7 Places in America That Will Pay You to Move There

If you’re willing to move and if you meet the qualifications, many rural American towns are offering incentives aimed at attracting new residents and reviving their communities.

At the beginning of the 20th century, rural America housed more than half the country’s entire population. While the number of Americans living in rural areas has been roughly stable over the past century - as urban and suburban America have boomed - its share of the total population has declined, falling from 54 percent in 1910 to just 19 percent in 2010.

This is due, in part, to migration to urban cores, especially by younger generations and the middle class.

This decline in population - and the accompanying social and economic challenges - is forcing rural America to come up with incentives to attract new residents back to rural communities.

Tribune, Kansas, offers such a program. “If you move here, we will pay down your student debt,” explains Christy Hopkins, community development director for Kansas’ least populated county, Greeley (in which Tribune sits).

This program, called the Rural Opportunity Zone (ROZ) program, offers perks to grads from big cities for moving to underpopulated towns in one of 77 participating Kansas counties. One of the incentives? They’ll help you pay off your student loans - up to $15,000 over the course of five years.

And it seems to be working - for both the town and its new residents.

“We’re the least populated county - we’re 105th in population for counties in Kansas, and now we’re eighth in college degrees per capita. There’s a correlation to draw,” says Hopkins.

Here are five towns and three states that offer a robust set of loans, programs and/or assistance for those seeking to become homeowners:

Curtis, Nebraska

Population: 891
Median home value: $79,000

Dream of building your own home from the ground up? Curtis, Nebraska, has a sweet deal for you. If you construct a single-family home within a specified time period,  you’ll receive the lot of land it sits on for free.

Marne, Iowa

Population: 115
Median home value: $75,300

Just 45 minutes east of Omaha, Marne will give you a lot of land for free - all you have to do is build the house (conventional construction or modular) and meet program requirements. Houses must be a minimum of 1,200 square feet, and the average lot size is approximately 80 feet by 120 feet.  

Harmony, Minnesota

Population: 999
Median home value: $93,900

Dreaming of a a newly built home in the Land of 10,000 Lakes? Good news: Your dream comes with a cash rebate.

The Harmony Economic Development Authority offers a cash rebate program to incentivize new home construction. Based on the final estimated market value of the new home, rebates range from $5,000 to $12,000, and there are no restrictions on the applicant’s age, income level or current residency.

Baltimore, Maryland

Population: 616,958
Median home value: $116,300

Definitively not a rural town, Baltimore offers homeowners incentives that are too appealing to leave off this list.

Baltimore has two programs offering robust incentives for buying a home in the city. Buying Into Baltimore offers a $5,000 forgivable loan (forgiven by 20 percent each year so that by the end of five years, you no longer have a balance) if you meet certain qualifications.

The city’s second solution is a brilliant one. The Vacants to Value Booster program offers $10,000 toward down payment and closing costs when you buy one of the program’s distressed or formerly distressed properties.

New Haven, Connecticut

Population: 131,014
Median home value: $168,400

Also not a rural area, but offering an incredibly generous package of homeowner incentives, New Haven offers a suite of programs totaling up to $80,000 for new homeowners, including a $10,000 forgivable five-year loan to first-time home buyers, $30,000 renovation assistance and/or up to $40,000 for college tuition.   

Alaska

Population: 739,795
Median home value: $310,200

Alaska offers incentives for veterans and live-in caretakers of physically or mentally disabled residents. They even have a manufactured home program and a rural owner-occupied loan program. See the full list of programs here.

Colorado

Population: 5.6 million
Median home value: $368,100

Colorado offers traditional programs that assist with down payments and low interest rates, but it also has a disability program that helps first-time buyers who have a permanent disability finance their home.

The state also has a down payment assistance grant that provides recipients with up to 4 percent of their first mortgage, which doesn’t require repayment.

Related:

• Small-Town Charm: 8 Homes for Sale in Less Populated Areas
• A Farmhouse-Style Prefab That’ll Make You Want to Ditch the Big City
• 5 Reasons to Buy a Home This Fall

Originally published October 2017. Information updated October 2018.

from Zillow Porchlight https://www.zillow.com/blog/7-places-america-will-pay-move-222241/

5 Reasons to Buy a Home This Fall

Real estate markets ebb and flow, just like the seasons. The spring market blooms right along with the flowers, but the fall market often dwindles with the leaves - and this slower pace could be good for buyers.

If you’re in the market for a home, here are five reasons why fall can be a great time to buy.

1. Old inventory may mean deals

Sellers tend to put their homes on the market in the spring, often listing their homes too high right out of the gate. This could result in price reductions throughout the spring and summer months.

These sellers have fewer chances to capture buyers after Labor Day. By October, you are likely to find desperate sellers and prices below a home’s market value.

2. Fewer buyers are competing

Families who want to be in a new home by the beginning of the school season are no longer shopping at this point. That translates into less competition and more opportunities for buyers.

You’ll likely notice fewer buyers at open houses, which could signal a great opportunity to make an offer.

3. Sellers want to close by the end of the year

While a home is where an owner lives and makes memories, it is also an investment - one with tax consequences.

