Buying Soon? Make Sure Your Credit is in Order

Here’s one that I know my friends in the mortgage industry can get behind. There’s no more important time to work on your credit score than when you’re about to apply for a mortgage. There was once a time when if you could fog a mirror, you could get a loan (hello 2006!) but those days are long behind us.  Now if you want to apply for a home loan, there are lots of qualifications.  Having good credit is right at the top of that list.  The higher your credit score, the lower the down payment you need to qualify, and likely the lower your interest rate.  Improving your credit can save you a ton of money—we’re talking about thousands of dollars over the life of the loan. Here are the actions you can take that will have a notable impact on your score:

Pay down your credit card balances

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Credit utilization is one of the biggest factors in determining your credit score. Your credit utilization should at least be less than 30 percent of your limit, and it’s even better if you can get it below 15 percent. This rule applies to both individual cards and your overall credit limit.

It may even be worthwhile to use some of the cash funds you were planning to use for a down payment to pay off credit card balances.  Speak to your mortgage lender about the best avenues to take to ensure you’re getting the best loan possible!

Do no harm

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Current credit minimums for FHA loans

Possibly the most important item on this list! While you certainly want to improve your score if possible, at the very least you’ll want to keep it steady. Avoid opening new lines of credit if you’re applying for a mortgage in the very near future. This will cause a hard inquiry to show up on your credit report.  Whatever you do, don’t go car shopping or start furnishing your new home before the closing date! Otherwise your lender and Realtor® will be none too happy with you!

Take care of negative items

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It’s good practice to check your credit report for negative items a few times a year—you can get one free report from each of the three major bureaus (Experian, Equifax, and TransUnion) per year.  Sites like Creditkarma.com are great for keeping track of your credit scores for free as well.

If you find any negative items (collections, late payments, etc.), write a letter to the original creditor. Explain the circumstances that led to the negative item, and request that it be removed from your report. It can be surprisingly effective, and removing a negative item will improve your credit score in a hurry. You can find some good templates for a request letter online.

Once your credit is in order, your lender will be able to get you pre-approved for a loan amount.  Make sure you get pre-approved before you start house hunting, or else you might fall in love with a home outside your budget!

Got any other credit tips?  Leave them in the comments!

 

Posted on January 18, 2017 at 3:46 PM
Sianna Johnson | Category: Finance, Real Estate, Uncategorized | Tagged , , , , , , ,

Is Now the Right Time to Refinance?

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Even though interest rates are on the rise, they are still at historic lows. If you have an Adjustable Rate Mortgage (ARM), it may be a good time to consider refinancing your home.  If you have thought about refinancing in the past, but were worried about being locked into a rate, getting in on the current low rates could be very financially advantageous.  It’s expected that rates will continue to rise over the new months, so waiting too long to refinance may end up getting you a higher rate.There’s no one-size-fits-all answer to whether your should refinance, so here are a few of the main considerations:

How long does your introductory rate last?

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Most ARMs have a fixed rate for the beginning of the mortgage. This is an introductory period (usually 3-10 years) when your rate will remain constant before it can be adjusted. If you have several years left in your introductory period, you can monitor interest rates for a while before making a decision. But if the intro rate is ending soon, it’s a great time to explore refinancing at a fixed rate.  Be sure to take note of what the rate cap is for your loan.  Usually, your APR cannot increase more than a certain percent during each period (so if you’re at 5% and you have a cap of 2%/year, your rate could go as high as 7%).  If you’re not willing or prepared to pay the max of what the cap could be, refinancing may be an excellent option.

How long are you staying?

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If you plan to sell your home soon—especially if you’re still on a fixed introductory rate—there’s not much motivation to refinance. But if you’ll be at your home indefinitely, you should consider your refinancing options. You could eliminate the stress of not knowing what your future mortgage rate and payments will be.  This also could allow you to put more into savings, since you’re no longer having to account for the possibility of a dramatic increase in your mortgage payment.

What’s your loan balance?

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The change in your mortgage payment will of course be determined in part by your remaining balance. If you owe $100,000-$200,000, a new interest rate may not greatly affect your monthly payment. On the other hand, if you owe $500,000, a change in interest rate could lead to a much higher payment.

Other factors

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The previous items are just a few of the factors that should go into a decision about refinancing. Changes in income and your current credit score should also be considered, so be sure to weigh your options and make an educated decision.  Talk to a mortgage professional who can help you figure out if refinancing is right for you.  If you’re in the Portland area, I can point you to a lender who will work with you to figure out your best options.

