Real Estate Information Archive

Blog

Displaying blog entries 1-10 of 33


Finally, you've done it: You've scoured the market for available homes—and then some—and found one you can't stop thinking about. It's time to make an offer!

But before you put your money on the line, take a peek around the neighborhood. We won't use a certain cliché, but there is a reason the pros emphasize location when buying real estate. You can change your house—but you can't change the neighborhood. And if your hood is on the decline, you just might have a helluva time offloading your home when you decide to sell.

A bad neighborhood isn't always obvious, though; sometimes you need to do a little digging to know if a community is worth buying in. Luckily, we've identified seven red flags that should give you pause before you sign on the dotted line.

Red flag No.1: Too many houses are on the market

There's nothing wrong with two or three listed houses on the same street. But if you see an army of "For Sale" signs, consider looking elsewhere.

"This points to illiquidity in the market and pricing pressure, which is a risk for buyers," says Alison Bernstein, the founder of Suburban Jungle, which helps families find their ideal suburb.

Of course, the hue of this particular red flag depends on the reason for those "For Sale" signs. Perhaps the neighborhood is rapidly gentrifying and longtime residents have decided to cash in. Or maybe there's a more sinister explanation, like increasing crime rates. Your agent can help you assess the situation before making any big moves.

Red flag No.2: The schools are enrolling fewer students

Schools in healthy communities should be steadily increasing their enrollment—or at least keeping the population steady, if there's no physical room to grow.

"Shrinking class sizes are a red flag," Bernstein says.

There are a number of reasons enrollment might decrease. Your local school might have a reputation for poor management, sending parents fleeing to charter or private options. Or perhaps residents are staying put as their kids grow up, leading to older neighbors and fewer close-by pals for your kids. That may or may not be a deal breaker, but it's certainly something to consider.

Red flag No.3: The area leans industrial

A nearby strip of cute boutique stores might be a nice selling point, but reconsider the purchase if the closest commercial influences lean toward the industrial.

"Be mindful of any kind of commercial influence on the block, such as close gas stations or anything that could be undesirable health-wise," says Ralph DiBugnara, the vice president at Residential Home Funding.

Any nearby industrial plants should automatically nix a neighborhood, and think long and hard before buying across from a car dealership or auto body shop, which attract a lot of car traffic.

Red flag No.4: There are lots of empty storefronts

Don't just stop at counting boutiques versus gas stations. Are the stores actually thriving, or are there lots of retail spaces for rent?

"Empty storefronts can tell you a lot," Bernstein says. "They point to less disposable income of residents than clearly there once was."

Why does that matter? Decreased disposable income indicates a neighborhood on the decline. If homeowners don't have money for dinner out, they probably don't have cash for upkeep. Shabby homes drag down property values. Meager cash flow can also lead to future foreclosures—and a foreclosed-upon home is a neighbor that no one wants.

Red flag No. 5: The Stepford style is in full force

You might love the homogenous, well-groomed suburban look (and there's nothing wrong with that!). But take a moment to examine it more closely. Are there any unique decorative doodads dotting each garden, like aluminum chickens or wind chimes? Or is the front porch furniture identical?

If all the neighborhood's homes (and landscaping) look suspiciously similar, "explore how restrictive the homeowners association is," says Susanna Haynie, a Realtor in Colorado Springs, Co. "It could be an issue."

Red flag No.6: There's no parking

Sure, the property may have a one-car garage—but where will your friends park, and where can you keep your spouse's car? If the streets have bumper-to-bumper traffic, think twice about buying in the neighborhood—especially if the home lacks a garage or carport.

"I'm always on the lookout for a lack of parking," DiBugnara say. "It's best to visit at night or on weekends to really, truly tell what will be available to you once you live there."

Unless you commute primarily by foot or bike—or you're OK spending your weekends circling the block—the neighborhood may not be a good fit for you.

Red flag No.7: Surrounding homes aren't well-maintained

A street in shambles might seem like an obvious red flag. But you also might have heard that buying the best house in the worst neighborhood is a prime opportunity for profit.

Tread lightly here: A street full of run-down homes with overgrown yards and broken fences should set off warning signals. And this has nothing to do with wealth; lower-income neighborhoods can be just as well-kept as more expensive ones. It's about pride. Neighbors with no pride in their home's appearance and upkeep decrease property values for everyone.

