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How recent credit score changes may be helping you
Recently, the three major credit reporting agencies removed nearly all civil judgments and about half of all tax liens from consumer credit reports. It’s all part of the National Consumer Assistance Plan (NCAP), a series of changes initiated by Equifax, TransUnion, and Experian. The actions were the result of a study by the Consumer Financial Protection Bureau that identified problems with credit reporting and recommended changes to improve credit reporting, accuracy, and quality, and to increase consumer credit education.
Improved reporting requirements
Under the NCAP, in order for any public record to be included on a credit report, it must include the name, address, and social security number or date of birth of the consumer. The provider of the information must also visit the courthouse at least every 90 days to obtain newly filed or updated public records.
Non-compliant reporting raises credit scores
The bureaus estimated that over half of all the tax lien records and 95% of all judgments did not meet the new data criteria, which required them to be excluded. Because both judgments and tax liens negatively impact credit scores, some consumers may have seen a boost, depending on which credit scoring model was used.
The most common impact was an increase of 11 points, but 18% saw gains of 30+ points. People who saw the most significant jump started with a relatively low credit score. In contrast, almost 20% of consumers saw a decline in their credit score once collections were removed, but it was more likely because those consumers worsened their scores in other ways.
Mortgage rates may still be impacted
Just because judgments and tax liens won’t necessarily be reflected in your credit score, doesn’t mean, however, that you can escape the financial consequences that they bring, especially if you’re applying for a mortgage.
Mortgage borrowers who have a judgment or tax lien were found to be 5 ½ times more likely to go into pre-foreclosure or foreclosure, so many mortgage lenders still want to see this type of information. Fannie Mae, for example, requires their approved lenders to follow their Selling Guide, which requires borrowers to pay off delinquent credit, like judgments and tax liens, at or before closing.
If you’ve seen a bump in your credit score, good for you! Leverage the momentum and keep your score moving up. Pay every bill on time, keep your credit utilization low, and monitor your credit report. Reporting errors are not uncommon, so check your report regularly for inaccuracies.
To request a copy of your free credit report, visit www.annualcreditreport.com By law, you are allowed one free copy of your credit report every 12 months from each of the three major credit bureaus — Equifax, Experian, and TransUnion.
The Lowdown on Down Payment Assistance
If you’re looking to buy a home, don’t let the fear of a big down payment hold you back. In today’s market, there are so many programs to aid you in the home buying process. So, even though a 20% down payment is typical, it isn’t always necessary. Keep in mind that you’ll pay more interest with a lower down payment, but make the choice that best suits you and your situation. Every home buying experience is different.
What are your options?
For starters, your credit union may offer special programs to help you purchase a home. Georgia’s Own has programs for first-time homebuyers and offers up to 100% financing on mortgage loans. There are also federal, state, and local first-time home buyer programs you may be eligible for, including:
- Dekalb First-Time Homebuyers Assistance Program
- Gwinnett Homestretch Down Payment Assistance
- Fulton County HOP (Home Ownership Program)
- Georgia Dream Homeownership Program
- U.S. Department of Housing and Urban Development
For more ways to save, try cutting out vacation time and expenses that you can afford to do without for a while. Set a strict budget and consider meeting with a financial advisor. It’s important not to empty out your savings completely to pay for a down payment, so explore all of your options before making a decision.
Are you really ready?
Regardless of how much you’ve saved for a down payment, buying a home is a big commitment – consider these factors before making a down payment so you’ll know that you’re ready.
- You won’t be clearing out your savings or emergency funds
- You’ll be staying at this home for at least five years
- You have a good credit score (720 or higher is best)
- You’ve paid off other loan debt (student loans, credit card bills, auto loans, etc.)
- Know all of the fees that come with buying a house rather than just the monthly mortgage payment
If you’ve got all your financial ducks in a row and now’s the time to buy, know that you don’t have to go it alone. Whether you’re still feeling a little overwhelmed or just want more personal help, contact a mortgage specialist to help find the best – and most affordable – way to get into your first home.
Ready to “List It?” Here’s what you need to know before selling your home
Late spring or early summer is arguably the best time to list your home, according to Zillow. School’s out so families are ready to relocate, the warm sun is shining, your lush landscaping is in full bloom, and the longer days invite the opportunity for more showing time. The winner of peak home sales is June, so you’ll be perfectly positioned for the mad rush of eager buyers.
