Slaying Home Buying Myths

Slaying Home Buying Myths [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Interest rates are still below historic numbers.
  • 88% of property managers raised their rent in the last 12 months!
  • The credit score requirements for mortgage approval continue to fall.

3 Tips for Making Your Dream of Buying a Home Come True

3 Tips for Making Your Dream of Buying a Home Come True [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Realtor.com recently shared “5 Habits to Start Now If You Hope to Buy a Home in 2017.”
  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking a lot about it.
  • Living within a budget now will help you save money for down payments and pay down other debts that might be holding you back.

Why Getting Pre-Approved Should Be Your First Step

Why Getting Pre-Approved Should Be Your First Step |MyKCM

In many markets across the country, the amount of buyers searching for their dream homes greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the My Home section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

THREE THINGS YOU SHOULD KNOW ABOUT “TRENDED CREDIT DATA”

Three credit cards piled on top of dollar bills

1 – What is it?
“Trended credit data” is an analytical tool that helps lenders better evaluate your spending habits.  It’s a detailed analysis of the last 24 months of your credit history, including:

  • Month-by-month balances on your credit cards and other debts; and,
  • The difference between your scheduled minimum payment and your actual payment amount.

2 – Why does it matter?
Mortgage lenders are now required to use “trended credit data” when they evaluate your loan application.  This helps them to spot trends including:

  • Do you typically max out your credit cards; and if so, which ones?
  • Do you typically you pay off your credit card balances each month?
  • Do you intend to carry a balance from month-to-month while making minimum or other payments?

3 – How does it impact you?
Trended credit data does not impact your credit score. It simply gives the lender a more thorough analysis of your balance and payment history over the past 24 months. For example, if you typically pay off your balances in full, this may positively impact your loan application.  On the other hand, if you typically max out your credit cards and make only the minimum payments, this may negatively impact your loan application.

You can always request a copy of your credit report from your mortgage lender, and it will now include your trended credit data.  If you notice any errors, feel free to dispute the errors with the credit bureaus using their standard dispute procedures.  Please contact me if you have any questions or for further information.

Slaying Myths About Home Buying

Slaying Myths About Home Buying [INFOGRAPHIC] | My KCM

Some Highlights:

  • Interest Rates are still below historic numbers.
  • 88% of property managers raised their rent in the last 12 months!
  • Credit score requirements to be approved for a mortgage continue to fall.

Questions? Every Home Buyer Should Ask.

3 Questions Every Buyer Should Ask Themselves | MyKCM

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Answering the following 3 questions will help you determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a recent survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”

This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the four major reasons why people buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not. 

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months. 

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait till next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates. 

The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase over the next twelve months as you can see in the chart below:

3 Questions Every Buyer Should Ask Themselves | MyKCM

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

Qualifying for a Mortgage

Would You Qualify for a Mortgage Now? | MyKCM

The widespread myth that perfect credit and large down payments are necessary to buy a home are holding many potential home buyers on the sidelines. According toEllie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.

Below is a graph of the distribution of FICO scores of approved loans in May (the latest available data):

Would You Qualify for a Mortgage Now? | MyKCMLooking at the chart above, it becomes obvious that not only do you not need a 750+ credit score, but 54.9% of approved loans actually had a score between 600 and 749.

More and more experts are speaking up about the fact that if potential buyers realized they could be approved for a mortgage with a credit score at, or above, 600, the distribution in the chart above would shift further to the left.

Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage: 

“The high median credit score is due to many millennials believing they won’t qualify with the score they have – and are therefore waiting to apply for a mortgage until they have the score they think they need.” (emphasis added)

CoreLogic’s latest MarketPulse Report agrees that the median FICO score does not always tell the whole story:

“The observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity.”

It’s not just millennials who believe high credit scores and large down payments are needed. Many current homeowners are delaying moving on to a home that better fits their current needs due to a belief that they would not qualify for a mortgage today.

So what does this all mean?

Moe put it this way:

“Many potential home buyers are ‘disqualifying’ themselves. You don’t need a 750 FICO Score and a 20% down payment to buy.”

Bottom Line

If you are one of the many Americans who has always thought homeownership was out of your reach, let’s get together to start the process of getting you pre-qualified and see if you are able to buy now!