10 Mortgage Commandments

Share this:

Whether you’re ready to buy a new home or you’re looking at refinancing your current home, it’s important to stay compliant with your loan guidelines to get the best rate for your home. Here are 10 mortgage commandments to follow as you prepare for your next chapter.

10 Mortgage Commandments

Commandment 1: Thou shalt not change jobs

This is one of the most important mortgage commandments. As you go through the loan application process, your lender and underwriter are looking closely at how big of a risk you are as a borrower. Sporadically changing jobs right before you apply for a home loan can pose red flags on your account.

Commandment 2: Thou shalt not buy a car, truck or boat unless you plan to live in it

Making any sort of large purchase before buying a home or refinancing your loan also is seen as a red flag. Your lender wants to make sure you’re ready to take on a mortgage loan, and if you buy large items right before you close, it could affect the rate and limits of your loan.

Commandment 3: Thou shalt not max out your credit cards

Credit pays a big role in determining if you’re able to qualify for a loan and if so, at what mortgage rate. It also plays a factor in what type of loan is best for you, so you can see why maxing out a credit card right before you close is a bad idea.

Commandment 4: Thou shalt not close any accounts

Again, credit is important in the mortgage process, and closing accounts can drop your credit score fast.

Commandment 5: Thou shalt not spend your down payment money

Saving for a down payment can take years of hard work. So stash away your savings and don’t use it for anything but an emergency. If you aren’t able to pay your upfront downpayment, you will likely disqualify for a home loan.

Commandment 6: Thou shalt not buy furniture (or anything else) before your loan closes

A lot of times people will buy furniture and appliances on credit cards, which generally is fine, just not right when you’re about to buy a home. Avoid all big purchases and opening lines of credit until after you have the keys.

Commandment 7: Thou shalt not become self-employed

Along the same lines of switching jobs, your lender and underwriter want to see you have a steady source of income. By becoming self-employed, it poses questions to your lender and underwriter about your ability to pay a monthly mortgage.

Commandment 8: Thou shalt not make any large undocumented deposits into your bank account

Any large deposits in your bank account will look suspicious to your lender. If you receive a cash gift to help for your down payment, be ready to show documentation that shows the bank account it came from and a letter signed by your gifter.

Commandment 9: Thou shalt not open/close/change bank accounts

Since you submitted your bank statement to your lender at the beginning of the process, changing bank accounts will cause you to submit many more forms of documentation, as well as complicate the entire remaining home buying process.

Commandment 10: Thou Shalt Not Co-Sign on a Loan for Friends or Family

Any loan you sign you name on means that your credit is attached. By signing for a friend, you have now opened a new credit line. You can see how this could significantly delay or even terminate your home loan process.

You may also like: Breaking Down Your Credit Score

Breaking Down Your Credit Score

Share this:

Your FICO credit score ranges from 300-850, where a higher number indicated lower risk. As you apply for a home loan, your credit score is a large factor in determining the amount of your home loan. Here are 5 factors that make up your credit score.

Breaking Down Your Credit Score

Payment History

Payment history makes up 35% of your overall FICO credit score. This section includes your account payment information, including any delinquencies and public records. If you make a late payment, it will significantly affect your credit score. As you might expect, the repayment of past debt is the number one thing you can do to lift your credit score the fastest. Making on-tome payments is one of the best ways to maintain a high score. Using auto-pay for your monthly expenses can help you stay on track.

Amount Owed

Amounts owed makes up 30% of your overall FICO credit score. This section includes how much you owe on your accounts. The amount of available credit you’re using on revolving accounts is heavily weighed. It is a good idea to keep low credit card balances and not use too much of your credit.

Length of Credit history

Length of credit history makes up 15% of your overall FICO credit score. The longer you have your credit lines open the better. This section also includes the timeframe since an account’s most recent transaction. Newer credit users have a hard time achieving high credit scores since those with a longer credit history have more data. When applying for a home loan, your lender wants to see that you have an extensive history of paying bills on time.

