Should You Get A Mortgage Preapproval?

When you start the process of buying a home, the single most important thing you can do is to get a mortgage pre-approval. This step is relatively easy and straightforward, and will give you a clearer picture of your exact budget. But more than that, sellers often look at pre-approval as an indication of how serious the buyer actually is.

In order to get pre-approved for a mortgage, you need to provide your lender with extensive documentation proving your income, assets and debt obligations (we will get into those details later). If you qualify, you will receive a pre-approval letter indicating how much you can borrow to purchase your new home.

Below, we will cover how to get pre-approved for a home loan and why it can be incredibly important.

What Is A Mortgage Pre-Approval?

When a lender preapproves you for a mortgage, it tells you exactly how much they are willing to loan you to pay for a home. The lender makes this determination by reviewing your credit report, income, employment history, assets and debts. Your pre-approval will come in the form of a letter. It will also contain an initial interest rate as well as terms of the loan.

Keep in mind that a pre-approval is not a commitment to lend. Your desired house still has to pass an appraisal to qualify for whichever mortgage option you are requesting. While a mortgage pre-approval is not an ironclad guarantee that your loan will end up closing, having a pre-approval does show sellers that you are serious in your intent to purchase a home and have the financial resources to follow through

Mortgage pre-approval significantly boosts your chances in the housing market. For starters, most real estate agents expect you to be pre-approved for a mortgage before you even request their services. They tend to view it as an affirmation that you are someone they can trust and that you are serious about buying a home. Pre-Approval basically hedges against window shoppers since a lot of time and effort goes into finding and showing properties.

The entire process takes about two-to-four weeks.

What Is A Mortgage Pre-Approval Letter?

If a lender offers you a pre-approval, they will issue you a pre-approval letter. A good pre-approval letter will contain several pieces of information:

• The amount of the pre-approval
• The length of time the letter is valid for
• Which loan option is being used (for example, 30-year conventional)

Is Pre-Qualified the Same as Pre-Approved?

No, a mortgage pre-qualification is not the same as a pre-approval. Pre-approval is a process that includes getting an in-depth review of your finances or a hard credit check. Pre-qualified does not. Pre-qualification offers a relatively informal estimate of how much you can borrow. In a pre-qualification, a lender usually asks for verbal or written estimates of your income and assets to calculate your debt-to-income ratio (DTI) and down payment savings.

When it comes to choosing between getting pre-qualified versus pre-approved, a pre-approval is going to be more comprehensive and give you a more accurate look at the types of mortgages you qualify for.

While pre-qualifications are a good way to come up with a budget and an initial estimate of how much you can afford, in the eyes of sellers and the real estate agents, they do not mean very much because none of the numbers are verified. This can be particularly problematic in markets experiencing low inventory.

How Long Does Pre-Approval Last?

If you are pre-approved, you will receive an approval letter offer that lasts for 60 – 90 days, depending on the lender. After that, you will need to apply again with another credit check and updated paperwork. If there are any major changes to your financial situation, your pre-approval amount might also change.

You can look at a house without pre-approval but getting pre-approved early in the home buying process is most beneficial. This way, you can find out if there are any issues that could prevent you from getting financing.

How to Get Pre-Approved For a Mortgage

In addition to considering your credit score, lenders will want to verify your employment and income. They will also be considering your debt-to-income ratio (DTI), which is a calculation of your total monthly debts, divided by your monthly income. This ratio, expressed as a percentage, helps lenders make sure you have enough income to reasonably cover your debts.

The exact DTI needed for mortgage approval varies by loan type. But generally speaking, you’ll want your debt-to-income ratio to be 50% or lower.

Now that you understand the importance of the mortgage pre-approval, let’s run through the process.

Step 1. Get Financially Ready

If you are looking to buy a home in the near future, your first step should be to make sure you are financially prepared. There are a couple of steps you can take to get ready.

Check Your Credit Score

A good credit score is key to getting pre-approved. Each lender and loan type has a minimum credit score requirement that will apply to both you and any co-applicant. For conventional loans, lenders typically like to see a credit score of 620 or higher. Before applying for a pre-approval, take some time to request a free credit report to ensure there are no errors on your report that could be negatively affecting your score.

