by Kevin Graham on January 11, 2017 in Home Buying/Selling
Credit can be a vexing topic for even the most financially savvy consumers. Most people understand that a good credit history can improve your chances of qualifying for a loan because it shows the lender you’re likely to repay it.
However, understanding the meaning of your score, how it’s calculated, and how it can influence your mortgage eligibility and the interest rates you pay is not as easy as it sounds. Below, we break down all of these topics.
Explaining Your Credit Score
The FICO credit score (created by the Fair Isaac Corporation) is one of the most common scores used by lenders to determine your mortgage eligibility, and it’s a component of pricing (i.e., the interest rates and fees you’ll pay to get your mortgage).
While exact scoring models may vary by lender, some variation of the standard FICO score is often used as a base. FICO takes different variables on your credit report, such as those listed below, from the three major credit bureaus to compile your score, which ranges from 300 to 850:
Payment History
Roughly 35% of your credit score is based on your history of timely payments on money you owe. If you’ve made your payments on time and in full in the past, there’s a good chance you’ll do the same in the future, so your credit score may be higher. If you’ve had any tax liens, late payments, lawsuits or bankruptcies, they can result in a lower credit score.
Amount Owed
Roughly 30% of your score is based on the amount of money you owe. Higher balances tend to lower your credit score, while lower balances can positively impact it.
Length of Credit History
About 15% of your score is calculated on the length of your credit history. Typically, the longer you’ve had credit accounts open, the higher your score can be.
Lacking a credit history may not hurt you when it comes to FHA and VA loans, but a good credit history is essential when you’re applying for a conventional loan.
Types of Credit
Types of credit determine about 10% of your credit score. This refers to the variety of types on your report, including installment debt such as credit cards and store cards as well as revolving debt such as student loans, auto loans or mortgages. Having a mix of installment and revolving debt can help prove you can handle different types of payments.
New Credit
About 10% of your score is determined by new lines of credit. Opening up multiple lines of new credit too quickly can negatively impact your credit score, as it may look like you’re desperate for credit. Asking for multiple lines of credit and receiving multiple credit inquiries also has the potential to hurt your score, even if you don’t end up opening new accounts.
Note that there are two types of credit inquiries – one for lending purposes and one for educational purposes. Inquiries for lending purposes may ding your credit score by a few points. However, getting your credit pulled by a company like QLCredit, which shows you your report and score for educational purposes, won’t impact your score.
If you’re shopping around for the best credit or loan terms, don’t worry. Multiple credit inquiries over a short period of time for the same type of loan will be grouped together as one inquiry, so your score won’t be as heavily influenced.
Minimum Credit Score Requirements
You may be wondering, “What credit score do I need to buy a house?” Unfortunately, you won’t be able to find an exact answer. There are several factors that go into qualifying for a mortgage besides your credit score, such as the type of loan you’re applying for as well as your income and debt levels. Because of this, there isn’t an exact number you need to qualify. Some guidelines are listed below.
Conventional Mortgages
Conventional mortgages are home loans that follow the standards set by Fannie Mae and Freddie Mac. They’re uninsured by the government and known for lower down payments and good interest rates. These are typically best for those with good or excellent credit, as these loans require a higher credit score than an FHA loan.
These loans tend to offer the most competitive interest rates and offer flexible repayment periods, such as 15- and 30-year mortgages. While you may pay more money up front, you can save more money over the course of a conventional loan than you would with an FHA loan.
Minimum Credit Score for Conventional Loans
At Quicken Loans, your credit score for a conventional loan must be 620 or higher. Various lenders have different requirements and may require a different score.
FHA Loans
Backed by the Federal Housing Administration, FHA loans are insured by the government, making them easier to qualify for than conventional loans. They offer down payments as low as 3.5% and low-equity refinances, which allow you to refinance up to 97.75% of your home’s value.
FHA loans can benefit borrowers with lower credit scores or those who spend a significant portion of their income on housing. New homeowners or current homeowners who are underwater on their mortgage and could lower their monthly payment by refinancing may also benefit from an FHA loan.
Minimum Credit Score for FHA Loans
The minimum FICO score for an FHA loan through Quicken Loans is 580, with a 3.5% minimum down payment. Other lenders may have different requirements.
For a standard FHA loan, a minimum of one credit score is required for you to qualify. If your lender obtains all three of your credit scores, they’ll take the middle score into consideration. If you apply for a mortgage with your spouse, lenders will use the lower of the two credit scores.
Better Credit Scores Lead to Greater Odds of Getting Approved
It’s important for you to know your credit score and understand what impacts it before you begin the mortgage process. Once you understand this information, you can begin to positively impact your credit score or maintain it so you can give yourself the best chance of qualifying for a mortgage.
It is possible to qualify for a mortgage with a relatively lower credit score but a high income and low levels of debt. It’s also possible to be turned down for a mortgage if your score is relatively higher, but you have high levels of debt and a lower income. Note that credit score requirements should be used as a guideline, as debt levels, income and down payments will also be taken into consideration when determining your mortgage eligibility.
