What Home Buyers Don’t Know Could Cost Them Date:June 27, 2013 | Category:Finance | Author:Vera Gibbons With the housing recovery now well underway — housing starts are up; builder confidence is at a 7-year high; there are fewer foreclosures; and home prices continue to rise — you may be inspired to get off the fence and buy that dream home. But are you really prepared? Here are a few things you may not know — and what you don’t know could potentially cost you. Credit score When was the last time you checked your credit score? Any idea how good or bad it is? Are there any errors on your report that need to be fixed? Long before you begin to house hunt, you need to know where you stand. The higher your score, the better your interest rate. Get a copy of your report — for free — at www.annualcreditreport.com. Mortgages An astounding one-third of home buyers surveyed by Zillow are ill-prepared to get a mortgage. Among the findings: 34 percent of first-time home buyers are not aware that it is possible to get a home loan with a down payment of less than 5 percent; 26 percent of home buyers incorrectly believe that they are obligated to close their loan with the lender that pre-approved them; and 24 percent incorrectly believe that the best interest rates and fees can always be found through the bank where they currently do business. You have to shop around! Get multiple quotes, understand rates and fees, and read lender reviews online. Competition With the number of homes for sale at historically low levels, all-cash buyers — typically investors eager to renovate and resell or rent out homes — are jumping into this rapidly rising market. And they’re swooping up homes like there’s no tomorrow! Don’t underestimate this deep-pocketed competition, but don’t take unnecessary risks (such as waiving inspection contingencies, for example), either, simply for the sake of getting your piece of the American Dream. You may be inviting trouble, and that trouble could be costly. Price Yes, you guessed it. Because there’s not much to look at these days (just a few months’ supply in some markets!), and you’re up against stiff competition, you could easily end up paying more than you bargained for. Don’t bust your budget! Your monthly mortgage payment should be 25 percent or less of your monthly take-home pay. Run the numbers using Zillow’s mortgage calculators. Related: 4 Real Estate Trends for Summer 2013 Remodeling? Avoid These Costly Mistakes Fatten Up Your Wallet This Summer Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
More Young Couples Say ‘I Do’ to Buying a Home Before Marriage By Graham Wood | Posted Apr 18th 2013 3:56PM First comes love … then comes a house … then comes marriage. Getting hitched may not be the ultimate sign of commitment these days as more and more couples opt to buy a house together before walking down the aisle, new research shows. Nearly 1 in 4 married couples ages 18 to 34 purchased a home together before getting married, according to a recent Coldwell Banker Real Estate survey released this week. That compares to just 14 percent of married couples ages 45 and older. That’s a reflection of millennials’ shifting attitudes toward commitment, said psychotherapist Dr. Robi Ludwig. “People are very commitment oriented, but millennials are much more pragmatic,” she told AOL Real Estate. “I think millennials are saying that if we want to have the life we want, we need to make smart decisions early on. … The home becomes the new engagement ring — and in some ways, the new wedding.” It’s not that these young couples are less committed by putting the purchase of a house before a wedding. According to the Coldwell Banker survey, 80 percent of all married couples who bought a home together at any stage of their relationship said that purchase strengthened their bond more than any other purchase they’ve made. (The survey of 2,116 adults was conducted March 8-12, reported USA Today.) For Zina Miranda and her fiance, Steve Roman, both 24 (and both pictured at left), buying a house was the next logical step after getting engaged. They’re not due to marry until May 2014, but this June will mark their five-year anniversary, and they were just ready to take the real estate plunge. The couple recently bought a house in Patchogue, N.Y. “We got engaged, and I was like, ‘OK, let’s start looking [for a house],” Miranda told AOL Real Estate. “It was just a really good opportunity to buy a house. We had been saving a long time.” Does she think that buying a home proves their commitment to each other even more than getting married? “On some level, yes,” Miranda said. The couple’s venture into homeownership is doubly important to them: It’s the first time they’ve lived together. “This is the house I could live in through the rest of my life,” she added. While that might be a beautiful thing for young couples in love, the legal ramifications of buying before marriage could be a little uglier. John Braun, a real estate attorney at Thomas Law Group in Minneapolis, said that he has one word of advice for couples buying a home before marriage: Don’t. If you buy a home before marriage, Braun explained, you basically sign a contract that gives you both equal ownership of the house, but not joint ownership (at least until marriage). In the event one of the partners dies, their share of the house goes to their heirs, not the other partner. And if you never make it to the altar and break up, well, “you are left owning a piece of property with someone who is wishing that you would die,” Braun joked. “When I am not scaring people away from [buying a house before marriage] altogether, I usually recommend that they have an agreement that governs their ownership interests whatever happens,” he said. “This kind of contract sets forth the contributions made by each party, establishes a right of either party to demand that the property be sold and makes a bunch of other decisions by agreement in advance that are impossible to make by agreement when the parties hate each other. This is an area where an hour or two with an attorney can really pay off in the long run; untangling these interests down the road is a time-consuming — and expensive — undertaking.”
