Get Your Credit Score in Shape Before Buying a Home

How strong is your credit? Cleaning up your credit is essential before you make any major financial moves. Having a bad score can hurt your chances of being able to open a credit card, apply for a loan, purchase a car, or rent an apartment.

It is especially important to have clean credit before you try to buy a home. With a less-than-great score, you may not get preapproved for a mortgage. If you can’t get a mortgage, you may only be able to buy a home if you can make an all-cash offer.

Or if you do get pre-approval, you might get a higher mortgage rate, which can be a huge added expense. For example, if you have a 30-year fixed rate mortgage of $100,000 and you get a 3.92% interest rate, the total cost of your mortgage will be $170,213. However, if your interest rate is 5.92%, you’ll have to spend $213,990 for the same mortgage – that’s an extra $43,777 over the life of the loan! If you had secured the lower mortgage rate, you could use that additional money to fund a four-year college degree at a public university.

So now that you know how important it is to maintain a good credit score, how do you start cleaning up your credit? Here, we’ve collected our best tips for improving your score.

Talk to a loan professional

You can protect your score from more damage by getting a loan professional to check your credit score for you. A professional will be able to guide you to whether your score is in the ‘good’ range for home buying. Plus, every time that you request your own credit score, the credit companies record the inquiry, which can lower your score. Having a professional ask instead ensures that you only record one inquiry. Once you know your score, you can start taking action on cleaning up your credit.

Change your financial habits to boost your score

What if your score has been damaged by late payments or delinquent accounts? You can start repairing the damage quickly by taking charge of your debts. For example, your payment history makes up 35% of your score according to myFICO. If you begin to pay your bills in full before they are due, and make regular payments to owed debts, your score can improve within a few months.

Amounts owed are 30% of your FICO score. What matters in this instance is the percentage of credit that you’re currently using. For example, if you have a $5000 limit on one credit card, and you’re carrying a balance of $4500, that means 90% of your available credit is used up by that balance. You can improve your score by reducing that balance to free up some of your available credit.

Length of credit history counts for 15% of your FICO score. If you’re trying to reduce debt by eliminating your credit cards, shred the card but DO NOT close the account. Keep the old accounts open without using them to maintain your credit history and available credit.

Find and correct mistakes on your credit report

How common are credit report mistakes? Inaccuracies are rampant. In a 2012 study by the Federal Trade Commission, one in five people identified at least one error on their credit report. In their 2015 follow-up study, almost 70% thought that at least one piece of previously disputed information was still inaccurate.

Go through each section of your report systematically, and take notes about anything that needs to be corrected.

Your personal information

Start with the basics: often overlooked, one small incorrect personal detail like an incorrect address can accidently lower your score. So, before you look at any other part of your report, check all of these personal details:

Make sure your name, address, social security number and birth date are current and correct.
Are your prior addresses correct? You’ll need to make sure that they’re right if you haven’t lived at your current address for very long.
Is your employment information up to date? Are the details of your past employers also right?
Is your marital status correct? Sometimes a former spouse will come up listed as your current spouse.

Your public records

This section will list things like lawsuits, tax liens, judgments, and bankruptcies. If you have any of these in your report, make sure that they are listed correctly and actually belong to you.

A bankruptcy filed by a spouse or ex-spouse should not be on your report if you didn’t file it. There shouldn’t be any lawsuits or judgments older than seven years, or that were entered after the statute of limitations, on your report. Are there tax liens that you paid off that are still listed as unpaid, or that are more than seven years old? Those all need to go.

Your credit accounts

This section will list any records about your commingled accounts, credit cards, loans, and debts. As you read through this section, make sure that any debts are actually yours.

For example, if you find an outstanding balance for which your spouse is solely responsible, that should be removed from your report. Any debts due to identity theft should also be resolved. If there are accounts that you closed on your report, make sure they’re labeled as ‘closed by consumer’ so that it doesn’t look like the bank closed them.

Your inquiries

Are there any unusual inquiries into your credit listed in this section? An example might be a credit inquiry when you went for a test drive or were comparison shopping at a car dealer. These need to be scrubbed off your report.

Report the dispute to the credit agency

If there are major mistakes, you can take your dispute to the credit agencies. While you could send a letter, it can be much faster to get the ball rolling on resolving a mistake by submitting your report through the credit agency’s website. Experian, Transunion and Equifax all have step-by-step forms to submit reports online.

