Must-watch Items on Your Credit Report

So you have just received your credit report and your score has dropped. Why? There are different items on your credit score that can affect your score negatively. Make sure you keep an eye on the following four must-watch items on your credit report to maintain a good score.

First, you can receive a free credit report once every year from each of the three nationwide credit reporting companies. You can order yours online from annualcreditreport.com or by calling 877-322-8228. (Other sites may advertise free credit reports, but the fine print often requires you to buy a product or service.) Some credit card companies also provide a free FICO credit report, and there are sites such as creditkarma.com where you can view your score for free as well.

Must-watch items

Late payments. Late payments and delinquencies have a huge impact on your credit score. They make up 35 percent of your entire FICO score. If you see marks that bills have been paid 30, 60, 90 or 120 days late, that is extremely damaging to your score. The other important factor is the timeline of how late your payment was and how long ago you made this mistake. The later your payment is, the more it negatively affects your score. The more time that has passed since the late payment, the less it affects your score.

Collections. Any collections activity on your report will go against your score. If you have had an account or bill that has gone to a collections agency, you are probably aware of it, but in some cases you may not be. There are certain situations where you may not be aware of collections action, such as if you didn't pay the last utility bill after you moved and the collection agency couldn't locate you. If you see a mark on your report that is not related to you, you can dispute it and have it removed. Any collections item can stay on your report for seven years, but the longer it has been on your report, the less it affects your score.

Active accounts. An easy way to detect identity fraud is to look for accounts on your credit report that you didn't open. If you have closed an account, it will reflect that on your credit report and you will be able to verify the date you closed it. If an account is shown as open but you have closed it, reach out to the issuer to find out why it is still active.

High debt-to-credit limit ratio. Credit score companies will look at how you utilize your credit cards by comparing the balance on one revolving account with the available credit from the lender. You want to keep your ratio under 10 percent. For example, if your credit card has a limit of $5,000 and you have a $1,000 balance on it, the ratio is 20 percent. If you are running a balance of $7,000-$8,000 on a credit card with a $10,000 limit, it will really negatively affect your score. It is even worse to have high running balances on several cards.

What items do you watch for most on your credit report?

Is Your Homeowner's Insurance Policy Out of Date?

Your homeowners' insurance policy is one of those things that, after you purchase it, you rarely think about. In fact, if you're like most homeowners, it's probably the same policy that you purchased when you bought your home. When was the last time you pulled it out of the desk drawer and took a look at your coverages?
Here are five reasons your homeowner's insurance may be out of date:


If you're unsure of what damages are covered…
In general, most homeowners' policies cover a standard list of damages. Some of the types of damages covered by most policies include:

• Fire
• Hail
• Smoke
• Theft
• Falling objects
• Freezing

It's important to remember that threats to your home vary greatly according to the location of your home. If you live in a coastal region, flooding or hurricane damage may be of concern to you. On the other hand, if you live in California or Arizona, fires and dust storms might be more prevalent. It's important to know how you're protected if these types of natural disasters occur.


If your rates are climbing…
It's always a good idea to keep an eye on your insurance rates and to revisit the policy every year to ensure that you're still getting the best deal you can. Many homeowners often choose to consolidate several of their insurance policies to one carrier to get a better deal. If you've noticed your rates are increasing, do not be hesitant to shop around.


If you moved to a new location…
When you move to a new location, it's likely you're taking out a new mortgage and, therefore, new homeowners insurance will be required. Keep in mind that the coverages that you had in your previous policy may change at your new residence. Also, keep in mind that even if you move to a new home within the same city, coverages like flood insurance can change drastically from one street to the next. Always consult with an agent regarding any changes that need to be made to the policy.


If you made improvements…
You may be capped out at a certain amount of money on your homeowners' policy that does not take into account any major improvements you've made recently. If you are upgrading or have done major renovations on your home, you should update your policy to reflect the increased value of your home.


If you are rebuilding according to new building codes…
If your home is damaged and you are forced to rebuild, there may be new building codes in place that were not there when you initially took out your policy. Those changes may require you to spend more than you would have previously. Make sure that you are covered for those additional costs.
Your local builders' association will be able to tell you what changes may affect your homeowners' insurance policy and the cost to rebuild. As always, you should be able to get straightforward answers from your insurance agent about these and other questions before you renew or upgrade.


It pays to do your research
As with all things in life, it pays to do your research and to never accept the status quo for too long. Dust off that homeowners policy to make sure you're covered. Don't wait until it's too late!

