What Credit Score Do I Need to Buy a Home?

 by Christine DiGangi

Buying a home may no longer be the American Dream (now people just want to get out of debt someday), but it’s still a huge goal for many. But if you don’t have a good credit score, that dream might go up in flames.
A lot of things factor into getting a mortgage, but it starts with your credit score. If your credit score isn’t good enough, nothing else matters. Depending on the loan program, lender and an applicant’s specific credit history, the minimum credit score necessary to buy a home varies. Heather McRae, a senior loan officer for Chicago Financial Services, said 580 is the lowest score she’s seen in recent loan approvals, and she hasn’t seen anything lower than that in a long time.

A 580 is a bad credit score (on the often-used scale of 300 to 850). A 600 credit score isn’t the best credit score, either, but that’s generally considered the minimum for an FHA-backed loan, said Scott Sheldon, a senior loan officer at Sonoma County Mortgages. FHA loans are popular among first-time homebuyers and have a minimum down payment of 3.5%. If you’re going for a conventional loan (one not backed by a government agency), the minimum credit score is 620, McRae and Sheldon said.
Those minimum scores are just that — they get your foot in the door. But mortgages are complicated and require a lot of paperwork, so if you’re barely squeaking in, you can expect a rough ride. Take that 600-minimum on a 30-year fixed-rate FHA loan.
“You’re going to have a lot —  I mean, a lot — of hoops to jump through,” Sheldon said. “It’s going to be very unpleasant.”
For people with lower credit scores, a down payment plays a huge factor in approval. McRae said a 20% down payment and a 620 credit score should get you a loan, but a smaller down payment will tighten credit standards.
“680 is kind of like the unspoken minimum, but you can definitely get something done below that,” she said. “If you’re under a 680 credit score, the mortgage insurance premiums get pretty steep.” Loans with less than a 20% down payment require mortgage insurance, which you can sometimes get rid of later.
Sheldon also said 680 is the unofficial minimum.
“680 would be the goal, the credit score to strive for if you want to have choice and flexibility,” Sheldon said. If you’re already close to a 680, he said to aim higher for even better loan terms. “You really want your score in the 740 range to get optimal pricing on any given day.”

There are home loans for people with a variety of credit scores, but with a financial decision of this size, it helps to set yourself up for the most affordable terms possible. If you’re thinking of buying a home at any point in the future, start preparing for the mortgage process now by building a good credit score. It can take awhile, especially if you had credit problems in the past, but there are many ways to rebuild your credit and position yourself to buy a home someday.
As you work on improving your credit, you can see how you’re doing by looking at your two free credit scores every month on Credit.com. Make sure you’re looking at your free credit reports each year, too, at AnnualCreditReport.com, because sometimes errors can be dragging your score down — and you need to find them to fix them.

Christine DiGangi is a reporter and editor for Credit.com, covering a variety of personal finance topics. Her writing has been featured on USA Today, MSN, Yahoo! Finance and The New York Times International Weekly, among other outlets.

December and 2012 Annual permit report

During 2012, permitting for 556 single-family houses worth $126.6 million in unincorporated Lee County was up 49% over the previous year, and up 68% compared to 2009, when home building hit a historic low here.  Permitting for 189 new multi-family units was up 35% over 2011 and 130% over the historic low set in 2009, according to the Lee County Department of Community Development.

Permitting for general commercial structures – valued at nearly $62.5 million – was down 49% over 2011, however 2011 commercial permitting spiked with construction of JetBlue Park and Park Royal Hospital.  Commercial permitting in 2012 was up 46% when compared to 2010 – the year when historic commercial lows were set in unincorporated Lee County. 

During December, contractors pulled 57 permits to build single-family houses collectively valued at more than $9.8 million in unincorporated Lee County.  That compares to 44 permits issued in November and six issued in December 2011.

Also in December, 15 multi-family units were permitted, compared to 20 in November and six in December 2011.

General commercial activity was valued at $517,636, compared to $3.7 million in November and more than $7 million in December 2011.

During December, Lee County Community Development issued 2,263 permits of all kinds for a total of 32,261 in 2012, up 10 percent from 2011.

For additional permit reports, go to www.leegov.com/dcd/Reports. 

Some information on BFIs...

The Florida market is in an upswing. Over the past year, prices have gone up 17% and the available market is only one third of what it used to be. Not to mention that money is still cheap to borrow. People are shopping—and they are buying. This does not only apply to residential homes—commercial and investment properties are also extremely busy.

The commercial market always stays behind the residential sales, whether the prices are dropping or going up. You can easily identify commercial opportunities with a BFI. A BFI document is an executive summary of a potential acquisition that will indicate why a client should be drawn to a project. It is, in essence, the first paragraph of a good resume—it’s purpose to draw the client in to read into the rest of the project, and then call in for more information.

To get a good BFI opening statement may take weeks of analysis of a project. It is the opening statement that carries all the meat of the presentation. Here is an example:

The Opportunity:

            To acquire an off market 200+ unit broken condominium project in Lee County, Florida for $30 million dollars ($23 million purchase price, $5 million in improvements and  $2 in carry cost) that will provide a three year return of 96% based on available financing.

The “off market” tells the buyer the deal has not been shopped.  The “broken condo” tells him it’s probably banked owned. “Available Financing” tells him that this can be a leveraged deal.  Now he is going to want to read the rest of the document to flesh out the details.