A home seller may want to take advantage of a gain or loss during this tax year, so you might find homeowners looking to make deals so they can close before December 31.

Ask why the seller is selling, and look for listings that offer incentives to close before the end of the year.

4. The holidays motivate sellers

As the holidays approach, sellers are eager to close so they can move on to planning their parties and events.

If a home has not sold by November, the seller is likely motivated to be done with the disruptions caused by listing a home for sale.

5. Harsher weather shows more flaws

The dreary fall and winter months tend to reveal flaws, making them a great time to see a home’s true colors.

It’s better to see the home’s flaws before making the offer, instead of being surprised months after you close. In fact, the best time to do a property inspection is in the rain and snow, because any major issues are more likely to be exposed.

Top photo from Shutterstock.

Related:

• How to Make a Competitive Offer Against All-Cash Home Buyers
• 5 Mortgage Misconceptions Set Straight
• 12 Tasks to Tackle Before Fall Arrives

Originally published October 19, 2015.

from Zillow Porchlight https://www.zillow.com/blog/fall-a-great-time-to-buy-185456/

5 Expenses Homeowners Pay That Renters Don't

Homeownership may be a goal for some, but it’s not the right fit for many.

Renters account for 37 percent of all households in America - or just over 43.7 million homes, up more than 6.9 million since 2005. Even still, more than half of millennial and Gen Z renters consider buying, with 18 percent seriously considering it.

Both lifestyles afford their fair share of pros and cons. So before you meet with a real estate agent, consider these five costs homeowners pay that renters don’t - they could make you reconsider buying altogether.

1. Property taxes

As long as you own a home, you’ll pay property taxes. The typical U.S. homeowner pays $2,110 per year in property taxes, meaning they’re a significant - and ongoing - chunk of your budget.

Factor this expense into the equation from the get-go to avoid surprises down the road. The property tax rates vary among states, so try a mortgage calculator to estimate costs in your area.

2. Homeowners insurance

Homeowners insurance protects you against losses and damage to your home caused by perils such as fires, storms or burglary. It also covers legal costs if someone is injured in your home or on your property.

Homeowners insurance is almost always required in order to get a home loan. It costs an average of $35 per month for every $100,000 of your home’s value.

If you intend to purchase a condo, you’ll need a condo insurance policy - separate from traditional homeowner’s insurance - which costs an average of $100 to $400 a year.

3. Maintenance and repairs

Don’t forget about those small repairs that you won’t be calling your landlord about anymore. Notice a tear in your window screen? Can’t get your toilet to stop running? What about those burned out light bulbs in your hallway? You get the idea.

Maintenance costs can add an additional $3,021 to the typical U.S. homeowner’s annual bill. Of course, this amount increases as your home ages.

And don’t forget about repairs. Conventional water heaters last about a decade, with a new one costing you between $500 to $1,500 on average. Air conditioning units don’t typically last much longer than 15 years, and an asphalt shingle roof won’t serve you too well after 20 years.

4. HOA fees

Sure, that monthly mortgage payment seems affordable, but don’t forget to take homeowners association (HOA) fees into account.

On average, HOA fees cost anywhere from $200 to $400 per month. They usually fund perks like your fitness center, neighborhood landscaping, community pool and other common areas.

Such amenities are usually covered as a renter, but when you own your home, you’re paying for these luxuries on top of your mortgage payment.

5. Utilities

When you’re renting, it’s common for your apartment or landlord to cover some costs. When you own your home, you’re in charge of covering it all - water, electric, gas, internet and cable.

While many factors determine how much you’ll pay for utilities - like the size of your home and the climate you live in - the typical U.S. homeowner pays $2,953 in utility costs every year.

Ultimately, renting might be more cost-effective in the end, depending on your lifestyle, location and financial situation. As long as you crunch the numbers and factor in these costs, you’ll make the right choice for your needs.

Related:

• Hidden Costs of Homeownership Typically Top $9,000 a Year
• 5 Mortgage Misconceptions Set Straight
• ‘You’re Throwing Money Away’ and Other Myths About Renting

Originally published August 18, 2015. Statistics updated July 2018.

from Zillow Porchlight https://www.zillow.com/blog/homeowners-pay-renters-dont-181888/

HARP Now Extended Through 2016

Since it first launched in 2009, the Home Affordable Refinance Program (HARP) has helped 3.2 million borrowers across the country lower their monthly payments by refinancing at historically low interest rates. Friday, FHFA Director Melvin Watt announced this relief won’t be ending any time soon.

HARP will continue through the end of 2016, allowing homeowners who owe more than their homes are worth and regularly make mortgage payments to refinance. To help eligible borrowers take advantage of this program, Zillow remains the only marketplace supporting HARP and FHA Streamline refinances.

The FHFA has started a 10-day Twitter campaign using the hashtag #HARPfacts to help spread the word. They’re targeting Chicago first, where nearly 40,000 Chicago-area homeowners could save an average $189 per month or $2,300 a year with HARP.

Get answers to your HARP questions here.