How Long Do Most Appliances and Home Systems Last?

If you get 10 years out of most of your home appliances, you will probably come out ahead. And your home systems should last maybe two decades. However, there are factors that will affect just how long your appliances and home systems last. On average, here's how long you can expect most of your major appliances and home systems to last — and when it's time to replace them.


Typical Life Span of Appliances and Home Systems

Today's appliances have a different life span than older appliances. Many newer models are high-tech and hence have different problems when they break down that may be more expensive to repair. Some older appliances are so inefficient that replacing them when they've exceeded their life span, even if they still work, makes more financial sense.

Other factors that will affect the life span of your appliances include brand, wear and tear, costs for or availability of replacement parts, complexity of repairs, and the age of the machine or system.
Once your appliances are out of warranty (typically after one to five years), you have to factor in life expectancy to determine when it's time to replace them. Here is a breakdown of the average life spans of typical home appliances and systems:

• Air conditioners: 8–15 years.
• Refrigerators: 7–13 years.
• Stoves and gas ranges: 8–15 years.
• Washing machines and dryers: 5–15 years.
• Dishwashers: 9–15 years.
• Water heaters: 8–15 years.
• HVAC systems: 10–30 years.

Your HVAC system has several caveats. If you run your HVAC system constantly over its life, it probably won't last three decades. If it's located in a damp or dank basement or near corrosive materials, it won't last that long either. For major systems, even if your equipment conks out after 15 years, it's considered at full life span if it's reached two-thirds of its expected life span.

Clues That You Should Chuck Your Stuff

Some of your appliances can create a hazard when they start to break down. Consumer Reports lists the factors that you should weigh when deciding to replace several major appliances:

• For your refrigerator, replace it if it's old and inefficient or if it keeps breaking down over and over again (once it's outside its warranty and is at least seven years old).
• Gas stoves last longer than electric ones, but if there is anything wrong with either, it should be fixed immediately — stoves present fire and electrocution hazards if they are not working properly.
• Washers and dryers should be replaced if after eight years they are leaking, noisy, shaking, overfilling, or not cleaning and drying clothes properly.
• If a repair is going to cost at least half what you would have to spend to buy the item brand-new, you should replace it.
• If your warranty is expired and the appliance has almost lived to its life expectancy, replace it if it's broken.

Of course, if there are problems with any appliance that create a hazard, you should chuck it and get a new one.

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5 Common Reasons Home Sales Fall Through

You've got your buyer, you've entered into a contract and you're well on your way to selling your home. Then, all of a sudden, things take a turn. The momentum is broken and it all begins to unravel. Before you know it, the deal is off and you're back at square one. Why does this happen?
Here are five common reasons:


Financial qualifications
Lenders no longer give out loans freely like they did before the housing crisis. Oftentimes, buyers who are prequalified or preapproved later find out that they aren't qualified to obtain the loan they need to fulfill the contract. Remember that even a preapproval letter is only a statement of intent and anticipation, not an actual loan.


Closing costs and fees
Buyers may become so enamored with your home and focused on general financing that they will underestimate the miscellaneous costs associated with actually closing on it, such as inspections, appraisals, commissions and seller's fees. Even a single unexpected fee of a few hundred dollars can be enough to tear the seams of a deal. Be sure that all costs and fees are clearly outlined early in the transaction.


Low appraisal
If there is an appraisal contingency and the subsequent appraisal comes in significantly lower than the sales price, this can be a major roadblock. Low appraisals are lethal to real estate deals, as neither party likes to budge in this type of situation. Even if you are willing to lower your sales price, it may no longer be a smart deal for you at that point.


Disclosures
A home inspection can uncover notable flaws that the seller either did not know of or purposely withheld from the buyer. In either case, undisclosed items can plant a seed of distrust in a buyer's mind. Always be sure that you've done your part to inspect and repair any possible issues. Never try to hide anything; it's simply not worth it to invest your time in a deal knowing that an undisclosed issue could become a sticking point in the end.


Personal circumstances
Let's face it: life happens. We all change jobs, go through financial downswings and deal with new challenges each day. Your buyer may decide to relocate to a new state or get laid off. Any one of a thousand things could happen at any given moment. You can't protect yourself from unforeseen circumstances, but you can have a better chance of predicting them by communicating and building a personal relationship with the buyer.


These are just a few of the common reasons deals fall through. Contact me today and I'll be happy to offer my advice for selling your home and avoiding potential deal-breakers.

Adjustable Rate Loans: How Do They Work?