Since completing a pre-approval application does affect your credit score, getting a free credit check that will not impact your credit score will give you a rough idea of your current score. You can then use the estimate as a baseline for checking if you meet a lender’s mortgage qualifications.

Pay Down Your Debt

During the mortgage pre-approval process, your lender will also look at your debt-to-income ratio (DTI), which compares your monthly debt obligations to your monthly income. DTI requirements can vary by lender and loan type, but generally speaking, the lower your monthly debt compared to your income, the better. For the best chance of qualification, you want to keep your DTI at 43% or less.

Step 2. Gather Your Documents

Your lender will run a thorough search of your financials. To avoid any future headaches and expedite the process, have the following documents at hand. Keep in mind that this is not an exhaustive list:

• Proof of Identity: You will need to show your driver’s license or government-issued ID, passport, Social Security card and other documents that verify who you are and where your permanent residence is.
• Proof of Employment History: Most mortgage lenders require the last 30 days of pay stubs that also indicate your year-to-date income.
• Tax Documentation: Be sure to bring your last three federal and state tax returns along with your last three W-2 forms. If you are self-employed, you can collect your most recent 1099 forms.
• Bank Statements: Likewise, you will need the last three month’s worth of financial statements for all your accounts. This may include checking, savings, money market, and certificate of deposit (CD) accounts.
• Asset Information: You should also collect statements for brokerage accounts or other taxable investment vehicles. Proving you have assets at hand would serve you well in the mortgage pre-approval process.
• Real Estate Income: If you are earning income from any property, you will need to provide specific paperwork. These documents can include a lease and documentation of rental income for the last three years. You will also need to prove the current market value of the rental property.

Step 3. Shop Around

When you are going through the process of applying for a mortgage loan, shopping around could result in a better rate and higher loan amount. It is not just rates you should be worried about, but also how the lender will treat you, so you need to be comfortable. Do they charge fees for mail-in or phone payments? Will they service your loan after it closes, or will the servicing be sold? Will they proactively reach back out to you if there is an opportunity to get you into a lower rate? All of these things need to be considered.

What to Do After You Get Pre-Approved for a Mortgage?

After a lender pre-approves you for a mortgage, your journey through home buying continues. Pre-Approval usually comes in the form of a letter proving that a lender has verified your information and is willing to give you a specific loan. But remember, you earned pre-approval because you demonstrated your trustworthiness as a responsible borrower. If you fail to in your obligations, your lender may reduce the amount you can borrow, raise your interest rate or revoke the pre-approval if you fail to maintain a good financial standing. Lenders continue to monitor your debt-to-income ratio. So you should avoid making any large purchases without first notifying your lender.

In addition, avoid opening any new lines of credit. Each credit inquiry will knock down your credit score and change your credit capacity. Instead, focus on paying off your current debt and keep paying bills on time to boost your credit score. A different lender may take notice of your improved credit score and offer you a better interest rate.

Once you have found a home you are ready and able to commit to, your lender will move your mortgage pre-approval onto the final application phase. The loan finalizes when an appraisal of the home is completed, and your mortgage is tied to a particular property.

 Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

by Windermere Tower

How Important Is School District When Buying A House?

There is so much to think about when choosing a home to buy: location, floor plan, property taxes, whether you will have any nosy neighbors poking around. If you have children, choosing a home in a reputable school district might also be at the top of the list.

But you might not realize that whether or not you’re a parent, school districts can play a major role in your home buying decision. Here’s what you should know about how school districts affect your finances when buying a house.

How to Determine How Good a School District Is

When evaluating a school district, there are a few things to take into consideration. Take a look at the quality, age, and facilities of the schools themselves. Look into how students perform on standardized tests. Check out the student-to-teacher ratio to see how much personalized attention the students receive. The amount of spending per pupil at the school will tell you how much of the budget is allocated for each student.

Most importantly, talk to people who have lived in the area for a while and have children enrolled in the schools. You may even want to schedule an interview with a teacher or administrator at the school. A good school district generally produces good kids. Not only are they academically inclined, but well-behaved as well. As such, areas with good school districts tend to be safer and experience less crime.