Related:

• Are You Eligible for a HARP Refinance?
• How to Find a HARP Lender
• HARP: Dispelling the Myths

from Zillow Porchlight https://www.zillow.com/blog/harp-now-extended-through-2016-175787/

What You Need to Know About the Fair Housing Act

If you’ve searched for a new place to live recently, you’ve likely seen the Equal Housing Opportunity logo (an equal sign inside a house) on a landlord’s, real estate agent’s or lender’s paperwork.

But the Fair Housing Act is more than just a logo. It’s a federal law designed to protect renters and buyers from discrimination.

Here are some key points to know about the Fair Housing Act when you’re searching for a place to live.

What is the Fair Housing Act?

Also known as the Civil Rights Act of 1968, the Fair Housing Act was signed into law by President Lyndon B. Johnson just days after the assassination of Martin Luther King Jr., who had championed the cause for many years.

The act prohibits housing discrimination based on race, color, religion, national origin, sex, disability and familial status (sex was added in 1974, and disability and familial status were added in 1988).

At the time the act was signed, overt housing discrimination was a huge problem throughout the country, including the attempted segregation of whole neighborhoods and the outright rejection of qualified renters based on race and other factors.

Today, much of the discrimination in the housing market is less obvious, but it’s still an unfortunate reality.

According to the National Fair Housing Alliance (NFHA), over 25,000 housing discrimination complaints were filed with the federal government and local and national fair housing agencies in 2017. Over half of the complaints were based on disability, followed by race at 20 percent.

But these numbers reflect only reported incidents. The NFHA estimates that over 4 million instances of housing discrimination occur annually, but many people don’t realize they’ve been discriminated against - or know what steps to take when it happens.

What does housing discrimination look like?

Most of the people you encounter in your home search, including real estate agents, sellers, landlords, property management companies and lenders, are bound to Fair Housing Act regulations and additional state and local laws, based on where you live or are looking to live.

Fair Housing Act violations can occur in all phases of buying and renting, including in advertising, while you search, throughout the application process, in financing or credit checks, and during eviction proceedings.

Here are a few examples of discrimination people in protected classes have encountered:

• A real estate agent tries to “steer” a buyer away from a certain neighborhood
• A landlord tries to avoid renting to someone by saying the unit advertised has been rented when it hasn’t
• A property management company refuses to rent to a family with children or requires a higher deposit
• A landlord evicts a person of color for a reason they wouldn’t evict a white tenant for
• A mortgage broker asks questions or requests excessive documentation from an immigrant couple that they wouldn’t request from another buyer
• A lender charges a single woman a higher interest rate than what her credit score should dictate
• A landlord refuses to make reasonable accommodations for a tenant who is disabled

What do I do if I’ve been discriminated against?

If you’ve been discriminated against in any of the ways above, or if you suspect that other actions taken by a property manager, landlord, real estate agent, broker or lender may be discriminatory, there are many resources at your disposal.

1. File a report: File a complaint with your regional Department of Housing and Urban Development (HUD) office - find yours at HUD.gov. You can also file a complaint on the national HUD website or with local housing resources found through the NFHA.
2. Get more info from local housing agencies: You can find a list of local housing counselors at HUD.gov. Besides answering questions about discrimination claims, these agencies provide home buyer education workshops, pre-purchase counseling and rental housing assistance.
3. Talk to an attorney: Like any other legal issue, when pursuing a complaint under the Fair Housing Act, it’s smart to consult a lawyer.
4. Find people you can trust: If you experienced housing discrimination from your real estate agent, mortgage broker or lender, it’s time to find a new professional to help you in your home search. Ask friends, family members and colleagues for referrals they know, like and trust. Remember - these real estate professionals are working for you, so their only concern should be finding you the home that’s right for you.

Related:

• Our Racially Divided Housing Market Is Changing, Thanks to Millennials
• ‘You’re Throwing Money Away’ and Other Myths About Renting
• Understanding Your Basic Rights as a Renter

from Zillow Porchlight https://www.zillow.com/blog/what-you-need-to-know-about-the-fair-housing-act-227310/

The Do's and Don'ts of Home Equity Loans

Home equity is a valued resource, and if you have it, you might be tempted to tap that wealth for other purposes. A home equity loan, which allows you to use your home’s equity as collateral, is a great way to do this. But depending on your personal situation, it may not be the right thing to do.

Here’s when a home equity loan makes sense - and when it doesn’t.

DON’T: Fund a lifestyle

Remember when homeowners yanked cash out of their homes to fund affluent lifestyles they couldn’t really afford? These reckless borrowers, with their boats, fancy cars, lavish vacations and other luxury items, paid the price when the housing bubble burst. Property values plunged, and they lost their homes.

Lesson learned: Don’t squander your equity! Look at a home equity loan as an investment - not as extra cash when making spending decisions.

DO: Make home improvements

The safest use of home equity funds is for home improvements that will add to the home’s value. If you have a one-time project (e.g., a new roof), then a home equity loan might make sense.

