Category Archives: Credit

7 Financial Habits That Will Make Buying A Home Easier

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsGood 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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).
  7. 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!

9 Steps to Take Now to Buy a Home Next Year

9 steps to buying a home in 2018You 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!

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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!

 

Team Marti’s Top 10 Tips for First-Time Homebuyers

Team Marti's Top 10 Tips for First-Time HomebuyersA 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!

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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]

Honest Advice for First-Time Homebuyers in a Sellers’ Market

Honest Advice for First-Time Homebuyers in a Sellers' Market

 

With home inventory so low, homes are selling quickly and above the asking price, in many cases. Here is some sound advice to help first-time homebuyers purchase a home in this sellers’ market:

  1. Get pre-approved from a mortgage lender. Whether you go through a traditional bank or a mortgage broker, first-time homebuyers should get pre-approved before shopping for a home. This will show sellers that their lenders have run a credit check, verified income and have tentatively agreed to lend the buyers money to buy a home. Pre-approval also typically means that the homebuyers know how much home they can afford. Learn more about pre-qualification and pre-approval here.
  2. Buy a home with a conventional mortgage. This will make homebuyers more attractive to sellers than someone who is getting financed through a VA or FHA loan, for example, because those home loan programs sometimes have greater restrictions.
  3. Put down a large down payment. While low down payment programs like VA and FHA home loans exist so buyers can buy a home with less money down, you will be more attractive to a mortgage lender and home seller with a larger down payment. This will also save you in mortgage interest over the life of your mortgage loan.
  4. Come to the table prepared to cover closing costs. When sellers have multiple buyers to choose from, they are more likely to select a homebuyer that is not going to ask the seller to share in closing costs.
  5. Require fewer contingencies when making an offer. When a seller has to wait for you to sell your home, or when other contingencies exist, a homebuyer becomes less attractive. Sellers want to sell their homes for as much money as possible, and as quickly as is possible. When contingencies exist, they could potentially hold up the selling process.
  6. Make an offer above asking price. Homes on the market now are selling within days. To buy one of those homes, homebuyers often have to offer more than the asking price to get their offer seriously considered. Of course, how much a buyer can offer is going to be based on their budget and down payment, but in this market, they should be prepared to go above the asking price.

This market is particularly challenging for first-time homebuyers. If you are in the market to buy a home now, consult with an experienced Realtor – like me – who can help you improve your chances of finding a home and getting your offer accepted. We can help you understand your options and improve your chances of having your offer accepted.

 

 

5 Tips for Getting a Mortgage in 2017

Special Home Financing Programs: FHA, VA and USDA LoansUnless you’ve got a trust fund or buckets of cash lying around, if you want to buy a home this year, you’ll need a mortgage. Here are 5 tips to help you find a mortgage that meets your needs:

  1. Find out how much of a down payment you need to save. Down payments vary from 0 percent to 20 percent down, and everywhere in between. Talk to your mortgage lender – or an experienced Realtor – to find out how much you need to save.
  2. Check your credit score. To determine your credit worthiness, you’ll want to review your credit score with a mortgage lender. If you are going for an FHA loan, the average qualifying credit score in 2016 was about 686. The average credit score for a conventional homebuyer was about 753, according to Bankrate.com.
  3. Get pre-approved. While pre-qualification does not guarantee you will get a mortgage, getting pre-approved does. When you get pre-approved by a mortgage lender, it means that lender has checked your credit, verified your income and assets and agreed to lend you money to buy a home, assuming everything else lines up (value of the home, etc.). Learn more about pre-approval here.
  4. The 4 Cs. When seeking pre-approval, a mortgage lender will look at the 4 Cs – Capacity (your current and future ability to make mortgage payments), Capital or Cash Reserves – how much money, savings and investments you have, Collateral – the home you want to purchase, and Credit – your credit history. Learn more about the 4 Cs here.
  5. Decide what type of mortgage is right for you. Before you apply for a mortgage loan, you’ll want to know the different types available to you. For example, if you are a veteran, you might be able to get a VA loan. If you are a first-time homebuyer, an FHA loan might be right for you. Talk to your Realtor and your mortgage lender to see what type of mortgage best fits your situation.