Credit Mix

Credit mix is also known as types of credit used. This section makes up 10% of your overall FICO credit score. FICO credit scores consider the combination of credit cards retail accounts, installment loans, finance company account and mortgage loans. As you can see, credit mix is not a huge factor in determining your overall score unless there’s very little other information from which to base your score. However, there is something to be said that if you have the decision to open your fifth retail card or an auto loan, utilizing an auto loan could help broaden your credit mix.

New Credit

New credit makes up 10% of your overall FICO credit score. When jumping into the home search, it’s ok to get your credit pulled but getting to many hard pulls from multiple companies can ding your new credit category of your credit score. So how you shop for credit and within what timeframe can affect your score. Once you get approved, it’s good to act with intention to find the right home in a timely manner.

You may also like: A Breakdown of Conventional vs. FHA Loans in King County

Mortgage Terms Explained

Share this:

Whether it’s your first time buying a home, or your third, it’s important that you understand the mortgage terminology so you can feel confident about your home loan. Here are the top 8 mortgage terms explained.

Mortgage Terms Explained

Fixed Rate Mortgage

A fixed rate mortgage is a mortgage where the interest rate and the term of the loan I negotiated and set for the lift of the loan. The terms for a fixed rate mortgage can range from 10-40 years depending on the type of loan.

Closing Costs

Closing costs are the costs that the buyer must pay upon closing on the home loan. These costs consist of attorney fees, recording feed, and other fees associated with the mortgage closing. Man times in buyer’s markets, the closing cost can be negotiated between the buyer and hot seller. This is one of the most common mortgage terms.

Loan to Value Ratio (LTV)

The loan to value ratio is done by dividing the amount of the mortgage by the value of the home. Lenders will typically require the LTV ratio to be at least 80% to qualify for a conventional loan or a refinance.

Private Mortgage Insurance (PMI)

When the LTV is higher than 80%, borrowers need to pay PMI on an FHA loan. This insurance is a guarantee to the lender that until the borrower reaches 80% LTV, they are covered from default. At 70% the PMI is required to be taken off.

Escrow

At the closing of a mortgage, the borrowers are generally required to set aside a percentage of the yearly taxes to be held by the lender. Additionally, the lender will collect additional money to be used to pay taxes on the loan. This escrow account is maintained by the lender who is responsible for sending the tax bills. If property taxes skyrocket, you will need to pay a higher monthly rate to keep your escrow account in good standing.

Equity

Simply, equity is the difference between the value of the home and the mortgage loan. Over time, as the value of the home increases and the amount of the loan decreases, the equity in the home generally increases. Especially in booming markets where home values are skyrocketing, the equity of home are increasing at a fast rate.

Amortization

The amortization schedule outlines how the loan is intended to be repaid. If you sign a 30 year mortgage, the amortization schedule will include the amount borrowed, interest rate paid and term. The actual schedule will give you an spreadsheet of all you monthly costs broken down over 30 years.

Appraisal

The appraisal is an inspection conducted by a professional appraiser who will give you an estimated value based on the physical inspection and comparable houses that have been sold recently. This is the protect the buyer, ensuring they are paying a fair amount for the value of the home.

You may also like: A Breakdown of Conventional vs. FHA Loans in King County.

A Breakdown of Conventional vs. FHA Loans in King County

Share this:

Buying a home is a very exciting step in your life, but could seem daunting and overwhelming if you have credit hurdles or a low income. Here’s what you should know if you’re weighing whether conventional vs. FHA loans in King County is the best way to go.

A Breakdown of Conventional vs. FHA Loans in King County

What is a conventional loan? What is a FHA loan?

One of the first things to know about Conventional vs. FHA loans in King County is that a conventional loan is a mortgage that is not insurance by any government agency, while an Federal Housing Authority (FHA) loan is backed by the government. In simple terms, FHA loans are popular among first time homebuyers and millennials since it has lower requirements when it comes to credit score and down payment.