By Les Christie @CNNMoneyApril 18, 2013: 2:59 PM ET NEW YORK (CNNMoney) The housing market has made a big comeback over the past year; home prices have surged some 8% and homebuyers can’t seem to buy up properties fast enough. But just as quickly as the market is gaining ground, some industry experts worry it will come crashing back to Earth. Here are three reasons the housing market recovery may not last: 1. The housing recovery is being led by investors. One problem is that investors are leading the latest surge in home prices, said Dean Baker, co-director of the Center for Economic and Policy Research. They are taking advantage of low interest rates and depressed home prices and when those rates and prices rise, they’ll likely pull back, he said. “An investor-driven boom is likely to end badly,” said Baker. “I’m worried that some of the big jumps in prices are driven by the same sort of speculation that drove the [original] housing bubble.” And while institutional investors and small but experienced mom-and-pop outfits have been buying many of the properties, there are a growing number of inexperienced “armchair investors” now buying into the boom — a sign that demand may be peaking, Baker said. Related: Buy or rent? 10 major housing markets In some hot markets, home prices should start slowing or even reverse gains. In Phoenix, where selling prices were up 23% year-over-year in January, many investors planned to rent out the properties they bought. “Yet, there was no comparable increase in rents and the rental vacancy rate in Phoenix is very high,” said Baker As investors realize a low rate of return on their investments, demand will soften, he said. 2. The economic recovery is just not strong enough yet. “These days, I worry more about the economy hurting housing than housing hurting the economy,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank. He’s especially concerned about employment. Hiring slowed significantly in March, with just 88,000 jobs added — the weakest showing since last June. Related: Was your home a good investment? Meanwhile, half a million Americans withdrew from the workforce during the month; either because they stopped looking for work or retired and stopped drawing unemployment. Many were discouraged workers, a sign that the economy remains weakened. While Bernstein thinks the housing recovery will continue, he believes it will do so at a much slower pace. Once the jobs picture improves, he said strong pent-up demand for homes should emerge. 3. Government cuts will hurt homeowners. Headwinds from the current round of government spending cuts — $85 billion worth — could also curb the housing market’s recovery. “The spending cuts from the sequestration [will] hit their apex this summer,” said Mark Zandi, the chief economist for Moody’s Analytics. The cuts, including unpaid days off for federal workers, cuts in unemployment compensation and decreased military spending, combined with the expiration of payroll tax breaks earlier this year, will lead to job and income losses that could strip about a percentage point off the GDP this year, according to Bernstein. Related: 5 best markets to buy a home And while current mortgage rates remain extremely low, about 3.5% for a 30-year, fixed-rate loan, they’re bound to go up, the industry experts said, making it a lot more costly for people to afford homes. “I’m worried that it’s too tough for many people to make the family budget, including the mortgage payment,” said Bernstein. 3 reasons the housing recovery may not last
Go Green Up Top With a Living Roof Date:April 18, 2013|Category:Tips & Advice|Author:Erika Riggs For thousands of years humans relied on natural roofs — made from sod, mud or straw — to keep their homes cool in the summer and warm in the winter. Today, “living roofs,” the next generation of those earlier thatched roofs, are slowly sprouting up throughout the U.S., primarily in cities where green space is limited and the benefits are more substantial. This recently sold home in Walla Walla, WA features a living roof. Alternatively called green roofs or vegetated roofs, living roofs are exactly as they sound: roofs that contain plants and a growing medium (special soil mix) rather than shingles, brick or asphalt. Living roofs can vary — from a lower-maintenance roof with drought-resistant plants or pre-planted modules to a roof set up to grow full grasses or gardens. Benefits of green roofs Living roofs’ benefits are primarily environmental, especially in larger cities: The roofs can absorb water runoff, reduce the heat emitted by buildings, keep buildings cooler