Great grades are not all that matter, though. Sometimes the schools that are ranked the highest are the ones with the most rigorous curriculums, and those can sometimes be overly stressful or overwhelming for children or adolescents. For more personalized recommendations, turning back to the community is always a good idea.

If you can, you should check out all of the district’s schools. While your child might be going to elementary school now, he or she will eventually be going to middle school and high school. You want to make sure that they are all suitable for your child.

Understanding School Ratings

According to the National Center for Education Statistics, there have been more than 98,000 public schools in the United States. Even divided by 50 states, that number can feel overwhelming. But each state has School Report Cards, which are federally mandated to be available to the public under the Every Student Succeeds Act (ESSA). These report cards are similar state-to-state.

Although the names of the sections may differ across reports, the information they provide typically is divided into one of five categories:

1. Demographics

This section provides information on the students attending the school. This might be enrollment numbers, teacher and staff information, information on racial or ethnic self-identification, economic standing, learning differences, family backgrounds, and more.

2. Academic Achievement

This broad category covers how students perform on state exams. ESSA allows individual states to set their own parameters for standardized tests. However, to make it easier to compare schools in a consistent way, this section also typically includes performance on nationally standardized exams such as the SAT and ACT.

3. College and Career Readiness

This information might be included within academic achievement, but is often in its own section. Performance in upper-level courses and on national standardized exams is strong indicators here, if they are not covered in in academic achievement.

4. Climate

The Climate section deals with school environment. Many campuses now implement student survey data, asking students their opinion on how high classroom expectations are or whether they feel as though their teachers care about them individually. On a broader scale, this section usually also includes safety and disciplinary information.

5. Accountability

Accountability, another ESSA term, is used to indicate if a school has been identified as needing additional support, and if so, what kind. Often, this information is indicated on the first page of the report, in the “Overview” or “Summary” section. Occasionally, however, this information is given a tab of its own within the report. The accountability score given to schools is determined by individual states, as are the plans of support moving forward.

What a Good School District Means When Buying a Home

If you are in the market for a new home you better be researching local school districts – it could mean all the difference for your family, whether you have children or not. Homes in the best school districts, on average, sell for higher prices than similar homes in less-popular school districts. A simple analysis might say that good schools are wholly responsible for this added value.

Here are four of the main reasons why the quality of school districts is something that you need to keep in mind when you buy your next home.

1. Good Neighborhood

A good school district tends to equal a good neighborhood. Great location can mean safer neighborhoods, an abundance of places to eat, ease of access to transportation, proximity to urban, beach or vacation areas and amenities like public parks and services.

2. Good Education

If you have children, the biggest reason to buy a home based on the school district is so you can provide them with a quality education. A good district will offer the best education for your children. This is especially important if you have children with unique learning needs. Some districts are more accommodating to children who need additional enrichment or learning opportunities.

3. Home Value Stability

Even if you do not have kids, living in a good school district can help increase your home’s value over time. That is because neighborhoods with higher school ratings tend to have higher home values. Homes will go up and down in value, but an outstanding school district can make all the difference during a tough market.

4. Higher Resale Potential

Real estate is by nature a venture that carries with it a certain level of risk and never comes with guarantees. While this is true, you do want to do everything in your power to make sure you get the best that you possibly can for your family. Home buyers should think about resale and building home equity when selecting their new home- even if they do not plan to move in the near future.

After all, plans change unexpectedly. You may think a house is your “dream home” and plan to live there forever, but plans change. If you find yourself in a position where you need to move in a few years, you want the resale value to be high.

School Districts Matter Even If You Do Not Have Kids

Even if you do not plan on using the schools, the school district should still be an important part of your home hunt. If you have been browsing online real estate listings or talking with your agent, you have likely seen or heard about local school ratings. School district ratings are one of the neighborhood lifestyle statistics you often find in home-for-sale listings, along with data about walkability, crime, and more.

It might be tempting to skip over this info if you do not have kids, but do not discount this valuable information. If you are not a parent or do not plan to be one, you might still want to consider buying a home in a "kid-friendly" neighborhood with highly-rated schools.

The National Association of Realtors (NAR) found 26% of home buyers said the quality of local schools was important when finding a home and 20% said proximity to schools was a deciding factor. Realtor.com found that homes in good school districts got 26% more online views than comparable homes in average school districts and sold on average eight days faster. When school districts maintain their good rankings, these homes will likely appreciate in resale value.

