Is A Bigger House Within Your Budget?

At this time of year, many families come together to celebrate the season. It's also the time when many realize their homes are just not quite big enough to host all of their guests and loved ones. Are you one of those homeowners dreaming for a larger space to call home?

You may have enough equity in your current home to move up.

According to the Q3 2019 U.S. Home Equity & Underwater Report by ATTOM Data Solutions,

14.4 million residential properties in the United States were considered equity rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value.

This means that one in four of the 54 million mortgaged homes in the U.S. have at least 50% equity. If these homeowners decide to sell, they can use their equity to put toward the purchase of a new home. Maybe you'll be one of them.

NAR recently released their 2019 Profile of Home Buyers and Sellers showing that,

This year, home sellers cited that they sold their homes for a median of $60,000 more than they purchased it, up from $55,500 the year prior. This accounted for a 31 percent price gain, up from 29 percent the year before.

Here's the equity gain breakdown based on the number of years these sellers lived in their homes

Bottom Line

If you're one of the many homeowners with big dreams of owning a larger home, let's get together. Working with a trusted advisor to find out how much equity you have is a great first step in putting your move-up plan in motion.

One of the Top Reasons to Own a Home

One of the benefits of homeownership is that it is a “forced savings plan.” Here’s how it works: You make a mortgage payment each month. Part of that payment is applied to the principal balance of your mortgage. Each month you owe less on the home. The difference between the value of the home and what you owe is called equity.

If your home has appreciated since the time you purchased it, that increase in value also raises your equity. Over time, the equity in your home could be substantial. Recently, CoreLogic revealed that the average homeowner gained more than $65,000 in equity over the last 5 years.

Unlike last decade, homeowners are no longer foolishly tapping into that equity. In 2006-2008, many owners used their homes like an ATM by pulling equity out to purchase new cars, jet skis, or lavish vacations. They were pulling out cash (equity) from an appreciating asset, and then spending it on rapidly depreciating items. That is not happening anymore.

Over 50% of Homes Have at Least 50% Equity

The number of homeowners that currently have at least 50% equity in their home is astonishing. According to the Urban Institute, 37.1% of all homes in the country are mortgage-free. In a home equity study, ATTOM Data Solutions revealed that of the 62.9% of homes with a mortgage, 25.6% have at least 50% equity. That number has been increasing over the last five years:By doing a little math, we can see that 53.2% of all homes in this country have at least 50% equity right now. Of all homes, 37.1% are mortgage-free and an additional 16.1% with a mortgage have at least 50% equity.

Bottom Line

Homeownership is different than renting. When you own, your housing expense (the mortgage payment) comes back to you in the form of equity in your home. That doesn’t happen with your rent payment. Your rent helps build your landlord’s equity instead.

How Quickly Can You Save Your Down Payment?

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long it would take to save for a down payment in each state.

Using data from HUD, Census and Apartment List, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Kansas can save for a down payment the quickest, doing so in just over 1 year (1.12). Below is a map that was created using the data for each state:

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3%-down programs? Suddenly, saving for a down payment no longer takes 2 to 5 years, but becomes possible in less than a year in most states, as shown on the map below.

Bottom Line

Whether you have just begun to save for a down payment or have been saving for years, you may be closer to your dream home than you think! Let’s get together to help you evaluate your ability to buy today.

69% of Buyers are Wrong About Down Payment Needs

According to a recent survey conducted by Genworth Financial Inc. at the Annual Mortgage Bankers’ Association Secondary Market Conference, 69% of mortgage professionals say that first-time buyers still believe a 20% down payment is necessary to buy in today’s market.

Nearly 40% of mortgage industry professionals surveyed believe that a lack of knowledge about the home-buying process is keeping potential buyers on the sidelines. Saving for a down payment is often cited as a huge barrier for first-time homebuyers to make the leap into homeownership.

If homeowners believe that they need a 20% down payment to enter the market, they also believe that they will have to wait years (in some markets) to come up with the necessary funds to buy their dream homes.

The greatest source of confusion cited in the survey results centered around down payments. The results are broken down in the chart below:

Rohit Gupta, CEO of Genworth Mortgage Insurance had this to say,

“While first-time homebuyers continue to drive the purchase market, we believe many are staying on the sidelines due to the misconception that a 20 percent down payment is required to secure a mortgage.
There are various low down payment options available today that allow prospective homebuyers to reach their dreams of homeownership sooner. It is crucial that, as an industry, we proactively educate eligible borrowers about solutions that will enable them to buy a home when they’re ready.”

Bottom Line

Don’t let a lack of understanding of the home-buying process keep you and your family out of the housing market. Let’s get together to discuss your options!

Where are Home Values Headed over the Next Few Years?

There are many questions about where home prices will be next year as well as where they may be headed over the next several years to come. We have gathered the most reliable sources to help answer these questions:

The Home Price Expectation Survey – A survey of over 100 market analysts, real estate experts, and economists conducted by Pulsenomics each quarter.