Adjustable rate mortgages are loans with variable interest rates that change according to the market rates, as opposed to fixed-rate loans, which guarantee a set rate for the entire period of the loan. ARMs may seem like a great idea some years, but in other years, you may wonder what you were thinking when you agreed to the loan. 
Many financial experts advise home buyers to seek fixed-rate mortgages. The set interest amount makes it easier to calculate monthly payments with no surprises. An adjustable rate mortgage can leave you with unpleasant surprises if the interest rates suddenly soar.
There are some pros and cons to adjustable rate mortgages. As with any financial decision, learn all you can about the topic and weigh the variables carefully before choosing a loan type.


The pros ...

• ARMs may be good for buyers who plan to sell in a few years. If you know your job requires you to move every five years, an ARM may be worth the risk of interest rates rising, depending on the current rate.
• Paying off your loan in a short time period may make an ARM better for some homeowners. For those who know they can repay the entire mortgage amount quickly but just need a short-term loan, ARMs may actually save them money.
• Some ARMs offer a combination of adjustable and fixed rates. These may offer the best of both worlds, depending on market rates. For example, a mortgage may be fixed for five years and then adjust annually.

The cons ...

• Interest rates may be low now, but that only means they'll rise later. When interest rates rise, your ARM loan rate will rate rise too. Your monthly payments will increase. This may be a hardship for some people.
• Adjustable rate mortgages may be saddled with a prepayment penalty. This means that if you suddenly come into a windfall and wish to pay your entire mortgage loan, you may actually be penalized for paying it off early.
• ARMs can be difficult to understand. There are many variables, and you have to carefully read all the fine print to understand the nuances of a particular ARM. Fixed rate mortgages are a lot easier to understand: borrow this, pay that; it never changes.

Adjustable rate mortgages come in and out of fashion, but the truth is that you shouldn't take out such a loan unless you understand the worst-case scenario and how it may impact your financial health. While they are not for everyone, ARMs do offer some advantages, and those who can take advantage of these opportunities may find them useful. Let us know if you want to explore the ramifications of an adjustable rate mortgage compared with a fixed rate mortgage.

Is This Your Situation: Shopping for a Home Mortgage

For most of us, shopping for a new home also means shopping for a home mortgage. In both exercises, you'll want to be a smart shopper. Working together, we can find a house you'll love. And while it's not likely you'll actually "love" your new mortgage, here are 6 secrets to make sure your financing needs and the lender you're considering are a good match.

1. Mortgage Pre-Approval
A no-cost, no-obligation pre-approval before you start house hunting can save you big time. The seller knows you're a "cash buyer" and may favor your purchase offer over another. Find a lender who offers pre-approval. That's not the same as "instant approval," which is often an approval loaded with qualifications. Nor is it a how-much-can-I-afford "pre-qualification" estimate, which doesn't give you the same bargaining clout.

2. Quick Loan Processing
Some lenders offer actual mortgage approval in just 5 to 7 days, and electronic underwriting is sometimes even faster. Ask about it. This quick turn-around could get you to settlement sooner, which may make you the most attractive potential buyer to your seller and may mean less time in temporary housing.

3. Flexible Underwriting Guidelines
Some lenders count the earnings of a spouse who doesn't yet have a job in the new location but has at least a two-year work history. That kind of flexibility may make you eligible to purchase the home you want.

4. Variety of Mortgage Products
Perhaps you'll do best with a short-term mortgage or an adjustable-rate loan or two-step plan. Find a lender who offers a selection of mortgages and even unique mortgage products that suit your situation best.

5. Rate-Lock Options
Find out what rate-lock options are available from the lender. The shorter the lock time, that is, the less time between when you agree on a mortgage rate and when you actually go to settlement—the lower the interest rate you'll have to pay.

6. Negotiable Lender Fees
Go to a lender whose fees are reasonable. Question extra charges, such as a "commitment fee" or "underwriting fee" or "processing fee." Mortgage lending is competitive and lenders often will negotiate fees to get your business.


We can work together to find the house that's right for you, and we can talk about how to make sure the loan is right, too. Please give me a call or send an email.

 

Making Extra Mortgage Payments Can Help

Do you want to pay off your mortgage sooner? Whether you've bought a home recently or you've been paying your mortgage for a while, making extra mortgage payments is a smart way to save money over the long term. The effort you put into paying more now and saving later will benefit you in the future even though the process might seem overwhelming right now.