If you have old information on your report that should have been purged from your records already, such as a debt that has already been paid off or information that is more than 7 years old, you may need to go directly to the lender to resolve the dispute.

Follow up

You must follow up to make sure that any mistakes are scrubbed from your reports. Keep notes about who you speak to and on which dates you contacted them. Check back with all of the credit reporting companies to make sure that your information has been updated. Since all three companies share data with each other, any mistakes should be corrected on all three reports.

If your disputes are still not corrected, you may have to also follow up with the institution that reported the incident in the first place, or a third-party collections agency that is handling it. Then check again with the credit reporting companies to see if your reports have been updated.

If you can keep on top of your credit reports on a regular basis, you won’t have to deal with the headaches of fixing reporting mistakes. You are entitled to a free annual credit report review to make sure all is well with your score. If you make your annual credit review part of your financial fitness routine, you’ll be able to better protect your buying power and potentially save thousands of dollars each year.

How to clean up your credit now

Does your credit score need a boost so you can buy a home? Get in touch with me. I can connect you with the right lending professionals to help you get the guidance you need.

How to Amp Up The Resale Value of Your Home

Whether you’re putting your home on the market this year or in the next five years, it is a smart decision to start building your home’s resale value now. Here are some ways to create a comfortable home while making it easier to put more money into your bank account on closing day.

Small Maintenance and Repairs

If you think that home maintenance on the weekends waste your time and energy, think again. The small chores you do around your home prevents it from losing value. Neglecting small maintenance and repairs causes 10% of your home’s value to walk out your door and slip through your windows. Most appraisers claim that homes showing little to no preventative maintenance can depreciate from $15,000 to $20,000.

A study conducted by researchers at the University of Connecticut and Syracuse University shows that regular maintenance boosts your home value by about 1% per year. However, ongoing maintenance costs offset that value, which means that regular maintenance actually slows down your rate of depreciation. Furthermore, because homebuyers generally notice any repairs needed upon buying a new home, proactive maintenance lets the homebuyer know that he or she will not have to spend extra money to maintain the basics. This makes your home more attractive, and thus more likely to get higher priced offers.

Maintaining the basics can cost you little money and certainly some effort, but there’s a way to accomplish this very important activity smartly. This article by HouseLogic, for example, shows you how to keep home maintenance below $300 a year. Planning ahead will also help make maintaining your home easier. Most professional appraisers and real estate agents recommend a proactive maintenance schedule that includes:

Keeping enough cash on hand to replace systems and materials
Creating and following a maintenance schedule
Planning a room redo every year
Keeping a notebook of all your maintenance and repairs

Landscaping

The Virginia Cooperative Extension at Virginia Tech published a study that shows landscaping can increase a home’s value by 15%. The study claims that a home valued at $150,000 could increase its value between $8,300 and $19,000 with the addition of landscaping. Particular landscape elements add different value. For instance, landscape design can increase your home’s value by 42%, plant size can increase your home’s value by 32%, and diversity in plants can increase your home’s value by 22%.

Replace Entrance Doors

If your entry doors are wood, consider switching them out for either fiberglass or steel doors. Steel doors add style and architectural interest to your home while improving security; you can add a deadbolt and electronic keypads to keep out intruders. Unlike wood doors, steel doors do not rot or splinter.

Alternatively, fiberglass doors can be designed to look like wood doors and give your home a modern look. Fiberglass doors conserve more energy than steel doors.

Pricewise, a steel door will cost you $1,335 with a 91% return on investment whereas a fiberglass door will cost you $3,126 with an 82.3% return on investment.

Garage Door Replacement

At first, you might not think that your garage door increases the value of your home. However, your garage door distinguishes your home from the other homes on your block. As the largest entryway of a house, garage doors get noticed first because they’re the focal point of your home. If you want to quickly increase the resale value of your home, you need to make the most of this space.

Some interesting things being done with garage doors include:

Increased Size: Bigger garage doors help homes stand out more, and homeowners can do more creatively with them.
Bold Colors: Bright and bold colors now can complement the color of your home, or you can build a concept around the color of your home.
Faux Wood: You can install fiberglass or steel garage doors that look like wood garage doors. This gives your home a new level of sophistication.
Windows: Large Windows on your garage door improve the aesthetic of your home, and provide light into your garage so that it’s no longer a dark space.

More importantly, a garage door replacement will cost you $1,652 and add $1,512 to the value of your home; that’s a return on your investment of 91.5%.