If you need money over time to fund ongoing home improvement projects, then a home equity line of credit (HELOC) would make more sense. HELOCs let you pay as you go and usually have a variable rate that’s tied to the prime rate, plus or minus some percentage.

DON’T: Pay for basic expenses or bills

This is a no-brainer, but it’s always worth reiterating: Basic expenses like groceries, clothing, utilities and phone bills should be a part of your household budget.

If your budget doesn’t cover these and you’re thinking of borrowing money to afford them, it’s time to rework your budget and cut some of the excess.

DO: Consolidate debt

Consolidating multiple balances, including your high-interest credit card debts, will make perfect sense when you run the numbers. Who doesn’t want to save potentially thousands of dollars in interest?

Debt consolidation will simplify your life, too, but beware: It only works if you have discipline. If you don’t, you’ll likely run all your balances back up again and end up in even worse shape.

DON’T: Finance college

If you have college-age children, this may seem like a great use of home equity. However, the potential consequences down the road could be significant. And risky.

Remember, tapping into your home equity may mean it takes longer to pay off the loan. It also may delay your retirement or put you even deeper in debt. And as you get older, it will likely be more difficult to earn the money to pay back the loan, so don’t jeopardize your financial security.

Related:

• Rehabbing a Home? Be Ready for These 5 Costs
• 5 Mortgage Misconceptions Set Straight
• The Counteroffer: Negotiating a Real Estate Deal

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.

Originally published February 23, 2016.

from Zillow Porchlight https://www.zillow.com/blog/dos-donts-of-home-equity-loans-192836/

This Tiny Home Has Its Own Pizza Oven – House of the Week

Forget waiting 45 minutes for the delivery guy to show up. In this custom tiny home, pizzas are ready in just two minutes!

Empty nesters looking to avoid the burden of a big mortgage, Robert and Rebekah Sofia embarked on a 20-month journey designing and building a 221-square-foot home in Ocklawaha, FL. Most people would balk at the idea of putting a 800-degree wood-fired pizza oven in such a small space. But with layers of plaster, cement and a heavy metal door, it’s completely insulated.

The Floridians were passionate about bringing a European flavor to their design and using recycled building materials. From the exterior corrugated metal to the cedar planks and doors - everything had a prior life. Best of all: The materials only cost $15,000.

In addition to the pizza oven, there are amenities you might not expect in a tiny house: a big apron sink, outdoor soaking tub, formal dining room with a chandelier, a hangout music loft and his-and-hers closets.

Photos by John Jernigan.

Related:

• You’ll Be Climbing the Walls of This Tiny Home
• This Shipping Container Will Make You Do a Double Take
• Tiny Home With 100-Mile Desert Views

The post This Tiny Home Has Its Own Pizza Oven – House of the Week appeared first on Zillow Porchlight.

from Zillow Porchlight https://www.zillow.com/blog/tiny-home-pizza-oven-226014/

How Much Does It Cost to Move?

How to Set a Home Renovation Budget

Quiz: Should You Renovate Your Home or Sell?

Can't Buy a House With Cash? You Can Still Land the Home

U.S. Homeowners Spend $15,000 in Hidden Costs to Sell a House

Selling a home not only takes time, but also costs money. To help with budgeting, Zillow and Thumbtack identified several common - but often overlooked - seller expenses.

From closing costs to home prep projects like carpet cleaning, U.S. homeowners can expect to spend more than $15,000 on these extra or hidden costs to sell the median home, according to Zillow and Thumbtack’s Hidden Costs of Selling Analysis.

Closing costs

The two largest closing costs are agent commissions and, in most states, sales or transfer taxes.

Nationally, sellers spend $12,532 for both closing costs on the median home. Sellers should also prepare for a variety of other smaller closing costs, including title insurance and escrow fees.

Home prep costs

Most sellers will complete at least one home improvement project before listing.

While some sellers prefer to complete these projects themselves, those who outsource can expect to spend more than $2,650 nationally to cover staging, carpet cleaning, interior painting, lawn care and house cleaning - five of the most popular seller home prep projects.

Location, location, location

As with all things real estate, these extra costs can vary significantly by region.

In San Francisco, homeowners can pay more than $55,000 on the median home to cover these combined closing costs and maintenance expenses - the highest among the markets analyzed.

Compare that to Cleveland, OH where home sellers pay just over $10,000 for the same costs.

Estimating profit

Even though selling a home costs money, most (73 percent) of sellers are still satisfied with the transaction, according to the Zillow Group Report on Consumer Housing Trends.

To estimate potential profit, sellers who have claimed their home on Zillow can use Zillow’s Sale Proceeds Calculator. It factors in the home’s sale price, mortgage balance and agent commissions, along with other common seller fees.

Curious how your metro stacks up for sellers? Here’s a breakdown of the metros analyzed in the report:

Looking for more information about selling your home? Check out our Sellers Guide.

Related:

• What Do Buyers and Sellers Pay in Closing Costs?
• Baby Boomers: Here’s How to Sell Your Home to Millennials
• 3 Steps to Prepare Your House for Sale

 

 

 

from Zillow Porchlight https://www.zillow.com/blog/hidden-costs-of-selling-home-215952/

6 Millennial Pink Homes Proving This Color Is Here to Stay

What Does a Builder's Warranty Cover?

