by Kathe Barge | Dec 1, 2022 | Blog, Buyers, Buying Conditions, Contracts, Helpful Tips, Interest Rates, Market Trends, Mortgage, Property Value, Real Estate
We would like to buy a new home soon but interest rates seem very high – we see advertisements for internet lenders offering what seem to be below market rates. Is this too good to be true?
If you were simply refinancing an existing mortgage debt, you MAY be ok choosing an internet lender. You would just need to be very careful that, before you apply to refinance your loan, you receive from the lender a full disclosure of all the costs and not just the rates. Often times I see lenders have exorbitantly high fees connected with low rates. In a sense, you would be buying down your rate by paying high fees upfront. You would want to be sure to compare them on the same day to a couple of local lenders and understand what you are paying to get the quoted rates. The reason you must compare rates on a singular date is because rates go up and down continuously and a rate may seem lower simply because you called a particular lender on a date rates dropped.
Since you are buying a new home rather than refinancing, I do NOT recommend that you use an internet lender. They do not tend to be familiar with area norms and that can cause you more headaches than you can imagine. There is a long list of particularities to PA Agreements of Sale and the last thing you want to do is have your closing delayed (while your movers are standing at the curb) while you wait for your lender (who does not have a local presence that you can visit personally to address any issues) to sort things out. As they are not familiar with our Agreements and processes, internet lenders may also impose requirements on you that are not requirements generally imposed by local lenders that may disadvantage you later. Finally, internet lenders often do not understand that PA Agreements of Sale declare “time is of the essence” inside the contract – what that means to you is that if you miss your closing date because the lender isn’t ready to close, the seller does have the legal right to declare you in default, keep your hand money and sell the home to someone else.
When buying, why take a risk? Rely on your trusted Realtor to help you find a local lender who offers the most competitively priced loan products and delivers exceptional customer service. Realtors cannot accept referral fees from lenders, so you can be sure we are motivated only by knowing you will have an outstanding transaction. Feel free to reach out to me for help finding you the best local lender to meet your financing needs!
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by Kathe Barge | Nov 4, 2022 | Buyers, Buying Conditions, Contracts, Helpful Tips, Interest Rates, Investment Properties, Listings, Market Trends, Mortgage, Property Value, Real Estate
Interest rates jumped up again. Is it time for us to just wait until spring and hope they start to come back down?
If you are a buyer, the real estate market offers you a great opportunity right now! Don’t be fooled by the higher interest rates – this is an awesome market for you to buy in! Why? Because all of the people who you would have been competing with are afraid of the interest rates and sitting by the sidelines. This allows you to have a competition – free opportunity to buy a home! Just six months ago, buyers would have been overjoyed to have an opportunity to buy a home without competition, to have had an opportunity to have had an offer accepted on the first home they offered on instead of their seventh, to have been able to purchase a home at asking price rather than asking price plus 10 percent! Do not miss this golden opportunity – there are some very nice homes available right now. You can refinance later with a convenient no cost refinance loan – get the house now! Once rates start to come back down, the buyers (who have all been sitting by the sidelines with you) will come racing back into the market, and bidding wars will be back. Make the smart move – buy now.
And as a side note, I do not feel we will see a “crash” in prices. Inventory remains at record lows and those homes that are selling continue to increase in their sales prices to new record highs, despite the increasing rates. This is not 2008 – I am not anticipating any “deals” to be had this spring – if anything the natural increase in the buyer pool we see every spring will boost prices because of the extreme lack of inventory. Feel free to reach out to me and we can strategize on how you can take the most advantage of the current real estate market while you still can!
A home’s value is set by the market. Value is always determined by what a buyer is willing to pay for your home. Many factors come into play in setting that value. Market value reflects quantitative factors such as: # bedrooms, # bathrooms, # garages, placement of garages (attached or integral), lot configuration (large and functional back yard? Cliff lot?), location of the home generally, age of roof, age of mechanicals. Market value also reflects more qualitative items: how updated is your home, and is it all new, or just refreshed? What is the floorplan (open concept?) What are your wall colors? There is always a range that value will land in, which we call the range of reasonable. There is no ONE price at which a home will sell. If there are many buyers seeking a home like yours, it will sell at the top of the range of reasonable. If there are not, it will take longer to sell and may sell a bit lower in the range. What the market does not consider in setting a value of a home is what you need from the home. In 2008, many homeowners had used their homes as ATMs and withdrawn large sums of money for educations, vacations and cars. When the market softened, there was not enough equity for them to be able to sell their homes and not be in a short sale situation. This fact, that a homeowner over-extended themselves on mortgages, is not the least bit relevant to market value. The market is also not going to consider what you plan to do next. If you plan to move to Los Angeles to be closer to family and are finding that the Pittsburgh market is not going to yield you enough to be able to buy in L.A., you will need to turn to other investments to make up any difference.