Plus, problems with the homes next door can indicate that the house you want might have bigger issues than meet the eye. Look at every house on the block for issues such as water pooling in the yards, or flickering porch lights.

"If there are problems such as water pipes or electrical issues, you will tend to see more than one home showing damage," DiBugnara says. Fixing these major problems "could be a major expense, hassle, or detriment to your value later on."

Ready to buy a home? Let The McLeod Group Network help - 971.208.5093 or admin@mgnrealtors.com

By: Realtor.com, Jamie Wiebe

Here’s What Mortgage ‘Rate Lock’ Looks Like, in One Chart

by Amy McLeod Group


In 2017, MarketWatch documented many of the reasons there aren’t enough homes to buy. One of the most striking forces in the housing market right now is “rate lock,” the idea that homeowners with ultra-low mortgage rates can’t bear to give up those loans and, in buying a new home, get stuck with a mortgage with a much higher rate.

Real estate data provider Black Knight shared data that illustrated the phenomenon. Among all homes listed for sale at that time, those with a mortgage that had a “5-handle,” a rate between 5.00 and 5.99%, were far more likely to be listed for sale than those with a 3-handle.


MarketWatch recently asked Black Knight for an update. The chart above shows the picture a year and a half later.

In its October Mortgage Monitor, Black Knight notes that homes purchased with the lowest interest rates in history, are also likely to have been bargains, since that was a particularly iffy moment just after the housing crisis. “At the bottom of the market in 2012 the average U.S. home sold for $199K, while interest rates hit a low 3.35%,” Black Knight analysts wrote.

“The same home today would not only cost 50% more (nearly $300K), but the interest rate on the mortgage would also be >1.5% higher. The $741 monthly mortgage payment on that house in 2012 (assuming 20% down) would be $1,257 today, a 70% increase to purchase the same home.”

That’s why Black Knight refers to “affordability lock,” rather than using the popular term “rate lock.”

By: Realtor.com,  

4 Reasons to Buy A Home This Winter!

by Amy McLeod Group


Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Insight report revealed that home prices have appreciated by 5.6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.7% over the next year.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase 

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have hovered around 4.8%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase in 2019.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You are Paying a Mortgage

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

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

Are you ready to put your housing cost to work for you?

4. It’s Time to Move on With Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Let The McLeod Group Network help you find your newhome! 971.208.5093 or admin@mgnrealtors.com.

By: KCM Crew

Forget Black Friday: This Is the Best Day of the Year to Buy a Home

by Amy McLeod Group

Home buyers looking for a sweet holiday deal should forget about Black Friday, researchers say. Their bank accounts will be better off if they wait until Dec. 26 instead.

Yes, after-Christmas sales aren't just good for scooping up discounted cashmere sweaters and kids' toys. Buyers who close on Dec. 26 are likely to spend a median $2,500 less (or save about 1.3%) than they would on any other day of the year, according to a recent report from real estate information firm ATTOM Data Solutions. Overall, December is the best time to buy a home at a bargain price, as there are fewer buyers in the market.

Those savings are substantial, as buyers typically spend an estimated $7,000 more than the estimated market value of a property across all days of the year.

To come up with its findings, ATTOM looked at the median sales price on that day compared with the estimated market value compared with the rest of the year. The firm included only days on which there were at least 10,000 single-family home and condo sales nationally. (Only four days did not meet that threshold: Jan. 1, July 4, Nov. 11, and Dec. 25.)

"Very few buyers are looking for homes to buy around the holidays, which means less competition for the few contrarians out there who are buying," Daren Blomquist, senior vice president at ATTOM, said in a statement. “Buyers and investors willing to start their home search right about when stores are setting up Christmas decorations will face less competition and likely be dealing with more motivated sellers, giving them the upper hand in price negotiations.”

But buyers need to time their offers wisely to save the most money, submitting them about a month before they plan to close. That means submitting bids right around now in order to finalize the sale around—or hopefully, the day right after—Christmas.

The other best days to purchase a home are Dec. 7, when buyers save a median $2,000; Dec. 4, at $1,823; Dec. 29, at $1,320; and Dec. 21, at $1,223.