7 Reasons Your Credit Score May Have Dropped

7 Reasons Your Credit Score May Have DroppedA good credit history is needed to buy a home, but what constitutes a “good” credit score varies by lender and loan type. For example, to qualify for an FHA loan with a 3.5% down payment, you need a FICO score of 580 or higher. Conventional loans backed by Freddie Mae or Freddie Mac require a minimum credit score of 620.

With that in mind, it is important to monitor your credit score at least annually. If you have seen your score drop since you last ran your credit report, here are some possible reasons for the change:

  1. Using too much of your available credit. You shouldn’t use more than one-third of your available credit. This can also become a problem if any of your creditors reduce your credit line, throwing the total balance versus total available credit ratio out of balance.
  2. Missing payments
  3. Accounts in collection, tax liens and bankruptcies will all lower your credit score.
  4. Average length of time with open credit lines. The longer, the better.
  5. Limited types of credit – a mix of different credit types is better than just credit card accounts, for example.
  6. Too many credit inquiries for credit cards and loans
  7. Inaccurate information on your credit report

Correcting these problems can take time and a concerted effort on your part to reverse the trend and boost your credit score, but it is possible. Talk to your mortgage lender for advice on what your credit score is, what it needs to be and how to improve it if you are falling short.

 

 

The Mortgage Process: What You Need to Know

As we said in our Oct. 17 blog post, this is a seller’s market, so it is important that you get pre-qualified or pre-approved for a mortgage. Here’s what you’ll need to qualify in the current real estate market:

  • A down payment. This can range from 5% to 20% of the purchase price. According to Freddie Mac, 40% of buyers are putting down less than 10% with some as low as 3%.
  • Income verification, credit history and asset documentation
  • Third-party appraisal
  • Stable income
  • Good credit history

Freddie Mac recommends these 5 next steps.

The Mortgage Process: What You Need to Know

 

Have questions? Not sure what’s next? Team Marti can help. Contact us today to set up a no-obligation appointment!

 

Top 10 Home Buyer FAQs: Part 1

Top 10 Home Buyer FAQs: Part 1 from Kent Realtor Marti Reeder of John L. Scott

 

Prospective home buyers have a lot of questions about buying their first – or next – home. Here are some of the most frequently asked questions I hear from home buyers.

1.  How do I get started? What’s the first step?

Choose a Realtor®, not just a real estate agent, to help you from the very first steps through the closing of your home. An experienced Realtor® can tell you what’s first, next and last, and there will be many steps. Start by asking friends and family for referrals. Then interview a few Realtors to see which best meets your needs and that you feel really understands what you want in a home. Is she easy to talk to, responsive and available? Is she a solo agent or does she have a team? How many homes has she sold in the last year? How long has she been a Realtor? All good questions.

2.  How long does it take to buy a home?

It depends, but usually 30 to 60 days from the time a home buyer signs a contract to purchase a home, according to Homes.com. This does not include time to shop for a home, make an offer, get the offer accepted or to apply for mortgage pre-approval.

3.  What type of credit score do I need to qualify for a home loan?

Again, the answer depends on what type of loan you are applying for. For an FHA mortgage loan, FHA.com says a FICO score of 580 or higher will allow you to make a down payment of 3.5%. A credit score lower than 580 will require a 10% down payment. For a conventional loan, Credit Sesame says home buyers need a minimum score of 620. We recommend you ask your mortgage broker, mortgage lender or your Realtor for the latest requirements, which can change. Bottom line: the higher the score, the better your chances for mortgage approval and the lower your interest rate.

4.  How much of a down payment do I need?

A down payment on a home is a percentage of the home’s purchase price that you pay up front. Ideally, you should plan on a down payment of 20%, but depending on a variety of factors, you may qualify for a loan with as little as 3% down. For a conventional loan, if you are putting less than 20% down, your lender may require private mortgage insurance (PMI) which will increase your mortgage payments. The more you put down, the less your monthly mortgage will be. Also, remember that your down payment is not the only amount of up-front cash you’ll need to buy a home. There will be other expenses including closing costs to budget for.

5.  Are there other mortgage loan programs besides a conventional mortgage?

Yes! There are special home financing programs available including specialty, government-based financing programs like FHA, VA and USDA loans. Learn more about them here.

