1 Of 3 Americans Wants To Buy A Home By 2020

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Is a home purchase on your to-do list over the next two years? You’ll have plenty of competition finding your new home, according to the latest PenFed Credit Union National Mortgage Survey.

The survey found that 37% of American adults are planning to purchase a home within the next two years. Over half (52%) of the millennial generation plan to buy within that timeframe, with many looking forward to their first home purchase.

Millennials will need all the resources they can muster to get that starter home. Demand continues to outpace supply, pushing home prices upward and out of reach for an increasing number of Americans. The current home supply increased to 6.2 months, near the 6-month level considered a healthy balance – but affordable starter homes are still in short supply in many markets.

According to the National Association of Realtors (NAR), first-time buyers need nearly 23% of their income to afford the average entry-level home. That’s the hig…

More Americans With Low Credit Scores Buying Homes

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If you have a low credit score and want to buy a home, your odds of getting a loan have improved. A study by the Fair Isaac Corporation (FICO) shows that credit scores for new mortgage originations have been dropping, suggesting that lenders are slowly relaxing the tight credit policies imposed after the housing crisis.

According to the study, new mortgage loans with credit scores less than 700 increased from 21.9% of all mortgage loans in 2009 to 29.7% in 2017. These include scores in the subprime market that can reach down into the 400s. (While the typical lower credit score limit is 620 for conforming loans and 500 for FHA loans, loans may be granted at even lower credit scores with extenuating circumstances.)

The shift in average credit scores is driven by FHA loans – as expected by the lower acceptance criteria for FHA loans. The latest Origination Insight Report from Ellie Mae shows that only 16.7% of conventional mortgage loan originations in July 2018 wer…

New 3% Down Payment Mortgages Available

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Are you looking for a mortgage that features a low down payment but can’t find a suitable conventional loan because of various restrictions?The Federal Housing Administration (FHA) offers loan products with down payments of just 3.5% for borrowers with FICO credit scores as low as 580 – an attractive combination for potential homebuyers with lesser credit that are struggling to come up with a sufficient down payment.

However, the FHA faces increasing competition for the low-down-payment mortgage market. The government-sponsored enterprises Fannie Mae and Freddie Mac are increasing their push into this market with new loan programs that allow certain borrowers to purchase homes with only a 3% down payment.

Freddie Mac already offered 3% down mortgages under the Home Possible program designed to help low-income borrowers. The program features optional down payment sources such as family contributions and employee-assistance programs, along with income flexibility f…

Stressed By Home Buying? Don’t Be

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A Stressful Experience

What’s the most stressful event you’ve had in your life? Applying for college? Going on a job interview? Hosting Thanksgiving dinner for your entire family?

According to a recent survey by Homes.com, buying a home tops all of those events as “the most stressful event in modern life.” One-third of respondents said they were driven to shedding tears at some point during the process. One in ten homebuyers claimed to have buyer’s remorse after their home purchase.

Home buying can be a prolonged and confusing process – but you can reduce the stress with research and realistic expectations at every step.

Know What You Want

It’s easy to fall in love with a home at first sight, but you must look at your purchase with a practical eye.

According to the survey, the average family viewed six homes before making their choice. However, the high rate of buyer’s remorse suggests that many…

How To Avoid Mortgage Scams

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E-mail scams can take many forms, but did you realize that an e-mail scam could scuttle your home purchase? The Federal Trade Commission (FTC) has warned homebuyers of a housing-related e-mail fraud that could drain your housing funds.

Thieves initiate the swindle by hacking into the e-mail accounts of homebuyers, real estate agents, and brokers, looking for information on home purchases that are approaching the closing process. Once they have gathered enough information to create a convincing premise and the time is right, the thieves send an e-mail to the buyer pretending to be a party (real estate agent, attorney, title company, or escrow personnel) involved in the closing process.

The e-mail outlines an alleged last-minute change in the closing process that requires transfer of money to a specific account – for example, claiming that there is a problem with a previo…

Millennials Should Improve Credit Before Home Shopping

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Small Changes, Big Impact

Sometimes a seemingly small difference can have a large effect, like the straw that broke the proverbial camel’s back. According to a recent study by the credit bureau Experian, that same principle applies to millennials and their borrowing behaviors. With a small change in financial habits, more millennials could significantly shift their risk perception with lenders – allowing them to qualify for mortgage loans or receive better rates if they do qualify.

Older Borrowers, Better Scores

Your credit score, a reflection of your borrowing and repayment history as reported to the credit bureaus, is a valuable risk assessment tool for lenders. It’s not the only measure, but you’ll need other positive factors – such as a large pool of savings or an increase in income – to overcome a poor credit score.

According to the study, average credit scores improve with age. Baby Boomers (age 5…

Your Low Credit Score Could Cost You $45,000

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Your credit score is one of the primary items that lenders check when they consider loaning you money. A lower score means greater risk, and lenders will charge you a higher interest rate because of that difference – but how much could it cost you over the lifetime of a loan?

According to a new study from LendingTree, if you have only fair credit instead of very good credit, the difference can cost you over $45,000.

LendingTree analyzed loan data from their database to assess the costs of a lower credit score as applied to five different sources of borrowing (credit card debt, personal loans, auto loans, student loans, and mortgages). Interest was calculated based on the average loan amount for each type of credit. Combined, the loans totaled $310,263 – dominated by the average mortgage loan of $234,437.

At interest rates available with very good credit (740-799), the total interest payment over the lifetime of all five credit sources was $212,498. At t…

Why Millennials Aren’t Buying Homes

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Waiting to Buy

According to a new study by the Urban Institute, millennials are waiting longer than previous generations to enter the housing market. Approximately 8% fewer millennials of ages 25-34 own homes as compared to baby boomers and generation Xers at the same point in their lives.

Why are millennials late to homeownership? The Urban Institute provided several reasons:

External Factors

The study found three primary external factors keeping millennials from entering the market.

1. Lack of Supply – Affordable housing is rare in more popular urban areas that millennials prefer (and where jobs are located). Housing starts are at approximately 1.2 million – an improvement from the post-housing crisis 550,000 units in 2009, but still below levels from the 1960s. Low supply leads to high prices even for modest homes.

2. Tight Cred…

Trump Changing Use Of Credit Scores In Home Loans

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Are you having trouble getting a home loan because you have no suitable credit history? Has your credit activity been dormant for a long enough time that lenders can’t properly evaluate your risk?

The FICO credit-scoring standard used by Fannie Mae and Freddie Mac requires that potential borrowers have a credit account open for at least six months to be able to assess credit risk properly. Without that background, you are “credit invisible.” You may be responsible with money and pay rent, utilities, and cell phone bills on time – but those aren’t considered in evaluating mortgage loan applications.

According to data from the Consumer Financial Protection Bureau (CFPB), approximately 26 million people are considered to be credit invisible. Nearly 19 million people are similarly shut out of mortgages because they have “stale credit” – their credit history hasn’t had enough rece…