Month: July 2013

Once you decide to go speak to a mortgage lender, you may walk away feeling a little overwhelmed.  There are lots of new concepts you’ll have to understand (unless you just happen to be an Economics major in your college days).

One of those concepts is called the back-end ratio.  Before you start imaging a truck backing up with its beeping sounds, let me explain.  One’s back-end ratio is a reliable way to simply see if you can afford a certain property.

A back-end ratio describes your total debt-to-income numbers.  It shows how much of your gross income would go toward all of your debt obligations.  Debt obligations are widespread (of course), but always include your “regular” bills of your mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees.  (Note to self: if you can OWN a car, even an ugly one, rather than paying monthly payments on it, you’ll qualify for a larger home loan).

In general, your total monthly debt obligation should not exceed 36 percent of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12 (months). The answer is your maximum allowable debt-to-income ratio.

Today’s post is more serious than some of the previous we-blog offerings.  And, let me say right from the start that I have borrowed the jist of this information from Realtormag.realtor.org.  I can supply you with the exact weblink if you would like it.  Here goes.

Not all real estate practitioners are Realtors®.  That term is a registered trademark.  It demonstrates that this real estate is a professional; he/she is a dues-paying member of the National Association of Realtors, and perhaps most importantly, that he/she subscribes to our strict Code of Ethics.

Realtors® go through weeks of training to earn their designation.  We must pass state and national tests.  And, like any professional, we don’t really want to work for free.  Please listen to these reasons.

1.  Hiring a Realtor — whether you are buying or selling — means you will have an expert on “your” side; we will guide you through the disclosures, inspections, mortgage documents, insurance policies, deeds, settlement statements, etc.  The seller’s agent is there for only the seller: don’t forget that.

2.  We will provide objective information (“comps” / Comparative Market Analyses), as well as our valued opinions.  It’s likely that selling (or buying) this house might be the first, or second, or perhaps fourth time for you.  For the Realtor, we’ve done this dance before.  Many times.  We know the tricky steps.

3.  We will find the best property out there.  We have a variety of ways to advertise, and we have a network of friends in the business.  That’s going to help you, whether you recognize it or not.

4.  We can help negotiate the best deal.  Plus, we will think of negotiable items that almost certainly escape your frame of knowledge.  Everything is ultimately negotiable: financing, terms, date of possession, repairs, furnishings, equipment, appliances, and in one rather odd case: goats.  If something happens and an amendment is needed — you couldn’t get the home inspection completed in the prescribed three-day window, for example — your Realtor can likely ease that amendment on through.

5.  When you’re selling, strangers are coming into your home, you know.  Having an expert Realtor there should make you feel just a little better about the prospect of strangers walking through your house.  A second element is that selling is an emotional experience.  A home symbolizes your family, your sense of self, your hobbies, your life: it is much more than four walls, a roof, and a stubborn front doorlock.  Having a concerned and objective third party helps you to stay focused on the big picture(s): the emotional and the financial.

6.  Real estate has its own language.  If you don’t know the difference between a FSBO and a horizontal property regime, you need someone who does speak the language.

7.  Every member of the National Association of Realtors makes a commitment to adhere to a strict Code of Ethics.  Our job is to protect you.  It is your right to expect nothing but honest and ethical treatment in all transactions with a Realtor.  In fact, it is mandatory that we refresh our commitment to the Code of Ethics every few years.  Times change.  Honesty and integrity should not.

Yes, it is possible in our society to buy (or to sell) a house without utilizing the professional services of a Realtor.  I can also give you instructions on how to extract a tooth, as long as you have some needle-nose pliers handy.  We are professionals.  Let us serve you.

Okay, you first-time home buyer.  You’ve scrimped, you’ve saved, and you’re ready to go talk to a banker or a mortgage lender about acquiring a mortgage.  You’re going to take the leap and become a homeowner.  What documents will you need to assemble?  Let’s point out several.

First of all, you’ll need to share your driver’s license.  Okay, that’s no biggie.  You’ll also want to provide a secondary form of identification, typically a passport or your social security card.

Next, we’re going to look at $$ documents.  You’ll need to supply a representative sketch of your financial picture.  That means the banker or the mortgage lender will ask to see recent pay stubs (for at least a couple of months).  You might supply copies of your bank’s statements for a couple of months, too.  Then, we move on to bigger — annual — statements of your worth.  You’ll be asked to provide copies of your Federal tax returns for the past couple of years, and it’s highly likely that those Federal returns will include copies of your W2’s (or W9s if you are self-employed).  It’s possible that your mortgage lender might request some other document as well, but these are the key elements of establishing your financial security.  For instance, the lender may ask for your landlord’s contact info to verify that you have been paying your rent on time.

You can start the process of getting “pre-qualified” even before you start the home search.  In fact, it’s a pretty good idea to do so, because the pre-qualification process usually takes several weeks.  Then you have chosen a mega Realtor (and I’m hoping it’s me).  We will work together: you’ll explain what you’re looking for, and I will narrow down selections based on your preferences and email them to you.  Once you find a few you want to visit, we will go visit those homes (and I will be encouraging you to take notes — believe me, houses will “run together” in your brain quickly).  Once you find THE house, we will execute a Purchase Contract on it — and you’ll take that to your lender.

