Credit Scores: Not a Be-All for Potential Lincoln Homeowners
Most Americans have now arrived at the conclusion that it is a good time to buy a home. That’s the top line analysis from one of the country’s major mortgage creators, but there’s a secondary finding about credit scores that could also have a sizeable impact on Lincoln real estate activity. Some would-be Lincoln homeowners would benefit from learning the information—which is about misinformation.
The second annual “Wells Fargo Homeownership Survey” is a national survey of 2,016 respondents, and the source upon which last week’s Franklin Codel analysis is based. The excellent news for current and soon-to-be Lincoln home sellers is that a whopping 72% of respondents think now is a good time to buy a home. Most Americans also agree that “owning a home remains a vital part” of the American dream— and continues to be a key element in the strength of the nation.
Running counter to that upbeat survey result is the finding that despite the efforts of lenders (and the government) to make credit more available to potential mortgage applicants, two misconceptions are widespread enough that they are “holding many potential buyers back.”
ü The misconception that every buyer must have at least 20% for a down payment; and
ü A belief that credit scores alone determine whether an applicant will land a home loan
Under the heading The legend of the 20% down payment, Wells Fargo’s Codel points out that 36% of the general population (and larger proportions of minority groups) qualify for loans with lower down payment options— some of them as low as 3%.
But equally illuminating is what Codel has to say about the importance of credit scores. He is the head of mortgage production at Wells Fargo, so Lincoln home seekers can be expected to pay attention to what he has to say, which is that credit scores are not as all-important as most people think. Because creditworthiness is not determined based on a single factor, homebuyers should do some investigating of their options “before excluding themselves based on credit scores alone.” And when it comes to the actual scores themselves, it’s not true that a ‘good credit score’ has to be above 780. There are multiple models and investor guidelines—and under some of them, more than 660 “is generally considered good.”
If it’s true that Lincoln homebuyers agree that now is the time to make a foray into the market, it’s refreshing (and rare) to hear a top mortgage lending insider provide that kind of encouragement. His conclusion is that the cited misconceptions can be overcome with a “better understanding of how credit works”—and that a good lender will use a borrower’s “entire financial picture, not just credit score” to decide whether to issue a mortgage.
- Written by Russell Stucki
Area Renters Contemplate National Trend to Rising Rates
“WHY YOUR RENT CHECK JUST KEEPS GOING UP” was the headline in CNN Money’s real estate special report last month, which could have explained to Lincoln renters why it is that U.S. rents keep rising faster than home values. After all, that doesn’t seem to make sense!
The list of reasons was long, and taken all together, fairly convincing:
· Millennials are renting longer
· Housing inventory is tight and getting tighter
· The housing crash scared those who would otherwise have become homeowners
· Baby Boomers are downsizing
· Rental construction slowed when confidence sank after the housing crisis
It all comes down to demand and supply—less of the latter, more of the former. Although the author may have exaggerated a detail or two (“…there just aren’t enough ‘For Rent’ signs to keep up with the demand”), more than one Lincoln renter will probably agree with the gist of the piece: rents have been on the rise long enough that it makes you want to think about the alternative: buying.
Some of the more extreme cases are urban: in San Francisco and Denver, for instance, renters have seen yearly increases of 15% and 11.6%, respectively, according to Zillow. Lincoln renters can find themselves in something of a bind, though—since those higher rent bills make saving for a down payment more difficult. It’s just one reason. Per CNN, “There are a bunch of things keeping renters on the sidelines, meaning “the folks that would be normally making the switch to become homeowners are still taking up the rental units.”
The result: more units remain occupied, vacancies go down; rentable units remain scarce…so prices renters pay continue to go up.
Will this Catch-22 situation persist forever? Most likely not: the broad economic news is that this year’s steady job growth coupled with the pronounced turnaround in builder confidence is likely to loosen the supply stranglehold. Last Tuesday, there was also the kind of news that can prompt builders to really get going: government data showed purchases of new U.S. homes surged (particularly in the Northeast and West), with sales of new homes soaring 24% so far in 2015. That’s the best showing since 2007.
- Written by Russell Stucki
Leadership - and Finding the Ideal Lincoln Real Estate Agent
A few of Lincoln's professionals operate as one-person enterprises, but that’s unusual. Even a one-doctor medical practice has back-up staff. Most lawyers, even if they aren’t in a partnership arrangement, have at least one assistant or secretary to help. Small commercial businesses are called ‘mom and pop’ operations because…well, you get the picture. Almost any serious enterprise takes a team effort to get anywhere—especially in this day and age.
So it’s no surprise that when they set about buying an area home or selling their own, most Lincoln folks don’t take on the project all by themselves. Even though the average American family buys a new home every 7 to 10 years, constantly changing state and local regulations make keeping up with them a professional-level challenge. And even though the first part of the buying process—finding the most likely listed properties—can be started from your computer, as soon as the winnowing begins, the knowledge of a Lincoln real estate agent—someone who lives and breathes real estate—soon becomes crucial.
As we wade deeper into the 2016 election cycle, one of the themes that keeps coming up is “leadership”—the ability to recruit and direct expert help. When buying or selling an Lincoln home, it’s no different: you want the team you assemble to be as strong as possible. That will free you for your most important leadership role, the decision-making. The first order of business is to find an agent who will not only assist with all the real estate transactional details, but also help identify and recommend other reliable professionals you will need in successive steps of the process. Since finding that agent starts with you, here are some tips to help focus your selection:
· Everyone responds differently to differing personalities. What type of person do you click with? Do you envision a real estate agent who is a straight shooter—who will deliver realistic advice, a bubbly personality full of optimism—or perhaps a bit of both? Jot down the personality traits that you would like to see in your agent.
· Identify needs unique to your situation. If you’re house hunting on a tight budget and need a home fast, you want an agent experienced in finding affordable options. If you’re selling an expensive home in a much-sought-after neighborhood, you might want a Lincoln real estate agent who’s sold high-end properties in the neighborhood.
· Ask colleagues, neighbors, and friends for recommendations. Don’t collect referrals from just one source. Everyone in your neighborhood might use the same agent, but a colleague might have another recommendation. You want to shop around for an agent, so don’t rely on just one referral.
· Check credentials. A credentialed real estate agent is absolutely essential. Of course, nix any agent who isn’t licensed in our state.
· Interview your short list. When you meet with potential agents, ask for a list of recent sales completed near your price point. See if you are comfortable with how the agent prefers to communicate: phone, email, text, or a mix. Finally, request the contact information for a few recent clients to check references—and then check them!
- Written by Russell Stucki
Making Sure the Positives are Included in Your Credit Report
Here is a one-question True or False exam that every future Lincoln 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.
Particularly for a first-time Lincoln 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 Lincoln 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.
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 Lincoln 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.
- Written by Russell Stucki