Zelman & Associates – The firm leverages unparalleled housing market expertise, extensive surveys of industry executives, and rigorous financial analysis to deliver proprietary research and advice to leading global institutional investors and senior-level company executives.

Mortgage Bankers Association (MBA) – As the leading advocate for the real estate finance industry, the MBA enables members to successfully deliver fair, sustainable, and responsible real estate financing within ever-changing business environments.

Freddie Mac – An organization whose mission is to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extending to all communities from coast to coast.

The National Association of Realtors (NAR) – The largest association of real estate professionals in the world.

Fannie Mae – A leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets always.

Here are their projections of prices going forward:

Bottom Line

Every source sees home prices continuing to appreciate – just at lower percentages as we move through the next several years.

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Whether You Rent or Buy, Either Way You’re Paying a Mortgage!

There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:

“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage as opposed to paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.22% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Gap Between Homeowners & Appraisers Narrows to Lowest Mark in 2 Years

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 4% or more over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

In the latest release, the disparity was the narrowest it has been in over two years, as the gap between appraisers and homeowners was only -0.5%. This is important for homeowners to note as even a .5% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home)

The chart below illustrates the changes in home price estimates over the last two years.

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand:

“Appraisers and real estate professionals evaluate their local housing markets daily. Homeowners, on the other hand, may only think about their housing market when they see ‘for sale’ signs hit front yards in the spring or when they think about accessing their equity.”

“With several years of growth, owners may have more equity than they realize. Many consumers use the tax season at the beginning of the year to reevaluate their entire financial life. It also provides a good opportunity for them to consider how best to take advantage of their equity while mortgage interest rates and borrowing costs are still near record lows.”

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.

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FICO® Scores on Approved Home Loans Drop Again

According to Ellie Mae’s latest Origination Report, the average FICO® Score on all closed loans dropped to 722 which is its lowest mark since April. The average includes all approved refinance and purchase loans.

FHA and VA loans showed the most opportunity for millennials looking to enter the market with low down payments and even lower FICO® Score requirements.

Ellie Mae’s Millennial Tracker revealed that those who purchased homes in December with an FHA Loan were able to do so with an average down payment of 4% and a FICO® Score of only 684.

Joe Tyrell, EVP of Corporate Strategy at Ellie Mae commented on the opportunity this brings to buyers,

“With the average credit score dipping, lenders are extending credit to borrowers who may have had no previous access to the housing market.”

Bottom Line

More and more potential buyers are able to qualify for a mortgage loan now! If you are debating a home purchase, let’s get together and evaluate your ability to buy today!

61% of First-Time Buyers Put Down Less than 6%

Wednesday January 17th, 2018 Down Payments, First Time Home Buyers, For Buyers

According to the National Association of Realtors’ latest Realtors Confidence Index, 61% of first-time homebuyers purchased their homes with down payments below 6% from October 2016 through November 2017.

Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2017 was just 10% and that percentage drops to 6% for first-time buyers.

Zillow Senior Economist Aaron Terrazas’ recent comments shed light on why buyer demand has remained strong,

“Looking into 2018, rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”

It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes.

Bottom Line

If you are one of the many first-time buyers who is not sure if you would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!

Veterans Affairs Loans by the Numbers

Some Highlights:

Since the creation of the VA Home Loans Program, 22 million veterans have been able to achieve the American Dream of homeownership.
So far in 2017, $188 billion has been loaned to veterans and their families through the program.
VA Purchase Loans are on the rise in 46 out of 50 states and Washington, DC.

Don’t Let Fear Stop You from Applying for a Mortgage

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:

Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO^® Score of all closed loans in September was 724, according to Ellie Mae.
Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

Buying a Home Can Be Scary... Unless You Know the Facts [INFOGRAPHIC] | MyKCM

Some Highlights:

Many potential homebuyers believe that they need a 20% down payment and a 780 FICO® score to qualify to buy a home, which stops many of them from even trying! Here are some facts:

40% of millennials who purchased homes this year have put down less than 10%.
76.4% of loan applications were approved last month.
The average credit score of approved loans was 724 in September.

Happily Ever Homeowner

Married couples once again dominated the first-time homebuyer statistics last year at 66% of all buyers, according to the most recent Profile of Home Buyers & Sellers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.

Many couples are deciding to use what would otherwise be their wedding fund as a down payment on their first home, as unmarried couples made up 8% of all first-time buyers last year. If you’re single, don’t fret; you can still buy your dream home! Single women made up 17% of first-time buyers in 2016, while single men accounted for 7% of buyers.

According to a survey by the Wedding Report, the average cost of a wedding in the United States at the start of the year was $25,961, which equates to a 10% down payment on a median priced home.

A recent article from the New York Times found that many singles are now asking their parents to allow them to use the money they’ve saved up for their wedding day to instead buy a home.