Posted on May 10, 2016 at 6:38 PM
Sianna Johnson | Category: Finance, Real Estate | Tagged ,

Rent vs. Buy. Which Makes More Sense?

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The title of this post is a question that if I had a dollar for every time someone asked me, I could probably already be retired.  Unfortunately, there’s no easy answer that applies to everyone.  One of the biggest determiners is location.  For instance, here in Portland, the rental market has gotten so out of control in the past few years, that rent increases are exceeding housing price increases.  Couple that with the fact that mortgage rates are still so low, that more and more renters are looking at home ownership as they find that monthly mortgage payments are actually more affordable than their current rent.  Now, this isn’t the case everywhere, but it is happening all over the US.  This article from Bloomberg shows the strain that high rents are causing people all over the country.

Many real estate sites will tell you that you should never, ever rent and that you need to buy now.  There’s a reason so many people decide to rent, though.  Renting isn’t always a bad idea.  If you’re the type of person that never likes to stay in the same place for too long, then it probably doesn’t make a whole lot of sense to buy a house. Zillow’s Breakeven Horizon estimates the number of years you would have to live in a home before buying it would become more financially advantageous than renting it.  At the end of 2015, the national breakeven average was 1.9 years.  So if you’re not planning on staying somewhere for more than 2 years, it definitely behooves you to rent.  If you’re lucky enough to be somewhere that’s rent-controlled, and you’re happy with your amenities, why would you walk away from that?  Having a landlord means that you aren’t the one that’s ultimately responsible for the home, which can be a big allure to some people.  For anyone that falls into these categories, by all means, keep renting!

Many of us, however, dislike the idea of paying down someone else’s mortgage, but aren’t sure if buying is right, either.  While there are pros and cons to both buying and renting, here are some pros to being a home owner:

  1.  Buying is cheaper than renting.  According to a study done by Trulia in May 2015, nationally, buying is 35% cheaper than renting due to low mortgage rates and home price increases and rent increases being on par with each other.
  2. Freedom!  Want to paint the kitchen a different color, or add carpeting to the bedrooms?  When you own, those decisions are up to you and you alone (well, maybe your budget, too).  Unless you have an HOA, you are free to make changes as you wish, and really create a space that is all you.
  3. Wealth Building.  Real estate is usually someone’s biggest financial investment.  Home prices tend to appreciate as time goes on, so you’re building wealth just by being in your home.  Also, the more you pay down your mortgage, the more equity you have in your home.  So the longer you stay, the more wealth you’re building!
  4. Homeowners get more tax breaks.  You may be able to deduct your mortgage interest payments every year, as well as any deductions for any energy efficient improvements that you make to your home.  Contact a tax professional to find out all the ways home owners can get tax breaks.
  5. Fixed rate mortgages don’t increase, rents do.  Unless you’re somewhere that’s rent controlled, your rent will go up.  It is just a part of the rental market.  If you choose a fixed rate mortgage, your monthly payment won’t increase for the life of the loan.  There’s definitely a peace of mind in knowing that you’ll always be paying the same amount every month.

Ultimately, it’s going to be up to you whether renting or buying better suits your lifestyle.  If you’ve been on the fence for a while now, however, this is a good jumping off point to help make your decision.

Posted on February 6, 2016 at 12:35 AM
Sianna Johnson | Category: Finance, Real Estate | Tagged , ,

What Does the Future Hold? 2016 Economic & Housing Forecast

There are so many things I love about working for Windermere, but what I love most is the access we get to information that I can pass along to all of you.  Now that 2016 is officially upon us, and we’ve started to settle back into post-holiday life, I wanted to share with you guys some numbers that we can use to figure out what to look forward to this year.

Windermere is fortunate to have Chief Economist Matthew Gardner on staff to provide valuable analysis of the economy and housing market. Matthew recently completed his national economic forecast which details his predictions for the 2016 economy and housing market.  I’ve added it here below for you.  Take a look, and let us all know what you think in the comments.  I think 2016 is looking to be a great year!

Matthew Gardner 2016 Forecast-page-001

Posted on January 11, 2016 at 11:48 PM
Sianna Johnson | Category: Finance, Real Estate | Tagged , , ,

What Does the Future Hold? 2016 Economic & Housing Forecast

There are so many things I love about working for Windermere, but what I love most is the access we get to information that I can pass along to all of you.  Now that 2016 is officially upon us, and we’ve started to settle back into post-holiday life, I wanted to share with you guys some numbers that we can use to figure out what to look forward to this year.

