Importance of Credit Scores when buying a home and what you can do to improve them

View detailsJuly was a busy month for me and I hope it will continue into August.  One thing I ran into several times last month was buyers having a hard time getting financing due to certain things on their credit.  Many felt they would not have any problem getting approved only to find that their credit scores had fallen for one reason or another.  There are many things that can cause your credit scores to fall below what a lender will allow including unpaid Medical bills or consumer loans, late payments on your mortgage, too much debt load, late  payments on credit cards, liens or judgments, bankruptcy, foreclosure or short sales……. and more.  It has always been my policy that my buyer clients have an updated pre-approval letter in hand before we begin looking for homes.  Why?  Because I don’t want you spending weeks searching for homes, find one you absolutely love and then not be able to have it.  Even if you had a pre-approval letter in the past year, they are usually only good for 90 days and need to be updated.  Your credit changes and lender guidelines change and you need to be current.

Did you know that FHA guidelines do not even have a credit score requirement?  That’s right, if you met all their other guidelines, your score does not matter, HOWEVER, most lenders will have what they call an "overlay" that adds that component and sets a minimum credit score requirement.  All lenders are different so it does pay to check a few and see what their minimum score requirements are. 

Knowing what your credit score is and what affects it in a first critical step to getting the best financing available and the lowest payment possible on your new home.  The higher your score, the lower your interest rate.  I posted an article a few years ago after a seminar our company hosted that had some great information about credit scores and I wanted to post the links to that 3 part series:

Myths and Misconceptions of Credit Scores Part 1
Myths and Misconceptions of Credit Scores Part 2
Myths and Misconceptions of Credit Scores Part 3

Once you have your credit scores high enough and you pre-approval letter in hand – you are good to go!  Almost….You do still need to have some cash available for appraisal, inspections, down payment and earnest money deposits.  If you have any questions about getting pre-approved, call me and I can help direct you to the right place – I am happy to help.

I have found the perfect home-Now what? NC Buyer tips

Buyer Tips  for first time home buyers or those not familiar with buying a home in North Carolina.   IMG_0748

 

It has been a very busy week this week for working with buyers.  I have had showing appointments in Statesville, Mooresville and the Troutman area just about every day and I will say, the pickins are gettin slim!  It is becoming harder and harder to locate that “perfect” home and the good ones are moving quickly.  With that being said, this week I wanted to remind you what you can expect when getting ready to put in an offer on a home and a summary of what you can expect after your offer has been accepted.

I found a great home, Now What?

After many hours of search for homes, driving by, scouring the internet and touring the neighborhoods, you have finally found the right home for you.  It was that “wow” factor the minute you walked through the front door.  You love everything about it and know this is the one for you.  Ok, now what do we do?  This is when your buyers agent really goes to work!  Finding you the right home is a lot of work, but negotiating the deal and getting it to closing is where they earn their paycheck.
Always be sure to go back through the home you have selected a second time before putting in an offer.  You want to really take a good look at all the features and condition of the home so that you can address any problems you see right up front.  Open the cupboards, check the appliances, check out the attic or basement, look for obvious things that you know you will want fixed or items you would like to remain with the home.  Maybe you would like the refrigerator, the washer and dryer or that swing set in the backyard.  Anything that is not “nailed, glued or screwed” down is considered personal property and should be removed by the seller unless you ask for it to stay as part of the negotiation.  Make a list of everything to include in the offer.  If you see any obvious repairs that you know you need to have fixed, put it on the list and address it in your offer to purchase.
Your agent will then go to work getting all the paperwork together to work up an offer.  They will perform a market analysis for you to help determine a good offer price, find the covenants and restrictions for you to review, see if they can locate a survey so you can check the boundary, pull the deed to confirm ownership, prepare all the Offer documents for signatures along with many more “behind the scenes” tasks that need to be handled before presenting an offer.

How much money will I need to put in an offer?

This is one question that I get every time and it is a good one.  Most buyers don’t know what to expect as far as costs upfront.  At this point, you should have already talked with your lender and received a pre-approval letter stating that you can purchase the home and that your credit has been reviewed.  Your lender should review a good faith estimate of charges that you can expect in connection with your loan.  These costs may include : Down payment, lender costs, attorney costs, inspection costs, recording and processing costs, pro-rated taxes and homeowners fees and monthly escrow amounts.  Depending on the type of loan you are receiving, these costs will vary.
You could ask the seller to pay some or all of your closing costs as part of the negotiation but the down payment (if required) will have to be paid by you.  On the NC offer to purchase, you may offer the seller an earnest money amount or a due diligence amount or both.  This is part of the negotiation and can vary depending on the skills of your agent, the size of the deal, the length of time until closing and other factors.  On average, it is usually $500 to $1000.  Earnest money will be kept in a trust account with one of the real estate offices involved and the due diligence money will be made out the the seller directly.  The due diligence money will not be returned to you but will be credited at closing.  If you back out, you will lose that money.  Earnest money may be returned depending on the reason for termination.  Each deal will vary so be sure this is very clear and that your agent has explained this to you thoroughly.
You will also need to have money available for the appraisal.  As soon as the offer is accepted, your lender will need a check upfront for this (usually around $450).  If you have asked the seller to pay for closing costs and they have agreed, you can ask that your inspections be paid at closing, but if you are paying for these items, you will want to bring your checkbook and pay the contractors directly.  Home Inspectors, Termite inspectors, septic and well inspectors and any other contractor you ask out will expect payment or at least a credit card number to have on file that will be charged if the transaction does not close.  As the buyer, you are still responsible for these costs as they are not required for most loans.  Inspections are for your protection and highly recommended but you could be out of pocket a large amount if things don’t go well and the seller refuses to fix items of concern.  Your agent will help you through this process and make it as smooth as possible but be prepared to weather some bumps.

