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While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let’s unpack the credit score myth so you can to become a homeowner sooner than you may think.
With today’s low interest rates, many believe now is a great time to buy – and rightfully so! Fannie Mae recently noted that 58% of Americans surveyed say it is a good time to buy. Similarly, the Q3 2019 HOME Survey by the National Association of Realtors said 63% of people believe now is a good time to buy a home. Unfortunately, fear and misinformation often hold qualified and motivated buyers back from taking the leap into homeownership.
According to the same CNBC article,
“For the first time, the average national credit score has reached 706, according to FICO®, the developer of one of the most commonly used scores by lenders.”
This is great news, as it means Americans are improving their credit scores and building toward a stronger financial future, especially after the market tumbled during the previous decade. With today’s strong economy and increasing wages, many Americans have had the opportunity to improve their credit over the past few years, driving this national average up.
Since Americans with stronger credit are now entering the housing market, we are seeing an increase in the FICO® Score Distribution of Closed Loans (see graph below):
But hang on – don’t forget that this does not mean you need a FICO® score over 700 to qualify for a mortgage. Here’s what Experian, the global leader in consumer and business credit reporting, says:
FHA Loan: “FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score: If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down (but you can put down more if you want to).”
Conventional Loan: “It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.”
USDA Loan: “While the USDA doesn’t have a set credit score requirement, most lenders offering USDA-guaranteed mortgages require a score of at least 640.”
VA Loan: “As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered.”
As you can see, plenty of loans are granted to buyers with a FICO® score that is lower than the national average. If you’d like to understand the next steps to take when determining your credit score, let’s get together so you can learn more.
In a recent article by Realtor Magazine, Mark Fleming, Chief Economist of First American Financial Corporation, notes,
“The largest group of millennials by birth year will turn 30 in 2020, which puts them entering their prime homebuying years”.
The article continues to describe how millennials have more buying-power than the generations that preceded them, making their interest in embracing homeownership stronger than ever,
“Millennials—the most educated generation—have the highest incomes across their generational cohorts, even when salaries are adjusted for inflation.”
This combination of power and desire has the potential to drive positive growth in the homeownership rate heading into the near future. According to Fleming,
‘“The gap between the potential and actual homeownership in 2018 narrowed slightly as the growth in homeownership modestly exceeded the increase in potential demand,” he says, citing First American’s Homeownership Progress Index.
“We expect the homeownership rate to further close the gap with potential in the years ahead as millennials continue to make important decisions, such as attaining an education and, later in life, getting married and having children.”’
That said, the shortage of sellable inventory in the entry and mid-range levels that’s attractive to potential millennial buyers may be a contributing factor as to why many millennials haven’t yet purchased a home. According to another recent report citing Frank Martell, President and CEO of CoreLogic,
“Lower rates are certainly making it more affordable to buy homes and millennial buyers are entering the market with increasing force. These positive demand drivers, which are occurring against a backdrop of persistent shortages in housing stock, are the major drivers for higher home prices, which will likely continue to rise for the foreseeable future.”
With millennials aging-up into mortgage-ready and home-buying territory, along with their strong buying interest and buying power, this generation is poised and ready to have positive impact on homeownership rates across the country. Many of them just need to find a home they’re excited to buy in this competitive end of the market.
If you’re thinking of selling, let’s connect and determine if now is a great time for you to list your house and move-up. More millennials are getting ready to jump into the market and join the ranks of homeownership, so demand for homes in the starter and mid-level range will continue to be strong.
It should come as no surprise that buying a home in a good school district is important to homebuyers. According to a report from Realtor.com, 86% of 18-34 year-olds and 84% of those aged 35-54 indicated that their home search areas were defined by school district boundaries.
What is surprising, however, is that 78% of recent homebuyers sacrificed features from their “must-have” lists in order to find homes within their dream school districts.
The top feature sacrificed was a garage at 19%, followed closely by a large backyard, an updated kitchen, the desired number of bedrooms, and an outdoor living area. The full results are shown in the graph below.
Buyers are attracted to schools with high test scores, accelerated academic programs, art and music programs, diversity, and before and after-school programs.
With a limited number of homes available to buy in today’s real estate market, competition is fierce for homes in good school districts. Danielle Hale, Chief Economist for Realtor.com, explained further,
“Most buyers understand that they may not be able to find a home that covers every single item on their wish list, but our survey shows that school districts are an area where many buyers aren’t willing to compromise.