"Great times to go out looking are all through November, particularly around Thanksgiving," Blomquist said. "While everyone else is shopping for great deals on Christmas gifts, you could be shopping for a great deal on a home. It's the home buyer version of a Black Friday sale."

The McLeod Group Network is here to help you find your new home! Contact us today at 971.208.5093 or admin@mgnrealtors.com. 

By: Realtor.com, Clare Trapasso

2 Myths Holding Back Home Buyers

by Amy McLeod Group

Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership: Down Payment, Credit, and Affordability,” which revealed that,

“Consumers often think they need to put more money down to purchase a home than is actually required. In a 2017 survey, 68% of renters cited saving for a down payment as an obstacle to homeownership. Thirty-nine percent of renters believe that more than 20% is needed for a down payment and many renters are unaware of low–down payment programs.”

Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:

“Most potential homebuyers are largely unaware that there are low-down payment and no-down payment assistance programs available at the local, state, and federal levels to help eligible borrowers secure an affordable down payment.”  

These numbers do not differ much between non-owners and homeowners. For example, “30% of homeowners and 39% of renters believe that you need more than 20 percent for a down payment.”

While many believe that they need at least 20% down to buy their dream homes, they do not realize that there are programs available which allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

As you can see in the chart above, 51.7% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier.

Let's get together and see if your dream home may already be within your reach. 971.208.5093 or admin@mgnrealtors.com.

By: KCM Crew

How Long Does Underwriting Take—and Can You Speed It Up?

by Amy McLeod Group

How long does underwriting take? Underwriting—the process in which mortgage lenders verify your assets to get a home loan—can last a little as two to three days, but typically takes over a week to finish.

Underwriting happens right before you close on a house, so timing can be crucial, particularly if you want to move in by a certain date. But make no mistake: Underwriting is unavoidable. All loans go through an underwriting process before the lender can promise you the funds for a purchase.

While you might have daily contact with your mortgage officer, the underwriting process is long, somewhat secretive, and seemingly mysterious. And very, very stressful! Here's why it takes so long, and a way to speed up the process.

What is underwriting?

Your mortgage officer typically reviews buyers' tax forms, paystubs, and other basic documents before issuing buyers a prequalification. Underwriting takes a fine-toothed comb through every form, deposit, and credit report, to ensure your credit-worthiness. An underwriter's job is to make sure you meet the lender's guidelines, confirming and assessing your income, debt, and credit.

Most of the mortgage process is relatively transparent, but underwriting takes place behind closed doors. Someone at the bank or a lender will relay any requests for documents or further explanations.

What does an underwriter look at?

The specific documents requested will vary based on the type of loan you are receiving (an FHA loan, for example, often requires more paperwork). Expect to provide your tax returns, W-2s, bank statements, and paystubs.

You can also expect to send additional documentation every time an underwriter has a question. For instance, your bank statement might show a recent $2,000 deposit. Youknow it's a birthday gift from your dear grandmother, but the underwriter doesn't. You will probably have to write a letter of explanation detailing the gift.

Underwriting can be frustrating, because the questions seem obvious. Don't worry—many underwriters find it frustrating, too.

"The banks also give almost no room for underwriters to make exceptions using their judgment," says Emily Rees, a former underwriter. "Underwriters are terrified of getting a loan audited and having a bad score, so they frequently will over-ask for documentation to cover their behinds, rather than stand confident in a decision and moving on."

How to speed up underwriting

The best way to speed up the process is to make sure your paperwork is complete, which should allow your loan to sail through in as little as two to three days—if you're lucky, even just one day.

But if more documents are required—as is true for the vast majority of loans, even for those with perfect credit—expect to wait at least a week for the underwriter to issue a "conditional approval."

Although the underwriting process can be frustrating, just know that you're near the finish line. If the underwriter only wants a few additional documents, you should be "clear to close" soon enough!

For more smart financial news and advice, head over to MarketWatch.

By: Realtor.com, Jamie Wiebe

4 Reasons Why Summer Is a Great Time to Buy a Home!

by Amy McLeod Group

Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Insights reports that home prices have appreciated by 7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.2% over the next year.

Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have increased by half a percentage point already in 2018 to around 4.5%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by nearly a full percentage point by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You Are Paying a Mortgage

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

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

Are you ready to put your housing cost to work for you?