My offer is accepted – now what?
After negotiations are completed and the agreed upon terms are accepted by all parties, you can begin the process of the inspections and getting your loan moving forward.  Schedule your inspections right away and plan to be present.  Call your lender and get all the required paperwork to them plus the appraisal check, make plans to start moving, contact utility companies to set up an account.  The best thing to do is to get a good checklist for things to do and attack them one at a time.  I provide my buyers with a refrigerator checklist of things to get done and people to contact to help keep you on track and I also provide a first time homebuyer binder that will have a great moving checklist in it.  Be sure you get your copy.  You can also find some good ones online.
After inspections are completed and any needed repairs are addressed, you are in a holding pattern.  It could be weeks where you are just waiting for things to happen.  Waiting on the lender to clear your loan, waiting on the sellers to complete repairs among other things.  Don’t lose patience here, it is normal and you just need to go with the flow.  Before you know it, closing day will be here.  Your agent will keep track of the due diligence date and make sure everything is in place before that date expires.  This date is your cut off for backing out of your deal.  After that, you are hooked.  Be sure you want to move forward and that you are confident your loan looks good, appraisal is good, repairs are complete and your feet are not cold!  Soon after that, you will call to turn on utilities in your name, set up the movers, do a final walk through and get ready to sign lots of paperwork.
Once the deed is recorded and you have those keys in hand…….you are good to go!  Enjoy your new home.  I hope this helps answer some of your questions about the basics but I know there are many other things involved in buying a homes and if you have additional questions, call me anytime.  I am happy to answer them for you.

Buying a home is not as easy as you think

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This week I wanted to talk a little about how to find a home in today’s market.  It is not as easy as some think.  The perception is there is a TON of  inventory out there and the prices have been dropping for the last few years so I should be able to find the home of my dreams at a huge bargain with no problems – right?  WRONG.  Let’s take a closer look at why this may not be true.

TONS OF INVENTORY:

Inventory depends on what it is you are looking for.  Sure there are currently 1090 single family homes for sale in Iredell County, but you are not looking at all the homes in Iredell County.  You are looking for something more specific.  Let’s say you want a home from $100,000 to $200,000 – that will narrow it down to 342.  You just want to look in Statesville NC – 166.  You want .5 acres or more – 90.  You have to have a two car garage – 49.  You can’t live without 4 bedrooms -10.  Get the picture?  The inventory gets smaller and smaller when you get down to what you are really looking for in a home.  In some price ranges, there is very little inventory to choose from and it does not take long to look at all the homes out there that fit your checklist.

PRICES HAVE BEEN DROPPING AND SHOULD GET A HUGE BARGAIN:

Well, based on what we just went over with the inventory, only 2 of the 10 are distressed homes (20%) and one of them is a 100 year old home priced 60,000 below tax value.  Now that could be your bargain – but if you were thinking of something a little newer, you might not get that huge bargain.

I CAN ALWAYS OFFER $30,000 LESS AND SEE IF THEY TAKE IT!

Who cares what the list price says!  “I say, let’s throw a really low offer at them and see if they are desperate”. Do you know how many times I hear this and just cringe?  Let’s look at this logically. If you are in investor, then you will not be living in the home and  your objective is to just get the best price on the property – no personal ties, no “goose bumps” and no attachment.  It’s all about price.  You don’t care how many times you hear the words “no” from the seller or “forget it and I am not countering either!”.  It’s all business.  But what about the home buyer that is looking for the home of their dreams?  Your objective is to get the best price for the home in this market with the least amount of stress.  This is why you have hired your buyers agent!  Their job is to pull comparables on the home you are interested in, make sure the price is REASONABLE for the current market and help you get the BEST price you can without overpaying.  Going in $30,000 less on a home that is already priced to sell will only get you off on the wrong foot with the sellers.  Sure, there is nothing wrong with going in a little under market value to see if the seller has any wiggle room – sometimes you get real lucky and catch a seller at the right time, but mostly they reduce their price very little.  If you are not willing to pay what the home is currently worth, you may find yourself with more headaches than you anticipated.

NOW I AM FRUSTRATED WITH HOME SHOPPING.

So many times, I see my buyers getting frustrated with the home shopping process and giving up or getting bummed out because they have seen so many homes and put in offers on several only to hear that they did not get the home.  Maybe there were multiple offers and your offer was not the best one, maybe your offer was too low and the seller could not lower their price anymore because they owed too much on the home, maybe the seller  just refused to “give their house away” even though it was overpriced to start with, maybe you were booted out because  cash offer came in before the seller signed the contract.  There are so many scenarios that could happen to derail your search for a home.

HOW CAN I CHANGE THIS SITUATION?

There are several things you can do to take some of the stress away from the home buying process. Consider your needs and wants again and see if you can live without some of your “must haves”.  Maybe you could live with a carport instead of garage, maybe you can make 3 bedrooms and a bonus or a basement work instead of 4 bedrooms, maybe .45 acres will be enough if the home is set on the lot well, maybe you can go up in price a little more to give you more options (although I don’t recommend this if you are on a tight budget- stick to the payment you are comfortable with).  Ask your buyers agent to suggest alternative things that could still get you a wonderful home, at a great price that will make you happy.

NOT WHAT IT APPEARS

Buying a home is hard.  Period.  The flood of foreclosures and short sales have not made it any easier for Real Estate Agents, Sellers or for buyers.  Sure the rates are real low and there are some great deals out there for buyers, but expect to make some concessions and even some renovations to get the BIG BARGAIN.  Set your priorities and make a list of what is REALLY important to you in your next home.  Features? Price? Location? If you want it all – be prepared to pay a fair price for it.