We are in a very robust market – your home is far more likely to garner more now – whatever that may be – than it could have in the past. Forecasters are also suggesting that values will soften by year end. My crystal ball is out for service, but what I can tell you is that every hot market eventually softens. Waiting out the market so that you can get a price that the market is unprepared to deliver at this time may have you waiting many, many years, and during that time you may need to invest even more in your home in order to deliver to the market what it needs in order to deliver an acceptable sale to you.
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by Kathe Barge | Feb 10, 2022 | Blog, Buyers, Buying Conditions, Contracts, Investment Properties, Listings, Market Trends, Mortgage, Property Value, Real Estate
What impact do you think rising interest rates will have on the real estate market?
I can’t tell you how many years the Fed has been warning us that they are going to raise the interest rates, and then nothing happened. But now, it looks like it is finally happening. Less than one year ago, conforming loans with good credit could be procured at rates below 3% fixed. Now they have inched up to 3.75% for conforming loans. While these are still historically great rates, the days of mortgage interest rates in the 3% range appear to be gone and we are slowly inching upward.
What impact will this have on the market? Typically, when rates increase the market slows. Buying power decreases – a buyer will qualify for a smaller mortgage amount when rates are higher. Even if a buyer qualifies for a loan amount, they may not want to pay the added amount each month attributable to the higher rate. Many buyers are cognizant of how much they don’t have available to spend on quality of life purchases, such as dinners out, when they have larger mortgage payments. This boils down to the fact that they may be unwilling or unable to buy at a price they could have last year, and this could depress housing prices.
However, this is counterbalanced by the fact that we are in a market with record low levels of inventory, so it is highly unlikely that interest rates will have any effect on housing prices in the short run. If anything, rising rates should cause buyers to move quickly and lock in homes and mortgages before rates continue to climb. And this would be the most sensible short-term response to rising rates. Buyers – rates are actually going up! The time to act is now!
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by Kathe Barge | Jun 23, 2020 | Blog, Buyers, Mortgage
With all that is going on in the world, why should we consider a move now?
I know it might seem counter-intuitive, but local market indicators suggest there has never been a better time to be in the market for a move. Why buy now? Here are my top reasons!
- Interest rates are unbelievably low! Fixed 30 year loans under 3%? Yes! You can buy more and spend less!
- We have some very nice homes available to purchase – its been a long time since I have seen so many nice choices.
- Some buyers are concerned about economic uncertainty right now and sitting on the fence. However, the economic factors associated with the housing crash in 2008 are not present now, so while the economy may slow down, we are not anticipating housing prices to drop. Take advantage of other buyers’ hesitation and buy now before you find yourself in a multi-party bidding war.
- Housing prices have continued to rise in our local markets despite the pandemic and economic uncertainty. If you are sitting on the sidelines, there is a good chance you will pay more at a later date!
I have outstanding opportunities across all price brackets. Why buy now? Check out more reasons below!
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by Kathe Barge | Jun 17, 2019 | Blog, Mortgage
My friend’s closing on her existing home was delayed and she ended up having to delay her closing on her new home, and was stuck with all of her stuff on a moving van and unable to move in to her new home. How can these major inconveniences be avoided?
Back-to-back closings do raise the possibility of delayed closings and moving vans sitting curbside waiting to unload. When there are multiple transactions lined up on top of each other, if one in the line-up fails to close on time, it will affect everything in line behind it. Ideally, transactions would not be back-to-back, but this only works if buyers are paying cash out of existing accounts or have sufficient resources to carry two homes, so that the new home can be closed independently of the closing on the old home. But even if transactions are not stacked, closing delays can still occur, causing unhappy buyers and sellers, because lenders aren’t ready.