Find the Right Agent

Choosing a location for a home is dependent on many factors for your individual needs. If you’re looking for better resale value and a safer location for your home, then you should consider buying a home that is located within a high-rated school district. Your realtor can help you choose a home in the perfect location for your needs

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

by Windermere Tower

Best Ways to Meet Your New Neighbors

Moving to a new home can bring with it a mix of emotions, especially if you are moving to a whole new city. Ensuring healthy relationships with your neighbors is a staple to feeling comfortable in your community. Our homes are more than just the physical space where we keep all of our things. They are the buildings and neighborhoods we inhabit, full of people who we share this larger definition of home with.

We have probably all lived in places where you have met all of your neighbors, and places where you have never once said a word to the people who live next door. Chances are you felt more settled in the homes where you also knew the people around you. Having a friend – or at least a friendly face – nearby goes a long way toward establishing feelings of home and community after moving.

Once you buy a new home and get settled in, you can start meeting your neighbors and building a community. The tips below should you give you a good jumping off point.

How to Introduce Yourself to Neighbors

The easiest way to meet new neighbors is simply to walk up to them and introduce yourself. Hopefully, your new neighbor will be happy to strike up a conversation with you.

1. Spend Time Outside

You might be surprised just how many neighbors you can meet by simply spending time outside in your new neighborhood. After all, you are not likely to meet your new neighbors if you spend all of your time in your house, so make sure that you spend time outside too. Walking the dog or taking your child on a walk is a great way to meet other dog owners or parents in the community. Talking about each other’s dogs or children is an instant conversation starter.

Make a point to do something outdoors every day. Hanging out on your front porch or taking a walk around the neighborhood can make it easy to strike up a conversation with another neighbor who is spending time in their yard. Gardening or beautifying the outside of your home will give you the chance for your new neighbors to come and introduce themselves. Over time, those neighbors you chat with when you are outside can become your friends.

2. Smile and Say Hello

This is sometimes all that it takes; it is as simple as that.

Meeting your neighbors does not have to include your introduction or a full conversation. Instead of thinking about throwing a housewarming party as soon as you unpack and create order in your home, just smile and wave to your neighbors when you see them. It will break the ice for future introductions and the neighbors will pick up your intention. Sometimes, that is all it takes for a good first impression.

If you want to talk, and you think the feeling is mutual, start the conversation. Let them know that you have moved in and let the conversation flow naturally. Remember, you will be able to pick up where you left off the next time you see them.

3. Offer Help

There is no better way to make a good impression on your new neighbors than to offer a helping hand. If you see that your neighbor needs help, offer some. They might need a tool that you can provide, or an extra pair of hands to carry something. This way, you will establish yourself as a person who is willing to help.

Those acts of kindness can help you make friends and show your new neighbors that you want to build a community. And of course, this is a great opportunity to talk to your neighbor and get to know them.

4. Ask For Help or Advice

You might think that it's not the best thing to ask for help from people you do not know. But remember that people love to help other people. It is built into our nature. You don't have to ask them to help you carry your sofa to your apartment, but you can ask to borrow a tool you need to assemble your furniture. When you stop by your new neighbor’s home to introduce yourself, ask them for advice on local activities or community events that you can be involved in. Asking for advice from a new neighbor is a great way to start a conversation.

As you explore the new community, consider asking a neighbor about their favorite local restaurants or coffee shops. You can also ask for recommendations for local service providers for everything from plumbing to the best place gym in town. Showing eagerness to learn about your new neighborhood will help your neighbors to feel at ease talking. This conversation will also give your neighbors the opportunity to tell you about events that happen in the local community.

5. Visit Nearby Public Areas

If you do not see many of your neighbors out in their yard or driveway, try meeting them in other areas of the community. Perhaps they relax at the community dog park or pool or exercise at the local gym. Visit typical meeting spots and you will likely make new friends there. You could also join a local club, group, sports team, or service organization.