In the case of Carrie Graham, a Protestant minister from Austin, TX, her parents had saved a ‘five-figure sum’ for her wedding and were more than willing to give her that money as a down payment on her dream home. Graham told The New York Times,

“Buying the home wasn’t me saying, ‘I’m never going to get married’ or I am going to get married.’ My own home had way more than equity benefits. It was a real gift to have a home in an extremely desirable neighborhood in a city that I love. It’s brought me joy.”

Bottom Line

More and more first-time homebuyers are finding a way to purchase their dream homes, even if that means delaying their dream weddings.

What You Need to Know About Qualifying for a Mortgage

Some Highlights:

Many buyers are purchasing a home with a down payment as little as 3%.
You may already qualify for a loan, even if you don't have perfect credit.
Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.

Is 2017 the Year to Move Up to Your Dream Home? If So, Do It Early! | Simplifying The Market

If you are considering moving up to your dream home, it may be better to do it earlier in the year than later. The two components of your monthly mortgage payment (home prices and interest rates) are both projected to increase as the year moves forward, and interest rates may increase rather dramatically. Here are some predictions on where rates will be by the end of the year:

Freddie Mac

“While full employment and rising inflation are signs of a strong economy, they also have the potential to push mortgage rates and house prices up. The higher rates and higher prices create significant affordability concerns, which may continue to characterize the housing market for the rest of 2017.”

Lynn Fisher, Vice President of Research & Economics for the Mortgage Bankers Association

“By the time we get to the fourth quarter of this year, we will still be under 5 percent – we are thinking 4.7 percent…Something north of 5 percent by the time we get to 2018, and by the time we get to 2019, we show fourth-quarter rates hitting 5.5 percent.”

Mark Fleming, First American’s Chief Economist

“Despite some regional disparities, title agents and real estate professionals do not expect increasing mortgage rates to have a significant impact on the housing market this spring. Continued good economic news, increasing Millennial demand and confidence that buyers will remain in the market even if rates exceed 5 percent bode well for 2017 real estate.”

Len Kiefer, Deputy Chief Economist for Freddie Mac

“We will probably see rates higher at the end of year, around 4.5%.”

Bottom Line

If you are feeling good about your family’s economic future and are considering making a move to your dream home, doing it sooner rather than later makes the most sense.

Buying a Home? Do You Know the Lingo? | Simplifying The Market

Buying a home can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.

Freddie Mac has compiled a more exhaustive glossary of terms in their “My Home” section of their website.

Annual Percentage Rate (APR) – This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate.

Appraisal – A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home’s worth to you and your lender.

Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.

Credit Score – A number ranging from 300-850, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750.

Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.

Down Payment – This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month.

Escrow – The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Fixed-Rate Mortgages – A mortgage with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages are typically 15 or 30 years.

Home Inspection – A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Mortgage Rate – The interest rate you pay to borrow money to buy your house. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.

Pre-Approval Letter – A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you're a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets.

Primary Mortgage Insurance (PMI) – If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home. For more information on how PMI can impact your monthly housing cost, click here.

Real Estate Professional – An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, to help you find your dream home, to negotiate any of the details that come up, and to help make sure that you know exactly what’s going on in the housing market. Real estate professionals can refer you to local lenders or mortgage brokers along with other specialists that you will need throughout the home-buying process.

The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher,’ and who puts your family’s needs first.

Get All the Facts about PMI | Simplifying The Market

When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase a home with a down payment below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

What is PMI?

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It's a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”

According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:

The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It's no doubt an added cost, but it's enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and to help you make the best decision for you and your family.

Renting or Buying… Either Way You’re Paying a Mortgage | Simplifying The Market

There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage - either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained this month in their article, “12 Practical Steps to Getting Rich”:

“While renting on a temporary basis isn't terrible, you should most certainly own the roof over your head if you're serious about your finances. It won't make you rich overnight, but by renting, you're paying someone else's mortgage. In effect, you're making someone else rich.”

Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.23% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Again… You Do Not Need 20% Down to Buy NOW! | Simplifying The Market

A survey by Ipsos found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. There are two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 40% of consumers think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO^® Scores

The survey also revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO^® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in February had a credit score of 752, while FHA mortgages closed with a score of 686. The average across all loans closed in February was 720. The chart below shows the distribution of FICO^® Scores for all loans approved in February.

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.

What do lenders look for on loan applications?

From first grade on, we are all striving to satisfy somebody. The teacher, the pastor, the coach, the bossâ€”they all have expectations. The sooner we learn to see the world their way, the faster we can get ahead.

Mortgage lenders are in the same category. Their opinion of your creditworthiness rests on a few simple things. Some you can't change much in the short term. But all of them, in the course of a lifetime, are well within your control.

