Denver Homes & Real Estate Blog by Marianne Bandy

Saturday, 25 April 2009

*Your Credit Score - A Mystic Art or a Numbers Game in Denver, CO?

You may think that the way your credit score is formulated is as scientific as the way a gypsy fortune teller determines your future at a carnival. A little smoke, some mirrors, a crystal ball and there you are, your high score of over 700 enables you to get great rates on homes and cars. Or, oh, too bad, it’s clearer now, 581, higher rates for you. Looks like renting and driving the old clunker are in your future for another year!

In reality, credit scores are based on five categories of your economic history: your payment history, how much you owe, how long you have had credit, the new credit you have tried to apply for, and the mix of credit you have. Your actual score is calculated with software created by the Fair Issac Corporation, which is why is it often called a FICO score. The three major credit bureaus which use this software don’t use the same scoring software, which is why the scores often vary and appear as random as that carnival fortune teller.

Not all of the categories are of equal importance in computing the score. Each category is assigned a value that sheds light on an important underlying concern.

Your Payment History – 35%: Includes the number of accounts you’ve had, the number paid as agreed, the number of delinquent accounts, how long they have been past due, how long since you have had a past due payment. Do you pay on time?

What You Owe – 30% - includes how much you owe on accounts and the types of accounts with balances; how much of your revolving credit lines you've used; amounts you owe on installment loan accounts vs. their original balances; number of zero balance accounts. Are you overextended? Do you pay consistently?

Length of Credit History – 15% - measures total length of time tracked by your credit report , length of time since accounts were opened, and time that's passed since the last activity. The longer your (good) history, the better your scores. Are you well established or new to the world of credit?

Types of Credit – 10% - notes total number of accounts and types of accounts (installment, revolving, mortgage, etc.) A mixture of account types usually generates better scores than reports with only numerous revolving accounts (credit cards.) Are you financially stable or likely to go on a spending spree that could max out your cards?

Your New Credit – 10% - calculates number of accounts you've recently opened and the proportion of new accounts to total accounts, number of recent credit inquiries, and the time that's passed since recent inquiries or newly-opened accounts. Do you appear desperate for more credit?

Credit scores range from a low of about 350 to a high of about 850. Your lender, if you are looking for a mortgage loan, will also review your length of time at your present job, the type of credit you are requesting, and your monthly income. They throw the middle credit score into the mix. While FICO and credit score assignment is purely based on formulas, lenders have different criteria for loans, so may be more forgiving of a lower credit score if your income is high enough, your job is stable, or you have something else going for you that they’re looking for.

Working toward a higher credit score is an admirable goal; in addition, owing less will put more money at your disposal when you are either saving for the house or after you have bought it. Even in this era when banks are tightening requirements for borrowers, there is still diversity in underwriting standards. Just make sure to ask about general requirements before you officially apply, as too many inquiries can cause you more problems. Credit scoring software usually recognizes when you are shopping for a single loan for a home or car within a short period of time, but if you find you need to do more preparation before applying again, your next tries will probably be counted as new inquiries.

Colorado Home Buyers: Have questions about how to get ready to qualify for financing for your Denver home? At Bandy Homes, we are here to show affordable properties in the Denver metro area and then help you make one on them yours! If you are a first time homebuyer, we can show how the $8,000 tax credit can help you.

Marianne Bandy

New Homes in Denver

POSTED BY: AT 10:49 am | Permalink | E-mail this

Wednesday, 22 April 2009

*Need a Down Payment in Denver, CO? - Be Creative!

So you’re a first time homebuyer, all set to claim your part of the American Dream as well as your $8,000 tax credit by buying a home this year. You’ve heard that the days of “no down payment” are gone for most people, while many of the down payment assistance programs are history. Today, most banks require a down payment; the last few years have proved that when there is no (or very low) equity behind loans, everyone’s in trouble when the economy falters.

Even if you can find a lender who will let you get by without a down payment, remember the wisdom your parents passed on about why down payments are a good thing. They give you a stake in the house. Your payments are lower. You also have instant equity in case you need to borrow against your home for a good reason, like your kid’s education or a medical emergency.

