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Don’t Trust Credit Reporting Agencies

11/17/2022
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When you apply for a mortgage loan, or any credit, the lender relies on information that is supplied by lenders, landlords, government agencies, courts, and credit card companies to three credit reporting bureau, Equifax, Experian, and TransUnion. Numerical values are assigned to defaults and late payments, income-to-debt ratios, types of credit and other data. The values are compiled into credit scores which provide a snapshot of your credit worthiness to anyone authorized to make inquiries.

According to a 2021 investigation by ConsumerReports.org, more than one-third of 6,000 surveyed consumers found at least one mistake in their credit reports and nearly as many found incorrect personal information such as names and addresses while 11 percent found account information errors. These errors can cause your credit scores to fall, making you pay more in interest for loans and credit lines, or in the worst cases, being denied credit altogether. 

What can you do? Get a three-bureau report and check for errors. One bureau may have accurate data while another can have incorrect or outdated information that can lower your credit scores. Sometimes, the incorrect data comes from the data furnisher – the lender, landlord, lien holder, etc. You’ll have to contact the data furnisher with proof of payment or release of lien or other evidence. Obtain a written statement of resolution to give to the credit bureau and to your mortgage lender via certified mail to make sure they get it.

Keep checking your credit at least once a year.




Guidelines for Safe, Clean Remodeling

11/10/2022
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As much as you’d like to rely on the professionalism of remodeling contractors (or yourself if you’re DIYing the renovation your home) the most important thing to be done is to keep the work site as dust-free and clean as possible.

Dust is one of the biggest dangers to the health of people and pets during a remodeling project. According to Buildclean.com, dust can include harmful substances such as dirt; organic matter from rodent feces and dead bugs; drywall, cement and sawdust materials; silica, asbestos and lead particles; mold and mildew; and volatile organic compounds like aerosols, paint, cleansers and solvents. The smaller the particles, the more dangerous they are, says the Environmental Protection Agency, especially those not visible to the naked eye.

Protective measures should include personal protective equipment for dust-generating work, such as facial masks, safety glasses, Tyvek disposable coveralls, shoe covers, and chemical-resistant gloves. Don’t allow anyone unauthorized to enter the work space, especially without protective gear. Because dust is so easily airborne, no one should eat or drink inside the work space.  

Prevent airborne dust from traveling to other parts of the residence. Limit traffic to and from the work space to prevent dust and debris being tracked elsewhere in the house. Turn off ceiling fans and air conditioning during dust-generating work. Cover vents, doorways and floors with plastic sheeting. Remove or cover furniture, wall décor, house plants and decorative accessories. Clean

Housing Sales Soften While Prices Escalate

11/7/2022

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This summer has been tumultuous for homebuyers and home sellers as they navigated blistering inflation, higher mortgage interest rates, and record home prices. But, the latest existing housing sales report from the National Association of REALTORS suggests that the market may be headed toward stabilization.

Housing sales volume in July 2022 retreated 5.9% from the previous month and was 20.2% lower than in July 2021. Meanwhile, median home prices shrank from $413,800 in June to $403,800 in July, but prices were still 10.8% higher than a year ago in July 2021, marking 125 consecutive months of year-over-year price increases.

Among the reasons cited for the declines was mortgage interest rates that went above 6% in June, but have since fallen to nearly 5%. Compared to 2021 when the average commitment rate for a conventional 30-year fixed rate mortgage was 2.96%, consumers paid double that percentage (5.41%) for the same loan in July 2022.

Homes are staying on the market slightly longer – from 2.6 months of inventory on hand in July 2021 to 3.3 month’s supply in July 2022. Yet, housing sales are still brisk. Eighty-two percent of homes sold in July 2022 were on the market for less than a month.

Housing shortages still abound, which is why prices aren’t falling any more than they have. Exacerbating the shortage is a slowdown in new single-family home starts as home builders turn instead to multi-family projects.

If interest rates and home prices continue to drop, sales volume could heat up again.

Design-it-yourself Wallpaper

10/26/2022

8220770.large.pngYour home can reflect your personality and taste in unique ways by designing your own peel-and-stick wallpaper. But there’s a lot to consider – pattern size and scale, how to repeat the design; colorways; and of course, choosing which walls you want to accent.

Start with a search on the Internet of motifs you like, such as geometrics, abstracts, flowers, or landscapes. Redraw them yourself on paper, play with the styles, colors and designs you like best, take a picture on your phone, and then upload it to the device you want to use. Or, download a free drawing app like Autodesk Sketchbook or Krita directly from Techjunkie.com to your mobile device.

Once you have a design you like, save it to the cloud, then contact a customizer such as Tempaper.com to help you “see” your design. You can also get design assistance from the site for $75 per hour. Sites like Spoonflower.com and Zazzle.com can also help, and you can use your designs on art prints, stationery, and other paper or fabric goods.