The BFI may refer to CAP rates (Capitalization Rates), IRR (Internal Rates of Return), LTV ( Loan to Values) and may include absorption studies, BOVs (Broker Opinions of Value), and Market Analysis. Of course, the BFI will not contain all of those details, but those studies have to be done in order to distill the information presented in just a few pages. 

BFI’s are normally done for larger projects but there are also tools we use for single family home and smaller investments as well. The bottom line is that there are opportunities in today’s market. Analysis and knowledge are still critical and so is the use of a knowledgeable profession real estate agency and agent. You not only need the answers to your questions, you need to know the right questions to ask. 

Buffett's housing bet pays off

Investment guru Warren Buffet said it's time to put money in real estate. His firm got an 11% return - $40M - in 2Q. Read more.

Check out this site!

Interesting concept to help home owners with upside mortgages, Maybe it can work in Florida as well, I’ll have to follow this one and keep you informed.

Tad

http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=1&id=278347

Is your upside down mortgage dragging you down?

I have had many discussions about foreclosures, short sales, upside down loans, overdue credit cards bills, and the ethics of stopping payments on a mortgage and indeed bankruptcy with many  friends that have found themselves in this unfortunate situation. The few friends that have made the decision to move forward without the excess baggage of debt and the fear of their own ethical and financial demise have described almost a feeling of weightlessness once that decision was made to move forward. Those who haven’t seem to be in a stagnate state of their life going nowhere.   It is very difficult to move forward with your life and begin the journey of rebuilding try to travel a path to your goal of financial freedom if the path is strewn with excess baggage.

Some thinks to consider:

• Prices are on the rise, but you may not be rising quickly enough to help you soon enough
• The clock is ticking – both on your recovery and on the tools that are here to help you recover.   The sooner you get rid of your baggage the sooner you can begin recovery. At the end of this year the Mortgage Debt Relief Act of 2007 will expire so you need to get your house listed as a short sale now.
• There should be no shame or ethical dilemma. Get over it.  Yes, I know you were brought up to always keep your promises, but if the bank was only counting on your promise they would not have asked you for a mortgage (A document that says of you can’t keep your promise they can look to your house for resolution).
• You are not in a very exclusive club and there are many members

·         Get your head out of the sand, regain your pride, and move forward

• Get an appraisal or BPO on your house so you are not guessing how much water is above your head.
• Upside down on your house or know someone who is?  Now is the time to list your home!!!  Contact West Coast Realty to discuss your options.

I am not an attorney and cannot and will never give legal advice. Any one in a tough financial position should always consult an attorney. 

10 Things You Should Consider When Making a Home Inspection (BEFORE You Buy)

With rising prices and multiple offers, homebuyers may feel pressured to make hasty inspections when considering a home. That is, if they make one at all.

A pre-offer inspection should help you structure your offer and, perhaps indicate things that should be further inspected during your due diligence period. When Florida was a buyer’s market, just half a year ago, many times a potential buyer would offer a very attractive high price and then drop it during the inspection. This is annoying to sellers and realtors, and a waste of time. A buyer would drop the price based on something that should have been evident during the pre-offer inspection, like a missing appliance or the necessity to paint the house. If you are in an urgent buy situation, it is wiser to assume that all repairs are needed before offering. If there is time, I would suggest a professional inspection. If there is not time for an inspection at all, either expect the worst or don’t buy at all.

During your due diligence period, there are ten things you should inspect.

1. Defective Drywall (Chinese Drywall). Chinese drywall is bad news. It is most common in houses built or remodeled between 2003 and 2007, and exposure can cause health risks for both your family and any pets in the home. Although there is no definite test for defective drywall, blackened air conditioner coils or copper wires, rotten egg, sulfur-like or acidic smell, and tarnished silverware or silver jewelry are all indicators of defective drywall.
2. Roof. In homes that are over 15 years old or with low pitch roofs, a roof inspection is essential. Many insurance companies will require a roof certification in order to give you homeowner’s insurance. In addition, a small leak can add up to a big cost in a short amount of time.
3. Plumbing. Look for leaks under the sinks, pitting on the chrome of fixtures, pinhole leaks, roots in the soil line, and corroded copper from bad water are all problems that can grow with time. Check the age of the water heater and for corrosion on the valves. 
4. Structure and Foundation. Have the “bones” of the home, the foundation, vents, windows, doors and gutters inspected. Dry rot and wood destroying organisms are prominent in Florida.
5. Electric. Look out for any non-licensed work or additions that were done to the system. 
6. Elevation and Grade. Especially in Florida, we get a lot of rainfall and are prone to flooding. Make sure the home is properly elevated and graded to handle heavy rainfall. 
7. Air Conditioning and Heating. Check the model and serial number of the heater or air conditioner and check the manufacturer’s website to determine the age. Anything over ten years old should probably be replaced. 
8. Insulation. In the walls, in the attic, and under any home that is elevated on wood or concrete. 
9. Appliances. Like air conditioning, check the model and serial number and check online to determine age.
10. Maintenance. A clean presentable home that is well cared for.

You can also check the county for building permits on the property you are considering—these will tell you if there has been recent work done on the property that you should be aware of, or to see if there has been work with no permit pulled. 

When in doubt, always hire a professional.