Category: Renter

Although a single late payment can lower your credit score—since payment history is 35 percent of your FICO credit score—how much it affects your score will depend on a lot of different factors. For example, making a payment one day late on a low-limit department store credit card may not be as detrimental to your credit as being 60 days overdue on your mortgage. Some of the factors that will determine the impact on your score include the type of account that it is, how late the payment is, if you’ve had other late payments, and what your credit score currently is. The important thing is to make the payment and get your account back in good standing, which you’ve done. Being late is one thing, but not making the payment at all is another thing altogether. Generally, if the late payment is your only late payment in the last several years, you shouldn’t worry too much about it. Also, keep in mind that a lender may choose to overlook a single late payment if the rest of your credit is very good. In the end, it’s not always about your credit score, but rather your creditworthiness in a lender’s eyes.

 

© Left Field Media

The day has finally arrived: you survived the recession by heading to grad school, you’ve been steadily working for a few years at XYZ Consulting Art History PR and Travel Blogging Firm (a nonprofit) to balance out your debt ratio, you’re in a committed relationship with your cat (so you think), and you’ve been roommate-free for two years and counting. Whew. It’s time to embrace that final mantle of adulthood by saying goodbye to your tiny rental/room in mom’s basement. Now, now, calm down—you know you’re ready! Let’s take a look at the number of factors to consider now that you’ve decided to adult.

First, the scary stuff: Consider your finances.
Buying a home is a great option if (1) your job is stable, (2) you don’t plan on moving soon (it’s the worst, anyway), and (3) rents are increasing. Take a look at your credit history and score, and figure out what available resources you can dedicate to a down payment and a monthly payment. The total amount you’ll need for a conventional loan is 20% of the home value plus closing costs. While this number may seem scary, there are multiple government programs and options for lower down payments. Typically, first-time homebuyers can put down 0-5%. Next, you’ll need to find a lender to pre-qualify you for a home loan at an affordable rate. Getting pre-approved for a loan will help expedite the closing process

Now the fun stuff: Finding the best fit. Looking for that perfect, two-bedroom downtown loft accessible to hiking trails, Trader Joe’s, and your favorite pub crawl will be a majorly fun timesuck. There are multiple online sites and apps to browse while commuting to work, being at work, coming home from work, and lying in bed before tucking your phone under the pillow. But before you jump online and start searching willy-nilly, decide what’s important to you. How far is your commute? How walkable is the community? How accessible are you to main roads and retail amenities? How many hipsters per square mile? How easy is it to find a bar? Are there Uber drivers always at ready? Is the neighborhood mostly families, older couples, young professionals, or a mixture? Narrow down your search to a specific geographic region in order to find what will fit you the best, as well as influence the outcome of your first major investment. It’s also important to remember that different kinds of homes have different expenses. For example, single-family homes don’t the same expenses for landscaping, HOA fees, and community amenities as townhomes and condos.

The dealmakers: Can I do this by myself? The short answer is no. I know, I know. You were raised on the internet, and therefore you can lifehack your way through any process. While this may be true when changing your timing belt or getting the best deal on a flatscreen TV, you’ll receive invaluable guidance and information by working with a licensed real estate agent. While the vast majority of inventory is accessible online with photos, video tours, and detailed information, agents specialize in specific market areas and have access to information about the homes and communities that you can’t find anywhere else. Additionally, their expertise is invaluable when touring a home. Licensed, experienced agents (read: not your friend’s friend’s brother or your goddaughter’s uncle) can look for potential issues and problems on house walkthroughs. While major issues are usually uncovered during inspections, an agent can save you a lot of heartache by offering their experienced-backed opinions before you make it to the inspection stage. If only Grey’s Anatomy had come with some kind of initial walkthrough…

So. Now you’ve found the house, you’ve selected an agent, and it’s time to submit your offer. An agent will be very useful—especially in competitive markets—in negotiating an appropriate price. The offer is put in writing (again, an agent will navigate you through this maze of paperwork), you’ll submit a “good faith” deposit, and you’ll finalize your purchase contract. Don’t panic! This is just the housing version of “You want to like, date seriously, like only me?” Yes, I want to date, like, only you.” It basically means that you’re committed, they’re committed.

Last steps: Closing. This is an entirely other blog post by itself, but never fear. With the right agent, it’s only a waiting game.

Congratulations! You’ve successfully become the kind of person who can read an entire article (with no GIFs or videos, mind you) about adulting without falling into a full-blown panic attack! While buying your first home may seem like a daunting task, with the right mindset and preparation, you’ll soon be moving your childhood paraphernalia from Mom and Dad’s into your new home and taking daily trips to IKEA—and don’t forget to bring the cat!

You’ve decided to sell your house. You begin to interview potential real estate agents to help you through the process. You need someone you trust enough to:

Set the market value on possibly the largest asset your family owns (your home)
Set the time schedule for the successful liquidation of that asset
Set the fee for the services required to liquidate that asset
An agent must be concerned first and foremost about you and your family in order to garner that degree of trust. Make sure this is the case.

Be careful if the agent you are interviewing begins the interview by:

Bragging about their success
Bragging about their company’s success
An agent’s success and the success of their company can be important considerations when deciding on the right real estate professional to represent you in the sale of the house. However, you first need to know they care about what you need and what you expect from the sale. If the agent is not interested in first establishing your needs, how successful they may seem is much less important.

Look for someone with the ‘heart of a teacher’ who comes in prepared well enough to explain the current real estate market and patient enough to take the time to show how it may impact the sale of your home.

Not someone only interested in trying to sell you on how great they are.

You have many agents from which to choose. Pick someone who truly cares.