Assuming that you have not been saving for your first home from the age of 10, how do you come up with a down payment? If you are buying a $200,000 home, you will need from $7,000 (3.5%) to $40,000 (20%) down. This means you may need to tap all available resources. Here’s a few ideas:

Pay Yourself First - Set up an automatic savings plan – this is always a good idea, though it may be a little late to do this if you are trying to accumulate a lot of money before the Homeowner Tax Credit expires. Get a gift from your parents, grandparents, other relatives, friends, or anyone else with breath and a checkbook. Make sure to check with your tax advisor for any applicable yearly limits.
Sell something of value, like a car, boat, motorcycle, or other asset. With your new home, you will be too busy with yard work to take road trips on that Harley to miss it the first couple years. Then maybe you can buy another one!
Liquidate investments, such as stocks, bonds, mutual bonds.
Take a loan or withdrawal from your 401K – but keep in mind that there may be interest, taxes, or penalties depending on how the money comes to you. Talk to your accountant on this one.
Allocate any large sums of money like your tax refund or bonuses to the down payment funds.
Collect on any money owed to you.
Check around for down payment assistance programs that you might qualify for – such as through your state or local government, your builder (for new construction), or your employment if you are a public servant like a teacher, fire fighter, or police offer
Seek out a private down payment assistance program.

Since it is always wise to keep plenty of money on hand to ease your transition into your new home, as noted in our last post Watch Out for Unexpected Costs in Your Affordable Home, be flexible in the type of loan you apply for. In most cases, an FHA loan, with its 3.5% minimum down payment is a great loan product for first time buyers. Once you are in the home, you can always pay down the mortgage if you want the benefit of more equity without having to make yourself cash poor upfront.

For plenty of help, both in finding a great Denver home and finding the best way to get your home financed in the Denver area, check out the Bandy Home Team. We will show how the new $8,000 tax credit will work for you too.

Marianne Bandy

Denver Relocation Experts

POSTED BY: AT 06:40 am | Permalink | E-mail this

Saturday, 18 April 2009

*Watch Out for Unexpected Costs in Your Affordable Denver, CO Home

If anyone has learned anything from the housing crisis of the last couple years, it should be “Buy an affordable home.” So what’s affordable? The cheapest house in town? Not necessarily. You want a home that is appropriate for where you are in your life. An affordable home is one that fits your income, your lifestyle, and your needs right now. Statistically, it is extremely unlikely that your first home will be the last home you buy. This means that an affordable home is one where with your current resources you will be comfortably able to make your down payment, plan for your monthly costs, and maintain your basic lifestyle. You might be willing to “tighten your belt” for a few months till you adjust to the new expenses, but you do not want to have to take a vow of poverty when signing your mortgage documents.

Once you’ve made the decision to buy your first home, your thoughts naturally go to all the great things you’ll do to improve it, decorate it, and make it your own. While you’re dreaming, cost is no object, so you see that plasma TV, the new furniture you’ve been wanting, the trendy window treatments, the multilevel deck. The reality is that before you order the plasma, you need to realistically assess the cash you’ll need to have on hand to get started in your new home. When you move into a home, especially if you are coming from an apartment, there are many unglamorous costs that you need to figure in to make the place functional.

What are some of these other one-time costs that need to be factored into an “affordable home?”

Appraisal fees - this part of the loan approval process can run $300- 500
Professional home inspection - $200 – 500 for a basic inspection, more for specialty inspections for structural engineering, mold, termites, or septic tank issues
Extra closing costs – an extra couple hundred dollars can be added on at the last minute for miscellaneous fees or prorations
Repairs, upgrades, renovations – repainting the kitchen can wait but fixing a leaky roof can’t. In some cases, repair costs can be wrapped into your new mortgage loan.
Moving fees – whether you are hiring professional movers or renting a truck and recruiting friends you pay in pizza, the costs add up
Termination fees on current services – if you can’t transfer your cell, internet, or cable service to your new home, you may need to pay early termination fees or pay deposits on new services
Appliances – if appliances aren’t included or the previous owner doesn’t want to sell, you will need to acquire major appliances
Lawn care equipment – a lawnmower or at least some basic tools for outside upkeep, even if you plan on hiring a lawn care service
Household items – the plasma TV may have to wait as you acquire trash cans, extra lamps, curtain rods, and towel bars
Contingency fund – when you’re a new homeowner, some unexpected cost always comes up. (This is not scientific, but ask any homeowner – it’s the truth.)