So how can these inconveniences be avoided? Selection of your lender and closing agent are absolutely critical. There are a lot of people out there who would like your mortgage and closing business. Many may even be your friends, neighbors or family members. But the relevant question, in addition to rates and fees, is whether they close on time every time. This is where you really need to rely on your agent’s expertise. Even consumers who move frequently only engage in the mortgage process once every few years. A busy agent is dealing with lenders daily. We know who stands behind their word and will not let you down, and who will not. A well-intentioned but poor performing lender can cost you significant unhappy delays – make a careful choice up front.
It is also crucial that you get your lender all of the documentation that he needs immediately at the time of mortgage application. You don’t want to be part of any delay. Finally, even once you have turned in all of your paperwork, its important to check in with your lender weekly, daily the week before closing, until they tell you that they have the “clear to close.” The old saying “the squeaky wheel gets the grease” is never truer than when it comes to closing your mortgage loan – stay in close touch with your lender!
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by Kathe Barge | May 21, 2019 | Blog, Mortgage
I have a friend who just had a terrible time closing on his mortgage loan because he moved some money into his checking account right before closing. Any tips om making sure the mortgage process is a smooth one?
Mortgage rates remain low, but the process of obtaining a mortgage is more complex than most buyers appreciate. Underwriters are extremely detailed in their review of mortgage applications – one small “mistake” could derail your entire application. Take the time before you buy to understand the possible pitfalls, and then steer clear for a smooth mortgage process.
First, don’t make large undocumented deposits into your bank accounts. Mortgage guidelines require that underwriters review all deposits reflected on bank account statements. If there are deposits present on a bank statement and the underwriter cannot tell where the funds came from, then the underwriter may ask for you to provide a “paper trail” to document the source of the funds used for the deposit. When making a deposit, keep the associated paperwork (i.e. the “paper trail”) you may have received that would show where the funds came from for the deposit (i.e. check stub, copy of check, receipt for liquidation of another account, etc…). Try not to make cash deposits if at all possible as it is difficult to show where “cash” came from. Try not to move your money around between accounts. There will be plenty of time to consolidate funds if you desire after you’ve closed on your new home. Be sure to save ALL pages of your bank statements. Do not throw them away or shred them.
Second, strive to have ‘boring’ bank statements – no NSF charges, no unusual deposits, not a lot of moving around of money between accounts. Achieving this will definitely make your mortgage process go smoother.
Finally, don’t open new credit and don’t take on new debts. Unless advised to do so by your mortgage professional, you should try to avoid having your credit checked by anyone or taking on any new debt (i.e. credit cards, car loans, lines of credit, etc…). Numerous credit inquiries may impact your credit score which in turn could affect your mortgage loan and interest rate quote. In addition, underwriters may require that you write a letter explaining the inquiries on your credit report stating if you did or did not acquire any new debts as a result of the inquiry. While it’s tempting to take advantage of an extra 10% off at a department store if you open a new credit card with them, it may be best in the long run to pass on those offers and use one of your existing credit cards.
Check back next week for more tips on making your mortgage application process a smooth one!
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by Kathe Barge | Jan 23, 2019 | Blog, Buyers, Mortgage, Real Estate
I know you don’t have a crystal ball, but what do you think about mortgage rates right now?
The short answer: I think they will only go up! We just had a slight drop in the rates this past week, but that is not expected to hold. If you are considering buying, now is definitely the very best time to take out a loan – by next month rates could have bounced back up again! There is really only one problem I see with this otherwise sage advice – inventory is very limited right now! You may not find anything that you want to buy!
The good news is we do have a new mortgage product that will allow you to lock the rate for 60 days, even if you haven’t found a home! The process is quite simple. The loan application is processed just like if you had found a home – you make full application and turn in your paperwork. You then have 30 days to get a home under agreement and the remaining 30 days to close. For those of you who are committed to buying in the short term, this is a very good option to guarantee you the lower rate while still giving you time to shop. If you don’t find a home within 30 days, you do lose the rate lock but you would have still completed the paperwork for your future loan application!
Prospective sellers, lower rates are good news for you too! Buyers can afford more when rates are lower and home prices therefore tend to be a little higher. We are officially in the long-awaited spring market, rates have dropped a bit AND we have a scarcity of inventory – the perfect trifecta if you are contemplating a sale! Give me a call and we can develop a strategy to maximize your return in this favorable climate!
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by Kathe Barge | Jan 15, 2019 | Blog, Buyers, Mortgage, Real Estate
We are interested in viewing homes but have been told that before doing so, we need to provide a pre-approval letter or proof of funds letter. Is this really necessary?
