Ask the Expert: Credit score isn’t good enough to buy new home
I have saved like mad for a down payment on a house, but now I find my credit score isn’t good enough. Do I have to make more money or what?
Congratulations on your savings. Now, you have to improve your score but that doesn’t require a new job.
Many don’t realize credit scores have nothing to do with income. A person making $20,000 a year could have a credit score equal to another making $100,000. The credit score tells lenders only one thing: How likely you are to pay back the loan.
It predicts this by considering five points:
1. Do you pay your bills on time? Your payment history is worth 35 percent of your credit score. Pay on time, every single time. Never be late.
2. Are you responsible with credit? Credit utilization counts as 30 percent of the score. This is the total of your credit limits divided by your total credit balances. Use no more than 30 percent of your available credit.
3. Your credit experience. Generally, the older your length of credit history, the better it is for your score. It counts 15 percent.
4. Are you applying for a lot of credit now? New credit accounts can hurt your score. Don’t apply for a number of credit cards in a short period of time. This makes it seem as though you are having a financial crisis. Never apply for credit before you apply for a mortgage.
5. Do you have experience with different types of credit? This counts the lowest toward your credit score at just 10 percent. Auto loans, mortgage loans and bank cards are different types of credit. Over time, consumers naturally acquire these types of credit. Stay with the accounts you have and pay them on time.
These days, a credit score of 720 to 750 is usually required for a home loan. However, FHA loans are more lenient.
o, assuming you are looking at homes you can afford, you don’t need to raise your income. Instead, make wise credit decisions and watch your score rise!
Should you remodel the house or tear it down?
Sometimes it pays to raze a house and build a new one.
Is your house 80 or 100 years old and seriously damaged, but in a location you love? You might be better off knocking it down instead of trying to remodel or buying a house somewhere else.
Tearing down a house is a good idea when:
- The house has rotted beams and antiquated wiring or plumbing.
- The foundation is faulty.
- A renovation that solves all of its problems would be too expensive.
- The house is on a large or attractive lot, and you like the location. Sometimes the land alone would be more valuable than the house on the land.
- The house has structural problems and is less valuable than others in the neighborhood.
Tearing down is a bad idea when:
- The house has historical value or features that would be difficult to re-create.
- You can get the updates you want with a modest renovation.
- If you aren’t sure, you will stay long enough to justify the effort and expense of a teardown.
If you decide on the renovation:
- Never start a renovation yourself if you don’t already possess the skills and time to finish it.
- Never count on an interested party to help you with renovations.
- Plan for at least three to four months in renovation mode for a room.
- For whole house projects, plan to live somewhere else.
- Reserve at least 20 percent over your budget for unexpected problems.
- Leave serious structural issues to a professional.
Price it right to sell your home in a brisk spring market
A new job, a new baby, retirement, or maybe just a taste for change. You want more space, less space, new space — whatever the reason, you just want to sell.
There are plenty of buyers even in this market since mortgage rates have dipped and slightly more houses are available nationwide.
So one of the key questions is how to price your house.
Your real estate agent will look at comparable properties and show you the sale prices, but there is always some strategy in pricing a property, depending on the market and even the reasons for selling.
If you need to sell your home quickly, pricing the property at market value or below can attract buyers and lead to a fast sale. A modest price could also attract multiple bids if there are not a lot of comparable houses in the area and potentially net a higher price than you ask. On the other hand, if there are lots of similar homes on the market, you will probably not get more than your asking price since buyers won’t get into a bidding war.
Pricing at or below the market can also be a good strategy if you don’t want to do any renovation. You may attract buyers who want a deal to put some sweat equity into their new home.
You don’t want to price the home so low that buyers think there is something wrong with it.
Now there is a time to list a house above market value. That time is when there aren’t many comparable houses selling in the area. Another reason to go higher in price is when the house you are selling is in particular demand, maybe because of its location in a great school district or waterfront property. But in general, you don’t want your price to be higher than comparable homes.
No matter how you price your home, you can get the best price by following traditional rules for sellers. Cleanup, declutter, and paint. Give your home its best look and increase your chances of getting the best price.
Slow start to the year for Virginia’s housing market
According to the January 2023 Virginia Home Sales Report released by Virginia REALTORS®, 5,609 homes were sold across the state in January, more than a 30% decline from January 2022. This marks the slowest January market the state has seen in eight years.
As sales activity has cooled, so has the sold dollar volume. There was approximately $2.4 billion of sold volume in Virginia in January, which is about $1 billion less volume than a year ago, a 28.5% decline.
In Virginia, the average days on market has been slowing since last summer. “This cooling has been a result of rising interest rates coupled with rising home prices and a lack of homes available on the market. This has led to more potential buyers choosing to sit on the sidelines,” says Virginia REALTORS® Chief Economist Ryan Price. In January, the average days on market statewide was 39 days, a full week longer than January 2022.
With homes remaining on the market longer, Virginia’s supply of homes continues to increase for the fourth month in a row; however, the overall inventory remains low compared to historical averages. At the end of January 2023, about three out of every four cities and counties Virginia had more active listings than the same time last year. The sharpest increases in listings occurred in parts of Northern Virginia, the Charlottesville region, and the Northern Neck market.
Though still considered a “seller’s market” due to the low inventory, the state’s overall market dynamics continue to shift in favor of buyers. “On average, we’re seeing fewer offers coming in, and there is less of a scramble to outbid other buyers,” says Virginia REALTORS® 2023 President Katrina M. Smith. “We are also seeing fewer sellers receiving their full asking price.” These trends are expected to continue in the coming months as the market responds to economic uncertainty and the volatile interest rate environment.