Now that the housing market has stabilized, more and more homeowners are considering moving up to their dream home. With interest rates still near 4% and home values on the rise, now may be a great time to make a move.

Sellers should realize that waiting while mortgage rates are increasing probably doesn’t make sense. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain budget for your monthly housing costs.

Here is a chart detailing this point:

Buyer's Purchasing Power | Keeping Current Matters

With each quarter percent increase in interest rate, the value of the home you can afford decreases by 2.5%, (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.

Act now to get the most house for your hard earned money.

Historically low mortgage interest rates have been a lifeline for many town first time homebuyers in recent years, keeping home ownership within reach for many who wouldn’t have otherwise been able to make the leap. For them, and for all the other than first time area homebuyers, the fact that home values have continued to rise has been an added boon.

But, as just about every mortgage industry expert will tell you, the gig is almost up for those rock bottom rates. Yet the question for many first time homebuyers remains: is it time to buy or not?

It’s a good time to take a hard look a few of the known facts—

According to web giant Zillow, as of Q1 2015, potential home buyers should expect to spend about 15% of their income on a mortgage for an average home in the U.S. When you compare this with the historical averages, it makes today’s rates temptingly low: the typical percentage has been closer to 21%. In terms of dollars spent monthly, that’s a big (and terrific) difference!

At the same time, the historical average has a typical renter shelling out 24% of income. Today, that’s closer to 30%…making first time homeownership that much more inviting.

Taken together, Zillow’s new calculations definitely appear to make finding a home to buy the more affordable option. On the other hand, it’s also true that a number of factors work against first time homebuyers—in Naperville and nationwide. College debt, for one, is far more of an obstacle than it used to be.  And the other side of those all-time high monthly rents in many places are making it that much harder for would-be first time homebuyers to save for a down payment.  But with the widespread phenomenon of growth in rents outpacing growth in home values, the rental affordability problem isn’t likely to improve any time soon. With mortgage rates likely to be on the increase as early as this fall, the long term outlook may not grow rosier as time passes. The implied takeaway: strike now while the iron is hot!

Whether this real estate foray is your first or tenth, if you’ve been considering taking advantage of this summer’s Naperville home buying bargains, contact me today for an introduction to a qualified mortgage broker—and to discuss whether this might not just be the perfect time to start your search!

People often ask whether they should buy a home now or wait. Recently released data suggests that waiting may not make sense as prices seem to again be on the rise. Let’s take a look at some of the data and commentary on the subject:

Ed Stansfield, chief property economist at Capital Economics:
“The current tightness of supply conditions would normally be consistent with much faster price growth. The continued steady growth in home sales that we expect this year will only add to this upward pressure on prices.”

Case Shiller Home Price Index
“The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.1% annual gain in March 2015 … with a 0.8% increase for the month.”

Anand Nallathambi, CEO of CoreLogic
“All signs are pointing toward continued price appreciation throughout 2015… Tight inventories, job growth and the impact of demographics and household formation are pushing price levels in many states toward record levels.”

Danielle Hale, Director of Housing Statistics at NAR
“Even without further acceleration, the pace of price growth remains too high. Strong buyer demand and low inventories coupled with relatively low new construction are helping to push prices up, keeping the housing market tipped in favor of sellers.”

FHFA Principal Economist Andrew Leventis
“The first quarter saw strong and widespread home price growth throughout most of the country. Home prices are now, on average, roughly 20 percent above where they were three years ago. This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of overall inflation observed during that same time period.”

Bottom Line

If you are planning on buying a home in the near future, waiting probably doesn’t make sense from a purely pricing standpoint.

One-Question Exam: A Credit Report True/False Quiz

Here is a one-question True or False exam that every future first-time home buyer should take:
True or False:
One sure way to build a strong credit report is to pay your bills on time.
(Answer: False)
Particularly for a first-time Naperville area home buyer, being able to present a strong credit report can make the difference between being able to afford a quality home that satisfies all your ‘must haves’—or one you just sort of settle for.
It’s about how much you can comfortably afford. The interest rate you will be offered is directly related to your bill-paying history, and a percentage point (or more) can make a big difference in your monthly budget. Because lending institutions charge more or less based upon the degree of risk they believe a loan carries, the stronger your credit report, the “more house” your monthly payment will cover.
Of course, since a string of unbroken records of punctual payments is what lenders look for, you might think that the answer to my one-question True or False exam would be an unqualified ‘True’—but not so fast. There’s a small catch is in the unbroken records that they look for. The word records.
Just paying your bills on time doesn’t build a strong credit report unless there are records of it—and for area first-timers who have been paying rent for years, all those prompt payments could well be missing in action. The surprising reason lies in the nature of our whole credit reporting system.
It’s voluntary.
As the L.A. Times spotlighted last summer, landlords, phone and cable companies, “and many other creditors don’t report your payments” to the big three credit bureaus (Equifax, Experian and TransUnion). They aren’t required to do so. If you’re planning on becoming one of our west suburban first-time home buyers, that might be a big deal—especially since rent payments usually make up the lion’s share of what you buy on credit. But you can do something about it!
Recognizing the difficulty some first timers were having in qualifying for home loans precisely because of such missing data, about five years ago, the credit bureaus teamed up with services like RentTrack that enable tenants to pay their rents online—and get credit for them. TransUnion and Experian also introduced services like “ResidentCredit” and “RentBureau” that encourage property managers to report rent payments for their tenants. That makes sense for landlords, too, because when rent payments are recorded, it enables them to better gauge the creditworthiness of their next batch of applicants.
Making sure your payments are being recorded will put today’s renters ahead of the game when they eventually decide they’re ready for the next step: home ownership. It simplifies the answer to that One-Question True or False credit report question greatly…to a simple “True”!