Even with new homes, things can go wrong. That is why many buyers of newly built homes are interested in warranties, which promise to repair or replace certain elements of the home.

Many home warranties are backed by the builder, while others are purchased by builders from independent companies that assume responsibility for specific claims. In other cases, homeowners purchase coverage from a third-party warranty company to supplement coverage provided by their builder. In fact, the Federal Housing Authority (FHA) and the Department of Veterans’ Affairs (VA) require builders to purchase a third-party warranty as a way to protect buyers of newly built homes with FHA or VA loans.

The key to any of these warranties is to understand what’s covered, what’s not covered, how to make a claim and the process for resolving disputes that might arise between you and the builder or warranty provider.

Most warranties for newly constructed homes offer limited coverage on workmanship and materials as they relate to components of the home, such as windows, siding, doors, roofs or plumbing, electrical and HVAC systems. Warranties typically provide coverage for one to two years, although the specific time period may vary by from component to component; coverage may last up to a decade on major structural elements. Warranties also routinely define how repairs will be made and by whom.

Warranties generally do not cover household appliances, tile or drywall cracks, irrigation systems or components covered under a manufacturer’s warranty. Most warranties also exclude expenses incurred as a result of a warranty repair construction, such as the need to store household belongings while a repair is being made.

Before you close on your new home purchase, you should ask your builder – or your third-party warranty provider – these questions:

• What does this warranty cover?
• What is not covered by this warranty?
• What’s the process or timeliness if I have a claim?
• Is it possible for me to dispute your decision to deny a claim?
• What is the extent of your liability?
• Can you refer me to other new home owners with whom you’ve worked so I can speak to them about warranty coverages?
• Where are some of you previous projects so I can speak with owners there?

The information you gain may not be enough to send you running from your new home deal, but it should help you understand where you’ll stand if you ever need to file a claim. You should also check with your state’s Attorney General Office or contractor licensing board to make certain your builder is offering all warranties he’s required to provide.

To learn more about builders’ warranties, contact your state or local builders’ board. If you’re making your home purchase with an FHA or VA loan, those organizations can also provide you with additional information.

Related:

• How to Find Your Dream Home
• Why Being Pre-Approved for a Loan Matters
• How to Find & Keep an Agent You’ll Love

Originally published June 11, 2014.

from Zillow Porchlight https://www.zillow.com/blog/what-does-builders-warranty-cover-151357/

What Do Mortgage Lenders Review on Bank Statements?

Trained to spot financial mismanagement, mortgage lenders take careful time to review your finances before approving or denying you for a home loan. The role of the lender in approving a loan is to make sure you have enough money for a down payment and closing costs, and to assess whether you’re able to regularly make your monthly payments. Part of how they do that is by reviewing your bank statements. That’s why it’s important to make sure all your documents and records are sorted and straightforward.

Bank statement warning signs

Overdraft charges
Lenders typically include your last two months of bank statements in their evaluation of your finances. Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances.

Large deposits
Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. This can be seen as iffy because it could appear that those funds are coming from an illegal or unacceptable source. Unless you can provide an acceptable explanation for your large deposit, it’s likely the lender will disregard those funds and apply your remaining dollars to their assessment of whether you qualify for a loan.

Signs of the bank of mom and dad
One way to help ensure that your bank statement won’t raise any red flags with lenders is by having consistent, tracked payments. If, for instance, you have automatic monthly payments to an individual rather than to a bank, lenders could see that as a non-disclosed credit account. This would be the case if you were to take out a loan from your parents and make car payments to them rather than an actual bank, for example.

How to reduce bank statement scrutiny

Take extra care of your transactions for at least a few months before applying for a mortgage. Lenders want to know that the money in your account has been there for some time, not just recently deposited. One or two big deposits into your account right before applying could indicate to lenders that the money you claim to have isn’t actually yours or isn’t a “seasoned” asset, meaning the money hasn’t been in your account for at least two months.

At the end of the day, it’s best to start the process of organizing your bank activity and statements prior to applying for a loan. When you start looking for a home, it’s best to have your financial information sorted in case your dream home hits the market and you have to move fast.

If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Remember: Underwriters review your accounts once more, just prior to closing. So, be sure to maintain healthy finances throughout the closing process too.

Photos courtesy of Shutterstock.

Related:

• 5 Mortgage Misconceptions Set Straight
• Why Is My Lender Asking About My Race on My Loan Application?
• 5 Reasons to Keep Your Lender in the Loop When You Make an Offer

from Zillow Porchlight https://www.zillow.com/blog/mortgage-bank-statement-review-224440/

How Do Co-Borrowers' Credit Scores Affect a Home Purchase?

Whether you’re a seasoned or first-time home buyer, be prepared to know your FICO score and have a firm understanding of your credit history. And if you’re buying with another person, their credit history can affect your joint home purchase.

What is a FICO score?