Payment history

This is the number one issue on any creditor's list. A pattern of slow, late, or missed payments will knock down an applicant's credit score faster than bowling pins on Ladies League Night. Your ability to pay is huge, determined in large part by your income and other competing debts. But there is also willingness to pay. And against all odds, even with crushing debt-to-income ratios, there are some people who always manage to make the Mastercard payment. An unblemished payment record can partially offset negatives elsewhere. Your payment history is perhaps 35 percent of your total creditworthiness.

Percentage of available credit you're using

In the underwriter's eyes, pushing your credit limits is a cardinal sin. It's better to have two accounts at half-limit levels than one maxed out. Some say 30 percent is the ideal debt-to-limit ratio on a revolving account, so consider juggling three cards if that's what it takes.

Length of credit history

You can't change your age. But you can get started on the path to creditworthiness at a young age by opening a Visa account and faithfully paying off the balance each month. Never borrow money needlessly, but if it makes all-around sense, consider a car loan. A two-year track record of on-time payments will greatly raise your standing among potential mortgage lenders.

"Mix" of credit types

It's also preferable to have a variety of credit types such as mortgages, credit cards, car loans, and personal lines of credit. A diversified mix is characteristic of someone with a long credit history.

Proof of income

Note the two key wordsâ€”"proof" and "income." Your hard work as a landscaper may buy you a nice living, but unless you file a 1040 at tax time, you'll be having a lot of short conversations with loan officers. Even in an age when contracting and freelancing is widely accepted, conventional employees with "W-2" pay stubs have a leg up over the self-employed.

Collateral

Assets go a long way to offset lenders' fear of risk. A property leveraged at 80 percent is less worrisome than one at 95 percent. And a six-figure 401(k) balance is a comfort too, even if they can't come after the money. It gives you options other than defaulting on a loan.

Recent efforts to get more credit

A red flag goes up if your loan request is preceded by a flurry of credit applications elsewhere, especially if they were successful. Can you pay the mortgage if you're also financing a new boat? Rapid expansion of credit can signal desperation and the start of a downward debt spiral if someone's income isn't sufficient to pay the bills.

10 Ways to improve your credit score

We always hear about how important it is to have a good credit score. After all, even if you have a good score, an excellent one will get you better mortgage rates and save you more money. But what improves your score the most? What lowers it? And how can you budget your finances to get the highest score possible? Here are 10 ways to improve your credit score, and help you achieve your financial goals.

Don't open too many credit cards at once
Each time you open a credit card, the company makes an inquiry of your credit. Too many inquires in a short amount of time can lower your score.
Don't charge more than half the limit on your credit cards
It is better to have 2 cards with a limit of $10,000, and only charge $5,000 on each, than to have one card maxed out at $10,000.
Don't cancel credit cards once you get them
While it may seem like a good budgeting method, canceling a card will erase all of the payment history built up - which makes up a large percentage of your overall credit score. Cut up any cards you don't use, and maintain the lower the limits on them.
Pay your bills on time
Any payment later than 30 days is bad for your credit.
Diversify your debt
Don't have all of your debt in one type. For example, it's better to have $10,000 spread out among credit card debt, student loan debt, a car loan, and a mortgage, than it is to have the entire amount in credit card debt.
Only charge what you can afford to pay off each month
Monitor your credit score
Get the free reports 3 times a year at freecreditreport.com
Dispute any wrongful claims you find on your credit report
If you're unsure about specific lifestyle changes needed to improve your credit, check out Fresh Start
Be aware of your limits
Monitor your spending closely so you don't charge more than half your card limits

The VA Loan Advantage

The VA Loan program is the most powerful home loan program on the market for many veterans, service members and military families. These flexible, government-backed loans come with significant benefits that open the doors of homeownership to veterans who might otherwise struggle to obtain financing.

VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow qualified borrowers to purchase a home with little to no money out of pocket.

The increasing popularity has stemmed from the loan program's signature benefits, which include:

1. No Down Payment

Saving money and building credit can be difficult for service members who are constantly on the move. With the VA Loan, qualified borrowers can finance 100 percent of the home's value without putting down a dime. Take a look at the chart below to see how much you can save through the no-money-down benefit of the VA Loan.

VA Loan Savings at Closing:

Loan Amount	0% Down	5% Down	10% Down	20% Down
$150,000	$0	$7,500	$15,000	$30,000
$250,000	$0	$12,500	$25,000	$50,000
$350,000	$0	$17,500	$35,000	$70,000
$450,000	$0	$22,500	$45,000	$90,000

2. No Private Mortgage Insurance

Many conventional lenders require borrowers to pay private monthly mortgage insurance unless they're able to put down at least 20 percent, which is a tough task for many veterans. Private mortgage insurance (PMI) is an insurance that protects lenders in case of a borrower default.

With a VA Loan, however, there is no PMI. This is because the federal government backs all VA Loans and assumes the risk on behalf of the borrower that is typically covered by the PMI.

This VA Loan advantage allows you to build more and more equity in your house, effectively saving you thousands of dollars over the life of your mortgage.