Timing, however, is not the only thing you need to factor into a successful sale. If you’re getting ready to put your home on the market, there are some other important things to consider:
Choose a listing agent
While many sellers would love to avoid paying a real estate commission and list their home on their own, it can be risky. Unless you have considerable experience and understand real estate law, listing your home “For Sale by Owner” could cost you significant time and money. Do your research and find a few licensed real estate agents who are experienced and well versed in your specific market. Interview each one and choose the agent who you feel has the most comprehensive marketing plan, can attract the most qualified buyers, is an effective negotiator, and who can be upfront an honest with you.
Gather important docs
Buyers like to see that a house is well maintained and that repairs and upgrades are done timely and by licensed contractors. A real estate agent should also be aware of any details that can be included in marketing your property. Gather warranties, instruction manuals, and receipts for repairs. Know the age of your home’s appliances, roof, furnace, air conditioning and hot water heater. Include the dates of any home improvement projects such as a bathroom or kitchen remodel, new carpeting or hardwood floor installation, room additions, and window replacements.
Order a pre-listing inspection report
When you’re selling your home, there’s nothing more disappointing than securing a contract and being surprised during the inspection process. Buyers have an easy out if anything of significance or too many items are found to be in need of repair. Hire a licensed inspector to perform a pre-listing inspection, and you’ll know about and have the opportunity to make repairs in advance. This will also alleviate much of the anxiety that accompanies the due diligence period.
Prepare your home for potential buyers
You want potential buyers to oooh and ahhh over your home, not comment on the mess and the clutter. Clear countertops, tables, windowsills, and all other visible areas. Also, don’t forget to straighten closets, cabinets, and drawers since buyers are always curious. You might even consider removing some furniture to make the space feel bigger. Rent a temporary storage unit, donate it, or sell it. You’ll have to decide what to do with it sooner or later, so why not now?
Depersonalize your living areas, too. Potential buyers want to envision themselves living in your home and not be distracted by family photos, keepsakes, or finger paintings. Try to create a blank canvas so they can project their own ideas and visions of a home.
Consider repainting for a fresh, crisp, and neutral look, touch up scuff marks, and make sure your home is clean–especially the kitchen and bathrooms. It’s also a good idea to ask your most honest, unbiased friend to perform the critical odor test. While not necessarily offensive, any distinctive smell in your home can be a deal breaker.
Staging can be a valuable service when selling your home. Professional stagers are design and space experts who evaluate your current furniture and accessory placement and recommend adjustments. They can rearrange what you already own or suggest that you rent or purchase some new items. In the end, they’ll help you take your decorating style to a new level while consciously making choices that are appealing to potential buyers.
Don’t ignore your curb appeal
You only have one chance to make a first impression. Your home’s curb appeal is critical to getting potential buyers in the door. Make them want to see more by mowing the lawn, mulching the gardens, pruning trees, and planting flowers. Consider painting the exterior of your home if it’s been more than five years and pressure wash your sidewalk and driveway. Be sure your mailbox is in good repair and add a plant or two to your front porch. Buyers do judge a book by its cover.
While a professional real estate agent can offer more specific suggestions for your home, these tips will help you get started. The preparation process may not be quick and easy, but in the end, it’ll have more eager, interested, and serious buyers knocking on your door.
How do credit unions stack up against larger lenders for home loans?
You’ve finally decided to put down some roots and purchase a home. It may be a big house with a white picket fence, a fixer-upper in the suburbs, or a condo in the city. Regardless, this purchase is one of the most significant financial decisions you’ll make in your lifetime.
To finance your dream home, you’ll likely need to take out a mortgage, as most home buyers do. There’s tons of competition among mortgage lenders, but at an even higher level, you’ll need to decide between applying through a bank or a credit union.
Credit unions have been expanding their presence in the mortgage business and are not only highly competitive in their offerings, but provide benefits that commercial banks simply can’t match. Here are three reasons you might consider joining the growing number of homeowners that value the advantages of a credit union:
They’re not for profit
Banks are responsible to investors who expect a return on their investment. Credit unions, on the other hand, pass any profits back to their members in the form of savings. That translates to lower interest rates and a lower total cost. Whether you’re borrowing a hundred or five hundred thousand dollars, even a quarter point will make a significant difference in the interest you pay over the life of the loan.
Also, unlike a bank, a credit union doesn’t charge their members the Intangible Tax on a mortgage loan, which positively impacts the total cost. This tax of $3 per thousand dollars borrowed amounts to $900 in savings on a $300k loan. The credit union’s mission is to serve the members of their community, not earn a profit from them.
They’re more accommodating and offer greater flexibility
Credit unions value their relationship with their members. You won’t simply be an account number. A credit union will work with its members to find a suitable mortgage solution that meets your needs.