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Let’s talk about your options! 971.208.5093 or mcleodgroupoffice@gmail.com.

By: KCM Crew

14 Factors That Can Stall the Mortgage Closing Process

by Amy McLeod Group

Once you find your dream house and your purchase offer is accepted, you need to get through one more step before you move in: mortgage closing. The time it takes to close on a home will vary from one person to the next. When everything goes right, loan closings can be completed in as little as 21 to 28 days, says Atlanta-based real estate agent Bruce Ailion. Currently, Ellie Mae reports that the average closing time for home loans is 44 days.

“Factors like the type of home loan or last-minute changes and requests will affect the amount of time it takes before a house becomes yours. But typically, a lender can close on a mortgage in about a month,” states Andrina Valdes, the division president at Cornerstone Home Lending, Inc. in San Antonio, TX.

However, not everything always goes according to plan. Issues can arise that can keep you from settling into your new place for weeks and sometimes months longer than you expected. Here are some of the most common snafus that can delay the mortgage closing process.

1. Expensive purchases for your new home

A word of advice: Don't make any pricey purchases with your credit card before closing on your house. "This could actually put buyers out of qualifying for their new home,” says Texas real estate agent Jeff Peterson.

After an offer on a house is accepted, some people may be tempted to buy a new sofa, dining set, or another expensive piece of furniture. But real estate experts warn that this could be disastrous. Right before closing, the mortgage lender will pull the buyer’s credit to make sure nothing has changed. A big purchase will show up, which could become an issue, because it means that the buyer is taking on more debt.

2. Death of the original homeowner

If there has been a death associated with the desired property, the home may need to go through probate court first to authenticate the former owner's last will and testament. “If that's the case, your closing will be delayed, and there's not much you can do about it,” says Jim Lorio, a Florida real estate investor. In some states, probate can take anywhere from a few months to a few years.

3. Homeowners association issues

If the previous homeowner has outstanding homeowner association (HOA) fees or fines, this could cause delays. In some cases, you may be able to negotiate those fees with the seller; otherwise, you will be responsible for paying them.

4. Verification issues

In some instances, the borrower’s landlord, mortgage company, employer, or source of down payment may not be willing to provide verification in a timely manner. Their failure to move quickly can slow you down.

5. Down payment issues

There are times when the lender may require the home buyer to put more money down; this may take time, especially if the buyer lacks the extra funding.

6. Lender may need additional information

In some cases, additional info may be requested late in the process. Other times, the lender may lose a document that will need to be obtained again.

7. Scheduling problems

One party—whether the closing agent, attorney, title company representative, lender, buyer, or seller—may not be available to meet on the closing day, which can push timelines back.

8. Buyer delays

If a buyer is self-employed, sometimes additional documents are required. If the buyer has multiple sources of income, this may need to be documented and verified as well. If the buyer is getting a down payment from an unconventional source or a gift, this could also slow down the process.

9. Flood insurance requirement

If your new home is in a flood zone, you may need to get flood insurance, which may require a benchmark survey. In some markets, this might take three weeks. Then, it must be reviewed by the mortgage underwriter—aka the person who approves your loan. Flood insurance, and even homeowner's insurance, can also sometimes be tough to get, depending on your past history with claims, credit, and location.

10. Appraisal disparities

Before a mortgage is ever approved, the bank must first appraise the home. If the appraisal comes in low, it may take some time to renegotiate the asking price of the home.

11. Title issues

In some cases, there may be a tax lien against the property that needs to be resolved first, in order to move forward with the closing process. Other times, the title may have the incorrect signature or attestation.

12. Property damage

If there is any type of damage to the property, the lender may require repairs prior to closing.

13. Contract disagreements

Sometimes the seller may not agree to the buyer’s contract requests (like agreeing to include the entire contents of the home in the deal). This can kill the transaction or require further negotiation between the agents and other parties involved.

14. Foreclosure

If a homeowner is in foreclosure, it can take up to 10 days to get a payoff from the mortgage company, which often includes legal fees.

Contact your local experts at The McLeod Group Network to start the search for your new home! 971.208.5093 or mcleodgroupoffice@gmail.com.​​

By: Realtor.com, Nikki Gaskins Campbell

Escalation Clauses: A Little-Known Bidding-War Strategy for Salem, OR

by Amy McLeod Group

For home buyers locked in a heated bidding war, there is one weapon that may help ensure victory: an escalation clause.