Wallpaper is sold by the square foot, so you’ll need to measure the height and width of the wall you want to embellish. Upload your image file and add it to the cart where you can order a sample to see how it will look. Because the custom papers are digitally printed, you won’t be able to order textured or metallic finishes.

The design process can be lengthy, but it’s worth it to personalize your décor.

Investment Real Estate Percentage Rules

10/19/2022

8220770.large.pngHave you ever wondered what the formula is to make money in real estate? Guidelines or rules can help you gauge profitability and improve your results before you invest in a home to flip and resell quickly, or a rental home.

Home flippers use the 70% rule, meaning that the maximum price you pay for a property to flip should be no more than 70% of the home’s after-repair value (ARV) minus the costs of improvements. Rocketmortgage.comsuggests you determine the maximum selling price by studying comparable area homes in similar condition to your planned renovations. Use this calculation: The After-repair value (ARV) ? .70 − Estimated repair costs = Maximum buying price.

For real estate rental properties, the 1% rule and the 50% rule are quick ways to determine if a property is a good buy-and-hold investment. The 1% rule means you should be able to charge no less than one percent of a property’s purchase price: $300,000 purchase price = $3,000 gross monthly rent.

To help you determine cash slow, Smartasset.com suggests that a property’s operating expenses should be roughly 50% of its gross income. If the property generates $3,000 a month in gross rent, the 50% rule is that you earmark $1,500 for expenses, excluding mortgage payments, HOA fees and property management costs. Whatever remains is your net operating income.

These percentage rules are only guidelines. Investors should research market conditions and plan for vacancies, unexpected repairs, and the possibility of rising operating costs.

BUYING LIFESTYLE REAL ESTATE

10/12/2022

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Are you living the lifestyle you want? Join the growing group of homebuyers who are valuing lifestyle over luxury and quality over quantity. The property you buy should bring more comfort and convenience to your daily life.

For some, lifestyle is about displaying wealth, such as a big home in a pricey neighborhood. For others, it’s location, like living on the beach or in a guard-gated community.

According to LuxuryActivist.com, time is the ultimate luxury. Your home should facilitate more time for family and friends, hobbies and interests, and healthy exercise. Lifestyle is about having the time, space, and equipment to do the things you want to do.

When you shop for a home, look carefully at how space is allocated for each room and activity. Is the kitchen arranged comfortably for family meal preparation? Is there space for you and your partner to each have a home office? You may prioritize sustainability through solar-power and xeriscaped lawns.

Your lifestyle should be free from compromise, like suffering a long daily commute to fund a dream home. Once you’ve moved, take the time to enjoy your home, play with your children, and watch glorious sunset views from your balcony.

IS NOW THE TIME TO REMODEL

10/5/2022

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With today’s runaway inflation and rising interest rates, it may seem like a good idea to put your remodeling plans on hold. Or, maybe not.

According to the Leading Indicator of Remodeling Activity (LIRA) by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, remodeling expenditures are expected to cool down from 17.4 percent in 2022 to 10.1 percent by Q2-2023. Despite slowdowns in homebuilding, retail building sales, and renovation permits, remodeling expenditures should reach $450 billion, twice the historical average.

As home sales decelerate, so will the need for contractors and materials. BusinessInsider.com reports that lumber prices are already down to $604.50 per thousand board feet in July 2022, 65% off from the 2021 high of $1,733 per thousand board feet. Lumber’s piling up at sawmills and retailers, making contractors and materials more affordable.

But, as long as overall inflation escalates, the Federal Reserve will keep raising overnight borrowing rates for banks, increasing the likelihood of a recession. Bloomberg.com says that over the next 12 months, a brief, mild recession is 47.5% likely.

If you decide to remodel, remain in your home for at least five years to weather further housing market volatility.

 

Homebuyers Catch A Break

9/8/2022

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If you’ve been discouraged about buying a home because the housing market is too competitive, you’ll like the latest 2022 forecast update from Realtor.com.

Inflation, higher home prices and higher mortgage rates are impacting affordability, which caused many homebuyers to move to the sidelines. In April 2022, existing home sales dropped 2.4% from March, and 5.9% year-over-year, partly due to mortgage interest rates crossing 5% for the first time in decades. Meanwhile, home prices in April rose 14.8%.

Home sellers are responding by putting more homes on the market in an effort to cash in before prices possibly begin to fall. Active listings, or homes listed for sale, are anticipated to grow 15% year-over-year in the second half of 2022. Home builders are stepping up production, too by about 5%, so buyers will have more inventory to choose from. Home sellers will have to become more competitive which will invite wait-and-see homebuyers back into the market. Housing sales volume for 2022 should be the second-highest in 15 years, even though a decline of 6.7% from 2021 is anticipated.

With unemployment rate near 50-year lows, wage growth should rise 3.8%, and flexibility to work remotely, even out of state, will continue. First quarter data showed that 40.5% of Realtor.com® home shoppers viewed listings located outside of their current state, up from 33.4% in 2020.