Are you ready to start the mortgage process? Contact Adam at 630-697-4500 to get started!
by Lydia Koehn on January 12, 2017 in Home Improvement
The right gear can go a long way toward protecting your household from the hazards of snow and ice. Don’t be fooled by the simplicity of some of these tools. They could be just what you need!
Roof Rake
According to the Occupational Safety and Health Administration (OSHA), at this time of year, most worker injuries and deaths are the result of falling during rooftop snow removal. OSHA recommends removing snow without going onto the roof. Why even worry about rooftop snow? While snowy shingles look lovely, heavy snow and ice can cause real damage to your roof. This is where the roof rake comes in – a snow removal solution that keeps your feet safely on the ground. The top roof rakes are metal marvels, lightweight yet sturdy, and some can even extend up to 25 feet. If you decide to rake your roof, you can keep your rooftop glistening by leaving up to an inch of snow in order to protect the shingles from scraping damage.
If your roof is already frozen with ice dams, try the pantyhose method of allowing water to flow through your gutters and off your roof. A pantyhose leg filled with calcium chloride ice melter and laid perpendicular to the ice dams on your roof will effectively create a path to drain excess water.
The Shovel
Don’t let the multitude of snow shovel models overwhelm you. Before you run out and grab the first red-handled shovel you see, decide on your preferred method of snow removal. The top shovel models differ, depending on whether you’re pitching or pushing the snow. Handle length is another option to consider. Short shovels with extendable handles are perfect for storing in your trunk in case your car gets stuck. Another option is to add on an extra handle to transfer the shovel’s load from your lower back to your upper body, saving you from unnecessary strain.
Snow Spear
No matter how special it may be, sometimes a shovel just won’t cut it – the ice, that is. Stick one to Jack Frost with the True American ice spear. The 7-inch-by-9-inch blade breaks up ice in your driveway, making it easier for you to clear away the snow. Prevent slips and falls while shoveling by first taking a crack at the ice beneath with this powerful scraper.
Boot Tray
Although snowflakes lay nicely on the frozen ground outdoors, once inside, they can wreak havoc on your home’s carpet and hardwood flooring. Stop snow in its tracks with a boot tray beside your front door. Whatever the weather – rain, sleet or snow – these boot trays will help keep your home clean and dry this winter.
Snow Blower
Spare your back and spoil yourself this winter by investing in a quality snow blower. There are two paths you could plow when buying this machine: electric or gas-powered. Of course, there are benefits and drawbacks to both types, and your choice will reflect your priorities. Electric snow blowers are typically lighter and quieter than gas-powered ones, but they do tend to overheat quickly. While there may be nothing quite like the drone of a gas snow blower to break the silence of freshly fallen flurries, gas snow blowers are generally more reliable and better able to handle large amounts of snow than electric versions. If you’re unable to purchase a cordless electric blower, then consider purchasing an outdoor extension cord that won’t freeze, maintaining flexibility in subzero temperatures.
‘Beet’ Snow and Ice
Although you may be used to throwing salt on your steps, large amounts of rock salt can actually be ineffective in extremely cold conditions as well as detrimental to the environment. Because of these and other drawbacks to using rock salt, we recommend trying out an alternative method of combatting ice in front of your home. The Missouri Department of Transportation (MoDOT) uses a mixture of beet juice and salt brine to fight icy roads. When used with beet juice, the salt’s damage to the pavement is lessened, says MoDOT.
Skip the salt altogether and melt the snow instead with electric heating mats and cable systems. From your sidewalk to your stairs (and even your roof!), electric mats and cables keep your pathways clear while you stay toasty warm indoors.
Windshield De-Icer
Don’t drive blind. Clear the view behind the wheel with a windshield de-icer. Effective windshield de-icers melt the ice and snow on your car, making scraping an faster and easier process. Tired of jiggling your icy door handle? Some de-icers even thaw frozen keyholes, doors and windows.
Ice Scraper
Stop struggling and invest in one of these top performing scraping blades to keep the road visible on your commute. The best ice scrapers have sharp sturdy blades, prominent ice-cutting teeth and a standard extension length of 5 feet, suggests TheWireCutter.com. Many ice scrapers also have the dual role of scraper and snow broom, with bristles at the other end of the blade. Additionally, collapsible shafts make for easy storage.
If your community transforms into a frosted wonderland in the wintertime, stock up on these snow necessities to ensure that your home is ready for a winter emergency.
by Lydia Koehn on January 4, 2017 from Home Buying/Selling
An empty nest and other lifestyle changes are propelling many people over a certain age to consider condominiums as an alternative to owning a single-family home. Furnishing and maintenance are hassles that are also driving many younger people to opt for condos. We’ve reviewed the potential benefits and drawbacks of condo living to help you decide if buying a condo is right for you, regardless of your age or where you are in life.
