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Home Buying

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Credit Score Fallacies Shouldn’t Stymie Home Buyers

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 real estate activity. Some would-be area 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 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.”

The misinformation:

  •  The misconception that every buyer must have at least 20% for a down payment; and
  • 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 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 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.

The takeaway is for prospective buyers to do some investigating to find out what their home owning prospects actually are: they might be pleasantly surprised. A good place to start: giving me a call!  

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Why Nearing Retirement Makes Buying a Home Easier

One of the advantages of reaching retirement age is that your needs can be much clearer to gauge than they were in the past. When it comes to planning for buying a home on Bainbridge Island, for instance, you no longer have to worry about many of the contingencies that created vast unknowns earlier on.

When we were at the starting line in careers and family life, we couldn’t know exactly where our career would send us, so the level of certainty we had when we bought our first house was sketchy at best. Likewise, the shape of our family, needs of our children (and even those of our parents) loomed as giant question marks. We might have had definite ideas about what we wanted the future to bring, but sooner or later, most of us learned that what happens is up for grabs. In the words of the immortal philosopher John Lennon,

Life is what happens to you
While you’re busy makin’ other plans…

But as more life experience builds, the better we get at predicting what the future holds. But that’s a skill that is only useful if we take what we now know and apply it. As retirement nears, here are four areas where most of us should be better able to make much better informed decisions when it comes to buying a home on Bainbridge Island:

1. Choose an Appropriate Size

Many couples seek large houses early in life because they expect to have children. Once the next generation has vacated the premises, though, staying in a home that’s larger than necessary means blown money—not to mention wasted time spent cleaning unused rooms. Retirees may be slow to recognize their new downsizing option: buying a home that better correlates with current needs. They may even want to consider a condo or apartment if minimal upkeep will free up income to direct toward more enjoyable activities.

2. Consider a Single-Level Home

Most people experience mobility issues as they age. Some solve the problem by installing expensive devices in their homes, even though they could deal more directly with those problems by moving to a home configured to present fewer challenges. For some people, moving to a simplified home lets them live independently for many additional years--for example, a single-level home without a front porch eliminates stairs entirely.

3. Find a Convenient Location

At some point, retirees may reluctantly decide that they don’t feel safe driving their cars. If anyone experiences warning signs of unsafe driving, it’s prudent to give up the keys before an accident forces the issue. This causes fewer problems when a retiree has chosen a convenient location. It could mean living close to stores, public transportation—or near relatives who can help with everyday tasks.

4. Stay under Budget

Retirees need to take seriously realistic budget expectations, since it’s usually true that they will have less money coming in than heretofore. An inelastic income may take some getting used to—but knowing what’s coming will make intelligent planning possible.

When it comes to locating and buying a home that fits your specifications, I hope you will give me a call to discuss the current crop of appropriate available properties!

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