First things first - what’s a FICO score and why does it matter? FICO is an acronym for the Fair Isaac Corporation, the company that developed the most commonly used credit scoring system. Everyone is assigned a number ranging from 300 to 850. The number assesses your credit worthiness through previous payment history, current debt, length of credit history, types of credit and new credit. For the purpose of buying a home or obtaining a loan, it’s the score most commonly used by lenders to determine the borrower’s level of risk. Many people simply refer to the FICO score as “credit score,” so we’ll do that moving forward.

Which score do lenders look at?

Typically, your lender will look at three credit scores reported from each of the three credit bureaus - Experian, TransUnion and Equifax - and then take the median score of the three for your application. Borrowers should hope for at least a 680, which is generally the minimum score for getting approved for conventional loans. For borrowers with lower credit scores, FHA loans allow a 580 score, or even as low as 500 if a 10 percent down payment is made. In any case, the higher the score, the better interest rate you’ll be offered.

Should I apply with my spouse or alone?

Deciding whether or not to include a spouse or a co-borrower on a mortgage application often comes down to whether it makes the most financial sense.

There’s not a ton of wiggle room when it comes to qualifying for a loan. You typically qualify or you don’t. If the only way you can qualify for the loan is by applying jointly to include the total income of both borrowers, then that might be your only option. But even if your credit and income are good enough to qualify for a loan on your own, applying together still might be a better option, as each scenario has its tradeoffs.

My partner has bad credit

When applying jointly, lenders use the lowest credit score of the two borrowers. So, if your median score is a 780 but your partner’s is a 620, lenders will base interest rates off that lower score. This is when it might make more sense to apply on your own.

The downside in applying alone, however, limits you to just your income and not the combined amount from you and your partner. While your credit score might be better, having a lender evaluate you on only your income could lower the total loan amount you qualify for.

If having your name on the home is a big deal, don’t worry. You can still be on the title of the home, just not on the mortgage.

Photos courtesy of Shutterstock.

Related:

• Who Owns the Home When Two Names are on the Mortgage?
• How Many Credit Checks Before Closing on a Home?
• 5 Signs It’s Time to Walk Away From a Home Purchase

from Zillow Porchlight https://www.zillow.com/blog/joint-mortgage-credit-scores-224438/

Who Owns the Home When Two Names are on the Mortgage?

When couples start a new journey as homeowners, questions can linger as to whose name (or names) should be listed on the mortgage and title. Many couples want a 50/50 split, indicating equal ownership to the asset, but sometimes that isn’t the best financial decision. Plus, with more than one person on the loan, the legalities of who owns the home can get tricky. A home is often the largest purchase a couple or an individual will make in their lifetime, so ownership can have big financial implications for the future.

Title vs. mortgage

For starters, it’s important to note the difference between a mortgage and a title. A property title and a mortgage are not interchangeable terms.

In short, a mortgage is an agreement to pay back the loan amount borrowed to buy a home. A title refers to the rights of ownership to the property. Many people assume that as a couple, both names are listed on both documents as 50/50 owners, but they don’t have to be. Listing both names might not make the most sense for you.

Making sense of mortgages

For many, mortgages are a staple of homeownership. According to the Zillow Group Consumer Housing Trends Report 2017, more than three-quarters (76 percent) of American households who bought a home last year obtained a mortgage to do so.

When a couple applies jointly for a mortgage, lenders don’t use an average of both borrowers’ FICO scores. Instead, each borrower has three FICO scores from the three credit-reporting agencies, and lenders review those scores to acquire the mid-value for each borrower. Then, lenders use the lower score for the joint loan application. This is perhaps the biggest downside of a joint mortgage if you have stronger credit than your co-borrower.

So, if you or your partner has poor credit, consider applying alone to keep that low score from driving your interest rate up. However, a single income could cause you to qualify for a lower amount on the loan.

Before committing to co-borrowing, think about doing some scenario evaluation with a lender to figure out which would make more financial sense for you and your family.

True ownership

If you decide only one name on the mortgage makes the most sense, but you’re concerned about your share of ownership of the home, don’t worry. Both names can be on the title of the home without being on the mortgage. Generally, it’s best to add a spouse or partner to the title of the home at the time of closing if you want to avoid extra steps and potential hassle. Your lender could refuse to allow you to add another person - many mortgages have a clause requiring a mortgage to be paid in full if you want to make changes. On the bright side, some lenders may waive it to add a family member.

In the event you opt for two names on the title and only one on the mortgage, both of you are owners.

The person who signed the mortgage, however, is the one obligated to pay off the loan. If you’re not on the mortgage, you aren’t held responsible by the lending institution for ensuring the loan is paid.

Not on mortgage or title

Not being on either the mortgage or the title can put you in quite the predicament regarding homeownership rights. Legally, you have no ownership of the home if you aren’t listed on the title. If things go sour with the relationship, you have no rights to the home or any equity.

To be safe, the general rule of homeownership comes down to whose names are listed on the title of the home, not the mortgage.

Photos courtesy of Shutterstock.