If everything is in order — which means you’re not trying to buy an $800,000 house when you were only pre-approved for $300,000 — we submit the offer.  If it’s accepted, there’s only a couple more hurdles before you get the keys to your new home.  We’ll talk about those other hurdles in another post.

For now, start digging up your last couple of years’ tax returns, and give me a call.  I can recommend some excellent local mortgage lenders.  It’s sfelton@realtracs.com or call me at 615-870-4094.

If you’re planning on buying a home in the next few months, you are probably facing more than a little work — especially if your credit score isn’t in good shape.  While you can’t change your credit score overnight, you can put some steps into place to raise it over the duration of two or three months.  Hence, start now and you may be ready to purchase this Fall and be in your new place before the big holidays!  Here are some basic tips.

Tip 1: Take a good hard look at your credit history.

Credit scores are drawn from information in your credit history, so anything that’s wrong, even from something way back, can possibly still bite you today. Most folks advise you to visit annualcreditreport.com and pull a free copy of your credit history. But there’s another great website called creditkarma.com.  Check for mistakes and call the places if you do find a mistake. Hint: don’t be angry when you call; assume the role of “I am seeking to purchase a house and I need your help” to get this error cleaned up.

Tip 2: Lower your utilization ratio.
Teach yourself a little about how credit scores are calculated. (Visit the Buying tab of this website) to find some great information).  One factor is “Amounts Owed,” which determines about 30% of your credit score. What those folks look at is how much you OWE on credit cards versus how many DOLLARS are made available to you (your credit limit).  Hence, if you are allowed $5,000 on a certain credit card and you keep it maxed out most of the time, that’s not so good.  It’s much better if you only keep maybe $1,000 or at the most $1,500 charged on that $5,000 card. This whole idea is called the “utilization ratio” — how much of your credit limit are you utilizing each month?

So how should you accomplish that low balance?  Well, (obviously), the first step is to pay down your credit cards as faithfully as you can. Your payment history accounts for 35% of your credit score.   But if you can’t exactly do that, consider shuffling the burden to another card.  Be careful here, of course — but if you have a high balance on one card and you haven’t put much of anything on a second card, shifting some of the balance to the less-used card might help.  (You have to pay it, too, of course: no free lunch…).  And a second step you might take is simply to call the bank or credit card issuer and ask them to raise your balance.  But, again, obtaining a higher credit limit does not mean that now you can go out and buy that new 55-inch HDTV you’ve secretly been wanting…

Tip 3: Refresh a card you haven’t used for years…maybe….

If, after reviewing your credit history, you are reminded that you used to have a Mastercard that you haven’t used for years, find that puppy. Call to make sure that the credit line is still “open.”  Getting that old account refreshed will increase the amount of available credit open to you (a good thing).  It might also extend your credit history (another good thing).

Okay, here are two things not to do. Don’t open a new account – that definitely will lower your credit score. And don’t close any accounts, because that would negatively impact your “utilization ratio” as described above.  Oh, and don’t go any freaky and buy a lot of expensive stuff like furniture for the house you haven’t even bought yet, or a new van to help you with your upcoming move…

Give Becky or me a shout if you’d like more information on the home-buying process: either of us would be thrilled to help you.  And let me just say — with a wink to your upcoming great credit score and new house — an early Happy Thanksgiving to you!!!

Lots of life’s activities require teamwork.  How about your job?  Who do you depend upon?  Do you need someone from a certain department to get a needed report done before you can run a particular program?  How about the teamwork required to run your household?  One person gets the dinner cooked while someone else gets to load the dishwasher, maybe.  And how about the teamwork needed simply when you’re driving from Point A to Point B?

I’ve been thinking a lot about teamwork this week.  I’ve taken on a small project that might help one of the people with whom I work.  And in turn I have been depending a huge amount this week on a friend who can help me solve some annoying computer problems.  It’s a natural phenomenon; none of us can get it all done.  We need the help of our friends.  Our teammates.

Teamwork is an essential ingredient in real estate, too.  If you’re ready to get your house sold, you need a team behind you — to help you with getting the place ready to sell (which might include packing, plumbing, or painting).  You need a teammate — such as a trusted realtor — to give you an objective opinion on how to price your home and how to present it in the best light possible to bring in an excellent and quick offer.  And you’re going to need some teammates to get you moved into your new place, too.

If you’re on the buying side of the equation, teamwork is even more necessary.  You’re going to need to locate a mortgage lender with whom you’re comfortable, a realtor to help you locate the right place, someone to help you sort through all of the many home choices, then you’ll need a home inspector, and perhaps a closing attorney.  Lots of people are involved (see graphic above), and it can feel a bit overwhelming at times.  Share your needs with your realtor; that’s our job.

Teamwork.  It’s necessary.  How can I help you today?