Fiberglass Attic Insulation

While energy efficiency is still not the sexiest selling point of your home, installing fiberglass attic insulation saves energy and garners a big payback on your investment. According to Remodeling Magazine’s 2016 Cost vs. Value top trends report, fiberglass attic insulation gained the top return on investment among the 30 projects in this year’s report. Using Remodel/Max as the cost source, a fiberglass attic insulation project cost $1,268 nationwide. Real estate professionals surveyed estimated that the work would boost the price of a home at resale, within a year of its completion, by $1,482. That’s a 116.9% return on investment.

Replacing Windows

Replacing your windows is another way to save energy and increase your home’s resale value. Replacing your old windows with energy saving models will beautify your home, keep it comfortable, and ease the workload of your HVAC system. According to HGTV, you’ll see a reduction in your utility bill by 7% to 15%. However, if you’re selling your home, you could expect a 60% to 70% recoupment of your investment. The two types of replacement windows that fetch the best return are vinyl and wood.

Remodeling Your Kitchen

Kitchen remodeling can get expensive, but small renovations can make your home more buyer friendly. Changing your kitchen’s texture and color using a matte finish and neutral colors such as putty or grey enhances your home’s resale value. Because matte finishes have transitional qualities, your potential homebuyer can easily match his or her stainless steel or black and white appliances. Also, refinishing cabinetry, or switching to Energy Star™ appliances provide comfort you like and pizazz buyers adore.

Flow is important to any interior design of a home. If you feel that your kitchen hinders a good flow, change it. A small investment to knock out a non-structural wall or remove a kitchen island creates space and provides flow that buyers love.

A minor kitchen remodel can cost you $20,122 while putting $16,716 of resale value into your home; that’s an 83% payback on the project. If you want to do a major kitchen model, this can cost you about $60,000 and put about $39,000 of resale value into your home, which is only about a 65% payback on the project. Therefore, consider a minor kitchen remodel first.

Bathroom Addition or Remodel

Likewise, carefully consider adding a bathroom or remodeling your bathroom. Switching out your frosted glass shower doors for glass doors, cleaning the grout, replacing the shower and floor tiles, switching out your sink or toilet, or replacing your sink and shower fixtures can cost you little money.

Adding a bathroom can get expensive, but it can reduce congestion during hectic times and provide your guests with a bathroom. Consult with your real estate agent or a local appraiser before deciding whether a full remodel or addition is right for your situation. While a bathroom remodel will cost you about $18,000 with a return on investment of about 66%, a bathroom addition will cost you about $42,000 with a return on investment of about 56%. Therefore, it’s best do your due diligence before working on your bathroom.

Your Needs and Buyers’ Wants

On that note, if you need to renovate your home, be sure to consider how those changes will affect its appeal to future buyers. Knowing design trends will give you the opportunity to make changes to your home based on where your needs and your potential buyer’s desires intersect, thus increasing your property’s resale value drastically.

Designers and design websites provide great ideas when you’re brainstorming home renovations. Keep in mind as you research, however, that you don’t want to sacrifice your needs for a comfortable home just for the sake of what you think a future buyer will want!

Therefore, before you begin making any changes to your home, consult your real estate agent. Real estate agents, because we are constantly working with new buyer clients, have insider insight into what home buyers are looking for now and in the future. We’ll be able to help you make smart choices when remodeling or renovating your home.

If you think you might want to remodel or renovate your home in the near future, or if you are just curious about other ways you can increase its resale value, please reach out to me!

Top Ten Team!

The results are in – Karen Cannon, Realtors is an Atlanta Board of Realtors Top Ten Team for 2015. We want to thank all of our friends and clients for helping us achieve such great success! The Northside Neighbor has a featured article announcing the achievement. Keep an eye out for more announcements and news.

Home Buying Strategies Used By the Pros

Thinking about buying a home? Since it’s likely the single biggest investment you will ever make, being prepared will help you make a smarter purchase decision. Don’t make an offer until you read and understand these real estate insider tips.

Know your buying power

What is buying power? It is the combination of how much you can realistically pay for a home and your credit-worthiness. You’ll need money saved for the down payment — which is typically between 10% – 20% of the price — as well as cash for closing costs, such as transfer tax, PMI, title insurance, and legal fees. For ongoing mortgage and maintenance, your monthly obligation shouldn’t be more than 36% of your monthly gross income.

A good credit score is usually 720 or above. A loan professional can help you figure out your buying power and give you a clearer idea of if your score is in the ‘good’ range. Have them check your score for you so that you don’t inadvertently lower your score by checking it yourself. You want to clean up your credit as soon as you can, and definitely before you get a mortgage pre-approval.