Credit Score

With conventional mortgage loans, home buyers are required to have a 620 or higher credit score. With FHA loans, scores as low as 580 are acceptable to qualify for a mortgage. It is important to note, the higher your credit score, the lower your mortgage rate for both conventional and FHA loans in Pierce County.

Down Payment

With conventional loans, a 20% down payment is typically required by the home buyer. However, talk with your lender as they may be able to lower the bar to 10% based on your circumstance. With an FHA loan, a down payment as low as 3.5% is acceptable to qualify for a home loan. For first time home buyers who haven’t saved much, the FHA mortgage loan makes it possible for them to obtain a home loan.

Mortgage Insurance

One of the largest benefits of a conventional loan is that because the home buyer pays 20% down, the mortgage insurance can be canceled since the loan to value ration reached 80%. If you pay less than 10% for your conventional loan down payment, monthly insurance payments are required until you reach a loan to value ratio of 80%. The biggest down side to FHA loans comes in the form of monthly mortgage insurance payments. While it’s wonderful to be able to qualify for a loan with 3.5% down, it means monthly payments, sometimes for the duration of the mortgage term, are required.

Loan Limits

It’s a common misconception that FHA loans are for low income borrowers only with credit challenges. In a market such as the booming Seattle Tacoma market, the FHA loan limit is nearly $700,000. That does not scream low income borrowers.

Hurdles

Conventional mortgages generally present fewer hurdles in terms of processing and inspections. While FHA loans can be advantageous for some home purchases, some sellers don’t want to deal with the challenges involved with the FHA loan process and it’s borrowers. In a competitive bidding situation where sellers have many offers to choose from, this can but the buyers at a disadvantage.

You may also like: Now Is The Time to Buy a Home in Pierce County.

Top 4 Benefits of a Home Security System

Share this:

Now that we’re in the thick of summer, you’re probably planning your summer vacations. Unfortunately, summer is the most popular time for robberies because of vacant homes, so it’s important that you have a security system in place to protect your home and valuables. Here are the top 4 benefits of a home security system.

Top 4 Benefits of a Home Security System

Protect your home

One of the most obvious benefits of a home security system is to protect your home and family from intruders. Homes without security systems are almost 3x more likely to be targeted by a burglar. This indicates that the mere presence of a security system can be enough to deter burglars. In the case of a break in, having a security system provides family members with enough warning to get to a safe location in or outside of the home while the systems dispatched local authorities.

Provide you with peace of mind

The presence of a home security system can provide peace of mind to you and your family. The next time you wonder if you closed the garage door, you won’t need to drive back home to check, you’ll just be able to look on your phone. Many modern security systems can close doors remotely through and app on your phone, as well as show camera footage of what’s happening in real time. Finally, one of the most popular benefits of a home security system is that it is beneficial for families that often leave family members at home. Whether it’s children or elderly parents, home security systems can provide peace of mind.

Keep an eye on your pets

Especially in the summer, it can be hard to bring your pets with you while you run errands. Instead of cutting your errands short because you’re worried about what Fido has gotten into at the house, you can check your security system app on your phone to see them in real time. A lot of security systems today have two-way audio, meaning in your pet is misbehaving, you can talk to them through your phone and they can bark back.

Save on homeowner’s insurance

Generally, having home owner’s insurance is a mandatory part of being a home owner. The cost of the coverage depends on location, coverage, insurance company, etc. In general, home owners receive a 10-20% discount in their insurance by having a functioning home alarm system installed. Since the cost of a home security system is the number one reason why people don’t install them, this is one of the best benefits of a home security system as it can help you save in another area.

You may also like: 5 Ways to Keep Your House Cool Without Air Conditioning

5 Ways to Keep Your House Cool Without Air Conditioning

Share this:

In these warm months it can be tempting to crank the AC if you have it installed, or plant yourself in front of a fan. But these aren’t the only ways to stay cool. While central air is great, it can also be quite expensive to run 24/7 in the summer. Here are 5 ways to keep your house cool without air conditioning.

