The Credit Scores You Need to Buy a Home

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Mortgage lenders check your credit history before approving a home-buying loan. Your credit scores are crucial to getting the amount you want to borrow at a good interest rate.

Your income vs. your debt, your payment history, the length of time you’ve had credit, new credit you’ve opened, and the types of credit you owe (such as student loans or consumer debt) are all calculated in a valuation system known as credit or FICO scores.

FICO scores range from 300 to 850, but because mortgage loans are so large and have such a long payback period, most lenders require scores between 520 to 700 and above, depending on the type of loan.

“Conforming” loans are guaranteed by the federal government, including FHA or VAloans. They require a minimum score of 500 to 520 and any scores lower than 580 will increase the minimum down- payment required to 10%. If you’re married or have a co-borrower, their scores must meet the same requirements.  All FHA loans require private mortgage insurance, which reduces the amount you can borrow.

“Conventional” loans are federally sponsored by Fannie Mae or Freddie Mac to be packaged into securities bundles and sold on the secondary market. Lenders can manage risk by requiring scores of 700 and above, using loan-level price adjustments, based on loan-to-value ratios and credit scores.

For any loan, the larger your down- payment, the lower your credit score can be. Credit scores also impact interest rates. The better the score, the better the rate.

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Life With An HOA

If you’re buying a home in a community with a homeowners association (HOA), there are some things you need to know. The community provides you with shared amenities and services like front yard maintenance and security patrols. The HOA board collects a monthly or annual fee to maintain those amenities, protect the integrity and safety of the community and to enhance property values for the homeowners.

The main benefit of life with an HOA is that you can enjoy the amenities you want without having to pay for them by yourself. But, shared benefits means that your dues are used for two things –property maintenance and improvements and for building reserves. This can include future expenses like swimming pool resurfacing or unexpected expenses like fallen tree removal. It also means that the HOA may have some rules you may not like, such as no yard signs or flags on holidays.

That’s why you need to see the governing documents of the HOA, including the CC&Rs, – covenants, conditions, and restrictions. These are the rules of esthetics, conduct, maintenance, and security the homeowners voted to have, such as how many pets you can own or whether you can park your car on the street.

Keep in mind that HOA boards are composed of volunteer homeowners like yourself and that they’re not property managers. HOAs typically hire third-party property managers so board members can enjoy the community, too.

You can then make the decision whether this particular community is right for you.

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It’s Okay to Buy and Sell Around the Holidays

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Once upon a time, real estate was thought to slow down as the new year approached, giving way to hot cocoa and flurries of snow. These days, we know better, and when winter comes around, it’s also the time to buy or sell your house. So, grab your mug, sit down by a fire and find out why now is the season of homes for the holidays:

1. Twinkling with holiday lights, your house will shine bright to eager buyers looking for their perfect home.

2. Temperature isn’t the only thing dropping this winter; mortgage rates are near historic lows.

3. Homes are new beginnings for buyers and sellers. When the clock strikes midnight on New Year’s Eve, sellers will want to start fresh and buyers will want to be all settled into their new home.

4. Tax benefits are the ultimate holiday gifts for both buyers and sellers who close before the end of the year. (See your tax advisor for more details and the best advice to take advantage of a transaction that takes place before December 31.)

5.Serious buyers are out. Your home won’t be subject to casual window shoppers, (they’re too busy at the mall or on their computer searching for holiday gifts).

6. Buyers have extra time off from work, which means more hours in their day to search for a home.

7. January is typically the month when employees are transferred to new positions. To capture these buyers, your home must be on the market now because they often can’t wait until spring.

Contact us to learn more! Or, print this information to share with a friend.

For more home tips, follow us on Facebook. Looking for a new home in the Kansas City area? Visit us at BHHSKCRealty.com!

Your Rights As a Borrower

When you shop for a mortgage loan, you have certain rights that are guaranteed by the federal government’s Consumer Financial Protection Bureau. Knowing your rights will help you get the best loan possible.