6. Turn to Your Pets Or Kids

Kids and pets can be a great way to connect with others. If there are neighborhood kids the same age as yours, you can meet other parents while giving your kids the opportunity to make friends. Children can often make neighborhood friends faster than adults can. Inviting your children’s friends over to your house gives you the opportunity to meet their parents. If you have young children, you could even start a weekly play group where parents and children meet together to socialize and play.

And if you have a dog, you may quickly connect with other dog owners while you are out on your daily walks or at the dog park. Finding these things in common can help create a connection and even help your pets acclimate to the new neighborhood.

7. Host a Housewarming Party Or A Block Party

Nothing brings neighbors together like a party. If you are determined to get to know your new neighbors, consider throwing a housewarming party and inviting them to stop by for coffee or a meal.

You could even work with community members to organize a block party. It doesn’t just benefit you — it gives all your neighbors the chance to meet and get to know one another. A housewarming party does not need to be complicated. Typically, you will give a tour of your new home to your guests. If your house is not put together yet, you could also hold a party on your porch or deck. Barbecue food, play music, and let the kids play in the yard.

8. Attend Neighborhood Events

Perhaps your neighborhood already has an established community with regular block parties and events. Attending these events is a good way to show your neighbors you want to be part of the community. You could even join your neighborhood association group.

9. Attend Community Events

Community events are one of the most fun ways to meet your new neighbors and find out what your local community is passionate about. Look up events in your area, stop by local businesses and take note of events listed on their bulletin boards.

Communities often hold regular local events such as farmers’ markets and festivals. Becoming involved in the community by attending local events is one of the easiest ways to get to know your new neighbors.

Find the Right Agent

The day will come when your new neighborhood no longer seems so novel and you have settled in to life in the community. Take the time in the beginning to go the extra step and immerse yourself in where you live, and you will feel a deeper connection and appreciation as the days, months, and years add up. A move to a new neighborhood is an opportunity to explore the world with a fresh set of eyes, so make the most of it and get out there. You will always be glad that you did.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

by Darla Monks

How to Buy a House If You Have Bad Credit

Buying a house is possible with bad credit, but it is harder and more expensive than it is for those with excellent credit. Bad credit can be a result of circumstance or not knowing better. A home is one of the biggest purchases most people will make in their lifetime, and it can be a stressful process, even if you have great finances.

There are private and government-backed loan options that make it possible to become a homeowner even if you have bad credit. Other options include raising your credit score before you begin looking for mortgages. Having a higher credit score makes it easier to get a loan and helps you receive the best rates.

While it may take some work to improve your finances and get your credit rating up, it is certainly within reach. Let’s look at the options.

What Do Mortgage Lenders Consider A Bad Credit Score?

Most borrowers do not know this, but many lenders do not require a specific minimum credit score to buy a house. A conventional mortgage lender is free to set their own requirements when it comes to your credit score. Government-backed loans give mortgage lenders some peace of mind but they do have credit score requirements.

If you have a credit score lower than 500, you might find getting a mortgage a bit hard and will probably need to focus on increasing your score first. The minimum credit score you will need depends on the loan type. Another option that prospective homeowners with bad credit can take is purchasing a home with a co-borrower.

First, let’s take a look at the credit score ranges from FICO:

Exceptional credit = 800 and above
Very good credit = 740 to 800
Good credit =670 to 740
Fair credit = 580 to 670
Poor credit = under 580

How Your Credit Impacts Your Purchasing Power

If you have poor credit rating, it typically means that you will have a difficult time getting approved for loans. The good news is, it is relatively easy to raise your credit score—it just takes some time and due diligence.

One of the biggest things lenders will look at is your payment history. If you have a history of irregular or missed payments, lenders will be more hesitant to approve a loan. It is important to pay credit card bills and other loans on time, and if possible, at higher amounts than the minimum payment due. This will show a lender that you have the capability to pay off debt and manage credit.

Another key area of concern for lenders is your debt-to-income ratio. Debt-to-income ratio, or simply DTI, refers to the percentage of your monthly income that goes toward debt payments. When applying for a mortgage, you will authorize a credit check where lenders examine your credit history, including your current debts and the minimum monthly payments for these debts. They will calculate your total monthly debt payments, and then divide this by your gross income to determine your DTI ratio. So, if you have a gross monthly income of $5,000, and $500 in monthly debt payments, you have a DTI ratio of 10%—which is excellent. But mortgage lenders do not only look at your current debts when calculating DTI ratio. They also factor in “future” mortgage payments to gauge affordability.