For many buyers and not just buyers with children, ‘location, location, location,’ means ‘schools, schools, schools.’” (emphasis added)
For buyers across the country, the quality of their children’s (or future children’s) education ranks highest on their must-have lists. Before you start the search for your next home, let’s get together to discuss the market conditions in our area.
If you are a “baby boomer” (born between 1946 and 1964), you may be thinking about selling your current home. Your children may have finally moved out. Your large, four-bedroom house with three bathrooms no longer fits the bill. Taxes are too high. Utilities are too expensive. Cleaning and repair are too difficult. You may be ready to move into a home that better fits your current lifestyle. Many fellow boomers have already made the move you may be considering.
The National Association of Realtors recently released their 2019 Home Buyer and Seller Generational Report. The report revealed many interesting tidbits about both categories of baby boomers: younger boomers (ages 54 to 63) and older boomers (64 to72). Here are a few of the more interesting topics.
The two major ways buyers found the home they purchased:
The distance between the home they purchased and the home they recently sold was much greater for boomers than the average seller.
The percentage of older boomers who lived in their previous home for more than 20 years was almost twice the amount of the average seller.
If you are a boomer and thinking about selling, now might be the time to contact an agent to help determine your options.
It’s exciting to put a house on the market and to think about making new memories in new spaces, but we can have deep sentimental attachments to the homes we’re leaving behind, too. Growing emotions can help or hinder a sale, depending on how we manage them.
When it comes to the bottom line, homeowners need to know what it takes to avoid costly mistakes. Being mindful of these things and prepared for the process can help you avoid some of the most common mishaps when selling your house.
When inventory is low, like it is in the current market, it’s common to think buyers will pay whatever we ask for when we price our homes. Believe it or not, that’s far from the truth. Don’t forget that the buyer’s bank will send an appraisal to determine the fair value for your home. The bank will not lend more than what the house is worth, so be mindful that you might need to renegotiate the price after the appraisal. A real estate professional will help you to set the true value of your home.
Today, most homeowners have been living in their houses for an average of 10 years (as shown in the graph below):
This is several years longer than what used to be the norm, since many homeowners have been recouping from negative equity situations over the past 10 years. The side effect, however, is when you live for so long in one place, you may get even more emotionally attached to your space. If it’s the first home you bought after you got married or the house where your children grew up, it very likely means something extra special to you. Every room has memories and it’s hard to detach from the sentimental value.
For some homeowners, that makes it even harder to negotiate, separating the emotional value of the home from the fair market price. That’s why you need a real estate professional to help you with the negotiations in the process.
We’re generally quite proud of our décor and how we’ve customized our houses to make them our own personalized homes, but not all buyers will feel the same way about your design. That’s why it’s so important to make sure you stage your home with the buyer in mind. Buyers want to envision themselves in the space, so it truly feels like their own. They need to see themselves in the space with their furniture and keepsakes – not your pictures and decorations. Stage and declutter your home so they can visualize their own dreams as they walk through your house. A real estate professional can help you with tips to get your home ready to stage and sell.
Today’s seller’s market might be your best chance to make a move. If you’re considering selling your house, let’s get together to help you navigate through the process while avoiding common seller mistakes.
Looking ahead, 2020 is projected to be a strong year for homeownership. According to the Freddie Mac Forecast,
“We expect rates to remain low, falling to a yearly average of 3.8% in 2020.”
If you’re currently renting, 2020 may be a great time to think about making a jump into homeownership while mortgage rates are low.
As noted in the National Rent Report,
“the national rent index increased by 1.4 percent year-over-year.”
With average rents on the rise, this year-over-year increase may not sound like much, but it can add up – fast. The math on how much extra it will cost you over time surely doesn’t lie.
Here’s an example: On a $1,500 rental payment, an increase of 1.4% adds an additional $21 dollars per month to your payment. When multiplied by the twelve months in a year, it’s a $252 overall annual increase. The price continues to multiply when you rent year after year, as rental prices rise.
History shows how average rental prices have been increasing each year, and there doesn’t seem to be much end in sight. Here’s a look at how rents have grown since 2012 alone:
Why not lock down your monthly housing expense, and at the same time build additional net worth for you and your family? If you’re thinking about buying a home, consider the financial benefits of what homeownership can do for you, especially while the market conditions are strong and current mortgage rates are low.
