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Archives for October 2019

What FICO® Score Do You Need to Qualify for a Mortgage?

While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let’s unpack the credit score myth so you can to become a homeowner sooner than you may think.

With today’s low interest rates, many believe now is a great time to buy – and rightfully so! Fannie Mae recently noted that 58% of Americans surveyed say it is a good time to buy. Similarly, the Q3 2019 HOME Survey by the National Association of Realtors said 63% of people believe now is a good time to buy a home. Unfortunately, fear and misinformation often hold qualified and motivated buyers back from taking the leap into homeownership.

According to the same CNBC article,

“For the first time, the average national credit score has reached 706, according to FICO®, the developer of one of the most commonly used scores by lenders.”

This is great news, as it means Americans are improving their credit scores and building toward a stronger financial future, especially after the market tumbled during the previous decade. With today’s strong economy and increasing wages, many Americans have had the opportunity to improve their credit over the past few years, driving this national average up.

Since Americans with stronger credit are now entering the housing market, we are seeing an increase in the FICO® Score Distribution of Closed Loans (see graph below):But hang on – don’t forget that this does not mean you need a FICO® score over 700 to qualify for a mortgage. Here’s what Experian, the global leader in consumer and business credit reporting, says:

FHA Loan: “FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score: If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down (but you can put down more if you want to).”

Conventional Loan: “It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.”

USDA Loan: “While the USDA doesn’t have a set credit score requirement, most lenders offering USDA-guaranteed mortgages require a score of at least 640.”

VA Loan: “As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered.”

Bottom Line

As you can see, plenty of loans are granted to buyers with a FICO® score that is lower than the national average. If you’d like to understand the next steps to take when determining your credit score, let’s get together so you can learn more.

If you’re interested in purchasing or selling a home you can start by Contacting Us directly or start searching for your new home here Anthem, Desert Hills, New River, Phoenix, Mesa, Scottsdale, Tempe, Glendale or Surprise.

Homeownership is the Top Contributor to Your Net Worth

Many people plan to build their net worth by buying CDs or stocks, or just having a savings account. Recently, however, Economist Jonathan Eggleston and Survey Statistician Donald Hays, both of the U.S. Census Bureau, shared the biggest determinants of wealth,

“The biggest determinants of household wealth [are] owning a home and having a retirement account.” (Shown in the graph below):

This does not come as a surprise, as we often mention that homeownership can help you to increase your family’s wealth. This study reinforces that idea,

 “Net worth is an important indicator of economic well-being and provides insights into a household’s economic health.”

Having equity in your home can help your family move in that direction, building toward substantial financial growth. According to the report noted above, people are not only creating net worth in the homes they live in, but many are also earning equity in rental property investments too. (See below):John Paulson said it well,

“If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”

Bottom Line

There are financial and non-financial benefits to owning a home. If you would like to increase your net worth, let’s get together so you can learn all the benefits of becoming a homeowner.

If you’re interested in purchasing or selling a home you can start by Contacting Us directly or start searching for your new home here Anthem, Desert Hills, New River, Phoenix, Mesa, Scottsdale, Tempe, Glendale or Surprise.

Real Estate Marketing Statistics October 2019

Asking Prices up 9% Over Last Year, but are Buyers Paying It?
These Homes Have Appreciated the Most since 2000

For Buyers:

The news media is filled with short-term predictions regarding the economy and how it will, or will not, affect real estate prices.  It’s understandable for buyers to want their home to appreciate in value after they purchase, who doesn’t?  However there is far too much attention paid to short-term influences and fluctuations these days and not enough attention paid to the long view.  Real estate is a long-term investment for many people. 

Despite the euphoria of 2005-2007 and the nightmare of 2008-2011, on average homes are selling 81.6% higher today than they were in the year 2000.  That’s an average appreciation rate of 4.3% per year over the course of 19 years.  Smaller homes appreciated the most over time while larger homes appreciated the least.  Homes under 1,000sf have appreciated 122% since 2000, an average of 6.4% per year.  Those between 1,000-2,000sf appreciated 106%, an average of 5.6% per year.  2,000-3,000sf appreciated 68% at 3.6% per year.  3,000-4,000sf appreciated 49% at 2.6% per year and homes over 4,000sf appreciated 11% at 0.6% per year.

For Sellers:

Average asking prices per square foot are up 9% over this time last year and they’re continuing to rise. However, not one individual price range has risen 9% or more; confusing, right? That’s because the sharp increase in the average has more to do with a growing market share of luxury active listings over $500K as inventory has plummeted everywhere else. The highest increase is within $200K-$250K, where sellers are asking 5.6% more than they were last year.

That’s followed by listings over $1M where they’re asking 4.2% more and $500K-$1M at 4.0%.  All other price ranges are just 1-3% higher.  But are buyers paying?  Actually, many of them are! In the $200K-$250K range, the average sales price per square foot is still 0.8% higher than the average list price; and between $250-$300K the average sales price is 6.8% higher than the average list per square foot. Things change over $500K.  Between $500K-$1M there’s a -6.3% gap between asking price and sales price and over $1M the average sales price is -15.1% below the average asking price.

If you’re interested in purchasing or selling a home you can start by Contacting Us directly or start searching for your new home here Anthem, Desert Hills, New River, Phoenix, Mesa, Scottsdale, Tempe, Glendale or Surprise.