The choice between buying and renting a home is one of the biggest financial decisions that many adults make. Check out this info-graphic for more information.
Real estate lost a lot of value during the recession but most areas have rebounded considerably. In some cases, the homes are worth more than they were before the housing bubble burst.
The dynamics are classic for this type of market: inventories are low, mortgage rates are low and demand is high. All price ranges are on the rise with some at an even higher rate because the short supply is causing competition among buyers.
Another reason many homeowners’ may have more equity is simply not staying current with what is going on in the market. In a recent FNMA study, it indicates that 23% of owners believe they have negative equity in their home when actually, it is 9%. 37% believe they have greater than 20% equity in their home when actually 69% of homeowners do.
Even if you’re not planning to sell your home, knowing the value helps you understand your financial position better. Home equity debt up to a $100,000 limit is tax deductible and can be used for any purpose. Owner’s commonly refinance to eliminate mortgage insurance, consolidate mortgages, pay off higher interest rate debt like credit cards or student loans or to buy out an ex-spouse’s equity.
Be aware that an automated value model like Zillow Zestimates uses algorithms to determine a price and while it might be in the ballpark, AVM results may only be accurate about 20% of the time. A comparable marketing analysis or broker’s price opinion will be more accurate due the subjective approach that will be used by an agent with personal experience in the area. An agent will consider factors like condition, floorplan, marketability and demand.
“If I tell you it’s going to rain, you can put the buckets on the porch.” If you grew up in the south, you made have heard this expression when a person is testifying to the veracity of his word. If you know a person and/or their reputation, you know whether you can trust their word or not.
However, with a stranger such as a buyer, the seller doesn’t know whether they’ll live up to the terms of the contract or not. Buyers submit earnest money along with a contract to demonstrate their commitment to the terms of the offer.
The more earnest money that the buyer deposits indicates to the seller a higher level of commitment to the contract. Except for stated contingencies in the sales contract, if the buyer fails to close on the sale, the earnest money may be forfeited. Significant earnest money makes the seller feels more secure that the contract will close.
There certainly are a lot of things that can dictate how much earnest money is appropriate. Local customs, price of the home and type of mortgage can all help to determine the proper amount. In some areas, it may be common for it to be 1-5 percent of the purchase price. In other areas, it might be a specific amount like $1,000 to $10,000 depending on the sales price. It really comes down to whatever the buyer and seller agree is the proper amount.
Another strategy is to put up an adequate amount initially until you get through the inspections or contingency period and then, to put up an additional amount when the contingencies have been removed.
The earnest money demonstrates the buyers’ sincerity in making the offer and proceeding according to the agreement so the seller can take their home off the market and start making plans to move and give possession of their home. Ultimately, both parties want to close as anticipated according to the contract and the earnest money helps facilitate that.
Credit scores are used by lenders to measure the credit worthiness of borrowers. While there are several different companies that offer scores, the FICO, Fair Isaacson Corporation, is the model that is used most often.
There are five key components that determine the overall score or rating. The most emphasis, 35% of the overall score, is placed on payment history which reflects whether the borrower paid on time and as agreed by the terms of the credit. Being late, missing payments or going into default would have adverse effects on this part of the score. FICO score.png
The second largest component, 30%, is credit utilization or the amount owed in relation to amount available. A person might have a $4,000 outstanding balance on available credit of $20,000. This would be a 20% ratio and would be considered acceptable. Owing $15,000 on $20,000 of available credit would be a 75% ratio and would negatively affect this part of the credit score. FICO says people with the best scores average around 7% credit utilization.
The length of time each account has been open and the account’s activity determines 15% of the total credit score. By having a longer credit history, the credit provider has a better indication of the borrower’s long-term financial behavior. Having an open account without activity doesn’t offer a provider much information.
New credit and types of credit each account for 10% of the total score. New credit can adversely affect a score because it is a new obligation without history of how it will affect the borrower’s ability to repay all of their liabilities. Types of credit include both revolving and installment debt. A good mixture of each can indicate less risk for lenders.
The combination of all five areas make up the total score which lenders use to determine credit worthiness. Another confusing issue is that all credit scores are not mortgage credit scores. This particular score determines not only whether the lender will make a mortgage but at what interest rate.
The best place to get your credit score if you’re planning on purchasing a home is from a trusted mortgage professional. This person will be able to suggest things to improve your score if necessary. Buying a home is one of the largest investments in most people’s lives; it is really not a do-it-yourself activity.
Shannon Foster-Boline Has Been Awarded the Certified Residential Specialist Designation
Knoxville, TN October 10, 14. Shannon Foster-Boline of Tennessee, has been awarded the prestigious Certified Residential Specialist (CRS) Designation by the Council of Residential Specialists, the largest not-for-profit affiliate of the National Association of REALTORS®.
REALTORS® who receive the CRS Designation have completed advanced professional training and demonstrated outstanding professional achievement in residential real estate. Only 37,000 REALTORS® nationwide have earned the credential.
Home buyers and sellers can be assured that CRS Designees subscribe to the strict REALTOR® code of ethics, have been trained to use the latest tactics and technologies, and are specialists in helping clients maximize profits and minimize costs when buying or selling a home.
Shannon Foster-Boline is a Broker with Coldwell Banker Wallace & Wallace, REALTORS®. She is a member of the Knoxville Area Association of REALTORS®.