You have the right to:

  1. Receive equal treatment by the lender, so that a credit decision isn’t based on your race, color, religion, national origin, sex, marital status, age, or whether any of your income is from public assistance.
  2. Shop for the best loan type for you, whether adjustable or fixed rate, and compare the fees of different lenders.
  3. Be informed about the total cost of your loan including the annual percentage rate (APR), points and other fees. Your interest rate is based on your credit history and credit scores, the borrowed amount and how much you’re putting as a down payment.
  4. Receive a Loan Estimate and Closing Disclosure Form, formerly known as a Good Faith Estimate, before you agree to the loan and pay any fees. Compare the exact loan product you want as offered by two or more lenders.
  5. Know which fees are not refundable if you decide to cancel the loan agreement, such as the fee to research your credit.
  6. Ask questions about loan terms and fees that you don’t understand.
  7. Know the reason if your loan was turned down.

Ask your lender to show you the advantages and disadvantages of each loan product so you can choose the best one to suit your needs. As always, consult your financial advisor before making any decision.

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How to Buy a Model Home

3676132.large.jpgWhat should you expect when you buy a model or “spec home” from a builder?

model home features upgrades to show the builder’s floorplans to advantage. If you can wait until the builder sells all their inventory, you may get the model at the initial offer price and with more upgrades than other homes in the neighborhood.

“spec” home is move-in ready. The clock is ticking on the builder’s bank loans, materials, and labor, so if you’re pre-approved by a lender and have no contingencies to delay closing, you can move in quickly.

Many builders have their own contracts, so you should be represented by your Berkshire Hathaway HomeServices network professional. Builders won’t negotiate price because of other homes in the subdivision, but your agent may be able to negotiate free or at-cost upgrades like adding a fence or backyard sod. The agent can help you negotiate better terms, see you through inspections, and make sure the builder performs as expected.

Shop for new homes with your real estate agent. If you can’t, inform the builder or their in-house salesperson that you’re represented and offer your Berkshire Hathaway HomeServices agent’s contact information. Builders won’t pay the agent’s commission if you bring them in after you’ve already toured the model or spec home.

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All About Contingencies

As you browse listings on BHHSKCRealty.com, you may find homes you like that appear to be unavailable, due to some kind of contingency. If you find the perfect home, but it’s labeled Contingent, should you pursue it or forget it?

The reality is that contracts fall through sometimes. If you have a back-up contract, you can buy the home should it come “Back on Market” or “BOM.”

Contingency
Nearly all offers-to-buy have contingencies. Typical contingencies include provisions that the home must meet the appraised value by the mortgage lender’s third-party appraiser, or it must pass a professional third-party home inspection to the buyer’s satisfaction. The buyer may make the contract contingent upon the lender funding the purchase.

Option period
Option periods give the buyer time to get financing and complete home inspections and the appraisal. Unless the buyer acts on a contingency, the home is considered out of option but it can still fall out of escrow.

To learn more, contact your Berkshire Hathaway HomeServices network professional.

For more home tips, follow us on Facebook. Looking for a new home in the Kansas City area? Visit us at BHHSKCRealty.com!

Homeowners, Buyers: It’s Either a Teardown or A Remodel

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Older homes that served our grandparents and parents well may appear poorly planned for today’s families. They tend to be smaller with narrow lots, closed-off kitchens, and fewer bathrooms and bedrooms. On the other hand, older homes tend to offer character and quality craftsmanship that is unmatched today. So, should you tear down an older home or remodel it?

First, choose the neighborhood. You’re buying the location, so it should meet as many of your household’s needs as possible – schools, transportation, entertainment and enrichment, medical care and shopping. It should have plenty of homes similar to the one you have in mind, including remodels and scrapped homes replaced by new construction.

Homes offered at “lot value” means that the structure offers no further value. This is a great candidate for a total remodel or teardown. If the lot is large enough, it can hold added square footage or a complete new home. But if the home has plaster moldings, stained-glass windows, all-wood stairs, and other artisan features, know that those things can’t be easily replaced today. You may want to preserve those unique elements and consider remodeling to complement the home’s original design.

Take your general contractor with you to see what needs to be brought up to date and if it’s more practical to remodel or rebuild. Like homes in like neighborhoods help determine and improve value, so don’t over-build or over-improve without similar comparable homes nearby to support your home’s value.

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