Lenders will use this information to determine your ability to manage your monthly payments and repay what you’ve borrowed. If possible, aim to reduce your overall debt—this will help improve your debt-to-income ratio and make it easier for you to get approved for a mortgage.

One thing to keep in mind is that it is wise to keep your credit card balances below 50 percent of your limit. This will show you can manage debt and thus, keep your credit in good standing.

Can You Buy A House With Bad Credit?

Government-backed loans typically have lower credit score requirements, but homebuyers with less-than-ideal credit can still get a private mortgage if they make up for it in some other way. You may be able to put more toward your down payment, which reduces the size of the mortgage you need — and the lender’s risk. This costs more upfront, but you start with more equity in your home. This can be a better financial move than putting down less upfront and paying more in interest.

While it is possible to qualify for a conventional mortgage with a low credit score, government-backed mortgages may be a better option. Ideally, if you are able to reduce your total debt now and increase your income, this will improve your debt-to-income ratio. Having a healthy level of income and few debts shows lenders you are likely to have enough cash to make your monthly mortgage payments.

No two situations are the same, and outside of your actual score, lenders will also be looking at things like:

• How much the borrower has available for a down payment
• The borrower’s overall amount of debt
• How much income the borrower earns
• If the borrower has any debts in collections

How To Buy A House With Bad Credit

If you purchase a home with bad credit, you can always repair your credit and refinance your mortgage for much better loan terms later on.

Let’s check out some of the loan options available and the average credit score requirements for each of them.

Conventional Loans: 620 minimum credit score

Conventional loans are the generic name for mortgages backed by the government’s largest mortgage agency, the Federal Housing Finance Agency (FHFA). The FHFA backs 81 percent of all U.S. mortgages, so your mortgage will probably be backed by the FHFA, too.

There is not a set minimum requirement for income, credit score or down payment to qualify for a conventional loan. However, the minimum credit score required to qualify for a conventional mortgage loan is usually a 620 or better.

USDA Loans: 620 minimum credit score

The USDA loan is a no-down-payment mortgage for buyers in rural parts of the country and lower-density suburbs. The U.S. Department of Agriculture subsidizes the program. It requires home buyers to have a minimum credit score of 620 at the time of purchase, along with other income requirements specific to a USDA loan.

VA Loans: 580 minimum credit score

The U.S. Department of Veterans Affairs guarantees VA loans for service members, veterans and some surviving spouses. VA loans are available to:

• Veterans who meet service length requirements
• Service members on active duty who have served a minimum period
• Certain reservists and National Guard members
• Certain surviving spouses of deceased veterans

If you believe you qualify, you should contact the VA to receive a Certificate of Eligibility. Some lenders may be able to get the certificate on your behalf.

Homebuyer Assistance Programs: 580 minimum credit score 

Homebuyer assistance programs rarely enforce credit score minimums. Instead, they adopt the standards of their accompanying mortgage.

For example, if you are a home buyer who uses a conventional mortgage with a 620 credit score requirement, the homebuyer assistance program you use for a down payment will also use the 620 minimum.

FHA Loans: 500 minimum credit score

FHA loans let you put down as little as 3.5% if you have a credit score of 580 or higher. However, you may still be able to get a loan with a credit score of at least 500 — but you will likely need to make a 10% down payment. FHA loans also require you to pay a mortgage insurance premium.

Additionally, you must meet the following requirements:

• DTI ratio of 43% or less
• Steady employment and income (proved with documentation)
• Home must be your primary residence
• The minimum credit score needed to get an FHA loan is 500.

Rent To Own Home Ownership Programs

Another option that is gaining in popularity is the rise of rent to own home ownership programs. There are companies and investors that will purchase a property for you and lease it to you with an option to purchase it from them at a later date.  This is a great alternative to traditional mortgage programs if you are having trouble getting approved. This program allows you to purchase a home if you are facing credit and down payment hurdles.