Getting yourself pre-approved to buy before you start viewing homes is an excellent idea. You will have to have a pre-approval letter to submit an offer (sellers are going to want assurances from an independent third party that you can afford the home before they take their home off the active market to sell to you). And you certainly don’t want to start looking at homes that you think you can afford, or that you were told you could afford last year, before interest rates increased, only to be disappointed to find out that the home you love is outside your price range. Getting a pre-approval upfront is the most sensible approach – in this hot market, you could easily lose out on a home while you wait for a lender to pull your information together and get you the letter. It is best to get it done up front.
Necessary? That depends on the agent you are working with and the sellers of the homes you are viewing. Some agents simply will not put a buyer in their car until they have completed the pre-approval process. On reflection, this makes sense. Realtors are one of the only professions that don’t charge for their time as it is expended – they are paid for their time only when (and if) you actually close on a property. Getting pre-approved upfront shows that you are serious about buying a home and not just out for a house tour! Some sellers also require pre-approvals be provided before they will allow their homes to be shown. As you might imagine, there are some homes that many people would like to see, just for fun, such as very expensive homes or homes of celebrities/ sports stars. However, selling a home is not about providing entertainment to the general public. One would hope that buyers would understand that sellers do not want to take the time to prepare for a showing to a buyer who is just out for fun – and hence, for those homes that might be a curiosity to many, it is important for sellers to require a pre-approval in advance.
If you are serious about a move, then financing, whether through a loan or with cash you have saved, is a necessary part of the buying process. My best advice is to go ahead and line up your financial ducks before you start the home search process. If you need help finding an excellent lender, give me a call!
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by Kathe Barge | Jul 2, 2018 | Buyers, Listings, Market Trends, Mortgage, Real Estate
We’ve noticed interest rates are rising on mortgages. What effect do you think that will have on our market?
You are correct – the fed raised the interest rates AGAIN this year, and have indicated that we need to be prepared for two more rate increases in 2018. Those increases are expected in September and December and many forecasters are expecting that rates will be over 5% by 2019. The economy has been incredibly strong and unemployment is lower than it’s been since the 1960s (excepting one month in 2000). With a surging economy, the fed is forced to raise rates in an attempt to keep investors interested in mortgages, control inflation and avoid a possible future economic crash. Rates are ¾ point higher than they were last year. Nonetheless, historically 6% is considered an excellent interest rate and they are still well below that!
With all of that in mind, today is as good as its going to get for years to come for mortgage interest rates. So don’t procrastinate any longer! If you are thinking of a move, there is no better time than now to find a new home and lock in your interest rate. In September you will likely pay more for the same house over the life of your loan than you would if you bought it roday. What impact will these rising rates have on the market? Some buyers will not be able to afford a home that they could have afforded previously – as rates rise all borrowers will qualify to borrow less and that lower number may or may not be enough for you to be able to buy the home of your dreams. All buyers will pay more for their homes over the life of the loan than the could have had they purchased earlier. Ultimately, higher rates could depress home values as buyers can afford less, but I do not see that happening in this market. We just do not have enough inventory for rising rates to depress home prices…yet. But if we ever bring supply in line with demand again, we may see rising rates soften home values.
Of course, as rates rise it becomes very important to shop your loan product. Those who get two lender estimates save on average $1500 upfront and those that get 5 save $3000 upfront on average. Most buyers will take the time to shop around for a new car, so why not take the same approach toward your mortgage. With rising rates, you will appreciate the upfront savings!
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by Kathe Barge | Nov 1, 2017 | Blog, Buyers, Contracts, Mortgage, Real Estate, Sewickley
Do you have any tips on how to get through the seemingly daunting mortgage process with as few headaches as possible?
I certainly do! Below are a few pointers on what you should not do if you want your mortgage to move smoothly through the process!
- Don’t quit your job
- Don’t change your job
- Don’t get a promotion
- Don’t buy any large ticket items (like five dollars or more!)
- Don’t make David Copperfield deposits (all funds need to be traceable)
- Don’t forget to tell anyone making a funds gift to you that you will probably need a gift letter and some proof (usually a bank statement) that they had the money to give
- Don’t forget to tell the lender about child support, alimony, wage garnishments or any other payroll reduction
- Don’t co-sign for even a candy bar!
