Tag Archives: Credit Score

First-Time Buyers Are Slowly Re-Emerging

First-Time Buyers Are Slowly  Re-Emerging

I just had the opportunity to read a great article in Realtor Mag that stated about 51% of buyer’s nation wide identify themselves as a ‘First Time Home Buyer’.  This is up from 35% just about a year ago. However, 9% of buyers say they can’t qualify for a mortgage and 25% of buyers say they don’t have enough money for a down payment.

Buying your first home can be daunting, but there are several things you can do to get prepared for the process. The first thing is to get your credit in order.  There are tips all over the internet, but one of the most important things is to pay your bills on time.  Your payment history comprises almost 35% of your FICO score.  The second piece of advice is to work on your debt to income ratio.  The lower your monthly payments (credit card bills, car payments, student loan payments, etc), the more you are usually eligible to borrow.  Pay some of your debt off or refinance to get a lower monthly payment.

Last but not least, start saving! There are plenty of programs out there that do not require you to have 20%.  There are even some loans that we have available here in the mountain region that really only require you to have enough money to put down an earnest money deposit, which is typically 1-2% of the purchase price.  However, having more money to put down can allow you to have lower monthly payments or get into a more expensive home. For more tips or tricks, feel free to reach out to me!


First-Time Buyers Are Slowly Re-Emerging

Last August, about 35 percent of home buyers identified themselves as first-time buyers. Flash-forward one year later, the share of buyers identifying themselves as first-timers has soared to 51 percent, according to research by realtor.com®.

As more first-time buyers re-emerge, new challenges – mostly financial – are becoming more paramount for the market, notes Jonathan Smoke, realtor.com®’s chief economist, in his latest column.

For example, about 9 percent of buyers are now reporting having difficulty qualifying for a mortgage, up from 5.6 percent a year ago. The number of buyers saying they need to improve their credit score has since doubled, increasing from 9.7 percent of all buyers in 2015 to 19.5 percent this August. What’s more, the percentage of buyers who say they don’t have enough funds for a down payment has increased from 16 percent a year ago to 25 percent this year.

“The market has seen growth despite higher prices in part because of pent-up demand from very qualified buyers who were able to meet the challenging mortgage qualifications that are the norm these days,” Smoke says. “A key question for the months ahead is whether a higher share of first-time buyers is ready or capable of qualifying for a loan and closing on a home.”

Smoke offers the following financial tips for first-time buyers who want to make a move sooner rather than later:

  • Get your finances in order: Know your FICO score and take efforts to get it above 700 to improve your chances of qualifying for financing and securing a better interest rate. Also, start collecting financial records, like recent bank and financial statements, the past two years of income tax filings, and pay stubs.
  • Know your down payment: The average down payment for 2016 is 11 percent nationwide. That can vary dramatically, however. Several down payment assistance programs also are available to help.
  • Get pre-approved: Getting pre-approved will prove you do have the finances in place to qualify for a mortgage and purchase a home. “A pre-approval letter as part of an offer will communicate to the seller that you have the ability to close,” Smoke notes.

Source: “First-Time Home Buyers Come Out in Force – But Face New Challenges,” realtor.com® (Sept. 8, 2016)

Wanna Buy a Home? Clean Up Your Credit Score

Your credit score is a major factor in buying a home. It is important to understand how best to set yourself up for success. Thanks to Jamie Wiebe and Realtor.com for outlining some helpful tips in getting your credit score under control. 


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So You Wanna Buy a House? Step 1: Clean Up Your Credit Score

By
Jamie Wiebe

It’s easy to fall in love with the idea of buying a home. You’ve got it all planned out: a five-bedroom home in your favorite neighborhood with a manicured lawn and—why not?—a nice pool.

Well, it may be the middle of winter now (we haven’t even tossed our Christmas trees yet, actually), but you’ve got a lot to do before prime home-shopping season this spring. So if you really want to land that dream home, you’d better get started now!

We’re kicking off our 2016 guide So You Wanna Buy a House? Each week, we’ll show you the next step to prep your finances, save for a down payment, find your dream home, and then finally ace the deal. (We’ll also have a 2016 guide for home sellers kicking off tomorrow.)

Step 1 is to clean up your credit score, also called a FICO score—a simplified calculation of your history of paying back debts and making regular payments on loans. If you’re borrowing money to buy a home (as most do), lenders want to know you’ll pay themback in a timely manner, and a credit score is an easy estimate of those odds.

Here’s your crash course on this all-important little number, and how to whip it into the best home-buying shape possible by spring.

Pull your credit report

There are three major U.S. credit bureaus (Experian, Equifax, and TransUnion), and each releases its own credit scores and reports (a more detailed history that’s used to determine your score). Their scores should be roughly equivalent, although they do pull from different sources. For example, Experian considers on-time rent payments while TransUnion has detailed information about previous employers.

To access these scores and reports, financial planner Bob Forrest of Mutual of Omaha recommends usingAnnualCreditReport.com, where you can get a free copy of your report every 12 months from each credit-reporting company. It doesn’t include your credit score, though—you’ll have to go to each company for that, and pay a small fee.

Or check with your credit card company: Some, including Discover and Capital One, offer free access to scores and reports, says Michael Chadwick, owner of Chadwick Financial Advisors in Unionville, CT. Once you’ve got your report, thoroughly review it page by page, particularly the “adverse accounts” section that details late payments and other slip-ups.

Assess where you stand

It’s simple: The better your credit history, the higher your score—and the better your opportunities for a home loan. The Federal Housing Administration requires a minimum credit score of 580 to permit a 3.5% down payment, and major lenders often require at least 620, if not more. So what can you do if your credit report is in less than shipshape? Don’t panic, there are ways to clean it up.

Dispute any errors

A 2013 Federal Trade Commission study found that 5% of credit reports contain errorsthat can erroneously ding your score. So if you spot any, start by sending a dispute letter to the bureau, providing as much documentation as possible, per FTC guidelines. You’ll also need to contact the organization that provided the bad intel, such as a bank or medical provider, and ask it to update the info with the bureau. This may take a while, and you may need documentation to make your case. But once the bad info is removed, you should see a bump in your score.

Erase one-time mistakes

So you’ve made a late payment or two—who hasn’t? Call the company that registered the late payment and ask that it be removed from your record. “If you had an oopsy and missed just a payment or two, most companies will indeed tell their reporting division to remove this from your credit report,” says Forrest. Granted, this won’t work if you have a history of late payments, but for accidents and small errors, it’s an easy boost for your score.

Increase your limits

One no-brainer way to increase your credit standing is to simply pay off your debt. Not an option right now?  Here’s a cool loophole: Ask your credit card companies to increase your credit limit instead. This improves your debt-to-credit ratio, which compares how much you owe to how much you can borrow.

“Having $1,000 of credit card debt is bad if you have a limit of $1,500. It isn’t nearly as bad if your limit is $5,000,” Forrest says. The simple math: Although you owe the same amount, you’re using a much smaller percentage of your available credit, which shines well on your borrowing practices.

Pay on time

If you’re often late with payments, now’s the time to change. Commit to always paying your bills on time; consider signing up for automatic payments so it’s guaranteed to get done.

Give yourself time

Unfortunately, negative items (such as those habitually late or nonexistent payments) can stay on your report for up to seven years. The good news? Changing your habits makes a big difference in the “payment history” segment of your report, which accounts for 35% of your score. That’s why it’s essential to start early so that you’re sitting pretty once you’re shopping for homes and find one that makes you swoon.

Once you’ve set your credit on a better path, it’s time to tackle the next major hurdle: saving for a down payment. Stayed tuned next week for the steps!