You will not own the home in the beginning. Rather, you will start off as a tenant but you will work your way towards being able to secure the deed of that home with your own financing. The terms are usually set by the owner or investor of the property and do not require perfect credit or a down payment upfront to enter this agreement.

Owner-Financed Programs

Much like rent to own homes, owner financed homes are a direct agreement between you and the owner of a property that allows you to make payments that go towards the purchase of your home. The eligibility requirements, credit standards, and down payment of these types of home-ownership programs will vary from owner to owner.

Improve Your Credit Score

Taking a few steps to improve your credit score before home shopping will improve your homebuying experience exponentially. Getting a mortgage with bad credit is possible, but raising your credit score helps you access larger mortgage loans with lower rates. You will have more overall options if you raise your credit score before you buy a home.

If you have a mortgage already and do not plan on moving, boosting your credit score can help you save money on interest payments and refinance if rates drop.

Here are some tactics for raising your score and positioning yourself for better homebuying opportunities.

• Check your report and score every year
• Dispute errors
• Make your payments on time
• Only use credit cards for essentials
• Do not close unused accounts
• Temporarily avoid new credit
• Get a co-signer

Why You Should Improve Your Credit Score Before Buying

Even improving your credit score by just a few points before buying can still save you thousands of dollars. If boosting your score allows you to be approved for a conventional mortgage instead of an FHA loan, you will save the up-front mortgage insurance premium of 1.75% of the loan amount. Additionally, conventional loans tend to have lower closing costs and interest rates than FHA loans.

While both FHA loans and conventional loans will require monthly mortgage insurance if you put down less than 20%, an FHA loan includes monthly mortgage insurance for the life of the loan that you can only get rid of by refinancing—and paying closing costs on a new loan. For a conventional mortgage, the private mortgage insurance drops off once your loan balance is equal to 80% of the property value.

Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

by Darla Monks

How to Know If a House Has “Good Bones”

We have all heard a house referred to as having “good bones” but how many of us actually know what that means? On the surface, it sounds great! Good bones… yes, I want that!

As realtors, we have dedicated our careers to helping people find a home that is perfect for their family. Some people assume that the perfect home means they will need to build from the ground up with each detail of their own choosing. Luckily, this is not necessarily the case. If you find a home with “good bones” you can transform it to your dream home.

A home with good bones typically describes a fixer-upper or possibly a home that has great potential. Fresh paint, new carpeting and other cosmetic touch-ups can hide a wealth of defects in a house. When evaluating an older home, buyers need to look beyond the carefully curated facade to discover the house’s underlying qualities—its “bones.”

Of course, whether or not a home has “good bones” is dependent on a number of factors. For instance, construction materials often vary from location to location due to weather concerns (think: hurricanes, earthquakes, flooding, etc). So the type of house that has good bones in one state may not have good bones in another.

In the real estate and construction industries, a house is described as having “good bones” if it doesn’t have any major defects that could lead to expensive repairs. Overall, though, there are a number of features that the majority of homes considered to have “good bones” share.

Keep reading to find out the big indicators that a home has good bones.

What Does “Good Bones” Include?

There are many factors that determine whether a home has good bones. Depending on the location of the property the home may be affected by environmental factors such as hurricanes, flooding, or tornados. Another factor you might want to think about is the age of the home. In reality what determines a home with “good bones” is the opinion of the realtor and buyer.

Here are some possible determining factors:

1) Construction and Foundation
Without a doubt, the first thing people mean when they say “a house has good bones” is that its foundation is solid and its structure is sound. Throughout the years, the materials we use to build houses have changed. Oftentimes, older wood frame homes built in the first half of the 20th century were actually made of higher quality wood construction than the wood frame homes built today. These higher quality materials can decrease the defects present in the home. Other house building materials that are generally considered to be “good bones” also include brick and concrete.

2) Sturdy Roof
One of the most important (and expensive) parts of a house is the roof. In your research, find out what materials were used to construct the roof on your prospective new home (slate, cement tile, and metal will last significantly longer than wood or asphalt shingles) and when it was last replaced.

A proper inspection of the house should be able to tell you whether a roof is in disrepair. Look for visible signs of wear and tear such as sags, rust, leaks, mold, fungi, and any lifting, missing, cracked, or curling shingles. Over time, untended roof problems will trickle down to inside-the-home damage, so it pays to be vigilant, or at the very least to make sure you will not be surprised by the need for repairs. If the roof is relatively new and shows little (if not, zero) wear and tear, you can assume the house has good bones.

