Facebook
YouTube
LinkedIn
You are here: Home » 2018 » February

QUICK CREDIT SCORE FIX

Your credit score is a number that summarizes your credit report. It is the end result of a very complicated formula that takes into account how well you pay your bills, how much debt you have, how “maxed-out” your credit cards are, etc. Lenders are relying more and more upon your credit score to determine not only if they will approve your loan, but also what rate you pay. For example, if your credit score is between 600 and 700, you would probably still get approved, but at a slightly higher interest rate than if it was 700 or more.

 

Sometimes, there will be an error on your report that brings your score down to just under the lender’s “cutoff” number. An incorrect reporting of one late payment on your report can drop your score by 10-15 points, or more. I’ve seen buyers with scores at 599, and they needed scores at 600 to get the loan they wanted. This is a frustrating situation because it can take a month or more to get some errors in your credit report corrected through the normal channels. By then you may have lost the home you wanted to buy, or the interest rate you wanted.

 

If you are faced with this situation, ask your loan officer if you are a candidate for a “rapid rescore.” If you have documents to prove your case that the information in your credit report is incorrect, you can request a rescoring of your credit report with the new, correct information. This may result in your scores going up, and this can happen in as short as a few days. This assumes, of course, that your proof is accepted and the creditor and/or the credit bureau agrees to change the reporting. The only advantage to the rapid rescore is the speed. It shouldn’t result in a larger change to your score than the normal process.

A BULLISH SIGN?

I noticed a small article last week in one of the real estate trade publications that really caught my eye. It was talking about the projections for an increase in the number of HELOCs (Home Equity Line of Credit) over the next few years. The chart showed that from 2012-2016 there were 4.8 million new HELOCs but that from 2018-2022 they are expecting 10 million. That’s more than double.

 

So why is this interesting to me? Well, let’s think about what most people get a HELOC for. Maybe they want to remodel the house, put in a pool, put in solar panels, or they want to buy a car, or a boat, or pay down some debt. Nearly all of those uses will put money directly into the general economy.

 

Let’s look at a typical bathroom remodel: The contractor gets paid, their workers get paid, they need to buy materials so the local hardware store gets paid. When the workers come to the house, they may stop off to get gas in town, buy a sandwich, etc. Once it’s done, you’ll want to buy new towels so the department store gets paid. This money can then be multiplied throughout the economy as each of those recipients turn around and spend more.

 

Tapping into your home’s equity is a way to live a lifestyle beyond your current income, so it’s like giving people a pay raise. I am NOT suggesting this is a “good” or wise way to live. I’m just pointing out that this increase in HELOCs will probably result in people spending more money, which is good for the economy, which usually drives real estate prices even higher. Yes, this happened last time. Yes, that ended in disaster. We can only hope that the new lending rules prevent the excesses of last time. Lenders are supposed to verify that borrowers can actually afford their payments.

INSPECTION IS NOT A REPAIR LIST

Potential home buyers often incorrectly view an inspection report as a mandatory repair list for the seller. The fact is, sellers are not required to produce a flawless house. They have no such obligation by law or by contract.

 

Most repairs are subject to negotiation between buyer and seller. Typically, buyers will request that various conditions be repaired before the close of escrow, and sellers may choose to repair all, some or none of these requests. Sellers may agree to make repairs as a matter of choice, not obligation, to foster goodwill or to facilitate consummation of the sale.  Sellers maintain the legal right to refuse repair requests. The buyer then has the right to choose not to buy the home, and receive their deposit back.

 

A big factor is the agreed-upon sales price. If the buyer is paying top-dollar for the home, they will expect more repairs done. Conversely, if the buyer is getting a “good deal,” the seller may be more likely to choose not to agree to any repairs.

 

Before you make any demands of the seller, try to evaluate the inspection report with an eye toward problems of greatest significance. Look for conditions that compromise health and safety like active leakage of water or gas. It’s common for sellers to agree to fix problems affecting sensitive areas such as the plumbing, roof, gas burning fixtures, or electrical wiring.

 

The primary objective is to know what you are buying before you buy it. All homes have defects, it is not possible to acquire one that is perfect.

 

Most real estate contracts require the seller to ensure that the smoke and carbon monoxide detectors are installed properly and operational, as well as having the water heater strapped correctly. The buyer does not need to request these to be done since that was already spelled out in the contract ahead of time.

Return to top of page

Contact Us

  • Sharp Realty
  • 320 Fairview Ave.
  • Brentwood CA 94513
  • P: 925.240.6683
  • F: 925.524.2302
  • E: info@SharpHomesOnline.com
  • DRE# 01858431