With average rents continuing to rise, now may be a great time to stabilize your monthly payment by becoming a homeowner and locking into a low mortgage rate. Let’s get together to discuss how taking advantage of the current market conditions might work for you.
It might seem like kind of an odd concept, but there are a number of companies that let you rent your home décor these days. Companies like Feather and CasaOne allow you to lease your furniture and other décor for a limited period or until you decide to buy it outright. Even some older rent-to-own companies have options to change furnishings after completing a portion of your lease. The big question is, how viable is this as a way to decorate your home?
With just about any situation where you have the option to rent or buy something, there will be proponents on both sides extolling why that option is the better deal. People will discuss markets when talking about renting or buying a home, or depreciation rates when discussing automotive lease options versus outright purchase. With furniture, however, the discussions have long been fairly one-sided due to the excessive cost associated with many rent-to-own furniture options. Unless you had another other choice, buying your furniture was the only way to avoid paying nearly twice as much in some cases.
The difference here is that these new options are intended as a way to provide flexibility in your décor instead of simply providing a path to purchase. While you do have an option to purchase, you also have the option to change your furniture options as your needs and tastes change. Because services like Feather are focused more on providing an actual service than simply selling furniture with installment plans, they have a larger focus on benefits than what you would get from a standard rent-to-own purchase.
There are two questions to ask when trying to decide if renting home décor in this fashion is a viable option for you. The first concern is the cost: is it really worth it to you to have the sort of flexibility these services provide, versus owning your furniture outright? Feather, for example, has a $19/month service charge in addition to the monthly furniture payments for members on annual contracts. If you don’t plan on taking advantage of all the services that Feather offers, it might not be worth paying this extra cost in your case. On the other hand, if you’re the sort that would like to be able to reinvent your living space on a regular basis, then the discounts and annual free change that membership provides might be more than worth that added monthly fee.
The second thing to consider is how viable these companies are in the long term. If there’s no market for this sort of a service, then you might find yourself without a service to use a few years down the road. This may not be a concern, however; the market has supported multiple more traditional rent-to-own services over the years, but companies like Feather aren’t really competing with those. Instead, they’re taking an updated version of their model and targeting a slightly higher income bracket. With reasonable pricing, some great style and a solid service model in place, these early movers into this new bracket could have significant staying power.
Regardless of whether you plan to rent or buy, it’s a good idea to plan out your décor before you start decorating. This is especially important if you’re using an online service like Feather where you’ll be doing your planning and shopping online. This is where it can help to have a professional interior decorator or designer there to assist you in choosing the pieces that will work best together.
We talk a lot about why it makes financial sense to buy a home, but more often than not we’re drawn to the emotional reasons for homeownership.
No matter the size or shape of a living space, the feeling of a home means different things to different people. Whether it’s a certain scent or a favorite chair, the feel-good connections to our own homes are typically more important to us than the financial ones. Here are some of the reasons why
From the best neighborhoods to the top school districts, even those without children at the time of purchase may have this in the back of their minds as a major reason for choosing the location of the home they purchase.
Owning your own home offers not only safety and security, but also a comfortable place where you can simply relax and kick-back after a long day. Sometimes, that’s just what we need to feel re-charged and truly content.
Whether your family is expanding, an older family member is moving in, or you need to have a large backyard for your pets, you can take all this into consideration when buying your dream home, so the space truly works for you.
Looking to actually try one of those complicated wall treatments you saw on Pinterest? Tired of paying an additional pet deposit for your apartment building? Maybe you want to finally adopt that fur-baby puppy or kitten you’ve been hoping for. Who’s to say you can’t do all of these things in your own home?
Whether you’re a first-time homebuyer or a move-up buyer who wants to start a new chapter in your life, now is a great time to reflect on the intangible factors that make a house a happy home.
Questions continue to rise around where home prices will head in 2020. The latest forecast from CoreLogic shows continued appreciation at 5.4% over the next year:
Additionally, ARCH Mortgage Insurance Company in their current Housing and Mortgage Market Review revealed their latest ARCH Risk Index, which estimates the probability of home prices being lower in two years. Based on the most recent results, 32 of the 50 U.S. states (plus D.C.) had a minimal probability of lowering by 2021.
Experts forecast home price appreciation to continue at a moderate rate as we move through 2020 and beyond. With appreciation growing, let’s get together and plan for your next move.
Parson Realty Group 