- Don’t schedule a vacation before we close (especially a cruise)
- Don’t order Direct TV, Cable, Telephone or any utility that will pull a credit report unless you want to write a letter of explanation about the credit report to the mortgage company
- Don’t change your name during the mortgage process
- Don’t go window shopping and let people pull your credit
Assuming that seems pretty straight forward to you, below are a few more choices some buyers make that make the process more difficult than it needs to be:
- Not being up front with your loan officer (hiding information)
- Finding a lender on the internet that offers a 0.001 interest rate
- Finding a lender on the internet that offers a 000000.1 interest rate and is from outside of the area
- Using a 100% Online Lender
- Not using the name on drivers license for mortgage docs (use Jr. and Sr. if required)
- Not telling your lender if you lose your job before you close
- Not shopping the Good Faith Estimate
- Delaying paperwork because you are irritated by the frequency and number of requests from the mortgage company
Take these pointers to heart and you will greatly simplify your mortgage process!
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by Kathe Barge | Aug 24, 2017 | Blog, Buyers, Listings, Market Trends, Real Estate
We have been sitting on the sidelines for a while now waiting for a home that meets our wish list to come on the market – what’s coming this fall?
You might be surprised to find out, you are one of dozens of prospective buyers sitting on the sidelines waiting for their ideal home to come on the market. USA Today recently reported (as shared on my Facebook business page, Kathe Barge Howard Hanna Sewickley) that we are nationally at a 20 year low in available housing inventory. What is going on you might ask?
USA Today reports that the Baby Boomers are to blame! Seventy-eight percent of Boomers own their own homes, and 85% of them have no intentions to move within the next year. This is tying up a significant portion of potentially available housing inventory. Why aren’t Boomers moving? Stated reasons range from being happy where they live and not wanting to uproot their lives, to having inadequate choices in empty nester inventory to escalating prices that make scale down homes more and more expensive. Boomers are reportedly less interested in destinations like Florida and Arizona these days and are choosing to stay in the homes and communities where their family and friends are.
In Sewickley, we have very few opportunities for scale down housing, and so Boomers are remaining in their homes. As a result, our inventory continues to dwindle and there are very few new introductions. There will likely be a few relocations as we move into the spring market, but with the low inventory and huge backlog of buyers, I expect pricing will be high and bidding wars probable. To be successful in this housing market, if you define success as actually getting a home and moving, you are going to have to accept a few key premises. First, you need to reevaluate your wish list and see what compromises you are willing to make. We still have many nice homes on the market – they may not be a perfect match for you, but could you make one work? You are more likely to receive a discount on a home that has been on the market. Second, if you decide to wait and a home comes on the market that is a good fit for you, be prepared to act fast and bid high. Complete the preapproval process now so that your offer is as strong as possible.
Our market is a steady one and I do expect we will see some new introductions as we move into fall, but your best recipe for success is one that includes reevaluation of the current inventory, compromise, fast action and generous, well crafted offers.
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As an Associate Broker at HOWARD HANNA REAL ESTATE SERVICES, Kathe Barge, CRS, ABR, CNE, is ready to answer any questions you may have regarding your real estate needs. Feel free to contact her at the office (412) 741-2200 x238, or on her mobile phone (412) 779-6060.
by Kathe Barge | Aug 17, 2017 | Blog, Contracts, Listings, Mortgage, Real Estate, Sewickley
Is it a good idea to pay down the principal on your mortgage if you have extra cash?
I have no doubt that my friends in the financial services industry would tell you that you should invest your money in the market rather than paying down the principal on your mortgage – debt is cheap right now and the stock market has been hitting all-time highs, so if you are comfortable with the risk, investing your excess cash in the market might yield you a higher return than pre-paying your mortgage.
However, possible appreciation is for many only one of several factors that should be considered. For some, eliminating debt provides a feeling of security. Having little to no debt can be a great comfort if you lose your job, choose a new, lower paying career or simply retire. For this reason, some choose to pay down their mortgage as quickly as possible so that they have a significantly lower monthly need for cash.
There is also a significant savings to those who pay off their mortgage early. Simply making one additional payment each year (for a total of 13 payments instead of 12) can make a notable difference in your total cash outlays. For example, if you add an extra 1/12 payment onto your monthly payment and if you have a $200,000 30 year loan at 4.5%, you will pay your debt off 4 years and 3 months earlier than expected and save yourself $27,000 in interest as well!