Keep in mind that things are usually more expensive than your estimate on paper. People tend to be optimistic when they write them down and underestimate the true costs.

At Bandy Homes, we will not only lead you to your affordable Denver home, but show you how the $8,000 first time homebuyer’s credit can work to your advantage in offsetting the costs of being a new Denver homeowner. We can also explain the various first time buyer assistance programs available through Colorado and local government offices.

Marianne Bandy

Denver Colorado Homes and Real Estate

POSTED BY: AT 02:26 pm | Permalink | E-mail this

Monday, 13 April 2009

*When Home Inspections Go South, Examine Your Options

A couple of weeks ago we talked about the value of having a home inspection before you agree to complete the purchase of a Denver home. The assumption was that if the inspector came up with a few issues, you could negotiate with the seller to have repairs made or knock some money off the price. What happens when the inspector finds major issues? When do you haggle and when do you run like the wind?

Inspectors basically find two types of problems with homes: the fixable and the unfixable (at least at reasonable cost). The unfixable problems include major foundation issues, location of the home in a floodplain or on a fault line, contamination of the water supply, or location under electromagnetic power lines. Some problems might not affect the livability in the short term, but finding home insurance or a buyer when you want to sell could be difficult. These are the types of inspector findings that should make you talk to your Realtor® about pulling out of the contract.

Most other things are fixable, although cost may be an issue. The inspector might find asbestos-clad pipes, unacceptable levels of radon in the basement, a serious crack in the foundation, water infiltration or mold spores, a pest infestation, roofing issue, or problems with the plumbing or other major systems. He might find that you need a more specialized inspection if he suspects a problem with the septic tank or other system he cannot see.

If the list of things you need to do is long and expensive, you need to reassess if you still want the property. You might be willing to put down $5,000 for a new furnace, but what if the house also needs a $50,000 septic tank repair and $35,000 worth of plumbing repairs? Given that housing prices in most areas are flat or declining, is it worth it make that type of investment in the home? If you are still interested, you might be able to negotiate some price reduction from the seller to have some repairs made, but the investment might still be sizeable. If the economics don’t make sense to you, dial your Realtor® about voiding the contract.

In the case of a Denver foreclosure or bank-owned property, you likely won’t be able to do much, if any, negotiating on the price for repair costs, but the total cost including repairs might still make the home a good value. FHA has a special loan available that can include costs for repairs up to $35,000, as long as the home will appraise. You need to purchase this type of home with your eyes open. Never skip the home inspection! Many foreclosed homes that have been vacant for a while have hidden damage that only a trained inspector can properly assess. In Denver, a common issue is broken water pipes that go undetected until the water is turned back on.

At Bandy Homes, we can help you assess the facts. We have helpful Denver buyer reports available and, of course, will be by your side to work through any transaction issues when you purchase your metro Denver home.

Marianne Bandy

Denver School Information

POSTED BY: AT 01:53 pm | Permalink | E-mail this

Tuesday, 07 April 2009

*Why Using a Realtor is Still a Good Value

With the rise of discount real estate firms and Internet listing services, homeowners who seek to sell their home often wonder if it’s worth it to sign up with a Realtor®. Especially at a time when many sellers know they will have to accept less, they are hesitant to promise part of their profits to an agent who does what they think they can do themselves.

Being a Realtor® is not rocket science; our work is definitely more in the “perspiration”, not “inspiration” category. Certainly, a savvy would-be seller can learn a lot about how to sell a home, implement the many good online suggestions for getting the home buyer-ready, and even get some information about comparable home values. When they list their home, they may even attract some potential buyers who think they will get a better price because no agent is involved.