Next week, we’ll cover the next 5 top frequently asked questions by home buyers. Have your own questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.

Thanks for reading!

 

 

 

Homebuyer FAQs: Mortgage and Closing Costs

What You Need to Know about Mortgage & Closing Costs

Whether you are a first-time homebuyer or a seasoned homeowner ready for your next home, it is important to understand mortgage and closing costs. Here are some frequently asked questions to help you better understand your options.

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsQ:  What factors impact a mortgage interest rate?

A:  There are many factors involved when determining a homebuyer’s interest rate including credit score, loan type, home price, down payment and mortgage costs (for example, points, mortgage insurance and closing costs).

Q:  What other credit-related factors are important when financing a home?

A:  The better your credit, the lower your interest rate for a home loan is likely to be. Mortgage lenders consider your overall credit score, but they also consider your credit history with them, the amount of debt you already have, how much money you have in savings, your total assets and your current income. Learn more about credit reports and scores here.

Q:  What are points?

A:  Also called discount points, points lower your interest rate in exchange for a fee paid at closing. When you choose to pay points, you pay more at closing, but you lower your interest rate and pay less for the home over time. Points are related to the loan amount, and one point equals 1 percent of the loan amount. For example, on a $200,000 mortgage loan, 1 percent of the loan amount would be $2,000. Points are listed on your loan estimate and on the closing disclosure.

Q:  What is mortgage insurance?

A:  Many lenders require mortgage insurance for borrowers who put less than 20 percent down on the purchase of a home. The mortgage insurance lowers the risk to the lender, making it easier for you to qualify for a home loan. The cost of the mortgage insurance is included in your monthly mortgage payment, increasing your monthly mortgage payment. The cost of private mortgage rates varies depending on the borrower’s down payment and credit score.

Q:  What closing costs will I have to pay?

A:  Closings costs, the amount of money you’ll need to pay when you close on the purchase of your home, vary. Sometimes these costs are paid out of pocket, but some lenders will roll these costs into the total loan amount of your mortgage. Certain closing costs may also be negotiated with the home seller and the home seller’s agent. Common closing costs include appraisal fees, title insurance, government taxes, tax service provider fees, and prepaid expenses (for example, property taxes, homeowner’s insurance and interest between the time of closing and the time your first payment is due).

For more information on interest rates, credit, points, mortgage insurance, closing costs and more, download this free home loan toolkit offered by the Consumer Financial Protection Bureau. It has some great information and checklists to help you through the home buying process. An experienced Realtor® can also answer these questions and guide you as you make decisions about buying a home.

Good luck!

Sources: Consumer Financial Protection Bureau

What’s the Difference Between Being Pre-qualified and Pre-approved for a Mortgage?

What’s the Difference Between Being Pre-qualified and Pre-approved for a Mortgage?There are all kinds of terms thrown around when it comes to buying a home. Two of these terms are “pre-qualified” and “pre-approved.” While these terms are similar, they are, in fact, very different. Let’s talk about the differences.

Pre-qualification

Being pre-qualified for a mortgage does not guarantee that you will get a mortgage. A lender will talk to you while you’re still a prospective buyer and ask you questions about your credit, assets and income. During this meeting, you will not be required to show proof of income, and a credit check will not be run. There’s no harm in being pre-qualified, but focusing on pre-approval should be your priority.

Pre-approval

Pre-approval from a lender means your credit check has been approved, and that your income and assets have been verified by the lender. The mortgage lender has made a decision to lend you money to buy a home.

There is a time frame to use your pre-approval for the purchase of a home, generally 120 days, according to Realtor.com. For pre-approval, you will need at least two years of tax documents, several weeks of paystubs, your two most recent tax returns, and any other proof of your income. A credit score of 740 or higher will help you get the lowest interest rates and a minimum credit score of 620 to be approved for an FHA loan.

In short, pre-qualification means a lender will have an overview of your financial history, without pulling a credit report or verifying your income. Pre-qualification will not help much when it comes to buying a home, but it will help you learn where you stand and if there are areas you need to work on. Pre-approval, on the other hand, is vital to getting a mortgage.

For more information, please contact your mortgage lender or an experienced Realtor®. Good luck!