and offset carbon emissions. In New York, green roofs have been particularly embraced. “From an environmental standpoint, NYC has significant stormwater problems, so creating more permeable space is a positive,” said Chris Brunner of New York Green Roofs. “Heat island issues [where urban areas have higher temperatures than surrounding areas] are enormous in NYC, and it also helps mitigate that.” New York City also needs solutions to manage water runoff. Each year, more than 27 billion gallons of untreated sewage enters the New York Harbor alone when stormwater runoff floods city sewers. The appeal of green roofs even led New York City Mayor Michael Bloomberg to previously offer one-time property tax abatements for owners who installed green roofs. And of course, adding green to the Big Apple’s concrete jungle is also appealing. “In New York City there’s not a lot of real estate left on the market, and it’s good if you can start capitalizing on the tens of thousands of rooftop space available, [something] that makes it so people can interact with a new sort of environment,” Brunner said. Cost and maintenance By far the biggest drawback of a living roof is the cost. According to the Environmental Protection Agency, costs start at $10 per square foot for simpler extensive roofing and go up to $25 per square foot. But most homes are not prepped for a living roof, and redoing the structure can drive up the cost even further. Different plants, such as the ones on this Charlotte, NC home’s roof, require varying amounts of maintenance. “If it [a building] wasn’t constructed with that purpose in mind, it would have to be checked out by a structural engineer,” said Damon Shelton, one of the founders of Element Smart Roofing in Seattle. “Most homes older than five years aren’t equipped to handle that kind of load.” Shelton’s company installs roofs made of pre-planted modules that layer over a membrane and slipcover. As far as living roofs go, those don’t require a lot of maintenance. “It’s set up so you don’t have to be an expert gardener to have a life roof,” Shelton said. “A lot of people shy away from the roof because of maintenance. You wonder, will these roofs live?” The maintenance is ultimately design dependent, Brunner says. “There’s a difference between low-maintenance roofs and ones designed to be more intensive.” Building trend This Seattle residence has a green roof just on its garden shed. Ultimately, the green roof movement is in its infancy, Brunner and Shelton say. “They’ve been doing green roofing and solar roofing in Germany,” Shelton said. “Seventy percent of their country has converted, but they’re way ahead of everyone else.” Brunner hopes that as the movement grows, the technology will improve and costs will go down. “The cost is going down, I can say that for being in the business for almost 7 years,” he said. “Supply lines are getting better, availability is getting better and competition is getting better. Green roofs are a great solution. It’s a fantastic technology, and it works very well.” Related: Green Home Trends: From Baby Steps to the Extreme Homes for Sale With Gorgeous Gardens Landscape in Small Spaces With Container Gardening
Mortgage Accessibility, Meeting Housing Demand Among Top Priorities for Housing Experts Date:April 19, 2013|Category:Housing Forum|Author:Cory Hopkins The housing recovery is on firm ground as buyers return to the market in droves and U.S. home values continue their more than year-long upward march. But stagnant income growth and a lack of flexible mortgage finance opportunities for home buyers are among the main concerns going forward, top economists and policymakers said recently at the Zillow-sponsored Forum on the Future of Housing. The forum, held April 18 at the Newseum in Washington, DC, and produced by Zillow in partnership with the American Action Forum and Progressive Policy Institute, attracted more than 250 attendees to listen to a series of panel discussions and keynote addresses featuring elected officials, leading housing-related association heads and housing analysts. Among the highlights were comments from Sen. Johnny Isakson (R-GA) and Sen. Jeff Merkley (D-OR), who each spotlighted the need for mortgage reform that is safe, sustainable and fair to borrowers and private lenders alike. “We didn’t have a down payment recession, we had an underwriting recession,” Isakson, a former real estate agent for more than 30 years, said during his conference-opening address. Underwriting standards supported by government-sponsored entities (GSEs) Fannie Mae and Freddie Mac prior to the housing recession