PMI Savings per Month:

Loan Amount	Monthly Savings
$150,000	Save $115/mo
$250,000	Save $191/mo
$350,000	Save $268/mo
$450,000	Save $345/mo

3. Competitive Interest Rates

Interest rates on home loans are based on risk assumed by the bank to finance the loan. Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can offer interest rates that are typically 0.5 to 1 percent lower than conventional interest rates.

Pair that lower interest rate with the ability to purchase a home with no money down and no private mortgage insurance and the savings start adding up significantly.

Lower Interest = More Savings:

Loan Amount	$150k	$250k	$350k	$450k
Savings from a 0.5% reduction in interest	$14,760	$24,480	$34,200	$43,920
Savings from a 1% reduction in interest	$28,800	$48,240	$67,320	$86,400

(Assumes 10% down on loan; see additional notes at bottom of page)

Additional Benefits

Basic Allowance for Housing

Basic Allowance for Housing (BAH) is a significant benefit for qualified active military members. Lenders can count your Basic Allowance for Housing as effective income, which means you can use BAH to pay some or all of your monthly mortgage costs.

BAH varies based on your pay grade, your geographic location and your number of dependents. Learn more about Basic Allowance for Housing.

No Pre-Payment Penalty

With many different types of loans, paying off a home loan before it matures results in a pre-payment penalty. This is because lenders miss out on additional opportunities to collect interest payments. The pre-payment penalty is a way for financial institutions to recoup some of that money.

The VA Loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options.

SHERRY DICKSON & ASSOCIATES TEAM

April Edition

It's a little warmer and a little breezier in Paris. Take advantage of the extra energy boost this season and get on top of your spring cleaning and improving your FICO score if you're house hunting. And ways to banish those allergies.

Spring Cleaning Checklist: Kitchens & Baths

Kitchens are the most utilized room in many homes and the first place most ambitious spring cleaners want to start. Tiny spaces under appliances or between cabinets and walls are havens for trapped food, splashes, and spills. Cleaning a high traffic area with a low traffic area helps you do your spring cleaning in manageable chunks without getting overwhelmed.

Use this quick checklist for getting your kitchen and bathrooms sparkling for the warmer months.

Kitchen

	Wipe down countertop appliances
	Clear and wipe out drawers, cabinets
	Run garbage disposal with baking soda or lemon peel
	Run dishwasher with vinegar
	Defrost and wipe out your freezer
	Dust refrigerator coils
	Clean the stove and under the range
	Pull refrigerator out and clean behind it
	Get rid of any old food and pantry items
	Clean stove and under the range

Bath

	Clean tile, inspecting all seals, caulk, grout
	Replace the shower curtain
	Wipe down countertops and cabinets
	Clear drawers and cabinets, replace liners
	Clean tub
	Clean toilet
	Disinfect and update First Aid kits
	Throw out old beauty and hygiene products

SHERRY DICKSON & ASSOCIATES TEAM
SHERRY DICKSON TEAM / Harold Carter Realtors
(903) 361-2733

Upcoming Open Houses

Make sure to check out my upcoming open houses.
Click here to see my listings in detail. I hope to see you there!

Combat Spring Allergies

Common allergens that catch us off guard in the spring months are usually pollen, dust mites, molds, and pet dander. Here are some tips to help ease the intensity of your allergies this season:

Take a daily over-the-counter medicine, daily, as part of your morning routine.

Wash bedding often to prevent spores and other allergens from floating around your home. Vacuum daily to further reduce household allergens.

Use a damp cloth instead of a duster, that way, dust mites are confined and not spread.

See an allergist if allergic reactions or other symptoms become too severe to handle on your own.

Click here to check the American Academy of Allergy, Asthma & Immunology’s website to see pollen levels in your area and say good-bye to "Gesundheit."

4 Steps to Improving Your Credit Score

The spring selling season is always a popular time to buy and sell. To prepare for buying a first or next home, refinancing, or if you just want to get back on track, you have to work on your FICO score.

A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people have scores near 650, but scores range from 300 to 850. The items that impact your FICO score are your credit-to-debt ratio, the types of credit you have, the number of recent credit inquiries, and most importantly, your payment history.

With all the lending turmoil lately, lenders want to know that giving you a loan isn't a risk. Your credit score gives some insight into what type of borrower you'd be based solely on your credit history.

Building your FICO score takes time, but you can see changes within a few months. You can improve your credit score, or gain credit if you don’t already have it, by using these helpful hints:

Correct your credit report. If you discover mistakes on your credit report, contact the bureau asking that the items be removed. If you have a common name, or the same name as a family member, you'll want to make sure all of the activity reported is correct.

Keep up with payments. Late payments kill your FICO score. It's the area where people who have experienced job loss take the biggest hit. It takes longer to restore your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.

Apply for gas station cards or store credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to obtain credit, increase your credit limits and start a solid payment history. Beware of carrying a balance because these types of cards normally have high interest rates.