Credit Unions also work hard to make the stressful mortgage process a more positive experience. They scan documents for more efficient processing, and are more than happy to close a loan at a member’s home, office, or the branch. The flexibility and accommodations they offer are just part of their culture and their desire to deliver superior service to their members.
They invest in their members
Credit unions also work to better educate their members on financial services and transactions. Your mortgage is debt that you’ll likely carry for the next 30 years. It’s incredibly important to understand the requirements of the loan, the process, the fees, and the answers to all of your other questions. They’ll also offer guidance on the type of loan that’s the best fit for a member’s circumstances.
Credit unions are solely devoted to helping people build a healthy financial future. Members quickly learn their credit union will be of service to them, even during a financial crisis. They take pride in building the community they’re a part of and invest in its future.
Banks still hold the biggest piece of the mortgage loan pie, but credit unions are making some significant headway. You should consider all of your choices and be sure to shop around to find the most favorable deal. Just remember that your neighborhood credit union may just be the best route to your dream home.
Should you buy a house when you’re under 30?
Buying a home is a huge milestone on the way to achieving the American Dream, but when you’re under 30, is it always a good idea? Most people view home ownership at any age to be a reflection of financial stability and a wise investment. When you’re under 30, it’s especially admirable and a pretty good indication that you have your act together.
There’s plenty to consider when you want to buy a home at the tender age of twenty-something, though. You’re young in your career, still learning to manage your finances and facing the hard truth about life’s unpredictability. Let’s look at some things you should consider before you rent a U-Haul and move down the road to home ownership.
What are your long-term plans? Buying a home is not a spur-of-the-moment decision. If you expect a return on your investment, be prepared to stay put for at least five to seven years, as a rule of thumb. You should also be in a position of stability in terms of your career and be on a path to financial advancement.
Calculate your monthly expenses. Are you still digging yourself out of student loan debt? Is your credit card debt under control? How much is your car payment? If you already owe tens of thousands of dollars, compounding it with a mortgage may be spreading your financial responsibilities a little too thin. Be honest with yourself and don’t bite off more than you can chew.
Are you able to purchase a home without exhausting your emergency fund? Your emergency fund is for unexpected costs. It’s critical that you have a financial cushion for surprise expenses that may otherwise devastate your finances. It’s even more important when you own a home. Costly home repairs are one reason, but if you’re laid off from your job or diagnosed with a serious illness, you’ll still need to continue to pay your mortgage and avoid foreclosure.
Can you afford to put down 20% and avoid Private Mortgage Insurance? Private mortgage insurance (PMI) protects the lender in the event your home falls into foreclosure. PMI usually ranges from 0.3% to 1.5% of the original loan amount per year, although it depends on the amount of your down payment and your credit score. Here’s a crazy thought: Put down 20% and avoid PMI altogether.
How’s your credit rating? Your credit score significantly impacts the interest rate on your home loan. Be sure to request a copy of your credit history before you apply for a mortgage. Review it and resolve any discrepancies. You might even think about taking some time to improve your score in order to secure a better interest rate.
How much do you know about mortgages? Rates may currently be at an all-time low, but you should still compare mortgage rates and talk to a trusted mortgage broker about loan options. There are first-time home-buyer loans, fixed and adjustable interest rates, and some that even offer down payment and closing cost assistance. They all have different features and requirements, so work with a knowledgeable broker who can find you the best deal.
Study the housing market before you buy. Is it a buyer or a seller’s market? You want to pay a fair price for your home, so make sure you’re not buying when houses are in high demand, and prices are inflated. Recognizing trends or changes in your local market could help you find a well-priced buying opportunity before anyone else.
Realize this won’t be your ultimate dream home. Your first home won’t likely be everything you want it to be, but a smart investment coupled with a few years of appreciation may lead you there. Seriously consider resale or rental value when choosing not only home features, but location as well.
Purchasing a home is a big deal, and it’s easy to get caught up in all the excitement. Consider these tips, take your time, and you’ll be sure to find your piece of the American Dream.
7 mistakes to avoid when purchasing your first home
You’ve been looking at online home listings for months, driving through neighborhoods on the weekends, and saving every spare dime for a down payment. You’re ready to make the home-buying plunge.
Buying a house is one of the most exciting—and stressful—times in your life. You’re eager to find your dream home and start the next chapter of your life, but let’s be serious. A home is a big investment, and you can’t afford to make a hasty, uninformed, or emotional decision.
