sure you have enough to cover a down payment, closing costs, moving expenses, etc. Read our article on closing costs to get a better idea of what those might run.
- Don’t use your credit cards or rack up more debt. Obviously, you don’t want to open any new credit cards before you apply for a mortgage, but it is just as important not to use the existing credit you already have. Banks will look at your debt to income ratio, so you want that debt figure to be as low as possible.
- Don’t overspend during the holidays. It can be tempting to spoil your loved ones during the holidays, but this could make it harder to get a mortgage – particularly if you use your credit cards for holiday shopping. Instead, get creative. Offer services (e.g., dog walking, babysitting, home organizing, handyman skills) or experiences (gourmet meals, outings, etc.) instead of giving gifts.
- Meet with two to three potential Realtors. We say “Realtor” instead of “real estate agent” because “Realtors” have different and a code of ethics to abide by. Real estate agents are held to a lesser standard. Talk to friends, family and co-workers to get recommendations, and do your research before scheduling no obligation appointments to interview. In addition, check their online reviews on Facebook, Zillow, LinkedIn and other sites to see what they’re clients are saying about them.
- Shop for a lender. Just like you would shop for a Realtor, explore your mortgage lending options. Check with your bank, local credit unions and mortgage brokers to see where you can find the best deal and the best long-term relationship.
- Gather your documents. When you meet with a mortgage lender, you’ll need to provide tax returns and W-2s for the last two years, pay stubs for the last few months, proof of your current living expenses, a list of debts and other expenses, etc.
- Get pre-approved for a mortgage. Once you’ve selected a mortgage lender and have pulled together all of your documentation, it’s time to get pre-approved! This will help you determine what your interest rate will be and how much home you can afford. Read more about getting pre-approved here.
Not sure what’s next? Have questions? Call Team Marti at 253-859-8500. We’d be happy to help you prepare to buy your next home in the New Year!
Imagine never having to pay rent again. Instead of paying a landlord every month, your monthly housing budget could go toward owning your dream home. Unless you’ve got rich relatives or a trust fund though, coming up with a down payment of 3 percent to 20 percent can seem a bit overwhelming. It doesn’t have to be. Here are 8 ways you can start saving for a down payment today!
- Reduce your current housing expenses. Your monthly rent is your most costly expense each month. Cut that bill by getting a roommate, moving to a smaller or less expensive place, or moving in with a relative for the short-term, and save the difference in a dedicated account for your down payment.
- Get a part-time job or a freelance gig. Increase your income by getting a part-time job or doing freelance work on the side. You could get a traditional part-time job in fast food or retail, but think beyond that to earn some extra cash. Are you good with technology, pets, words or art? Become a consultant, dog walker, blog writer or Etsy artist.
- Cut daily living expenses. Do you get a $7 latte each morning? Are you paying for a gym membership you rarely use? Do you spend a lot on take-out? Those costs add up. If you cut non-essential expenses, you could yield a few hundred bucks each month.
- Shop for your new insurance. Car insurance can be pricey, particularly if you are young. If you work with an insurance agent, ask if there are discounts available, or if they can get you a better price. For example, you can usually get a discount by getting your car insurance and renter’s insurance from the same carrier. You can also shop online for different types of insurance at an online site like Esurance.com. Caution: Be sure you are comparing coverages, not just price.
- Set up automatic savings deductions. To help you discipline yourself, set up an automatic deduction into your savings account with each paycheck. This is an easy way to save your money before you get a chance to spend it.
- Get rid of unwanted stuff. Whether you’ve got college textbooks you don’t need or slightly outdated electronics you’ve already replaced, there is a market for your unwanted stuff. There are lots of online marketplaces – Facebook, OfferUp, Craigslist, etc. – where you can sell your items online. Just be careful and always transact business in a safe, public place.
- Save your tax refund and bonus checks. If you get a refund at tax time, bonus checks at work or a birthday check from your parents, put that money in the bank!
- Pay down debt. High interest rates on credit cards or paying interest on multiple student loans can eat into your budget. Pay down your credit cards with the highest interest rates first, and consider consolidating your student loans to reduce the total interest paid.
With good planning, budgeting and discipline, you’ll be ready to start home shopping before you know it.
Buying a home can be a difficult decision, particularly in a hot real estate market, but research shows that buying a home is a great investment — and is more financially advantageous than renting. Here are three reasons to consider buying a home this fall:
- Prices will keep going up. According to CoreLogic’s latest Home Price Index, homes have appreciated by 6.7 percent in the last 12 months. They are expected to increase another 5 percent over the next year, so the home you are looking at buying today will be 5 percent more this time next year.