Keep your credit in rotation. If you have older or unused credit cards, use your cards to keep your accounts active. But, make sure you pay them off in one or two payments if you can.

Now that you know more about credit reporting, you'll be able to improve your FICO score. Remember that when it's time to apply for a mortgage loan, contact me at sherrydicksonteam@gmail.com, and I can help you keep your credit inquiries within a two-week window to avoid a negative on your credit score.

To learn more, visit www.myFICO.com and get a free report at www.annualcreditreport.com.

Questions about buying or selling?

Give us a call at (903) 361-2733 or send us an email at sherrydicksonteam@gmail.com.
We're glad to answer questions — no obligation, of course.

XSellerate

Documents the mortgage lender will want from you

By Holden Lewis • Bankrate.com

Couple with a baby on lap, working on paperwork © Monkey Business - Fotolia.com

Mortgage lenders require paperwork that verifies every facet of your financial life: income, debts, assets and more.

The lender will request the following documents, so gather them before you apply for a mortgage.

Checklist

W-2 forms from the previous two years, if you collect a paycheck.
Profit and loss statements or 1099 forms, if you own a business.
Recent paycheck stubs.
Most recent federal tax return, and possibly the last two tax returns.
A complete list of your debts, such as credit cards, student loans, car loans and child support payments, along with minimum monthly payments and balances.
List of assets, including bank statements, mutual fund statements, real estate and automobile titles, brokerage statements and records of other investments or assets.
Canceled checks for your rent or mortgage payments.

About the W-2s

Guidelines typically require the most recent Form W-2 wage and tax statement, but some borrowers are asked for two years of W-2s.

"If your loan hasn't closed by the time that new W-2s should be received by the employees, then (the lender) may ask for that, certainly," says Julie Miller, a residential mortgage planner for Broadview Mortgage Corp. in Tustin, California.

About the profit statement

Self-employed borrowers may have to submit a current-year profit and loss statement, especially if the year is more than half over or they haven't filed their prior year's tax return.

During the housing boom, many self-employed borrowers got loans with little or no income documentation. Those loans are rare now.

About paycheck stubs

Loan guidelines typically specify one month of verified income. You can prove this with paycheck stubs. Employees who are paid electronically may be able to access a corporate website to print out paycheck stubs.

About tax returns

You will be expected to provide tax returns, including all the pages and schedules. The returns will be scrutinized for unreimbursed employee business expenses, self-employment business losses and signs of loan fraud, such as reported income that doesn't match your W-2s.

You'll be required to sign IRS Form 4506-T, which allows the lender to get a transcript of the tax return from the IRS. It's not a bluff: The lender will get the transcript of your tax return straight from the IRS and compare it with the copy of the return that you gave to the lender.

Ordering your tax transcript "has become an industry standard as fraud prevention," says Brad Blackwell, executive vice president and portfolio business manager for Wells Fargo Home Mortgage.

About the list of debts

All the above documents (W-2s, paycheck stubs, tax returns) tell the lender how much you earn. The list of debts tells the lender how much you owe each month. The lender then calculates your debt-to-income ratio, which is key to the loan decision.

Debt-to-income ratio

Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.

Debt payments / income

Example: Jessie and Pat together earn $5,000 a month. Their total debt payments are $2,000 a month. Their debt-to-income ratio is 40 percent ($2,000 divided by $5,000 = 0.4).

About the list of assets

The lender will want current bank statements, and possibly previous bank statements, too. These documents will be scrutinized to verify that you're telling the truth about the source of your down payment money. If you saved up for your down payment, without gifts from family, your bank records will verify that.

The lender will want to know your other assets, too. The lender wants evidence that you will have enough savings and investments to weather unexpected expenses after you have paid for the down payment and closing costs.

About canceled rent checks

Often, renters will be asked to supply 12 months of canceled rent checks and bank statements showing that the rent was paid on time. Renters without that documentation can provide the landlord's name and contact information for payment verification.

For current homeowners, the lender might ask for canceled checks and bank statements showing that the mortgage was paid on time. Any late payments are likely to show up on the credit report, too.

Speaking of the credit report

The lender will check your credit reports. Months or weeks before applying for a mortgage, check your own credit reports. Correct any errors, such as:

Accounts listed on your report that don't belong to you. Often this is mistaken identity; sometimes it's a sign that you're a victim of fraud.
Notations that say an account is open, when you have paid it off and closed it.
Incorrect details regarding credit limits, amounts owed, account opening dates.

Loan documentation tips

When asked for documents, provide them promptly. Never cross out, white out or alter any information on a document. "If you white out anything, it's not a valid document for our purposes," Miller says.

Always provide every page of every document -- even the pages that say "This page is blank." "They want that, too," says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, California. "If it says 'page one of seven,' they want to see all seven pages."