5 Ways to Keep Your House Cool Without Air Conditioning

Close the blinds

By keeping your blinds closed, you prevent the sun rays to heat up your home and serves as one of the most popular ways to keep your house cool without air conditioning. Keeping you blinds closed can save you up to 7% on bills and lower indoor temperatures by 20 degrees. So when you wake up in the morning, keep your bedroom blinds closed and go about your day. You will thank yourself when you want to sleep that night and you room is relatively cool. This is especially true for south and west facing windows as they receive the harshest light.

Open windows in the morning

The coolest part of the day is right when you wake up. Make it part of your morning routine to crack your windows open from 8am-12pm to allow the cool air to fill your home. After noon, the air outside tends to rise above the indoor temperature, so at that point you’ll want to close your windows. Because of these benefits, opening windows in the morning is one of the most popular ways to keep your house cool without air conditioning.

Place a fan in the window

While you open your windows during the coolest part of the day, place a fan in your window sill, so cool air is quickly entering your home. If you want extra cold air try filling a mixing bowl with ice, and position is at an angle in front of a large fan so the air whips off the ice in an extra cold way. This trick helps keep you house cool without air conditioning costing you a fortune in the summer.

Swap sheets

While flannel and fleece sheets are great for keeping you comfortable in the winter months, cotton is a smarter option this time of year as it breathes easier and stays cooler. Nowadays, there are cooling pillows sold in many stores, so if your head tends to heat up during the night, a cooling pillow might do the trick for you.

Start grilling

Using your stove or oven in the summer can and will make your home hotter. If you’re always feeling like its 100 degrees inside of your home, that last thing you want to do is heat it some more by boiling broccoli. Pan your meals around the grill so you can keep your house cool without air conditioning. Besides, grilled meals are often times lighter and more refreshing and can be more appealing in the summer.

You may also like: 7 Updates to the Master Bedroom for a Better Night’s Sleep.

Seattle Neighborhood Update

, ,
Share this:

Seattle Neighborhood Update

Last month brought some long-awaited, positive news for buyers with May posting the most new listings in over a decade. Despite the uptick in inventory, most homes are selling in less than a month. Prices haven’t been impacted either, with the majority of the region continuing to experience double-digit home price increases. Here is the Seattle Neighborhood Update for May/June.

Read the full Local Market Update, including statistics for the Eastside, Seattle, King County and Snohomish County.

seattle neighborhood update

You may also like: Washington State Appreciation Rate.

5 First Time Home Buyer Mistakes in Puyallup

Share this:

Buying a home is an exciting and thorough process, so it’s important as a first time home buyer that you are aware of common mistakes made by other first time home buyers. Check out these 8 first time home buyer mistakes in Puyallup and how they can be avoided.

5 First Time Home Buyer Mistakes in Puyallup

Falling in a love with a house

This is one of the most common first time home buyer mistakes that can lead to financial burden or major disappointment. When you are looking at homes, it’s good to keep track of the ones you really like (and don’t like) and note what you like or don’t like about them. If, at the moment you see your “dream home” you become blinded to all other homes you still are planning to tour, all of the other homes will not make a very strong impression. If you don’t end up buying your “dream home” you may feel major disappointment or even buyer’s remorse.

Skipping the home inspection

The best way to avoid nightmare fixes later on is to gain peace of mind now. The average home inspection is under $500 and is a good way to evaluate what’s going on with your new home. If the home inspector finds a problem with the roof, you can talk with the home seller about it before your close on the home. If you skip out on the home inspection, you may have to pay hundreds to thousands later down the road. This is one of most avoidable first time home buyer mistakes in Puyallup.