helped inflate the housing bubble by sacrificing loan safety for profit, Isakson said. He has proposed phasing out the federal backstop role in the secondary mortgage market over 10 years, leaving a single, private company that’s created to eventually replace Fannie and Freddie. Keynote address by Johnny Isakson, United States Senator (R-Ga) In the forum’s closing address, Merkley echoed his Senate colleague’s concerns over Fannie and Freddie’s pre-bubble excesses. “We should never again let the humble, amortizing, fixed-rate mortgage become a predatory instrument,” Merkley said. “We can’t afford to get GSE reform wrong. We can’t afford to return to the former Fannie and Freddie model of private gain, public pain.” Keynote address by Jeff Merkley, United States Senator (D-Ore) The first panel discussion focused on the future of housing demand. It was moderated by CNBC real estate correspondent Diana Olick and featured Eric Belsky, managing director of Harvard University’s Joint Center for Housing Studies (JCHS); Mark Calabria, director of financial regulation studies at the Cato Institute; Doug Holtz-Eakin, president of the American Action Forum; Jerry Howard, CEO of the National Association of Home Builders (NAHB); and Richard A. Smith, chairman, CEO and president of Realogy Holdings Corp. The panel agreed that rising home prices are a boon to current homeowners but could present an obstacle for future buyers as income growth stagnates while prices keep escalating. Much of the discussion also focused on the current role of large and small investors in the housing market and how much of an impact they will have going forward. “Dismiss the idea that this is an investor-driven recovery,” Realogy’s Smith said. “It’s not.” Howard of the NAHB cited rising household formation rates as an indicator of solid future demand for housing, particularly at the first-time home buyer level. But he also said builders are having difficulty creating supply to meet this nascent demand, as lending standards for land acquisition and development for builders remain incredibly tight. Other panelists pointed to growing demographic diversity, increasing urbanization and the enormous size of the so-called “echo boom” generation as future drivers of housing demand. Panel on The Future of Housing Demand moderated by CNBC’s Diana Olick. Nick Timiraos of the Wall Street Journal moderated the second panel, focused on the future of mortgage finance. Panelists included Mike Fratantoni, vice president of the Mortgage Bankers Association (MBA); Jason Gold, senior fellow for financial markets at the Progressive Policy Institute; Laurie Goodman, senior managing director at Amherst Securities Group L.P.; Chris Mayer, Paul Milstein professor of real estate at Columbia Business School; and Scott Simon, managing director of Pacific Investment Management Co. (PIMCO). The capacity of lenders to actually make loans was a major topic. PIMCO’s Simon said loan capacity was down 45 percent, largely because several of the largest lenders in the country, including Citibank and Bank of America, have essentially stopped writing mortgages. Fratantoni of the MBA said much of the reluctance to write loans can be attributed to the very low margin for error among lenders facing harsh and costly penalties for regulatory non-compliance. “The mortgage industry used to be like a factory that made sweaters. Every now and then, you got a few that were imperfect, and had a few threads loose, but it was mostly OK,” Fratantoni said. “Now, the mortgage industry is a factory that makes jet engines. And nobody wants an imperfect jet engine.” Mayer said the mortgage industry could benefit from improving technology, as other industries have, but has so far been slow to adopt new, digital evaluation, underwriting and management processes. He also advocated for portable mortgages, which could be carried throughout a homeowner’s lifetime as they move from home to home. All panelists said they were concerned that rising mortgage interest rates may disrupt the mortgage market in coming years, making mobility more difficult and dampening demand for adjustable-rate mortgage products that are likely to become more expensive over time, not less. Panel on The Future of Mortgage Finance moderated by The Wall Street Journals’ Nick Timiraos Thanks to everyone who attended our Forum on the Future of Housing. Please check back here next week, when we will have an on-demand video of the forum available. For Zillow Chief Economist Stan Humphries’ full PowerPoint presentation highlighting the national housing market please click here.