Finally, remain ready to supply updated documents. "Documents expire after 60 days," Blackwell says. "So if homebuyers take a long time in their house-hunting effort, we won't need the whole thing again, but they will have to bring the most current paycheck and that type of thing."

Things Not to do Before Closing Escrow

You're about to buy a home, and are now "in escrow," the homestretch of the home-sale process. During this period, you as the buyer will provide the needed funds for the home (most likely from your lender and with your down payment), the owner will transfer ownership of the property and the sale will be finalized.

Which means that if everything goes right -- all contingencies are met, both the seller and the buyer meet their contractual obligations and your financing to purchase the home is in place -- the home you have been aiming to buy will soon be yours.

But even though closing day is just around the corner, you're not out of the woods yet. There are several missteps a home buyer can take that will put getting a loan, and finalizing the transaction, at risk. Read on to avoid these goofs:

Leaving town or falling off the planet
Going on vacation or becoming hard to reach while in escrow is not a good idea, especially if your lender needs to get in touch with you to process your loan. Any glitches in that process can push back the closing date for your home. For the same reason, it's not a good idea to change your cell-phone number right now. It's best that you keep in touch with all necessary people while you are working to close on the property.
Changing jobs
When you're looking to close escrow and take possession of a home, you don't want to make your lender uneasy. Changing jobs (or going solo/self-employed) during this time period could certainly make a lender queasy and lead that lender to question whether you'll be able to afford that home. Lenders prefer a steady and consistent job history. If you make a job switch just before closing on a home, it could put everything on hold while your lender re-evaluates your financial position.
Being a big spender
You're about to get a new house, so why not whip out your credit cards and buy a new washer/dryer, dishwasher and refrigerator...or maybe, take out a loan for a new car for your new driveway?
Because these big purchases (and taking on more debt) will throw off what's called your "debt to income ratio" (which measures how much of your monthly income goes toward debt obligations), a ratio lenders consider when evaluating a loan application. You don't want to end up buying items for a home you don't have -- one that you lost because you nixed your chances of securing that mortgage before it went through.
You might even run into trouble if you pay for these items with cash -- lenders look at how much cash reserves you have when approving a mortgage. And don't think you're off the hook if you lease a car instead of purchasing one -- leasing a new car at this time could jeopardize your standing with your lender as well.
Instead, try to keep the balances on your credit cards low and don't take on new debt (this includes co-signing on a loan) until after you close on your home.
Paying bills late
If you're about to close on your home, stay current on your bills -- you don't want to wreck your credit score just before your loan goes through. Any changes to your credit status could affect the likelihood of closing on your new home, so you want to keep your credit good -- at least until you close on your home.
Opening/closing new credit card accounts
Opening up new credit cards or closing old ones just before closing on your new home could negatively affect your credit status, so again, wait until making such moves until your mortgage is secure.
Moving big amounts of money
Before that home is definitely yours, don't transfer large amounts into your checking or savings accounts -- check with your mortgage company before doing so. If they see large amounts of money moving around, they may wonder why and raise the red flag. (E.g., they may think you've secured another loan and have more debt obligations than you did when initially applying for the loan.) Again, you don't want anything to delay or hold up your closing.

17 Frequently Asked Questions on FHA Loans

Below are answers to the most common questions about home loans backed by the Federal Housing Administration, also referred to as FHA Loans.

1. What are Federal Housing Administration Home Loans?

They are mortgages best suited for borrowers with steady income, but without 20-percent down payments, including first-time buyers, those trying to conserve cash, early-career borrowers, or those with adverse credit history.

2. Do I get my loan directly from FHA?

No. The FHA guarantees your loan but doesn’t lend money. An FHA-approved lender approves and funds your loan, and the FHA guarantees the loan for the lender.

3. Do FHA loans benefit lenders or borrowers?

Both. If you miss payments due to short-term hardship, the FHA can help (ask your FHA lender how). If you eventually go into foreclosure, the FHA can cover lender losses. Because of this reduced risk, lenders can offer very attractive FHA rates and down payments.

4. What’s the catch? How can the FHA guarantee these loans?

All FHA borrowers pay Mortgage Insurance Premiums (MIP). Currently (as of January 2015), FHA loans have 1.75-percent upfront MIP and 0.45-percent to 1.05-percent monthly mortgage insurance. The monthly percentages change based on loan amount, down payment, and whether your loan term is greater than or less than 15 years. The FHA’s MIP fund is used to help borrowers and lenders.

5. Are MIP fees permanent?

The duration of monthly MIP varies depending on loan amount, down payment, loan term greater than or less than 15 years, and when you put your loan in place.

You can also eliminate monthly MIP if you gain enough equity in your home to eventually refinance into a non-FHA mortgage (ask your lender for details). The upfront MIP can be financed, paid in cash, or covered by a seller credit. It can be refunded on a prorated basis if you refinance into a new FHA loan within 36 months.

6. What kinds of FHA loans are available?

The most common FHA terms are 30-year and 15-year fixed, but there are also adjustable rate options. These loans have no prepayment penalties and are assumable by any qualified future buyer of the property.