Not considering home resale value

As a first time home buyer you may think that the home you’re moving into will be your forever house. I can assure you that you will most likely move one day. So it’s important to consider the home’s resale value. If the home you’re looking at was recently fully remodeled and seems to be the nicest house on the block, you likely won’t gain much equity on the home. Be thinking about how you can add value to the home to up the resale price later on.

Trusting a verbal agreement

Everything in the home buying process needs to be written down and signed to hold any weight. While it may feel like you’ve built a great relationship with the home seller and they will hold the house for you as you make a decision, without them signing a form, it’s just promise, not a legal agreement. So if you’re serious about anything during the home buying process, make sure you sign it and the other party signs it as well.

Not budgeting for monthly mortgage and maintenance

The biggest change that you’ll have to adjust to as a first time home buyer is that you now have a monthly mortgage and you’re in charge of all maintenance for the home. This is one of the most common first time home buyer mistakes in Puyallup since it’s such a change from renting. You’ll need to budget for a mortgage but also keep a few hundred dollars a month for maintenance in case of emergency. The last thing you want is to have to pay a professional to come out since your washer/dryer leaked and you don’t have the funds saved up.

You might also like: Budgeting Tips for Home Buyers in Pierce County.

Budgeting Tips for Home Buyers in Pierce County

,
Share this:

Buying a home is one of the largest financial transactions you will make, and preparing your budget beforehand will help make the home buying process in Pierce County less stressful. Here are 3 budgeting tips for home buyers in Pierce County.

Budgeting Tips for Home Buyers in Pierce County

Organize your finances

By breaking down your monthly spending into rent, utilities, shopping, groceries, extracurriculars and savings, you’re able to see your areas of strength and areas of weakness. For example, say you are spending $1500 a month on rent, $200 a month on utilities, $1000 a month on shopping, $500 a month on groceries, $150 a month of extracurriculars, and $100 a month on savings. When you put all of these data points into a pie chart and you’re able to visually see that you’re spending almost 30% of your monthly bills on shopping, when half of that could go into your savings pot. By walking through your finances one step at a time, you’re able to track what you spend and make goals to increase your savings.

Set goals

While your large goal is to buy a home, setting smaller goals will help you stay on track and feel successful while you make your way there. If your goal is to set aside $500 a month into savings, how are you going to get there? Consider these methods:

  • Switch to a cheaper gym. Gyms can be extremely expensive, and especially so if you aren’t using them as much as you’d like. Do some research on less expensive gyms, and look into home workouts so you can see if you can cut that cost out all together.
  • Cancel cable during the summer. Television usage drops dramatically in the summer due to vacations, spending time outside, and spending time with loved ones. Consider cutting your cable bill just for 3 months (granted you’re not in a contract), and watch your savings increase those three months.
  • Limit restaurant visits to once a week. Restaurant bills can add up, especially if you’re buying appetizers, drinks, and desserts. Make it a goal to only eat out at a restaurant once a week, and make your own meals the rest of the week.
  • Make your own coffee. The average Starbucks coffee is $5. Imagine if you cut that cost out of your monthly spending. A bag of coffee ranges about $20 a bag and lasts about a month. That’s a savings of $135 a month just on coffee alone.

Track your progress

While it’s great to make goals, they don’t mean much unless you track your progress. The most important budgeting tip for home buyers in Pierce County is to keep yourself accountable. If you make a purchase that wasn’t planned for, add it to your budget and readjust your goal for that month. It’s ok to make an extra purchase here and there, just as long as you can stay on track for the coming months. As a home owner, there are many unplanned costs that come up, so getting into a habit of budgeting now will prepare you for these financial challenges that inevitable pop up.

You may also like: 7 Steps to Buying a Home in Pierce County.

7 Steps to Buying a Home in Pierce County

Share this:

Buying a home can be a long confusing process, especially if it’s your first time. On top of that, Pierce County is feeling the pressure from the booming housing in King County, which adds another layer of difficulty and competition. So you might be asking yourself, how do I go about this home buying process? Here are 7 steps to buying a home in Pierce County.