 
By saving your money and refining your repayment goals, you can take the next steps toward additional mortgage payments and experience your return firsthand. Your motivation for making as many payments within your spending limits as possible is knowing you'll be able to pay off your mortgage faster and bask in your return on investment sooner. In addition to taking years of interest off your loan, you'll also end up making fewer payments at lower prices over time.


How to Make Extra Mortgage Payments

Write down your mortgage value, your interest rate and the number of years you have to pay your loan; once you see the savings you'll make in the next few decades with these three tips, you'll want to start making extra mortgage payments today.

1. Add a Small Dollar Amount Each Month. Commit to adding a small amount of money like $10 or $25 to your mortgage payment every month. You won't notice the difference, and you'll also decrease the number of months you spend paying your mortgage while saving money in the long run.
2. Make Extra Payments Early in Your Loan Term. Execute your additional mortgage payments as frequently as you can early in your loan, depending on how much your current budget will allow. You'll end up paying your bills for a shorter amount of time and spending less money in the process.
3. Make Lump-sum Payments Sooner Rather Than Later. Carry out larger extra mortgage payments in the first few years of your mortgage term to pay more now and save a lot in the long term. You'll make an immense dent in the overall amount you contribute to your loan and avoid paying thousands of dollars in interest.

Because making one or more extra mortgage payments per year can help tremendously, keep these examples and tips in mind as you review your budget, set your goals and start saving. Cutting back on spending and putting effort into these additional payments will be worth it once you've finished paying off your mortgage and saved thousands of dollars along the way. If you're wondering about the other ways you can ease the burden of your loans as a homeowner, I'm always available to contact for more information.

Is This Your Situation: Wondering How You Can Buy a Foreclosed Home?

Maybe you’ve heard stories about people who bought rundown properties for little to nothing and turned them into palaces. You might be curious about how one acquires a foreclosed home. Is it difficult? Are the prices as good as they seem? Buying a foreclosed home is possible — you just need to know a little bit about the unique process of buying one. Keep reading to learn the first steps to buying a foreclosed property
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You work with a bank
You will likely be working with the bank’s broker. These agents work directly with the bank that owns the property. They often have long-standing relationships with the bank, so they also have insight on other foreclosed properties that are due to hit the market. When you find a foreclosed home that you’re interested in, you will contact the bank’s broker directly, and this is the agent you will be working with to purchase the home.


Pay in cash or get preapproved 
Many of these homes are cash-only. If they are in the auction stage or if they’re government owned, you must pay cash up front. If the property is REO (real estate owned — the bank now owns the property) you can get buyer financing, but you should come prepared with a letter from your lender stating how much money you are preapproved for. Since these properties are bank-owned, they come at a cheaper price tag — meaning they’ll sell quickly. If you’re not preapproved for a loan and you’re not paying cash, chances are, someone else will snag it before you.


Look at comparable properties before you make an offer
It’s hard to know exactly what to bid on a foreclosed home. The bank could price the home above market value or below. The only way to know how you should bid is to look at comparable homes. Also, take note of how long the home you’re interested in has been sitting on the market. If comparable foreclosed homes are selling quickly, you should bid high; but you might have some wiggle room if the home you’re after has been sitting idle for a while.
Keep in mind that there is no bargaining room when it comes to the condition of the property. Foreclosed properties are purchased “as is.” You will not be able to get a cheaper price by arguing that the floors need replacing or the ceiling is cracked.


Safest to buy when it’s REO
The safest time to buy a foreclosed property is when it’s REO. However, you might not be able to get as much of a bargain compared with when the house was still in auction. When the home is REO, it is owned by the bank and any liens or back taxes have been cleared. Sometimes the house is even cleaned up a bit, but no major repairs are performed. Below are other stages of the foreclosure process that typically offer more challenges to buyers.

• Pre-foreclosure – The homeowner is still in possession of the property. However, they have stopped making payments on the house and the home is selling for below market value. The lender must agree to accept an offer on the home that is less than what is owed on the mortgage loan.
• Auction – If the home doesn’t sell in pre-foreclosure, it goes to auction. This may be because the lender and homeowner couldn’t come to an agreement during the pre-foreclosure stage. 
• REO – Real estate owned, meaning that the bank takes possession of the property. 
• Government Owned – The home falls into the hands of the government if it does not sell in the REO stage. It takes a long time to purchase a home when it reaches this stage because of excess paperwork and other procedures. 

If you’re thinking of buying a foreclosed home, contact me today for more information.