7. How do FHA rates compare to conventional rates?

FHA rates are the same and often lower than Conventional Conforming loans. Your lender can do rate comparisons based on your profile.

8. Can I buy an investment property or second home with an FHA loan?

No. FHA loans are for owner-occupied property only. You must move into the property within 60 days of closing a purchase, and must occupy the property for at least one year. After that, you can change how you use the property.

9. What are the basic qualifying rules for FHA loans?

You can have a credit score as low as 580. Your total monthly housing obligation (mortgage payment, taxes, HOA/insurance, mortgage insurance) plus all other debt (credit cards, student loans, car loans, etc.) shouldn’t be more than 43 percent of your income, but your lender can advise on any flexibility they might have on this “debt-to-income” ratio.

10. Do I need money left over after I close?

There are no reserve requirements for FHA loans, though you should strongly consider your reserves in relation to your monthly obligation and income.

11. Are gift funds allowed?

Yes. Gift funds for some or all of cash-to-close are allowed from family members or — in select cases — friends that can be proven as long-term relationships. The gift donor will be subject to federal gift tax rules.

12. Are co-signers allowed?

Yes. Co-signers are also allowed, and the co-signer doesn’t have to live in the property. Your profile is combined with their profile to qualify. The full loan amount and payment will show up on the co-signer’s credit report.

13. Are seller credits allowed?

Yes. A seller can credit up to 6 percent of the sale price toward cash-to-close (which includes but cannot exceed: closing costs, prepaid items, and mortgage insurance).

14. Are there special FHA qualifications for single family homes?

Not really. Single family home approvals for FHA loans are similar to conventional loans. If the purchase contract or appraisal calls for pest work or deferred maintenance, this work will need to be cured prior to the loan funding.

15. Are there special FHA qualifications for condos?

Yes. A condo project must be approved by your lender or by HUD (FHA’s regulator) prior to any unit in the condo project being eligible for FHA financing. They review all the condo legal documentation, budget, unit mix (residential versus commercial), occupancy mix (owner-occupied versus rental ratio), and a number of other factors. Ask your lender if a condo project you like is approved already. If not, these approvals can take weeks, so plan accordingly with your lender and your real estate agent.

16. Are FHA loans relevant for higher-priced markets?

Yes. The national FHA loan limit is $417,000, but limits go up to $625,500 in high-priced markets. With a 3.5-percent down payment in an FHA-designated high-priced market, you could buy a home priced up to $648,000. And you could get up to a $695,000 price with a 10-percent down payment. It’s easy to look up FHA loan limits for your area.

17. What should I do if I want an FHA loan?

You should find a lender to talk to about FHA loans before looking at properties. Before you write an offer on any specific property, ask your lender to review the property for FHA eligibility. Also make sure your real estate agent and lender know if you’re seeking seller credits before you write your contract.

NE TEXAS Real Estate News

You may have enough equity in your current home to move up.

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Over 50% of Homes Have at Least 50% Equity

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What if you only needed to save 3%?

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Here are their projections of prices going forward:

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Veterans Affairs Loans by the Numbers

Some Highlights:

For many, the mortgage process can be scary, but it doesn’t have to be!

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Some Highlights:

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Some Highlights:

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The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher,’ and who puts your family’s needs first.

What is PMI?

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1. Down Payment

2. FICO® Scores

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Payment history

Percentage of available credit you're using

Length of credit history

"Mix" of credit types

Proof of income

Collateral

Recent efforts to get more credit

Don't open too many credit cards at once

Don't charge more than half the limit on your credit cards

Don't cancel credit cards once you get them

Pay your bills on time

Diversify your debt

Only charge what you can afford to pay off each month

Monitor your credit score

Dispute any wrongful claims you find on your credit report

If you're unsure about specific lifestyle changes needed to improve your credit, check out Fresh Start

Be aware of your limits

Monitor your spending closely so you don't charge more than half your card limits

The VA Loan Advantage

1. No Down Payment

VA Loan Savings at Closing:

2. No Private Mortgage Insurance

PMI Savings per Month:

3. Competitive Interest Rates

Lower Interest = More Savings:

Additional Benefits

Basic Allowance for Housing

No Pre-Payment Penalty

Spring Cleaning Checklist: Kitchens & Baths

Upcoming Open Houses

Combat Spring Allergies

4 Steps to Improving Your Credit Score

Questions about buying or selling?

Documents the mortgage lender will want from you

Checklist

About the W-2s

About the profit statement

About paycheck stubs

About tax returns

About the list of debts

Debt-to-income ratio

About the list of assets

About canceled rent checks

Speaking of the credit report

Other documents you might have to provide

Loan documentation tips

Leaving town or falling off the planet

Changing jobs

Being a big spender

Paying bills late

Opening/closing new credit card accounts

2. FICO^® Scores