Related:

• How to Get a Mortgage and Change Jobs at the Same Time
• 5 Questions to Ask Potential Mortgage Lenders
• What Is the Difference Between Interest Rate and APR (Annual Percentage Rate)?

from Zillow Porchlight https://www.zillow.com/blog/home-ownership-two-names-mortgage-224435/

10 Things You Need to Do When Buying A Home

A home is often the biggest financial investment you’ll make in your lifetime. In fact, a recent Zillow analysis reports that the typical American homeowner has 40 percent of their wealth tied up in their home.

Several years ago, I wrote a complete guide to financial planning on one index card, which went viral and later became a book: “The Index Card: Why Personal Finance Doesn’t Have to Be Complicated” (co-written with Helaine Olen).

Now, following up on my original index card, I’ve written a guide on buying a house. Below is the housing index card - a handy resource to print out and take with you as you look at houses or think about buying one, plus some additional advice as you contemplate making the big decision.

1. Buy for the long run. Assume you’ll own your home for at least five years.

A home is a significant investment, not to mention a linchpin of stability. According to the Zillow Group Consumer Housing Trends Report 2017, the majority of Americans who sold their homes last year had lived in their home for at least a decade before selling.

Some are even staying for the long haul. Almost half (46 percent) of all homeowners are like me - living in the first home we ever purchased. In short: Buy a home you want to live in - one equipped (or ready to be equipped) with the features and space you need, both now and in the future.

2. Buy to improve your life, not to speculate with your money.

Your home is more than a financial investment; it’s where you sleep, eat, host friends, raise your children - it’s where your life happens.

The housing market is too unpredictable to buy a (primary) home purely because you think it will net a big short-term financial return. You will most likely be living in this home for several years, regardless of how it appreciates, so your first priority should be finding a home that will meet your needs and help you build the life you want.

3. Focus on what’s important to you. Don’t be distracted by features you don’t need.

Today’s housing market is short on inventory, with 10 percent fewer homes on the market in November 2017 than November 2016.

So, focus on finding a home you can afford that meets your needs - but don’t get distracted by shiny features that might break your budget. Nice-to-have features often drive up the price tag for things you don’t particularly value once the initial enjoyment wears off.

Make a list of your basic needs, both for your desired home and for your desired neighborhood. Stick to finding a home that meets these needs, without buying extra stuff that adds up.

4. Determine a budget and stick to it. Don’t look at houses above that budget.

It’s important to set a budget early - ideally before you even start looking at homes. In today’s market, especially in the more competitive markets, it’s incredibly easy to go over budget - 29 percent of buyers who purchased last year did.

The most common culprit? Location. Zillow’s data indicates that urban buyers are significantly more likely to go over budget (42 percent) than suburban (25 percent) or rural (20 percent) buyers.

There’s nothing inherently wrong with that. Local schools matter, and psychologists tell us that a short commute improves your life. But be realistic about your local market and about yourself. Know what you’re willing to compromise on - be it less square footage, home repairs or a different neighborhood.

5. A 20 percent down payment is ideal. If you can’t afford that, consider a smaller down payment, or lower your budget.

If you can afford it, a 20 percent down payment is ideal for three reasons:

• Buyers who don’t put a full 20 percent down pay a premium, most commonly in the form of private mortgage insurance (PMI). This is less financially punishing than it used to be, given today’s low mortgage rates. A monthly mortgage payment (with PMI) may be lower than a monthly rental payment in many markets - but still.
• Buyers who put more down upfront typically make fewer offers and buy faster than those who put less down. Zillow research found that buyers with higher down payments make 1.9 offers on average, compared to 2.4 offers for buyers with lower down payments (after controlling for market conditions).
• A higher down payment reduces your financial risk. You don’t want to owe more money than your house is worth if local markets dip when you need to sell.

6. Keep a six-month strategic reserve after down payment. Stuff happens.

While a down payment is a significant expense, it’s also important to build up a strategic reserve and keep it separate from your normal bank account.

This reserve should cover six months of living expenses in case you get sick, face an unexpected expense or lose your job. A strategic reserve will not only save you from financial hardship in the event of an emergency but also provide peace of mind.

When we accumulated a strategic reserve, my wife and I finally felt ready to build for our future. Without it, we were living from paycheck to paycheck, anxiously managing our cash flow rather than saving or budgeting.

7. Get pre-approved, and if you want to avoid uncertainty down the road, stick with a boring 30- or 15-year fixed-rate mortgage.

The pre-approval process requires organizing all your paperwork; documenting your income, debt and credit; and understanding all the loan options available to you. It’s a bit of a pain, but it saves time later. Pre-approval also shows sellers that you’re a reliable buyer with a strong financial footing. Most importantly, it helps you understand what you can afford.

There are a variety of mortgage types, and it’s important to evaluate all of them to see which is best for your family and financial situation. Those boring 30- and 15-year mortgages offer big advantages.

The biggest is locking in your mortgage rate. In short: A 30-year fixed mortgage has a specific fixed rate of interest that doesn’t change for 30 years. A 15-year fixed mortgage does the same.

