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Approximately 110 million Americans will see their credit score change in the upcoming month due to FICO launching a new scoring model this summer called the FICO Score 10. The new model will focus more on consumer’s account balances and potential missed payments over the past two years. An estimated 40 million consumers will see their scores drop by an average of 20 points as a result of the new scoring model. How it Works FICO’s new scoring model is designed to weigh delinquencies, especially those that have occured in the past two years, more heavily than past models. The new model will be putting those with late payments on their history as well as those that have a history of high utilization ratios (the amount of credit you use vs. what you have available) at a disadvantage. It will also flag consumers that apply for personal loans, which are generally considered riskier than other financial options. How it Affects Your Mortgage According to Fair Isaac Corp., the company behind FICO scores, the new model should reduce defaults significantly, particularly for lenders who issue mortgages. Fair Isaac reports that, “the reduction in defaults is even higher for newly originated mortgage loans, at 17% compared to the FICO score used in that industry.” If and when lenders do begin to use the FICO 10 model to evaluate mortgage applicants, potential homebuyers will need to take extra steps to prevent late payments, which could negatively impact their score, leading to higher interest rates and less favorable loan terms. However, a higher score can mean a lower rate, which can save you thousands over the life of ...
If you’ve lived through the recent real estate and economic recessions, the very title of this article may cause some pain. In the not-so-distant past, this country was swept with an economic crisis that many of our generation had never seen. It felt like the market would never recover. Fast forward a few years and now, once again, long term wealth is being built through real estate and the opportunity is available to the average American. The Appreciation Factor Appreciation, or the rising of home prices over time, is how the majority of wealth is built in real estate. While prices can fluctuate, real estate values have consistently increased over time and there’s no reason to think that’s going to change. According to the National Association of Realtors (NAR) , the average price appreciation of a single family home ranged from 29% (seven year tenure) to 39% (ten year tenure), with average gains of $38,000 to $49,500 respectively. One thing to consider when it comes to real estate appreciation affecting your ROI is the fact that appreciation combined with leverage offers huge returns. For example, if you buy a property for $300,000 and it appreciates to $330,000, your property had made you a 10% return. However, you likely didn’t pay cash for the property and instead used the bank's money. When considering that you may have put 10% down ($30,000), you have actually doubled your investment, which is a 100% return. The Longer You Own a Home, The More Equity You Gain Net worth, in the form of equity, is one of the first measures of the financial benefits of homeownership can build over ...
A healthy job market paired with lower mortgage rates have made homes more affordable for many consumers in the United States. Consumer Confidence in the Current Economy With a consistent demand for housing across the country as a whole, consumers are confident in the stability of both the current economy and job market. 2019 saw three interest rate cuts from the Federal Reserve which helped support some of the housing market’s recent strengths as well. Some speculate that the housing market may still have more room to grow as unemployment rates remain low and average wages are beginning to increase. Scott Clemons, chief investment strategist with Brown Brothers Harriman, expressed that, Housing is important for consumer psychology since homes make up the bulk of most people's wealth, not stocks. Housing can continue to be a tailwind for the economy. The average 30-year fixed mortgage rate is hovering around 3.625%, down from 4.51% at the beginning of 2019. In response, new home sales hit the highest level since 2007 beginning in December of 2019. Brad McMillan , chief investment officer at Commonwealth Financial Network noted that, “Housing is a significant indicator of consumer willingness to spend, and this recovery is a positive indicator for 2020”. In response to swirling rumors of a recession to hit 2020, CNBC , quoting Goldman Sachs economists, stated, Just months after almost everyone on Wall Street worried that a recession was just around the corner, Goldman Sachs said a downturn is unlikely over the next several years. In fact, the firm’s economists stopped just ...
One of the first (and most important) steps you should take when buying a home is getting a mortgage pre-approval. Securing a mortgage pre-approval lets sellers know you’re serious and will help your offer stand out in a crowd. It tells real estate agents that your time is valuable and alerts lenders that you may be taking out a mortgage in the near future. Here are our top 4 reasons why getting a mortgage pre-approval should be your first step in securing your dream home. You’ll Know How Much You Can Borrow and Afford Getting pre-approved gives you a solid understanding of what you can afford, what you’ll be able to borrow, and your overall budget. It can be easy to get caught up in the excitement of finding the perfect home but it’s important to fall in love with one that makes sense financially. Speaking with a lender will give you a conditional green light on what you can afford and what price range you need to stay within. It’s important to note that lenders calculate what you qualify for based off of your gross income, which is your income before taxes are taken out. Consider your daily, weekly, and monthly expenses when determining what budget works best for you. You’ll Gain a Competitive Advantage When Making an Offer Currently, we are in a seller’s market. Inventory is low so buyers need to be as competitive as possible when securing the perfect home. Get a step ahead of other buyers by securing a mortgage pre-approval. Sellers want to choose someone that’s prepared and a mortgage pre-approval gives sellers confidence that closing the deal won’t get derailed by some ...
If you remember the days before online listings, virtual tours, and e-signing, you understand just how much things have changed in the real estate industry. Clients focus has shifted towards marketing, content creation, and overall responsiveness of agents which makes the ability of modern realtors to keep up with the move toward mobile more important than ever. According to the National Association of Realtors (NAR), 87% of buyers purchased their home through a real estate agent or broker, a statistic that has steadily increased from 69% in 2001. While tech hasn’t replaced the need for an agent, realtors need to be fluent in industry advancements (and the client demands that come with them) more than ever. A Real Estate Agent’s Changing Role Jeremy Wacksman , Chief Marketing Office at Zillow, commented on technology in the industry: Before, you spent a lot of time doing information gathering, collecting, and responding. The internet really opened the doors. Agents are freed up to help get the deals done. But now they have to be an agent, negotiator, price setter, and a community resource. Glenn Orgin , CEO of the real estate tech platform Richr, would agree. In a recent interview, he stated that, “The introduction of virtual services allows sellers to stage homes in virtual reality, so buyers can easily view homes from any location”. With data being made more accessible than ever, Orgin sees technology shifting the role of a realtor to a local market expert and service provider. Realtors will need to take advantage of new technology to help their team become more responsive when keeping up with their clients. ...