The Pros
Maintenance Managed
Owning a house comes with a host of responsibilities that can make condos an easier transition for people first dipping their toes into the housing market. “If you are not handy and don’t like managing people to get things done, a home can be a challenge,” says Sep Niakan, Miami real estate broker and founder of CondoBlackBook.com. Mowing the lawn, cleaning out the gutters and shoveling snow are chores that many people would much rather pay someone else to do. An aversion to home maintenance has driven many people to invest in condos in place of single-family homes. “The reason why millennials like condos versus buying a single-family residence or buying in a neighborhood is the maintenance,” says Charles Kniffen, director of mortgage operations at Quicken Loans. “The maintenance is just a ton less,” he says.
People looking to make the most of retirement are also often drawn to the maintenance-free living that a condo offers. “They are looking to do more outside their homes, to enjoy downtown and waterfront activities. They don’t want to be gardening and working on the lawns on the weekend,” says Alexei Barrionuevo of Curbed.com.
Pack Up and Go
For young people on the move, condos are an excellent home option. “Millennials may lean toward a condo because they might travel for work or leisure a lot, and being able to lock up your unit door and know everything else is being taken care of and secure is a comfort to them,” suggests Niakan. Having the exterior of your home managed by the condo staff cuts residents’ ties with a regular maintenance schedule, allowing them to come and go more freely without worrying about the security and upkeep of their home.
For those approaching retirement, condos allow for increased flexibility in scheduling family vacations and other leisure time. “For those snow-birds that live in the east in the summer and the south in the winter, condo living is perfect,” said Denise Supplee, co-founder and director of operations at SparkRental.com.
Small Scale Luxury
According to Gail MarksJarvis of The Chicago Tribune, people who have retired or are nearing retirement are often attracted to the luxury condo market. As they tour new condos purchased by their children, they are sold themselves on the open layouts, elevated views and vibrancy of many condo communities. “One floor living can be appealing, organized events, and again, perks like a fitness center or swimming can be advantageous to the older home buyer,” Supplee says.
Access to Transit
Another factor motivating people, particularly young people, to move into condos is easy access to public transit. Whether they’re concerned with saving money or with decreasing their carbon footprint, many people closely consider transit access when deciding on the location of condos in both urban and suburban areas, suggests Mark Savel, a sales representative with Sage Real Estate in Toronto.
Lower Price Tag and Insurance
“Because of the lower price tag, it may be easier to qualify for a condominium,” Supplee says. This is a great benefit for anyone who might have a tighter budget to work with. Additionally, insurance rates are lower for condos, as residents are only responsible for insuring the inside of their homes. The outside of condos, including roofing, driveways and common buildings, are all insured through the condominium, and maintenance and repairs are covered through the homeowners association fees.
Move-In Ready
Fully furnished condominiums appeal to many people who may be making the transition to living in a smaller space. For those with busy schedules, move-in ready condos eliminate the often time-consuming search for furniture. And for those looking to avoid the hassle of moving bulky couches and tables, furnished condos could also be appealing.
Close-Knit Community
“In many condo complexes, there’s a certain community that builds up. It might be people under 30 or younger families with kids,” Kniffen says. “There are also senior living communities. You can kind of find your fit,” he adds. You can typically guess at the makeup of the community based on the layout of the housing. For example, four-bedroom houses generally attract families. Thus, those living in condo communities are frequently connected by similarities in age and lifestyle.
Wheelchair Accessible
Condominium projects are also built to appropriate code as specified in the Americans with Disabilities Act to accommodate those with disabilities. “Sometimes you buy a house and maybe you have a friend that’s in a wheelchair, that person may not have access to your house,” Kniffen says. “You know when you buy a condo, they’re going to have access to it because it is built to code and those codes are kept up.”
The Cons
HOA Regulations
Unlike people who are buying for the first time, people making the transition from owning a single-family home have to adjust to abiding by the homeowners association (HOA) regulations. The loss in autonomy that comes from condo living could be a potential roadblock for those accustomed to the freedom of managing their own house on their own terms.
“You may not like some of the stuff the condo association tells you to do. They may decide that they want all fuchsia doors and that’s what’s going to happen because it’s a condo,” says Kniffen. “They can dictate that kind of stuff.” In addition, the interior of the condo could be subject to certain standards because condo owners desire similar layouts. The potential design limitations of condos could put a damper on your ability to express your individual style.
HOA Fees
Although you’ll be paying less insurance with a condo, there are the HOA fees to consider. HOA fees are monthly dues that usually cover maintenance, lawn care, and other services and repairs. Covered services vary, so make sure you know what’s included in your condo’s HOA costs. Fees can range from a couple hundred dollars up to a thousand dollars a month and can be raised at regular intervals.
Make sure the condo’s HOA budget is in order. If it isn’t, the association dues might not cover emergency maintenance, and you could be stuck with a higher bill down the line. Quicken Loans requires that 10% of the HOA budget go toward emergency savings when you’re applying for a mortgage on a condo.
Hard Sell
Condos can be more difficult to sell as a result of certain HOA regulations. “If your association’s not doing the right thing, then you could be very limited on who you can sell your property to or who will buy your property. It can affect the type of loans that you qualify for along with your potential buyer,” Kniffen says. Also, high HOA fees could be a potential deterrent to future buyers, making your condo more difficult to sell.