Check Credit Score

Knowing where you’re at financially and credit wise, can help you understand the home buying process as well as make you confident in your decisions. The higher your score the better the interest rate your mortgage will be. On apps such as Credit Karma and Credit Wise, you’re able to see a fairly accurate representation of your credit score, as well as areas of opportunity. If your score is now where you’d like it to be, consider delaying buying a home in Pierce County until you’ve built up your credit.

Save Save Save

When buying a home in Pierce County, most home loans require at least 3.5% down, so it’s important to save enough so you’re able to cover that cost. A good rule of thumb is if you can’t save at least 5% down, you may want to reconsider buying. Ideally, you’ll be able to put 20% down, because anything lower will result in you having to pay mortgage insurance.

Plan For Expenses After Move In

Being a home owner includes additional costs on top of a mortgage. These costs can include property taxes, insurance and maintenance fees that can add hundreds of dollars per month. The bottom line is if your put everything you have toward this house, and have little left in your bank account, it may be wise to look at buying a home in Pierce County with a lower monthly mortgage.

Get Pre-approved For a Mortgage

Once you have your finances and credit all lined up, determine how much you can afford to spend and stick to that limit. To get pre-approved for a mortgage, you’ll have to find a lender. The lender will require documentation from you such as previous tax returns, pay stubs, and bank statements so they can determine the loan amount.

Start House Hunting

This is the fun part! Open up Redfin and Zillow and search for homes in the area you’d like to live. Spend your weekends touring homes and eliminating the homes you don’t like along the way. Remember, you’re not only buying a house but a life so be sure to look at schools zones, crime rates, and walkability of the neighborhoods.

Put in an Offer

You want to make sure the home your put an offer on meets your needs. It’s important to stay rations and stick with your price limit while buying. Home buying can be an emotional process, so it’s important to stick to your guidelines. A lot of times people go over their budget in bidding wars and end up over buying a home out of their price range.

Close!

If the seller accepts your offer, the offer will be contingent on securing the loan with your lender, a home inspection, and a walk through 24 hours before closing. Closing fees can add up to about 5% of the mortgage amount, so be sure you’re prepared to pay appraisal fees, title insurance, property transfer taxes, and inspection fees.

You may also like: Essential Home Buyer Tips.

Washington State Appreciation Rate

Share this:

The Great Recession took its toll on housing prices, with home values declining throughout the country. Since then, prices have rebounded. While many areas of the U.S. are not back to pre-crash levels, the Washington State appreciation rate has increased significantly.

Homeowners in Washington State have the second highest appreciation rate in the country.

The economists at CoreLogic recently released a special report entitled Evaluating the Housing Market Since the Great Recession. In the five-year period from 2012 to 2017, the Washington State appreciation rate has risen to 57 percent. The national average was 37.4 percent.

The map below was created to show the 5-year appreciation from December 2012 to December 2017 by state. Washington, Oregon, Idaho, California, Nevada, Utah, Colorado, Michigan, Georgia, and Florida are at or above 40 percent 5-year home price appreciation.

washington state appreciation rate

Lumber prices increase, doesn’t help home inventory.

“Lumber prices have increased dramatically, by about 25% over the last 12 months,” says Robert Dietz, chief economist at the National Association of Home Builders. A labor shortage in the residential construction industry is also contributing to the fact that fewer homes are being built, Dietz adds.

Take advantage of your increased home equity.

If you’re thinking about selling your home, now is an excellent time to take advantage of your sharp increase in equity. Today’s market very strongly favors sellers, so you can expect to get the best possible price for your property. It’s also not uncommon today for the buyer to accommodate your needs as you look for another home. Not only will your days on market be remarkably fewer in a sellers’s market, but you might receive multiple offers, which could drive up the sales price.

Are you thinking about selling your home? Call the VonKarl Inman Real Estate Team and get a free valuation of your home. We’re happy to answer any questions you might have!

You may also like: Photography Tips for Real Estate Listings