- Mortgage rates will also go up. Mortgage and banking experts project that interest rates for 30-year mortgages will go up, which means your monthly mortgage payment will also go up. Buy now and lock in an interest around 4 percent.
- You’re paying someone’s mortgage; it might as well be yours. Even if you are renting, you are paying your landlord’s mortgage. Why not take that same amount of money to buy your own home.
If you aren’t sure if this is the right time for YOU to buy, let us know. We’d be happy to meet with you to discuss your circumstances.
This summer was a great time to list your Kent, Covington, Maple Valley, Auburn or Black Diamond home, but if you missed your window, don’t despair. Fall is in the air, and in our current market, it is still a good time to sell. In fact, here are five reasons to consider selling your home this fall.
- Demand remains strong. According to the National Association of Realtors, buyer demand is strong across most of the country. In our area, home inventory is low, so buyers are competing for homes on the market, so sellers often get multiple offers once they list.
- There is less competition now. While inventory is low, experts anticipate that a new wave of homes on the market is coming. Why? The average number of years a homeowner would stay in their home was six, but it is now now, so homeowners who bought in 2008-2010 will have accumulated equity, giving them the freedom to put their homes on the market. If you wait until that happens, demand will drop, and so will prices.
- The selling process is quicker than normal. Because the housing market is competitive right now, buyers are doing their part to stand out from the crowd, so sellers will choose them. This includes getting pre-approved for a mortgage, so when they are ready to buy, they’ve already got a tentative commitment from their mortgage lender. This speeds up the process for closing.
- Now is the time to move up! According to CoreLogic, prices are expected to appreciate by 5.2 percent over the next year. That means if you want to upgrade to a larger home or purchase a luxury home, you will get a better price on that home now than you will a year from now. The longer you wait, the higher that luxury home will cost.
- It’s time to move to the next stage of your life. Right now buying a home makes more sense than renting one, so selling your home to purchase another one with appreciating value makes sense. Is your family growing? Did you just get married? Are you downsizing because you’re now an empty nester? These are all good reasons to sell your current home and to buy one that better suits your changing lifestyle.
If you have questions or would like to discuss whether or not this is the right time for you to sell your South King County home, let us know. Team Marti would love to help you understand your options!
CoreLogic’s latest Equity Report revealed that ninety-one thousand residential properties regained equity in Q1 2017. The outlook for 2017 remains positive as well, as an additional 600 thousand properties will regain equity if home prices rise another 5% this year.
The study also revealed that:
- Roughly 63% of all homeowners have seen their equity increase since Q1 2016
- The average homeowner gained about $14,000 in equity between Q1 2016 and Q1 2017
- Only 1.6% of residential properties are near-negative equity
Below is a map showing the percentage of homes with a mortgage, in each state, that have positive equity. (The states in gray have insufficient data to report.)
Frank Martell, President & CEO of CoreLogic, believes this is great news for the “long-term health of the U.S. economy.” He went on to say:
“Homeowner equity increased by $766 billion over the last year, the largest increase since Q2 2014. The rising cushion of home equity is one of the main drivers of improved mortgage performance. Since home equity is the largest source of homeowner wealth, the increase in home equity also supports consumer balance sheets, spending and the broader economy.”
Of the 93.9% of homeowners with positive equity in the US, 78.8% have significant equity (defined as more than 20%). This means that nearly three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home, now.
The map below shows the percentage of homes with a mortgage, in each state, that have significant equity. (The states in gray have insufficient data to report.)
If you are one of the many homeowners who are unsure of how much equity they have in their homes and are curious about their ability to move, let’s meet up to evaluate your situation.
During National Home Ownership Month (June), the Federal Trade Commission and the National Association of Realtors issued a warning to homeowners, advising them to protect their mortgage closing from scammers. According to the FTC blog post, scammers sometimes use emails to steal closing costs and personal information from homebuyers.
Here’s an edited excerpt from the FTC:
Here’s how the scam works: Hackers break into the email accounts of homebuyers or real estate professionals to get information about upcoming real estate transactions. The hacker then sends an email to the homebuyer, posing as the real estate professional or title company. The bogus email says there has been a last-minute change to the wiring instructions, and tells the homebuyer to wire closing costs to a different account. But it is the scammer’s account. If the homebuyer takes the bait, their bank account could be cleared out in a matter of minutes.
If you’re buying a home and get an email with money-wiring instructions, STOP. Email is not a secure way to send financial information. Instead:
- Contact the company through a number or email address you know is real. DON’T use phone numbers or links in the email.
- Don’t open email attachments, even from someone you know, unless you’re expecting it. Opening attachments can put malware on your computer.
If you’ve already sent money to a scammer, act quickly.