3) Natural light
Having plenty of natural light and well-constructed windows is a major plus when buying a home. A bright, airy ambience can also come from a home being optimally situated on the property. Windows that face south typically get lots of light throughout the day, while north-facing windows receive less. Windows on the east and west generally get strong morning or afternoon light, respectively.  To get a sense of the home’s natural light and to properly assess these “bones”, you will need to walk through the home in-person during different parts of the day. If the home is light and bright, you can say that the home has good bones.

4) Plumbing
How old is the plumbing and is it in good condition? These are questions that must be asked before purchasing a home. Typically the older the home the more likely you are to have concerns arise.  If the pipes are in good shape and the toilets, showers and other plumbing features are up to code and in good working condition, then you can be sure this home has good bones.

5) Coherent Floor Plan
Once you have filtered out all the bad decor, consider the flow of rooms, their size and proportion, and any inefficiencies or wasted space. This is often easiest to do by looking at a floor plan, because you can quickly see adjacencies, odd-shaped rooms, and potential ways to recapture unused square footage.

Consider the number of floors, bathrooms, and bedroom size and location. Do you want the main bedroom to be on a separate floor, or do you need it to be close to a small child’s room? Make sure the location of the laundry room is convenient—and assess the placement of appliances and toilets in the kitchen and bathroom, as changes in plumbing and electrical work are costly.

6) Good Location and Lot Size
There are some things you just cannot change about a property, and where it is located—and how it is oriented on its site—is one of those things. You have heard it from every real estate agent, and they’re right: Location is (often) paramount. A beautifully laid out townhouse is suddenly not as perfect if it is located far away from where you were looking, and a home in the ideal neighborhood that was placed on its lot so that it almost abuts its neighbor can be similarly unappealing.

Here are a couple “bonuses” if you find them in a home!

1) Flooring
Finding a home with good floor or original wood flooring can be a huge bonus to the value of your home. While damaged or low-quality floors are not necessarily a deal-breaker, they are considered to be part of the “bones” of the home. Given that real wood floors are quite expensive to replace, it is always a huge bonus when the house has good flooring, especially if all you need to do is sand them down and add a stain. If a home’s floors are capable of being restored to their former glory, you can consider the house to have good bones. 

2) Unique Features
Oftentimes, home buyers adore old, fixer-upper homes for their unique charms and historic features, such as wooden beams, wainscoting, vintage wallpaper, or antique lighting can be a factor of considering the home to have good bones. If you consider these features to be important in a home, then you can say the house has good bones. 

3) Bonus Rooms
Whether it is a mother-in-law apartment with the potential for rental income or an oversized basement with extra storage space, a home with a bonus room is always a big advantage. Not only is it good for resale value, but it is also an added convenience and expansion potential. If the home has a bonus room, you can claim it has good bones. 

Remember to Overlook Cosmetic Concerns

Even though charming features can be an indication of good bones, do not get too wrapped up in decorative details. While midcentury modern has been back for some time and the shabby-chic style is all the rage, there are definitely trends from the past that just do not speak to us today. Things like shag carpeting, dingy paint, and peeling wallpaper can all be replaced without spending too much money. Do not be deterred by a kitchen full of avocado-colored appliances. Instead, squint and imagine the space with gleaming hardwood floors and bright white walls.

A Professional Inspection is Crucial

While a home may appear to have “good bones,” the only way to truly know for sure is to conduct a professional home inspection. An inspection typically includes a thorough look at the condition of a home’s heating system, central air conditioning system, interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation basement, and visible structure.

In addition to the standard inspection, you might also consider adding on tests for radon, mold, and lead-based paint, as well as a pest inspection and a well and septic inspection, if needed.

Most inspectors will provide estimates on the ‘life expectancy’ of certain items like the roof, furnace, and appliances. That is why it is a good idea for buyers to attend their inspection. Not only can you learn a lot about the home you are buying, but it is also a great opportunity to ask questions and discuss any concerns.

Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

by Darla Monks