Finally, the more you pay down your mortgage principal, the faster you build equity in your home, which will put you in a great position when you want to buy a new home. In essence, paying down principal early works as a sort of forced savings plan – before you know it you will have amassed an impressive nest egg!
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As an Associate Broker at HOWARD HANNA REAL ESTATE SERVICES, Kathe Barge, CRS, ABR, CNE, is ready to answer any questions you may have regarding your real estate needs. Feel free to contact her at the office (412) 741-2200 x238, or on her mobile phone (412) 779-6060.
by Kathe Barge | Jun 1, 2017 | Blog, Buyers, Contracts, Listings, Market Trends, Mortgage, Real Estate
It’s true! Bidding wars are back in some neighborhoods! The extremely tight inventory, coupled with the influx of spring buyers has made the competition sometimes fierce for well-conditioned homes in great neighborhoods. The first thing you should do to set yourself up for success in a hot market is to get a pre-approval from a reputable local lender.
The pre-approval process is more than a pre-qualification. It involves submitting all documentation to your lender long before you actually make an offer. This includes tax returns, bank statements… The lender will underwrite your loan subject only to the appraisal of your new home once you find it. This makes you an incredibly strong buyer – you could choose to remove the mortgage contingency altogether and insert only an appraisal contingency, but even short of that, knowing that you have taken the time to get fully approved will impress the seller and give you some advantage over other buyers.
Pre-approval (as opposed to pre-qualification) is also important so that you don’t find out 75% of the way through the home buying process that you cant afford the home. Sometimes lenders miss some of the critical pieces of your puzzle during the pre-qualification process that an underwriter will pick up. For example, it is possible that your gross income is high, and that you reported that figure to the lender, but when the underwriter reviews your tax return they see that your AGI (adjusted gross income) is lower due to alimony. Child support payments will also lower the amount of the loan you can qualify for. You may have co-signed student loans or car loans for a child, or a mortgage for a family member. Any debt you have co-signed for, whether it is an asset you use personally or not, will lower the loan size you can qualify for. And of course, pending actions for divorce, as well as dings on your credit you were unaware of (such as doctors bills you forgot to pay) will affect your ability to borrow. Better to take the time to figure this out up front and target homes you know you can afford, rather than being tempted by those out of your price range!
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by Kathe Barge | May 4, 2017 | Blog, Buyers, Contracts, Listings, Market Trends, Real Estate
We have found a new home that we want to buy, but the seller can’t close until late this year. Should we put our current home on the market now or wait until we get closer to the closing date for our new home?
We are currently experiencing an exceptionally strong spring market! I have not seen a better time to sell in recent years! So now would be an excellent time to list your home for sale. However, if you do, you need to expect that your buyer is unlikely to wait for many months to close. Rate locks are generally only good for 60 days, so any closing beyond that exposes the buyer to the possibility of interest rate hikes. Additionally, this time of year most buyers are looking to occupy their new homes in time for school to start in the fall. So if you list your home now, you need to be prepared for the possibility of an interim move to a short-term rental. You may view this as the safest option because if your home does sell quickly requiring a move to an interim rental, you will at least know that you will not be stuck carrying two homes at one time!
Your other option is to wait until closer to the closing on your new home to put your current home on the market. This would certainly be the more convenient option – you would not have to find an interim rental property and store your personal effects. However, while homes do sell in the fall market, it does not have nearly the momentum that the spring market has. If you choose to wait and list your home in the fall, it is possible that you will need to carry two houses until the spring 2018 market begins. I also don’t have a crystal ball to predict whether the spring 2018 market will have the same momentum that the current market has.
In the end your decision will need to be based on which risk factor concerns you more. Would you be more unhappy if you had to spend interim months in a rental property because a buyer this spring needs your house now, or would you be more unhappy if you had to carry the cost of owning two homes for several months? The answer to this question should guide you as to when is the appropriate time to list your home for sale.
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by Kathe Barge | Sep 15, 2016 | Blog, Buyers, Mortgage, Real Estate, Sewickley Herald
Dear Kathe,
How important is your credit score – what should I know about it?
Your credit score is more important than you might think! Many people never consider is how much their “not so great” credit is costing them. Just a 100 point differential in a credit score, from a 720 to a 620 for example, could cost you in excess of $91,000 in additional interest fees paid on a $300,000 loan over the life of that loan! That’s a lot of money to forego because of credit issues.
