Friday, July 20, 2018

The Inside Workings of Credit Scores (Part 1 of 2)


Consumers are encouraged to check their credit reports once per year. The primary reason for doing so is to make sure there aren't any mistakes. Unfortunately, credit reports are prone to contain mistakes. It's not really the fault of the three main credit repositories, Equifax, Experian and TransUnion because all three are just a database. Whatever is reported to them is what you see. Further, someone with a similar name can show up on someone else's report. If you're not the only Bob Smith in town, this is certainly possible.
Someone else's poor credit might very well be showing up on your report which can directly damage your credit scores. When you find an error work with your loan officer to get it fixed. Your loan officer has working relationships with credit agencies and can help get mistakes fixed and provide a method to get your scores back to where they should be.
But have you ever wondered how these scores are calculated in the first place? They follow an algorithm first developed by The FICO Company years ago. For a while, credit scores weren't the primary force behind a credit decision but over time the impact of a credit score became more and more important. Most every loan program available today has a minimum credit score and if a score falls below the minimum, there's some additional work that needs to be done to get those scores back on track.
There are five characteristics of your credit history that make up your three-digit score:  your payment history, account balances, how long you've had credit, the types of credit used and how often you've applied for new credit over the past couple of years.
Credit scores range from 300 to 850. Let's say a borrower has a credit score of 600 but needs a 620 to qualify for a particular loan program. Credit scores will improve much more quickly by paying attention to the two categories that have the greatest immediate impact on a score- payment history and account balances.

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Thursday, July 19, 2018

Can You Use Bonus Income to Help Qualify for a Home Loan?


Yes, you can. But the bonus income needs to follow a few rules, first. Employees get paid in different ways. The most common is a regular paycheck on the 1st and the 15th of each month or maybe every other week. One of the primary responsibilities of a mortgage lender when evaluating a loan application is to make the determination the borrowers have the ability to repay the new mortgage along with any existing monthly credit obligations. The process is relatively simple. The lender compares total monthly credit obligations with gross monthly income. When calculating the mortgage payment, which includes an amount for taxes and insurance, lenders like to see this amount be somewhere near 28-33 percent of gross monthly income and closer to 41 percent when including all monthly payments.
Lenders then verify income by reviewing the most recent paycheck stubs covering a 30 day period. The stubs will show the gross income, deductions and net pay. It will also show a year-to-date amount. In addition, copies of your last two years of W2 forms will be needed. Lending guidelines require there be at least a two-year history of employment and then make the determination the income is likely to continue into the future. If someone is self-employed, then the last two years of personal and business income tax returns will be reviewed along with a year-to-date profit and loss statement.
Okay, but what about a bonus? Can that be used if needed? Guidelines for bonus income follow the same type of review as other types of income. Is there a history of receiving bonus income? There needs to be verification the bonus income has been received for two years. In addition, the bonus income needs to be regular and of a similar amount each time. Let's say an employee gets a bonus each quarter for reaching a particular goal. The bonus amount is $1,000. The lender will need verification this amount has been received for the past two years. With this history, the lender can reasonably determine the bonus is likely to continue. Using this example, there is an additional $333 per month that can help the borrowers qualify.
If on the other hand, the bonus amounts vary in amount or frequency, it's possible the income cannot be used, even though there is evidence the employee has received it. Or, the bonus might be an annual bonus paid at the first of every year. In this instance, the additional income can't help, even though it's been the same for the past two years. Why? Because a bonus paid in January probably might not be around come August or September.
One final note about bonus income- if more than 25 percent of the individual's income comes from a bonus or as a commission, that person is then considered self-employed and will be underwritten as such. If you're planning on using your bonus income to help qualify, it's a good idea to speak with your loan officer first to see how you'll need to document this additional income.

Wednesday, July 18, 2018

4 Reasons To Redo Your Master Bath (Part 4 of 4)

Because it's easier than redoing your kitchen
We're not saying you shouldn't redo your kitchen. Especially if you're going to sell your home sometime soon, you're going to want to look into that. But your home (presumably) only has one kitchen, which can make renovations a huge hassle if you're planning to live there while they're being made. If you have more than one bathroom, you'll still have a place to shower, shave, and shampoo, even if your master bath is a construction zone for a while. The dust is also typically less intrusive with a master bath reno because it's not an open space like the kitchen, which makes it easier to stay put while the work is being done.

Tuesday, July 17, 2018

4 Reasons To Redo Your Master Bath (Part 3 of 4)

Because you deserve to enjoy it before someone else does
Like we said…getting in there and updating your bathroom means you get first crack at the gorgeous new walk-in shower instead of turning the house over to somebody else as soon as the updates are done. It's just not fair that you finally have the bathroom of your dreams, and you won't get a chance to use it.

Monday, July 16, 2018

4 Reasons To Redo Your Master Bath (Part 2 of 4)

Because you can do a lot of it yourself
Speaking of DIY, how handy are you? If your answer is, "not very," you can still have a hand in doing some of your own updates, which will give you an added dose of pride and save you some cash. While plumbing and electrical are probably not going to be on your agenda if you're not skilled in those areas, perhaps you can lay some new tile or at least do some demolition of the old, ugly stuff you've been wanting to get rid of forever.

Sunday, July 15, 2018

4 Reasons To Redo Your Master Bath (Part 1 of 4)


Many of us hold off on doing any renovations or updates to our home because we don't want to spend the money. Oftentimes, those updates don't happen until we're getting ready to sell our house - which is sad, because it means you don't get to enjoy the updates yourself. When it comes to the master bath, it's often the last place that gets done, period, because we so often focus on kitchens and spaces that guests more commonly see. But, you deserve to luxuriate in that sparkling new tub and gaze at those pretty countertops now - not just on your way out the door to another home. And that's only one reason to start updating your master bath right away.
Because it gives good ROI
Like any other renovation, your return on investment will depend on how good of a job you do. Make poor choices or do shoddy work and your reno likely won't pay off. But make smart updates and you could see an average of a 70.1 percent return - one of the higher returns for reno project, according to the 2018 Cost vs. Value Report from Remodeling magazine, which takes the pulse of renovations nationwide every year. That potential ROI is based on a spend of $19,134 for a "non-upscale" remodel. (Their upscale remodel of $61,662 yields an average return of 56.2%.)
Do some of the work yourself, get great deals on materials, and find other cost-cutting measures, and your ROI will be even greater. Also, if you're turning a tiny shower into a large, luxurious one, adding a soaker tub to a bathroom that was missing a tub altogether, or turning a one-vanity space into a two-fer, you could be creating a space that will help attract buyers instead of turning them off. A bad master bath can make your home sale a bust.

Saturday, July 14, 2018

5 Tips for Staging Your Home (Part 5 of 5)

5. Use Mirrors
Mirrors can help brighten a dark hallway, bring light into a room and make a room seem larger, says Forbes. For a big impact, get a cheap mirror and add a decorative frame, or group a lot of small mirrors in differing shapes and sizes. In a room with a window, place mirrors across from the window to reflect the sunlight.
Staging is all about helping potential buyers create an emotional connection with your home. Help buyers picture themselves living in the house by decluttering, grouping furniture and accessories, adding one or two bold accents and using mirrors. Now get ready for the offers to roll in.