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full January 2023 Virginia Home Sales Report.
Instead of going up, mansions go down
Down is the new up when it comes to luxury homes. Or at least that’s what architect Randy Correll said in a recent interview with the Wall Street Journal. Instead of expanding their homes’ footprints or building new floors — sometimes prohibited by local zoning codes or historical designations — wealthy homeowners are building huge basements with amenities that most homeowners can’t even fathom (pun intended).
These aren’t your youth’s musty unfinished basements or dated rumpus rooms. Luxury basements occupy thousands of square feet, sometimes across multiple levels.
Natural light warms the spaces through skylights and staircases, and high-tech engineering keeps Mother Nature out.
When former Dallas Mavericks owner David McDavid and his wife Stacie purchased a 9,000-square-foot Aspen estate, they dug into the mountainside to add a 4,000-square-foot basement at their daughter’s insistence. The new subterranean space has multiple guest suites, a gym, and a vast hot tub and steam room.
On the island of Nantucket, where house footprints are often strictly regulated, another homeowner is constructing a 16,000 square-foot home with an extra 5,600 square feet underneath for a bowling alley, 3-D golf simulator, and spa. Not to be outdone, another new Nantucket build will be a modest 5,000 square feet on the surface, but with 10,000 square feet below to house a basketball court, garage, additional bedrooms, and a bespoke “wellness space.”
And in Beverly Hills, a $500 million mega-mansion boasts about 105,000 total square feet — about half of it below ground.
But while homeowners might love their underground mansions, not everyone feels the same way. Massive basements require noisy, dirty, and prolonged construction, and the neighbors will certainly complain. After a local outcry, the city of Aspen recently limited basements to a paltry single level. And Beverly Hills may never see a 50,000-square-foot basement again — property owners in the Hillside area now need special permits to remove more than 3,000 cubic yards of earth.
Community News & Real Estate (January 2023) with Jen Avery, REALTOR
- R-MA 5K Run/Walk
March 25 – The Parent Association at Randolph-Macon Academy is organizing their 2nd annual 5K Run/Walk for the Upper School and Middle School including families and friends. We are looking to begin more business and community connections! Sponsorship is available on multiple levels. Call me to discuss!
Shout-Out to our GOLD sponsors so far: Apple House, Beth Waller, Associate Broker at KW Realty Solutions, JunkLuggers (Winchester), C&C Frozen Treats, Marlow Motors, Hadeed Carpet, BattleGrounds Fitness, Front Royal Dental Care
- Ride with Rotary:
April 29 – Staggered starts beginning around 8am.
The Rotary Club of Warren County is hosting the 2nd annual RIDE WITH ROTARY fundraiser event benefiting the local Concern Hotline.
There are multiple routes to choose from, all routing through the beautiful and historic Shenandoah Valley.
10 Mile – Casual Ride
24 Mile – Quarter Century Ride
50 Mile – Half Century Ride
64 Mile – Metric Century Ride
This is a rain or shine event – Riders must be 18 years of age or older.
See routes and more details on our eventbrite site: REGISTER NOW!
All riders must sign the waiver and present it at event registration.
First 75 people to register will receive a free event T-Shirt.
(Food vendors will be on-site to purchase food during and after the event)
Warren County Market Report for January 2023 with Jen Avery, REALTOR
Watch this video for a quick summary of Warren County real estate January 2023.
In general summary:
- New Listings are UP 54.5%%
- New Pending DOWN -12.7%
- Closed sales are DOWN -46.2%
- Average Median Sold $307,450
- Average Days on Market 47
*If you would like a copy of this report emailed to you, please send request to firstname.lastname@example.org.
Resource: January 2023 Market Stats by ShowingTime
Bright MLS: Statistics calculated February 2023
Jennifer Avery, REALTOR® “Your Happy Home Expert!”
BPOR, SRS, CNE, E-Pro Certified | Licensed in VA
email@example.com | 540-683-0790 | www.jenaveryrealtor.com
CRUM REALTY, INC| 318 S Loudoun St, Winchester VA 22601 | 540-662-0400
Ask the expert: Buying our first house
We are buying our first house and are concerned about interest rates. Someone mentioned a mortgage buydown to get lower rates. What is this?
A mortgage buydown could make sense for buyers if they have extra cash left over after closing and are buying a house they will live in for a long time.
A mortgage buydown is when someone (the buyer, seller, or builder) pays mortgage points at closing and gets a lower interest rate. If the real estate market favors the buyer, then sellers or builders will sometimes cover mortgage points as an incentive to buy.
A permanent mortgage buydown is when the buyer pays a lower rate for the life of the loan. In a temporary buydown, rates increase after a period of time.
Depending on the scenario, you should intend to stay in the home for at least seven to 10 years. That’s because a buyer typically wouldn’t break even on the extra cash it takes to buy the mortgage points divided by what they would save in a month on their mortgage. If the points cost $16,000 and you save $201 on your mortgage each month, breaking even would take at least 6.6 years. If you move in three years, you lose money. In that case, it would have been better not to buy points.
There are several common variations on the buydown. One is a 3-2-1 buydown. In this case, suppose the buyer gets a mortgage at 6 percent. With the 3-2-1 buydown, the buyer pays an interest rate of 3 percent in the first year, 4 percent in the second year, and 5 percent in the third year. From years 4-30, the buyer pays 6 percent.
The cost of points will vary depending on the lender and the prevailing interest rates. With a 30-year loan on a $400,000 house at a rate of 6 percent, a 3-2-1 buydown would cost about $17,421, which is what the buyer would save on payments over three years.
Wind: 4mph SSW
UV index: 0