Windermere is fortunate to have Chief Economist Matthew Gardner on staff to provide valuable analysis of the economy and housing market. Matthew recently completed his national economic forecast which details his predictions for the 2016 economy and housing market.  I’ve added it here below for you.  Take a look, and let us all know what you think in the comments.  I think 2016 is looking to be a great year!

Matthew Gardner 2016 Forecast-page-001

Posted on January 11, 2016 at 11:48 PM
Sianna Johnson | Category: Finance, Real Estate | Tagged , , ,

5 Things Every Seller Should Do Before Listing

You’ve made the decision to sell your home, now you just call an agent and they put a sign in your front yard, right?  Sure, if you’re not worried about when it will sell or for how much.  If you’re looking for top dollar, though, you’ll have to put in a little more work than that.  A lot of sellers will meet with an agent assuming that the day they sign the listing agreement is the day advertisement of their home will begin.  It’s always frustrating to see a seller whose move is time-sensitive learns that their property won’t be ready to list for a few weeks.   There are definitely things that need to be done alongside your real estate agent, but putting in some prep work will cut down the time before you can list, and ultimately close and get moved!

Here are 5 things to do once you decide to sell:

  1. Determine the Equity in Your Home

ITA18FXIBLThe first thing you need to do is figure out how much is left on your mortgage balance.  You want to ensure that your payoff amount is less than what you’ll sell for, or else you won’t be making any money off your home! Then there are the costs of a transaction: commissions, prorated taxes for the year, etc. You’ll also have to think about where you’re moving.  Most people use the proceeds of their home’s sale for the down payment on a new house.  Will the equity in your home cover all that?  Call up your mortgage lender and ask their opinion.  They will be able to answer a lot of the preliminary questions you might have.

To figure out what your home is truly worth, you’ll need the expertise of a real estate agent who can perform a Comparative Market Analysis (CMA) for you.  If you just want to get a ball park idea of what your home is worth before meeting with an agent, you can look at market trends in your area.  Neighborhood News is really excellent; it’s free, updates monthly, and it will give you info on recently sold properties in your specific area. From there, you can see that other 2 bedroom homes are selling in your neighborhood for between $250K-$275K, for example, and determine if that will be enough for you.

BEWARE of online home estimates!  Sites like Zillow or Trulia (who was recently bought out by Zillow, so they are now pretty much one in the same) will give you an estimated value of your home, but it’s been found that they get within 5% of actual market value only about 50% of the time.  While you can use their estimate to get an idea of what you’re home is worth, don’t get caught up in that number.  Once you’ve determined that you can sell and you’ll still have some money left in your pocket, it’s time to move to the next step.

2. Declutter and Depersonalize

9ORZU6QN7SI’ve talked about this before but that’s because this is probably the easiest and most cost-effective way to get your home ready to sell.  Take a look around your house.  Are there pictures of family and friends all over your walls?  Buyers don’t want to see them.  It’s hard to envision yourself in a house where there are signs of someone else’s life everywhere. Take anything that’s specific to you or your family: photos, trophies/awards, kids’ art, personalized/monogrammed items and store them.  You’re going to have to pack them for the move anyway!  If you’re not quite ready to see your wall sans family portrait, make a note now of everything that will have to be put away before your home starts being shown.  Especially for homes with children, this will be more things than you initially think!

Cluttered spaces are a big turn off as well.  As comfy as your oversized recliner is, the fact that it takes up half the floor space in your living room isn’t doing you any favors.  A good real estate agent will have access to a staging company that will be able to do most of the hard work for you, but before you make that call, it’s good to know what pieces you’ll need to put in storage.  Take this time to do some research on local storage companies.  That way, when the time does come to move out your bigger, bulkier furniture, you’ll already know who has the best deal.

3. Make Minor Repairs

6B70C91911You don’t need a professional to tell you that the doorknob you have to jiggle just so isn’t a selling point.  Make sure finishes are functional and don’t look dated.  Go through each room and replace anything that is staying with the house that wobbles or flickers.  Wood floors should probably be refinished and unless carpet is spotless, it should be replaced.  While you can offer a credit to the buyer to make your home more enticing, it’s a lot easier for someone to fall in love with the plush feel below their feet.

If your roof needs replacing, bite the bullet and just do it. The second you hire a real estate agent, they’re going to suggest you do it anyway. Roofs in disrepair can turn off a buyer faster than you can blink three times.  No one wants to worry whether the rain is going to leak through during the first big storm.