Though about 12% of real estate sales these days are FSBO (For Sale By Owner), most people stick with a Realtor.® From experience, I as a Realtor® can sort through the often contradictory Internet tips to tell sellers what they really need to do to their home to make it sell. (Replace that bathroom tile, skip the Jacuzzi! ) I can fine tune the area data to price a home right and then promote it in a variety of online and traditional sites. This exposure is part of a larger marketing plan I set up for every client.

Where my experience really comes into play is in dealing with buyers and their agents. I know how to field questions about your home and the neighborhood in a way that is honest, tactful, and in compliance with federal consumer and housing laws. When buyers, often well educated by the Internet and primed to expect a low price by the media, start negotiating, I am experienced in bringing the transaction to a mutually satisfactory close with the right buyer. Needless to say, when other factors, like short sale or pre-foreclosure situations are involved, I am trained to be a long distance runner in pursuit of elusive loan mitigation officers – a time-consuming adventure most FSBO sellers are unprepared to handle. As a matter of fact, I am CDPE-certified, so if you are trying to avoid Denver foreclosure yourself, I can help.

For best results in selling your home, avoid the temptation to go FSBO. Hook up with an experienced agent. If you want to see how Bandy Homes would market your home, check out the credentials of our Denver home sales team. I am ready to help you buy or sell a home in the Denver metro area.

Marianne Bandy

Relocate to Denver

POSTED BY: AT 10:09 pm | Permalink | E-mail this

Thursday, 02 April 2009

*Real Help to Make Your Home Affordable

Is your mortgage payment too high? If your answer is "yes," you may be eligible for help from Washington. President Obama's new program, Making Home Affordable, is ready to help over nine million Americans who need to refinance their homes or have their loans modified.

making home affordable logo

It is easy to find out if you qualify for this program. The government's new website www.Makinghomeaffordable.gov was set up in mid-March to help people learn if the housing plans will rescue them from a high interest rate or an excessive payment. The plan is unique because it establishes clear standards for who qualifies and who does not.

The refinancing part of the program might apply to you if you are up to date on your payments but cannot refinance because the value of your home has fallen. These days, lenders want to make sure there is equity in the home before they will issue loans. (When your home is refinanced, you are actually getting a new loan.) The federal program will help you if you meet the following criteria:

You must live in the home
Your loan is backed by Fannie Mae or Freddie Mac
Your payment is current and has not been late in the last 12 months
You have enough income to pay a reduced payment
Your mortgage is between 80% and 105% of the current value of your home.

The loan modification part of the program is aimed at you if you are having trouble making your payment, either because your interest has increased or your income has decreased. You can qualify whether you are behind or not yet delinquent on your payments. This program might help you if meet these requirements:

You must live in the home
Your loan is backed by Fannie Mae or Freddie Mac
You loan started before January 1, 2009
Your unpaid loan is less than $729,750 for a single family home
You are having trouble making payments due to hardship and you will sign a statement describing the hardship
Your monthly payment is more than 38% of your income before taxes
You have enough income to pay a reduced payment

On the website, you will be asked a few simple questions to see if you may qualify for either of the programs. If you do, you are then told to contact your lender to complete the application. The site even lists all the documents you should have ready when you place the call to the bank or loan servicer, such as mortgage documents and payment books for your first and second mortgages, account balances and monthly payments on credit cards, student loans, and other debts, tax returns, recent paystubs for members of your household, information about savings accounts or other assets, and especially in the case of a mortgage modification request, a letter describing what happened that now makes it hard for you to pay your mortgage.

The website has helpful payment calculators to show what your new payment might be and a list of frequently asked questions to make the program even clearer. It is intended to put your mind at ease if cdpe, logo you want to stay in your home but are having trouble with the current payment.

What if you do not qualify for the program but still need help? This is where a Realtor like myself who is a Certified Distressed Property Expert can offer you other helpful solutions to avoid foreclosure in Denver. Contact me today at Bandy Homes for a caring and confidential analysis of your situation.

Marianne Bandy

Denver Colorado Homes and Real Estate

POSTED BY: AT 06:57 am | Permalink | E-mail this