Don’t try to time the market

Even within a city’s limits, there can be micro markets that are increasing or decreasing in value. A knowledgeable buyer’s agent can provide you with a buyer’s market analysis report, outlining which neighborhoods are still up and coming — with potential for increased property value — versus those that have peaked with inflated home prices.

There’s never a perfect time to buy a home, even if you’re in a hot market. It can take a while to know what you like, and you may need to see 10 or more houses before you decide. Another good reason to be patient: you might find a better deal. Look for expired listings, which may offer more price flexibility and accept a lower-than-list offer. Don’t bother with FSBO (for sale by owner) listings though — since they’re not represented by a professional, they are often overpriced.

Be ready to make a stand-out offer

If you love it, make the offer. Otherwise, that dream home may disappear faster than you think, and especially if you’re buying in a hot market. Have your buying agent contact the listing agent before you submit an offer so that they can decide what’s important to include in the offer. If you’re serious about putting in an offer, you want to increase the chances that it’s accepted.

Show that you’re serious about the purchase by creating a buyer’s offer packet. It should include your lender’s preapproval letter, a screenshot of your down payment money in your bank account, and comps that support the rationalization of the offer you are presenting.

Once you’re in the negotiation process, have the inspection conducted before it’s too late to back out of a deal. If there are any major structural issues, you may be able to make the seller repair them as a contingency to your offer. Minor issues that you can repair on your own may be points for negotiating a lower offer.

Work with a professional for insider exclusives

If you’re thinking about buying a home soon, or even in the near future, let me know the details. I may have just what you’re looking for in an exclusive listing not available to the general public – so get in touch today!

Mortgage Rates Drop Again

Existing-Home Sales and Prices Climb

As we head into the busy spring home-selling season, home buyers will be happy to know that mortgage rates are back on the decline. The same can’t be said of home prices, though, which continue to rise.

Freddie Mac’s just-released weekly survey of lenders shows little change in the following average rates for the most popular home loan terms:

30-year fixed-rate mortgages averaged 3.62% with an average 0.6 point for the week ending Feb. 18, 2016. A year ago, the rate averaged 3.80%.
15-year fixed rates averaged 2.93% with an average 0.5 point. The same term priced at 3.07% a year ago.
5-year adjustable-rate mortgages priced at 2.79% with an average 0.5 point. Last year at this time, the same ARM averaged 2.99%.

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“Since the beginning of 2016, 30-year rates have fallen almost 40 basis points, helping housing markets sustain their momentum into this year. ” Sean Becketti, chief economist for Freddie Mac, said in a release.

In the meantime, rising home prices put a damper on home loan activity, according to the Mortgage Bankers Association weekly report. Overall, mortgage loan applications dropped 4.3% from one week earlier, with an 8% slip in refis in contrast to previous weeks of gains.

Purchase applications were down 4%, but are still 27% higher than the same week one year ago.

Existing-home sales, home prices climb

A shortage of housing inventory is pushing home prices and sales to new heights, but the upward climb isn’t necessarily a good thing for homebuyers.

According to the National Association of Realtors, existing-home sales in January climbed slightly — 0.4% — to a seasonally adjusted annual rate of 5.47 million. That’s the highest annual rate since July 2015. While that’s good news for the market, homebuyers are feeling the pressure of inventory shortages, which helped push the median existing-home price up to $213,800, an 8.2% increase over January 2015.

Lawrence Yun, NAR chief economist, says that the housing market is off to a strong start this year, but a slowdown in new-home construction, as well as a lack of existing homes for sale in many markets, has the potential to keep pushing prices higher.

“The spring buying season is right around the corner, and current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” Yun said in a release. “Home prices ascending near or above double-digit appreciation aren’t healthy — especially considering the fact that household income and wages are barely rising.”

To complicate things a bit more, new-home sales fell 9.2% in January to a seasonally adjusted annual rate of 494,000, according to the U.S. Commerce Department. A 32.1% drop in new sales in the West (where homes are typically more expensive) was the driving force behind the plunge, followed closely by losses in the Midwest.

With a stall in new housing starts during these cold winter months, homebuyers might find it difficult to get into a newly built home or resale without some fierce competition. And despite mortgage rates staying below 4%, more homebuyers might be priced out of the market as housing prices continue to rise.

This article originally appeared on NerdWallet.