It is therefore well worth your time to understand what goes into credit, what makes your score go up or down, and how to positively influence your credit score. Your payment history forms the largest part of the score. Just one 30-day late payment can reduce your score a full 50 points! Ouch! Put your bills on auto-pay whenever possible and you will be making great progress toward avoiding this costly mistake! If you miss one payment once, take the time to call the credit card company and beg them not to report it – most will forgive one late pay each year.
How much you currently owe on your credit cards is the second largest piece of the equation. Ideally, you do not use more than 15% of your outstanding credit line, but in no event should you exceed 30%. So, for example, if you have $10,000 in credit available to use, you should not be using more than $1500 – $3000 of that credit. This number is easy enough to manipulate when you are planning on buying a home or refinancing – just refrain from charging in excess of 15% – 30% of the available credit line in the 6 – 12 months immediately preceding your mortgage application and you can positively impact your score.
Credit inquiries can also reduce your score – avoid applying for new credit cards or other loans during the months prior to your planned application. Also avoid closing old lines of credit – having open but unused lines of credit will positively impact your credit utilization percentage. When a credit card company chooses to increase your line of credit that also increases your score, but beware – if they decrease your line due to overuse or late payments, this can reduce your score as much as 100 points.
Lenders generally require scores to exceed 650 in order to obtain a loan at all, and the best rates go to borrowers with scores exceeding 760. Even insurance companies look at credit scores these days and give the best rates to customers with the best credit. There is simply no getting away from the impact your credit can have on your budget. So do yourself a favor and take the time to monitor your own credit and understand how your choices impact your scores – you’ll thank yourself in the long run when you have more money left over to spend on the things you love!
by Kathe Barge | Aug 25, 2016 | Blog, Buyers, Mortgage, Pittsburgh, Real Estate
Dear Kathe,
We are planning on buying a new home in the coming months? Should we get prequalified or preapproved for a loan? What is the difference?
Its always important to make one of your first steps in buying a home a conversation with a lender. Pre-qualifications are easy – you just pick up the phone and tell the lender your income and amount you have available to put down towards the purchase, they check your credit and issue a preapproval letter. However, this does not hold much clout with the seller.
A preapproval is a much more rigorous process. Basically, you apply for the loan without having found a house. You give the lender all of the documentation they think they need and they out it through the loan underwriters. This is much more time consuming – these days lenders require quite a long list of documentation and explanation to approve a loan. However, this is something you will have to go through anyhow when you are ready to buy, so its not a bad idea to get it done upfront.
The preapproval process will also save you potential heartache later. Sometimes buyers are surprised at what gets in the way of a loan, You may have child support or student loan debt, for example, that you don’t think to mention in the very simple prequalification process that lowers what you can afford on a monthly basis. It would be unfortunate to find your dream home only to go through the loan approval process and find out that you don’t qualify to buy it. Additionally, sellers strongly prefer preapproval letters from buyers because they know lenders have taken a thorough look. A preapproval letter will make your offer much stronger, which could be important if more than one offer is received.
Keep in mind that whether you go through the prequalification or the preapproval process, this does not bind you to a specific lender. Once you have a home under agreement, you are free to shop rates and costs to choose the best lender for you.
by Kathe Barge | May 14, 2015 | Blog, Buyers, Mortgage, Real Estate, Sewickley, Sewickley Herald
Dear Kathe,
How important is it that we get preapproved before we begin our home buying process? Couldn’t we wait until we find a home and then meet with a lender?
Preapproval is an important first step in the home buying process, for many reasons.
First, before you consider any homes, its very important to know not just what you can afford, but what that will cost you each month, and whether you are comfortable with that payment. There are many people who qualify for far more than they want to afford, and there is no sense getting your heart set on something, only to realize that the monthly payment feels much too steep to you. Additionally, you may qualify for more (or less) than you had assumed – it is a far more efficient use of your time to shop in the range you know you can afford and are most comfortable being in.
Second, sometimes the preapproval process will reveal credit issues that will prevent you from getting a mortgage, yet. No credit issues that you know of? Best to double check. With reporting errors and identity theft, you would be surprised how many people have glitches on their credit that they didn’t know about. Its best to be sure upfront – when you start the pre-approval process, the lender will check your credit and this will give you some time if there is any “clean-up” work that needs to be done.