 

6 Home Improvements That Do NOT Add Resale Value

Just because you’ve added tons of fancy upgrades to your home, does not mean you’ll get any more money for your house when it comes time to sell. In fact, you’ll probably end up sinking lots of money into these projects and seeing little to no return on investment. If you’re wondering how you can improve your home’s value, these are six projects that you can skip altogether. 

Pools
The resale value on your pool may differ depending on where you live. For instance, if you live in a state like Florida or Texas, many times, buying a house with a pool is a no-brainer. That’s because the climate is so hot in these areas that pools are almost a necessity. However, for safety reasons families with young children may not like the idea of having a pool. Also, if you live on the East Coast, buying a house with a pool is oftentimes considered a hassle. Pools on the East Coast don’t get used nearly as much as those in the south.
Also, installing a pool will cost you more than just the installation process. There are reoccurring fees for cleaning and maintenance. Overall, it is rare that you will recuperate the installation and maintenance costs when it comes time to sell your home.


Landscaping that goes beyond curb appeal
Over-the-top landscaping, elaborate gardens, ponds and more will not make your home more valuable. These additions are too personal to get your home a more expensive price tag. Although your beautifully manicured hedges are aesthetically pleasing, they might not be everyone’s cup of tea. The only thing that really matters in terms of landscaping when it comes time to sell your home is that the grass is cut, and you have a few nice features, such as a gravel walkway and some potted plants to satisfy potential buyers. Keep in mind that anything more than that will be a labor of love and not to boost home value.


Improving above and beyond what’s typical in your neighborhood
Be careful not to over-improve your home so that it sticks out in your neighborhood. Despite your best instincts, rushing to improve every little thing about your house to boost its value will do you a big disservice. Buyers looking in your neighborhood are seeking a house in a specific price range, but yours, if you over-improve it, will be out of their budget. And someone who can afford your house will probably be looking in neighborhoods already well-known for their affluence.


Lots of little maintenance projects
Don’t get confused between home improvements and home maintenance. Things like upgrading the electric, replacing the roof, replacing the furnace or installing new gutters are all considered necessary updates that every home needs and won’t lead to added value.


Home office addition or remodel
According to Forbes, home office remodels only lend a 46 percent cost recoup. That’s not very high. Not everyone needs a home office, so an addition of one will only appeal to certain buyers. If you have an extra room in your house, many people would rather see it turned into a guest room or nursery.


Sunroom addition or remodel
The same goes for a sunroom addition or remodel – it’s not an essential home feature. Sure, some buyers might like the idea of a sunroom, but it’s not on many people’s must-have list, so it won’t add value. Forbes lists a sunroom addition as only lending a 49 percent cost recoup.
For more information about what you can do to make your home more appealing to potential buyers, give us a call today.

Concerned About Buying a Home?

Purchasing a home is a big investment that requires a lot of planning. It's important to take the proper steps to ensure that your homebuying process is easy and stress-free. But not only that: Did you know that preplanning will actually help you save money on your home purchase? Keep reading to find out how this is possible.

Get preapproved
Before you even set foot in a house you're interested in purchasing, you need to meet with your financial adviser to determine the home loan amount you are approved for. This will help you determine which neighborhoods to look at and what homes you will be approved for without the hassle of finding your dream home and then finding out that you aren't approved for the loan.  Research and talk to banks to find the best home loan and interest rate so that you can purchase a home that you love while staying in your budget.


Maintain your budget
It's important for any homeowner to maintain and stick to a budget when purchasing a new home, especially for a first-time homebuyer. Take into consideration extra expenses that come along with buying a home, such as taxes and maintenance. If you want amenities in your home that are beyond what your budget allows, you may want to consider purchasing a fixer-upper.  Work with your Realtor if you find a home that you love but that's a little above your price range. Your Realtor is there to help negotiate a price that works with your budget.


Consider long-term investment potential
Purchasing and owning a home is a long-term investment, and its potential should be considered before purchasing the home. Does the home have a solid foundation? Is the neighborhood well-kept and maintained? These are things you need to consider when deciding whether the home is a good long-term investment. You also need to consider whether you have the time and budget to maintain certain homes. An older home may require a lot of upkeep. Or you may be buying in a neighborhood that has certain rules about how the outside of your house and lawn need to be kept.  The homebuying process can be full of complications and bumps, but if you take the time to plan out your budget and other necessities, you won't get stuck in a home you can't afford or one that requires too much maintenance. To ensure a successful homebuying process, contact us today, and we will help put you into a home that's just the right fit.