Practical Renovations for Investment Properties Date:April 19, 2013|Category:Tips & Advice|Author:ProfessorBaron.com If you’re a new rental property owner, or even someone just considering becoming a landlord, you’re probably wondering which home improvements make the most sense when updating your investment property. Should you replace the windows or flooring? What about painting the walls and upgrading fixtures and finishes in the bathrooms and kitchen? The nicer your property, the longer you’ll likely keep your tenants. With that in mind, these improvements should make your property desirable without putting too much strain on your wallet. Interior paint New paint in a lighter shade is always nice. Glidden Soft Ecru, for example, is light and bright, and you can use a flat or semi-gloss finish for walls. Whatever color you choose, make it a lighter color and paint the whole house the same shade, except ceilings, which should be white. Flooring Carpeting can be relatively inexpensive but usually only lasts a few years. Plus many tenants get the “ick” factor seeing worn wall-to-wall carpet filling a space. Many landlords are opting instead for wood laminate flooring, which looks great and is tough as nails while being less expensive than hardwoods. Laminate is easy to clean between tenants, and there’ll be no arguments over who should pay for carpets to be cleaned. It’s better, however, to stick to tile in the kitchens, bathrooms and other high-plumbing areas. Plumbing If the property is reaching its second decade, you should consider having a plumber change out all the water valves, hose bibs, supply hoses and sink faucets (you can skip the in-wall supply or drain lines, as they typically last a much longer time). Check the dishwasher supply and drain lines, and especially the washing machine supply hoses and drain hose, which should be changed out every few years. Doing this upfront work will help reduce the risk of a pricey water-related disaster. Bathrooms Changing out old towel bars, toilets and sink faucets shouldn’t be too expensive. A new vanity top, medicine cabinet and/or light fixtures can be installed by a good handyman. If the property is 30-plus years old, it might be time to change out the shower, tub and floor tile as well. Kitchen The kitchen gets more expensive, so hopefully it’s been updated a little. If not, having the cabinets sanded and painted, and adding nice doorknobs should update the space without too much expense. Switching out old fluorescent ceiling lights for new track lighting and adding a newer countertop (laminate isn’t too pricey) could really update the look for years going forward. Consider changing out the sink/faucet, too, if you’re doing the countertop. You can find reasonably priced replacement combo packs at home improvement stores. Door knobs and locks These aren’t too expensive, and you can switch them out yourself. Interior knobs make the unit look much nicer, and exterior knobs and locks add security. Try Kwikset’s Smartkey exterior locks, which can be re-keyed in place between tenants. Related: Are You Ready to Be a Landlord? Rental Property Investing 101 Rental Homes: Making More Money by Keeping Your Tenants Happy Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
What Is A Market Analysis? Real Estate News | Apr 16, 2013 | By: Deidre Woollard What does it mean when a Realtor does a market analysis on a property? Today’s question comes from Stockbridge, MI. Q: I have never sold a house before, I have a realtor coming tonight to do a Market Analysis, what is that? I have an idea what it is but want to be sure. If they tell me a price they think the house is worth and I think differently then what? A: A market analysis pertains to a list of information about homes that have sold in your neighborhood or surrounding area similar to yours. Yes it will show pricing and this will be statistics that a realtor will utilize to figure out what to list your house for. Another good idea is to go view the current homes for sale in your area that are similar to yours minus a bedroom or a basement. That is another way to see what features these homes have compared to yours. Your agent is going to tell you what the best price is to list your home that is of course their job and it may be you will not agree. You can always list for your price and try it out for a few weeks and see if get any buyer interest. You may also want to interview