It’s an addendum to a real-estate contract, typically when the offer is made, in which a prospective buyer says, “I will pay X dollars for this house, but if another buyer submits a verifiable bid that’s higher, I will raise my offer in increments of Y dollars to a maximum price of Z.”

These clauses are particularly useful in a competitive real-estate market where homes typically get multiple bids. If a bidding war erupts on a home, the escalation clause will automatically raise the buyer’s offer on the house by the predetermined increment, up to the maximum amount the buyer authorizes. It eliminates the back and forth of offer and counteroffer and helps the buyer avoid paying too much for a house by getting caught up in the frenzy of a bidding war. But they can be risky for buyers who use them.

“A buyer can think of an escalation clause as a ‘have your cake and eat it, too’ clause,” says David Reiss, a Brooklyn Law School professor who specializes in real estate. “But in real estate, as with cake, it is hard to have it all.”

One concern is that the buyer is tipping his hand to the seller by using an escalation clause, Prof. Reiss says.

By indicating the maximum amount he will pay for the house, a buyer is revealing important information—that he’s willing to pay more. For example: Seller lists the house for $1 million. The buyer bids $950,000 with an escalation up to $975,000. The seller can counteroffer at $975,000, knowing that the buyer can both afford it at that price and is willing to pay it.

“Sellers get more money than they ever thought they would have,” says Carrie DeBuys, a real-estate agent with Realogics Sotheby’s Realty in Seattle. In her market, it isn’t uncommon for a seller to receive “10, 15 or 20 offers on a property.”

On the flip side, an escalation clause may not be in the seller’s best interest, explains Prof. Reiss.

Say a house is listed for $1 million, and there are three bidders. Buyer A offers $950,000. Buyer B offers $975,000 with an escalation clause that could go up to $1 million in $5,000 increments. Buyer C offers $980,000. In this scenario, the seller would get $985,000 from Buyer B after the initial offer escalates over Buyer C’s offer. But, had the seller not relied on the escalation clause and instead asked the bidders for their best and final offer, he might have sold the house for $1 million. “We know that the buyer was willing and able to go up that high,” Mr. Reiss says. “Thus, the seller is likely getting $15,000 less in the escalation-clause scenario.”

While escalation clauses are commonly seen in competitive markets like San Francisco and Seattle, they are less common at the top end of the market. “They’re not really happening at the ultrahigh end because the X amount—the increment—has got to be pretty significant,” says Billy Rose, president and co-founder of the Agency, a brokerage in Beverly Hills. “If you’re talking about a $15 million house, the X amount needs to be substantial enough to be material. A $2,000 increment is not going to make a difference.”

Escalation clause tips

Here are some things to consider if you’re thinking of using an escalation clause.

• Be aware of the mortgage. If an escalation clause is invoked, buyers may need additional cash on hand for a larger down payment. The escalated price can also affect the type of mortgages available to the buyer—as well as the appraisal, which may not match the escalated price.

• Feel out the seller first. “Some agents and sellers do not react favorably to escalation clauses because they think they are unfair,” says Michael Nourmand, president of Nourmand & Associates, a brokerage in Los Angeles. “You should know their position before blindly using this strategy.” Otherwise, the seller may not consider your offer.

• Get it in writing. Buyers should specify the type of documentation the seller must provide before the escalation clause kicks in. For example, the escalation clause could specify that the seller must provide a copy of the highest offer received.

Let’s get together to discuss your options! 971.208.5093 or mcleodgroupoffice@gmail.com.

By and photo credit: Realtor.com, Robyn A. Friedman 

6 Mortgage Questions a First-Time Home Buyer May Be Embarrassed to Ask

by Amy McLeod Group

Mortgage questions abound when you're a first-time home buyer. Compounding the challenge is the embarrassment over interrupting the conversation with a would-be lender or seller to ask, "'Scuse me, what is a credit score? How much money do I need as a down payment?" Everyone knows this stuff, right?

No, they don't all know—so you should ask these questions. Or, at the very least, study up a bit so you know the basics. To help get you up to speed, here's a crash course on the most common mortgage questions and answers you need to know. Take five to read on, and wonder no more.