These typically have lower rates but higher monthly payments, since you must pay it off in half the time. Conventional fixed-rate mortgages help you manage your household budgeting because you know precisely how much you’ll be paying every month for many years. They’re simple to understand, and current rates are low.

One final advantage is that they don’t tempt you with a low initial payment to buy more house than you can afford.

8. Comparison shop to get the best mortgage.

Though a home is the biggest purchase many of us will ever make, most home buyers don’t shop around for a mortgage (52 percent consider only a single lender).

I certainly didn’t. This did save me some annoying phone calls and hassle, but it cost me $40 or $50 every month, for years. The difference of half a percentage point in your mortgage rate can add up to thousands of dollars over the lifetime of the loan. It’s important to evaluate all the available options to make sure you’re going with the lender who meets your needs - not just the first one you contact.

The three most important factors to buyers are that the lender offers a loan program that caters to their specific needs (76 percent), has the most competitive rates (74 percent) and has a history of closing on time (63 percent).

9. Spend no more than a third of your after-tax income on housing (unless you live in an especially pricey market).

It’s better to regret spending too little on your home than spending too much. One-third of your after-tax income is a manageable amount. This isn’t always possible if you live in a place like San Francisco or New York, but it’s still a good yardstick for where to be.

10. When getting ready to buy, always be willing to walk away.

Buying a home is a time-consuming, stressful but ultimately rewarding endeavor - if you end up closing on a home that meets your needs. But it’s important to manage your expectations in case you don’t immediately find a home you can afford with the features you need.

Always be prepared to walk away if the sellers don’t accept your offer, the home doesn’t pass a rigorous inspection or the timing isn’t right. Hold fast to your list of must-haves, stick to what you can afford and don’t overreach or settle.

It’s no tragedy to miss out on any particular house. Remember that you’re playing the long game. You want to be happy 10 years from now.

Related:

• 6 First-Time Homebuyer Mistakes to Avoid
• Why Is 20% Ideal for a Down Payment?
• 5 New Year’s Resolutions That Can Help You Buy a Home in 2018

from Zillow Porchlight https://www.zillow.com/blog/10-things-must-do-buying-a-home-224314/

5 New Year's Resolutions That Can Help You Buy a Home in 2018

Thinking of buying a home this year? We compiled five New Year’s resolutions that can help you keep your financial resume in tiptop shape.

1. Avoid job hopping

Employment history and income are two of the biggest factors lenders look at when evaluating a mortgage application. A new job may be a good career move, but if you plan to buy a home in 2018, know that it can be a red flag to some underwriters - especially if you’re moving to a different industry.

A steady job history and few or no gaps in employment over the past two years are ideal, as it helps lenders more easily forecast your future income.

If you do get a new job while home shopping, let your lender know as soon as possible. It doesn’t mean you won’t qualify for a mortgage - just be prepared to show extra documentation.

If you’re moving from a commissioned or hourly job to one that’s salaried with equal or more compensation, it may help your application, as lenders often prefer borrowers to have steady, predictable paychecks.

2. Limit monthly subscription services

Monthly subscription services are certainly convenient, but they can add up. Even if you pay off your credit card every month, you could be dinged for high credit utilization if your credit report is pulled midcycle.

If you’re thinking of buying a home this year, consider keeping your monthly subscription services to a minimum.

3. Build a solid credit history

One of the first things a lender will look at is your credit history. Lenders like borrowers who have a history of paying off debts, like credit cards, on time because it signals that you’re less of a risk and a responsible borrower.

If you don’t have credit, securing a home loan may be significantly more challenging and time-consuming, but not impossible. Records of paying rent and utilities on time, as well as student loan debt or cell phone bills, can help show a potential lender that you have a history of managing monthly payments.

4. Check your credit

Your credit score can have a significant impact on your ability to buy a home. A low credit score can negatively affect how much money a lender is willing to loan you, as well as your interest rate.

Just a few percentage point differences in an interest rate can cost you thousands over the life of a loan. Monitor your credit closely, especially for fraudulent activity, to prevent any surprises that could delay the loan application process.

If you’re unsure of your credit score, many financial websites offer credit score monitoring, or you can get a full credit report once a year.

5. Avoid large purchases

Avoid taking on large amounts of debt - whether it’s buying a car or planning a large vacation - before buying a house, even if you’re already preapproved.

Your debt-to-income ratio, or how much money you make compared to how much debt you have, can significantly affect how much money a lender is willing to give you. Keeping debts to a minimum can help make the home-buying process go a lot more smoothly.

Just like proofreading your resume before you apply for a job, cleaning up your financial resume can help improve your chances of buying a home.

Take advantage of online tools and resources, like our affordability calculator, which can help you determine how much home you can afford. Our mortgage calculator can also provide custom down payment estimates based on home price and interest rates. And as you search for your future home, check out our extensive lender and agent reviews, which can help you find the best real estate partners for your needs.

Related:

• Can I Afford a House?
• 5 Questions to Ask Potential Mortgage Lenders
• Owning vs. Renting: What is the Right Decision for You?

from Zillow Porchlight https://www.zillow.com/blog/resolutions-can-help-buy-home-2018-224008/