That said, affordability will remain an issue for many homebuyers as home sales prices rise 6.6% and mortgage rates reach 5.5% by the end of the year.


About Institutional Homebuyers

9/1/2022

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One reason there’s a shortage of available homes to buy across the U.S. is that corporate investors are snapping up single-family homes to use as rentals or to flip back onto the market after making improvements. Institutional homebuyers (companies, corporations, LLCs) have always been around but a new report by the National Association of REALTORS (NAR) found their market share rose 84% in 2021. Based on deed records, institutional homebuyers accounted for 15% of residential purchases in 2021.

The record low interest rates of 2020 and 2021 and rising inflation – 8.5% in March 2022 – are ideal incentives for institutional homebuyers to turn to residential real estate for asset acquisition as a hedge against inflation. They buy properties to turn into rentals where rents can be raised annually. Investors look for dense populations with fast growth, fast rent growth and home appreciation, fast home sales volume, and low vacancy rates. NAR also found they look for areas with higher incomes and education, more young people and minorities, and a high density of renters.

In those areas where institutional investors are more than 30% of market share, the number of household formations grew 11%, average rents increased more than 30%, home prices rose 40% or more, and home sales rose 70%, all over the last decade.

The top five states with the largest market share of institutional homebuyers were:

·       Texas (28%),
·       Georgia (19%)
·       Oklahoma(18%)
·       Alabama (18%)
·       Mississippi (17%)

Closely followed by:

·       Florida (16%)
·       Missouri (16%)
·       North Carolina (16%)
·       Ohio (16%)
·       Utah (16%.)

Don’t Spend Money Before Your Loan Closes

8/26/2022

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If you’ve qualified for a conforming mortgage loan, there’s important information you need to know.  Your loan, rate and terms are not set in stone – if you make any financial changes, you could put your loan at risk or risk having to pay a higher interest rate. 

A conforming loan is one that participating banks offer that meets guidelines required by the government-sponsored entities (Fannie Mae, Freddie Mac) to purchase the loans for resale on the secondary market. In other words, the bank loans you money to buy a home. It then sells your loan to Fannie Mae or Freddie Mac that buy loan packages as investments. That allows the bank to make new loans, keeping the mortgage lending market fluid. Otherwise, there would only be a small finite number of mortgage loans that a bank could make and few people would be able to buy a home. 

But there’s a caveat. The loans that go into the loan packages have to meet the lending guidelines and standards set by Fannie Mae and Freddie Mac. Those guidelines include how much income vs. debt the borrower has. 

Income, down payment sources, consumer debt, court-ordered child support, liens, home appraisal and any other factors that could influence a borrower from repaying the loan is carefully monitored under the Uniform Mortgage Data Program (UMDP).

The UMDP implements Fannie Mae’s 2010 Loan Quality Initiative (LQI), a means of collecting updated electronic appraisal and loan data. The LQI electronic data processing is designed to help the bank catch “undisclosed liabilities,” or discrepancies between the loan origination data and the loan package that Fannie Mae receives after closing and resale. 

While the compliance requirements are directed toward banks and appraisers, consumers can also be affected by credit and eligibility standards. Banks identify undisclosed liabilities by retrieving a refreshed credit report just prior to the closing date and reviewing it for additional credit lines. That means banks will retrieve your credit report at least twice - once to okay the loan, and again to make sure you still qualify for a conforming loan. 

Simply put, the bank watches for changes in your financial situation. If a loan doesn’t conform to the LQI, it can’t be sold. If a lender can’t sell the loan, it doesn’t want to make the loan and carry it on its books. 

Here’s an example. Your lender may warn you not to make any purchases on your credit cards until after your home purchase closes. But you decide that you can’t move into your new house without new furniture. Depending on your income-to-debt ratio, that new living room or bedroom suite may change your credit score enough to disqualify you for a conforming loan. Your loan, even though you were pre-approved, is canceled by the bank. How does the bank know? 

The LQI “requires lenders to determine that all debts of the borrower, including those incurred during the loan application process, are disclosed on the final loan application and included in the borrower qualification.” 

In addition, the LQI has vendor services to “provide borrower credit report monitoring services between the time of loan application and closing” as well as “direct verification with a creditor that is listed on the credit report under recent inquiries to determine whether a prospective borrower did in fact enter into a financial arrangement with the creditor, which may not be listed on the loan application.” 

The bank can also run a Mortgage Electronic Registration System (MERS®) report to determine if the borrower has undisclosed liens or another mortgage is being established simultaneously. With this array of tools to make sure your loan meets underwriting standards, the bank can proceed with or cancel your loan at any time. 

Ask your lender what else you can do to make sure your loan stays on track.

Resist the urge to use your credit cards or open new lines of credit. Pay your card balances on time. It’s better to picnic on the floor than lose the chance to buy your home because you bought new dining room furniture. 

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