- If you wired money through your bank, ask them right away for a wire recall. If you used a money transfer company, like Western Union or MoneyGram, call their complaint lines immediately.
- Report your experience to the FTC and to the FBI’s Internet Crime Complaint Center at ic3.gov. Report as soon as you can and give as much information as you can. If your bank asks for a police report, give them a copy of your report to ic3.gov.
Learn more about protecting yourself from phishing and what to do if your email is hacked. If you gave your information to a scammer, visit IdentityTheft.gov.
A seller’s market can be a tough place for first-time homebuyers to purchase their first home, but don’t despair. It is certainly doable. Educate yourself on what’s needed to succeed in a seller’s market and work with an experienced Realtor who will give you world-class, 24/7 service. Here are our top 10 tips for first-time homebuyers. Good luck!
- Get pre-approved for a mortgage. We recommend doing this before you begin shopping a home, so you know how much home you can afford and what type of credit you have, which will ultimately impact your loan terms, including the interest rates.
- Begin your home search online to get an idea of what’s available. Check out Realtor.com, Zillow, Northwest MLS or your favorite Realtor’s website.
- Work with a Realtor early on in your process. A talented Realtor can help guide you through what can be a very complex process, and offer advice specific to your situation. Get recommendations from friends and colleagues, and be sure to check out the referrals online before you meet with them. Read their online reviews and testimonials and their LinkedIn profile to see how long they’ve been selling real estate. You might also interview a couple of different agents to see who might be a good fit for you.
- Know the difference between your wants and needs in a first home. List all the features you want in a home and categorize them as ‘must haves,’ ‘should haves,’ and ‘absolute wish list.’ Learn more here.
- Check out the neighborhood and schools. The features of your home will be very important to you, but the neighborhood where you want to buy should also play a factor. Are there similar homes in the neighborhood? Are they well maintained? What amenities are nearby (e.g., parks, restaurants, shopping)? If you have a school-age child, or will be starting a family, what schools will your child attend? Visit the neighborhood at different times of day, if possible.
- Attend open houses. This is a great way to tour homes on the market to see what’s available. Keep in mind though that in a HOT real estate market like this one, a new listing may receive multiple offers the day of the open house. If you fall in love with a house you are touring, you’ll want to act on it right away.
- Write a winning offer. In a seller’s market, you need to bring your best offer to the table with as few contingencies as possible. Work with your Realtor to offer a fair but attractive price.
- Understand that your offer might get rejected. Competition is tough these days, so you may not get the first home you put an offer in on. Be patient. It will happen.
- Be prepared to cover closing costs. In a seller’s market, the seller tends to have control, so prepare to cover your own closing costs which will be on top of your down payment. Here are some additional guidelines.
- Don’t expect any home to be perfect. Sure, you have your heart set on a dream home with all of the desired features, but that is unrealistic. Realtor.com suggests you focus on three main factors: price, size and location. If you get all three, great, but getting two is more likely.
Good luck, and let us know if Team Marti can help!
[Sources: Inman, Realtor.com and CNN Money]
Home buying and selling are complicated, detailed processes and, because they are often the most significant financial commitments of your lifetime, they can be highly stressful too. However, with a real estate professional on your side, buying or selling a home can be manageable, even enjoyable. Here are 5 reasons to hire a real estate professional when buying or selling a Kent, Covington or Maple Valley home.
- Rules, regs and paperwork. Each state regulates the contracts needed to buy or sell a home and these regulations change all the time. However, a real estate professional – ideally a Realtor – is up-to-date on the latest rules and regulations, and she can streamline the process for you.
- 180 steps to closing. According to the National Association of Realtors (NAR), there are 180 steps a full-service Realtor follows in return for their sales commission, including everything from pre-listing activities and entering a home into the MLS database to the home inspection and post-closing follow-up. Yes, 180! Let your real estate professional focus on those steps, while you focus on selecting the right home and getting ready for your move.
- Negotiation. Even if you enjoy a good negotiation, it can be very stressful, particularly when you are talking about a transaction worth hundreds of thousands of dollars. A real estate professional like me can take the emotion out of that process for you while putting years of negotiating experience to use.
- Home value. A real estate professional has the experience to price your home correctly, based on its true value and how current market conditions will affect the value. While you may know what you paid for your home and what you need to get out of it, a real estate professional can provide an objective value and her recommendations for putting a price tag on your home.
- Market conditions. The Seattle real estate market is one of the hottest in the country right now. An experienced and trusted real estate professional will stay on top of selling trends and know the ins and outs of the local real estate market to ensure you get the best deal possible.
If you are thinking of buying or selling a home this summer, contact Team Marti now for a no-obligation consultation of your situation.