other agents and get at least 3 realtors opinions and choose the realtor you feel with market your property the best. In the end if you want to sell then go with an agent that has a solid marketing plan and knows your community and has sold in it before! Study the market analysis and see if selling your home is what is financially best for you at this time. If inventory is low then you should expect a fast sale but if numerous homes like yours are for sale at the same time then maybe a good time to wait unless your home has a fabulous feature the others don’t have like a basement, pool or other – your realtor will know best! Good luck and let me know if can answer any other questions! – Krisztine Bell, Homestager Virtually Staging Properties
Should We Sell Our Home With Furniture? Real Estate News | Apr 17, 2013 | By: Deidre Woollard How much does furniture matter when selling a home? Today’s question comes from Birmingham, AL. Q: Do certain homes sell with furniture? Would you have to put the furniture in the house or would you include the furniture in the amount of the whole house? A: Very good question. It really depends on the floor plan and the furniture. If it’s an unusual floor plan than yes it does help, but in most circumstances furniture properly place and in good condition can help a buyer visualize how to place there own furniture. However too much furniture can make the home look too small. If you notice most new home subdivision have furnished models because the buyer can then visualized how to place the furniture they own and if the floor plan will work with what they have. Some homes however will show better empty if it’s a standard floor plan. Main thing to consider is stuff, too many nick knacks, personal pictures etc. take the buyer away from looking at the house they don’t remember the house they remember the stuff. So clean out the clutter, make sure you don’t have to much furniture, clean out the closets and garages as well. Pack up, you’re moving put it in storage or a POD and don’t put it on the market until it’s ready to show. The first two weeks of marketing are the best two weeks. Clean, shine and be ready. Start at the curb look at what the buyer will see, check the front door and the shrubbery first impressions do make a difference. The market is improving quickly don’t miss out by being unprepared for the buyers that may have an interest. – Ginny Willis, REALTOR® Re/Max First Choice A: Should you make an offer on a property, you can ask the seller to leave specific items. However, your offer on the property should be based on the value of the home and not the furniture. Should the seller decide that they want to leave the furniture, ideally it would have to be negotiated separately via a purchase contract for personal property. Otherwise, you should make sure that the contract indicates that the furniture is of no real value. – Charita Cadenhead, REALTOR® BHam Wire Realty A:That depends on the seller. Some sellers will sell their homes with the furniture. This happens in cases where they do not want to move it. Of course, you can always ask for anything in the offer. Or you can offer to pay for the furniture you wish to have. A lot of sellers with vacation homes sell the house with its entire contents when they sell. – Terry Stiles Harrison, REALTOR® Realty Styles LLC
30-Year Fixed Mortgage Rates Decline for Third Consecutive Week Date:April 16, 2013|Category:Finance|Author:Alexa Fiander Mortgage rates for 30-year fixed mortgages fell this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 3.34 percent, down from 3.35 percent at this same time last week. The 30-year fixed mortgage rate hovered between 3.41 and 3.32 percent for the majority of the week, dropping to the current rate this morning. “Rates fell slightly this past week after lower-than-expected retail sales numbers raised concerns about softening consumer confidence,” said Erin Lantz, director of Zillow Mortgage Marketplace. “We expect mortgage rates will remain depressed this week due to apprehension related to the Boston Marathon bombing and threats from North Korea.” Additionally, the 15-year fixed mortgage rate this morning was 2.55 percent, and for 5/1 ARMs, the rate was 2.32 percent. What are the rates right now? Check Zillow Mortgage Marketplace for up-to-the-minute mortgage rates for your state. *The weekly rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.