1. What do you need to get a mortgage?

Before loaning you money, lenders want to see proof that you've proven reliable paying off past debts, so you'll need to start establishing credit.

"There are ways to verify your past payments on utility bills, cellphone, and rent," notes Michael E. Matthews, senior vice president of PrimeLending. "Get a credit card, pay it back carefully. Your car and college loans—those things help you establish credit and help you get a mortgage."

2. If you have bad credit, how do you improve it?

Matthews talks to a lot of borrowers who come to him with this mortgage question. They think they have bad credit but are doing better than they think.

His first tip: Check your credit report. It's free to download one copy each year, and you may be pleasantly surprised by what you find. And if the news is bad, there's still hope.

"If you’ve got bad credit, a lot of times there’s aged activity on there—an old collection, a medical bill, something you didn’t know about," Matthews says. And these "errors" can often be fixed, boosting your credit score fairly quickly.

If you do have a bunch of bad marks and late payments, however, start paying on time and your score will gradually improve. Here are some ways to raise your credit score.

3. What’s the difference between a mortgage pre-approval and a pre-qualification?

"Pre-qualification is not going to hold the same weight as a pre-approval," says Matthews. "You can go online and get somebody to print you out a pre-qual letter. And you’ll find that if you’re negotiating with an agent and they’re looking at a pre-qual letter, it’s probably not worth much to them."

A pre-approval letter—involving lenders fully checking your finances in a verifiable way—takes more time and effort, which is exactly why it carries much more weight. If you're serious about buying a home, get pre-approved to show you mean business. Here's more on the difference between mortgage pre-approval vs. pre-qualification.

4. How much down payment do you need for a mortgage?

The gold standard down payment for a mortgage is 20%—so if the home's price is $200,000, you'd ideally have to pony up $40,000 of your own money to get the loan.

If you don't have that much, all is not lost. You can put down less, but that means you'll have to pay PMI, or private mortgage insurance. It's an extra fee of about $50 to $100 a month that lenders will require to mitigate the risk that you might default on your loan due to your lack of funds.

"There’s risk there that literally has to be accounted for, and that ends up being insurance that adds to your mortgage payment," says economist Jonathan Smoke. "When you put less down, the trade-off is you actually have to spend more on a monthly basis."

That said, there are some exceptions that allow a buyer to avoid PMI even with a small down payment. Buyers who are in the military, veterans, and family members of veterans may be able to avoid PMI with a Veterans Affairs loan. And once your equity in your home rises above 20%, you can stop paying PMI.

5. What kind of down payment assistance is available?

If you're looking for help with a down payment, Smoke says, the "bank of Mom and Dad" may be a smart start—if your parents have the means to pitch in. Gifted money can help many people qualify for a loan, he says, although you absolutely must tell your lender that the money was a gift—fibbing on this front will raise red flags.

If private assistance isn't an option, or isn't enough, never fear—there are over 2,000 down payment assistance programs across the country that can help, as long as you meet eligibility requirements in terms of income and credit.

Check with your real estate agent or lender, as they may be able to tell you about programs in your area that will help you become a homeowner.

6. What types of home loans are available?

Loan types vary widely, but Barbara A. Carrollo-Loeffler, director of consumer and residential lending at Provident Bank in Jersey City, NJ, says loans typically fall into two camps. The first includes loans with an adjustable rate, meaning the interest rate could change after a period of time. The second includes loans that are "fixed" or "term," meaning the rate will stay the same for the length of the borrowing period. Generally term or fixed-rate loans are more common and considered the safer option, but it all depends on your circumstances, including how long you plan to stay in the home.

Here's more info on the pros and cons of various types of home loans, and which one is right for you.

Contact your local experts at The McLeod Group Network for all your Real Estate needs! 971.208.5093 or mcleodgroupoffice@gmail.com.

By and photo credit: Realtor.com, Jeanne Sager

Displaying blog entries 1-10 of 33

Share This Page

Contact Information

Photo of The McLeod Group Network Real Estate
The McLeod Group Network
Keller Williams Capital City
1900 Hines St SE #220
Salem OR 97302
971-208-5093
Fax: 971-599-5229

**Disclaimer: Amy McLeod, and her team, do not initiate, process, or service mortgages.  And provide this information only as a service.  You should confirm information here with your Licensed Mortgage Lender.