Landscaping and paint jobs shouldn’t be ignored, either!  My earlier post (which I linked to above, but here it is again) goes into much more detail about updates such as these. In short, buyers generally want something move-in ready.  The closer you are to that, the more buyers will be interested and the more they will be willing to pay.

4. Think About Throwing in Extras

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Sometimes a buyer will walk into a home and fall in love with some of the stuff you have inside.  Of course you’re probably not going to give them your bed, but certain things like appliances can sweeten the deal.  Is there anything that you would be willing to part with?  Maybe there’s a large bookcase in your den that was custom built to fit that wall.  There’s a good chance that you won’t want to bring that with you either because it’s too large and cumbersome, or because it’s a weird size that only works for that room in particular.  I was in a house recently that had a large freestanding island in the kitchen.  The seller planned to leave it behind because even though it wasn’t fixed to the house, it was so heavy that taking it along was impractical.  It fit really well with the general aesthetic of the house (very modern) and added a lot of counter space that otherwise would have been lacking in the home.

*On a quick side note, if you plan on leaving any furniture or appliances when you do move out, make sure the movers know not to take those things!  If those items are promised in the purchase agreement and aren’t there when the new owners show up, you’ll be in trouble!*

5. Find a Real Estate Agent You Trust

96E1A8F1CBYou’ve done your homework, made sure your house looks great, and now you’re really ready to sell!  Make sure you’re hiring an agent that you trust and that you’ll know can get the job done for you.  Interview different agents to find out who’s services fit best with your needs, and most importantly, find someone you like!  You’ll have to work closely with this person for a while so if they have a personality that clashes with yours, it could be an early red flag.  If you choose a Realtor®, know that we must abide by a strict code of ethics that are not required by other agents.

Now, the only thing left to do is list your house!

Posted on November 2, 2015 at 11:16 PM
Sianna Johnson | Category: Real Estate | Tagged , , ,

How Much Cash Do You Need to Buy a House Today?

The other day, I was talking to a couple friends of mine that are starting their journey to home ownership.  They asked me a great question: “What’s the least amount of money we need to buy a house?”  Of course, there is no one magic number that I or anyone else can give that applies to everyone.  First things first,  to get the best picture of what you can afford, it’s imperative that you talk to a great loan officer.  They are the money experts, and they will be able to take a look at your pay stubs, bank accounts, credit scores, and any other financial materials to determine what you can afford.  They will help you figure out the right type of loan for your needs and how much you can be pre-approved for.

There are a few number you can look at to get a ball park range of what your costs may be, though.  Firstly, know that it’s not always necessary to put a 20% down payment.  There are loan programs available that range from the typical 20% we all know, to as little as nothing down.  FHA loans, which are insured by the government require 3.5% down.

The down payment is just the first chunk of money to pay attention to, however.  Buyers need to be ready to pay for inspections on homes they would like to put an offer on.  Inspections typically range from $300-$500, but can be variable by location.  Websites like Angieslist.com are a great resource for comparing costs in your area.  Expect to pay more as well if you plan on including a sewer scope or radon testing.  A lot of buyers are tempted to bypass these inspections to save some cash, but skipping an inspection can be more costly in the long run.  Finding out about defects in the home before you move in can give you some leverage in negotiations, and you may be able to get the seller to fix it or give you a credit at closing for any problems.  If nothing else, the peace of mind knowing that there are no hidden secrets in your home is worth the cost in my opinion.

Lastly, come the closing costs.  A good rule of thumb is that you will typically owe about 2.5% of the purchase price in closing costs.  Credit.com has a nice break down for price ranges when you’re putting down less than 20%:

  • For a home purchase between $500,000-$600,000, you’ll need at least $10,000 for closing costs
  • Between $300,000-$500,000, at least $8,000-$10,000 for closing costs
  • Between $150,000 $300,000, at least $7,200 for closing costs

Hopefully, this is a good jumping off point for you.  Again, to get a better grasp on what costs you’ll be paying, talk to a mortgage broker.  They’re the only ones who can give you real, professional advice.  If you’re in the Portland area and are looking for an excellent broker, contact me and I can put you in touch with one that will suit your home buying needs.

Did I miss anything?  Any other tips?  Let me know in the comments!

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Posted on October 12, 2015 at 7:56 PM
Sianna Johnson | Category: Real Estate | Tagged , , , ,