The First Thing to Do Before Buying a Home By Gerri Detweiler | Credit.com – Fri, Feb 22, 2013 6:00 AM EST m/b?P=m.hr0grHg2.qY0BJUWdrUgAPYw6jw1Fq.O0AD0AE&T=1ev7so20u%2fX%3d1365965039%2fE%3d1183311986%2fR%3dfin-glob%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d3102362489%2fH%3dX2lkPSIxYmU0NDUyYy1iMGJlLTM2ZjYtOTI1Yy0zMTJhZTQyNzQ0ZWQiIGNhbl9zdXBwcmVzc191Z2M9IjEiIGNvbnRlbnQ9ImZpbmFuY2UiIHJlZnVybD0icmVmdXJsX2ZpbmFuY2VfeWFob29fY29tIiBycz0ibG1zaWQ6YTA3NzAwMDAwME1EWWNSQUFYIiBzZXJ2ZUlkPSJtLmhyMGdySGcyLnFZMEJKVVdkclVnQVBZdzZqdzFGcS5PMEFEMEFFIiBzaXRlSWQ9IjQ0NTEwNTEiIHRTdG1wPSIxMzY1OTY1MDM5MDc2OTQ5IiB0b3BpYz0icGYtQnV5aW5nIiA-%2fQ%3d-1%2fS%3d1%2fJ%3d4281C70A&U=12b1hdoee%2fN%3d9vXekGKL5Uw-%2fC%3d-1%2fD%3dREC%2fB%3d-1%2fV%3d0″> Home prices in most parts of the country are just about as affordable as they are likely to get, and mortgage rates remain super low. Together, those factors mean that many people are thinking about buying a home. Some will be first-time homebuyers, while others will be “boomerang” buyers who lost their homes in the housing meltdown but are now hoping to get back in. Still others may see this as the best time to upgrade to a larger home, downsize to a smaller one, or to move to the retirement locale of their dreams. Whatever your motivation for buying a home, unless you are going to pay cash for the property, there’s one essential step you must take first: get your credit reports and credit scores. The reason? Your credit scores will help determine what type of home loan financing you can get, and the interest rate you’ll pay. You’ll want to have plenty of time to dispute credit report errors if you find any, and get them fixed. The last thing you want is to find out at the last minute that you can’t buy your dream home because of something on your credit report that shouldn’t be there. If you will be buying and financing a home with someone else — a partner or spouse, for example — you’ll each want to get your credit reports and scores. Get them from all three major credit reporting agencies; Equifax, Experian and TransUnion, as they each collect their own data and don’t share corrections with each other. You can do this for free once annually at AnnualCreditReport.com. You’re Not Just a Number The three-digit number that represents your credit score will be important when it comes to buying and financing a home. A difference of a few points could make a difference in the rate you’ll pay for your mortgage. Mortgage lenders will typically use the middle of the three credit scores to determine the rate/program for which you qualify. But that doesn’t mean you need to obsess about your score. Doing so can cause you unnecessary grief. After all: Trying to tweak your scores based on what you think may help improve them can sometimes have the opposite effect. There are many different loan programs with different credit score requirements. A loan officer can help you shop around to find the right program to meet your needs. Keep in mind that you have many scores, not just one, so trying to figure out which scores matter most can be an exercise in futility. When it comes time to apply, your lender will pull the credit scores needed to process your application. In the meantime, you can find out where you stand and get an idea of what factors may be strong, and which may not be. Again, no need to obsess over the number. In fact, when we recently included a free credit score with our free Credit Report Card — one of our most popular tools — since we wanted to make sure that consumers understand that they don’t have a single score. That’s why we provide an Experian Scorex Plus score, but also show consumers their estimated VantageScore and FICO scores along with it. After all, there are dozens of scores available at any given time, and if you focus on just a single number, you may miss the bigger picture. What’s in a Number? If focusing on the number that represents your credit score isn’t the most important thing, then what is? Understanding the elements that make up your scores can be much more important. Our Credit Report Card, for example, assigns a grade to each of the main factors that go into a score: Payment History Debt Usage Credit Age Account Mix Inquiries Within those, we recommend you put your efforts toward the things you can control. If you get a “C” or “D” for a particular factor, you’ll get suggestions for things you may do to address that grade. Some of these may be things you can address immediately while some may not be under your direct control. If you earn a “D” for debt usage because your balances on one or more of your credit cards is close to your limits, you may want to pay some of them down if you have the cash available to do so. On the other hand, if you have a large student loan balance that you can’t afford to pay off, you may want to simply focus on making your payments on time rather than taking all the money you’ve saved for a down payment to pay it off. [Related Article: What’s a Credit Score? Really] What Can Your Score Do For You? When it comes to buying a home, your credit scores can help you secure the financing you need to buy the property and pay it off over time. Your credit scores are a tool to help you achieve your personal and financial goals. If you can get the loan you need with the credit scores you have, then be satisfied with that — even if you don’t have the best score your loan officer has seen! And finally, it’s important to put your scores in context. Mortgage lenders will look at other factors, like your debt-to-income ratios, employment history, and down payment. As any loan officer can tell you, even a perfect score can’t get you a loan if — for example — the appraisal comes in too low, or if you can’t document your income.