Here are a few of the most common blunders homebuyers make and how you can avoid them, or at least learn from their mistakes.
1. Failing to check your credit report
Amazingly, the Federal Trade Commission’s last large-scale study of credit reports found that 26 percent of consumers had at least one inaccuracy in their credit report. Not all of those errors would have impacted their credit rating to the point that it resulted in a higher mortgage interest rate, but it certainly would have for some.
It’s critical to review your credit report at least three months before you plan to apply for a home loan. If you find an error, you’ll have time to dispute it and have it corrected before lenders check your credit report for preapproval. If your credit report is clean, it will improve your credit score and likely impact the interest rate on your mortgage. All consumers can access a free copy of their credit report annually from annualcreditreport.com.
2. Skipping the mortgage pre-approval
There’s pre-qualified and pre-approval. Both show the seller that you’re a serious buyer, but pre-approval requires a credit check and the submission of supporting documentation for income and assets. It will also help you save time by allowing you only to view homes that you already know you can afford instead of falling in love with one that’s outside of your price range. Put in an offer, and a buyer who already has pre-approval has a leg up on a buyer who doesn’t.
3. Missing the Hidden Costs
Once you find your dream home, most buyers simply calculate their mortgage payment and say, “Sure, I can afford that.” When reality sinks in, you soon figure out that you’ll need to pay taxes, insurance, utilities, HOA and maintenance fees. These are the hidden costs that may just push you over the top of your budget. If you’re a first-time homebuyer, it might be the closing costs, appraisal fees, escrow fees, and moving costs, among others. You can’t forget about the added costs that come with purchasing a home and the extra responsibility of being a homeowner.
Ask the sellers about their summer and winter utility costs, HOA fees, and property taxes. Talk with your insurance agent about the cost of a homeowner’s insurance policy and ask your broker for an estimation of your closing costs. Gather as many quotes and estimates as you can so that you can make a more informed decision about whether you can afford to purchase this home. It’s better to know the truth sooner than later.
4. Waiting for everything on your wish list
In the real world, when do we get everything we want? Even when you’re spending $100K, $300K or $500K, there will always be compromise. Here’s our advice: Keep an open mind. It’s unlikely that any one home will have everything on your wish list. You’ll need to separate those wishes into wants, like a fireplace or a fenced yard, and needs, like a garage or four bedrooms. You might even label some of them deal breakers, such as a specific town, school district, or its proximity to your office.
Flexibility is a critical component in the house-hunting processes. The goal is to find the home with the most wants and needs that still fits within your budget.
5. Assuming the neighborhood is just fine
You may have found love in a home, but if the neighborhood isn’t up to par, it could be a costly mistake. With a house comes the neighborhood, so take a good look around before you buy—and do your research. Not everything a homebuyer should consider is out in the open.
Think about the reasons you’re purchasing this home. Do you have children? The quality of schools in the area might be an important factor to consider. Visit the schools personally and take a tour. Review information, rankings, test scores and other analytics online. Drive through the neighborhood at different times of the day and chat with parents as they wait for their kids to come home on the school bus.
Does the neighborhood feel safe at night? Check the local crime reports and registered sex offender list. How’s the local shopping? Where’s the nearest grocery store or park? These are all questions you should investigate before purchasing a home.
6. Not considering the resale value of your home
You’re buying a home, not selling one, so why worry about resale value? It’s simple. Sooner or later you’re going to want to sell this home, and you’ll need someone to buy it. Don’t buy the home with the railroad tracks running through the backyard just because it has a gourmet kitchen that you’ve fallen in love with. There’s a reason it’s priced below market value and a bonus if you can close in 30 days.
The best approach is to look for a home that offers the general preferences of a typical homebuyer. You can paint, decorate and furnish to add your personal style, but when you’re ready to sell, whether in a year due to a job transfer, or in 40 years when you retire to the beach, your home will appeal to the highest number of prospective buyers.
7. Letting your emotions rule your decision
The decision to purchase a home should be made primarily with your head, not your heart. Yes, you should love your new home. After all, you’re investing a ton of money to own it, and you’ll be living in it every single day. But, you shouldn’t be so enamored that you’re blinded to what it can do to your budget. When you’re already spending such a large amount of money, another $10K or $15K doesn’t seem like very much, but it can put you in a tighter financial situation than you’re prepared to handle. One layoff, job change, illness, or any other situation that causes a reduction in salary can easily cause your dream home to become a burden.
One recommended guideline is to spend no more than one-third of your monthly income on housing costs, which includes your total mortgage payment, taxes, and insurance–no matter how tempting it is.