Finally, when you make an offer on a home, the seller will expect your agent to provide a pre-approval letter. In the spring market, there are many buyers out there and another buyer could end up getting an offer in and accepted before you even have your pre-approval letter back.
Prepare yourself for success in this spring market – after you hire your buyer’s agent, get your pre-approval and you will be ready to buy your new home.
by Kathe Barge | Oct 24, 2013 | Blog, Buyers, Market Trends, Mortgage, Real Estate, Sewickley Herald
As mortgage rates continue to rise, if you are thinking that a move might be in your future, now is definitely the best time to make an offer on a new home. Rates are still below 5%, but it is expected that in 2014, they could rise to 6%. On a $417,000 30-year mortgage, the payment could be as much as $327 more each month and over the life of a 30 year loan, you will pay in excess of $117,000 more in interest. By sitting and waiting rather than acting now, you are costing yourself money – a lot of money. If your affordability is capped by income or debt load, you may also be costing yourself the home you want to buy. As interest rates increase, you will be able to buy less home. At the $417,000 mortgage level, a 1.25% increase in interest rates will decrease ability to buy by $50,000. So if you qualified for a $417,000 loan this year (and no more), you may only qualify for a $365,000 loan when rates hit 6%.
Hedging your bets and thinking rates will drop a bit? There is absolutely no reason to do this. Many lenders offer no-cost refinances. If rates drop, you can refinance to a lower rate with no cost to you. You can have your cake and eat it too – if you buy now you can hedge your bets against the likely rate increase, but if they happen to drop, you can take advantage of a no-cost refinance to capture the lower rate!
The fall market is also an outstanding time for buying a home. Competition is lower than it will be in the spring and you will have an increased likelihood of achieving a better price on a home. It is also generally less expensive to hire movers in the fall and winter months.
Sellers, you may be tempted to wait for the spring “crush” to list your home. With the expected increase in interest rates, this plan may backfire as buyers may become even more hesitant as rates increase. If you know you want to sell, we definitely have movement in our market – now is the best time to list!
by Kathe Barge | Mar 15, 2012 | Blog, Buyers, Mortgage, Real Estate, Sewickley Herald
Obtaining financing to purchase a home seems to get more and more complex as the years pass by. Many of my readers are likely long term homeowners who pay their bills on time and are not concerned about getting their next loan, whether its time to move up, down or just across town. But what about the next generation of home buyers? The next generation of home buyers may very well be your kids or grandkids. Our housing market starts at the bottom and builds from there. People buy their first home, which allows someone else to make a move, and eventually all of these moves will affect you and your property value. So equipping the next round of first time home buyers with the tools it takes to actually buy a home benefits us all.
When I was a kid I overheard my parents talking about saving the 20% down and being sure to pay all the bills on time. But we recently moved through a period in our nation’s lending history when money was free flowing and loans could be had with a wink and a handshake. But those days are gone, likely forever.
After many “easy money” years, our newest group of home buyers may not have been educated with the old mantras – save – pay on time – and they may shocked to find out that they don’t have what it takes to get a loan. So what does it take? A loan applicant must have credit in their name (and not a card they are authorized to use that belongs to mom or dad) on three separate lines (cards, car loans) and they must NEVER have made a late payment. The cards DO NOT have to be actually used to establish a credit history – the potential homebuyer just has to have been granted the cards. If they do use the cards, then as a general rule, it is not a good idea to charge more than 50% of the credit granted in any given payment cycle, at least if they are nearing a time when a loan application is planned. If they miss a payment, that line of credit is disqualified and they will need to show the existence of 3 lines of credit that have never had a miss. If they don’t have three lines of credit showing on their credit report, they will only be eligible for an FHA loan, and must be able to show 12 months of payment history on other things such as a cell phone bill or utility bill in their own name (note: utilities paid on a budget plan do not satisfy this requirement).
So what should you be doing to help the next generation of home buyers? Educate your kids & grandkids about how they will have to learn to use credit cards responsibly and how they will always have to pay their bills on time. When you feel they can handle a credit card (or 3), help them choose appropriate no fee cards. Consider checking in with them each month at first to make sure that they are remembering to pay the bills (preferably in full) by the deadline each month. With a little coaching, we can all help the next generation of homebuyers to be ready to successfully purchase their new home.
