You arent alone if you dont have great credit. Around 15 of Americans have a credit score from 500 to 599, which is considered poor. Around 10 of people have credit in the range of 600 to 649, which is considered fair.
When youre applying for a mortgage, youre most likely to be approved with a score of at least 650, although even anywhere in the 600s can make it challenging. If your score is below 500, youre almost certainly not going to be approved for a mortgage, and beyond that, the following are key things to know.
Conventional mortgages tend to have the strictest requirements as far as your credit score. Freddie Mac and Fannie Mae are two companies offering conventional mortgages. Freddie Macs minimum credit score requirement is 660, with a down payment of 3. Fannie Maes minimum score for a 3 down payment is 620. If you make a down payment of at least 25, you may be eligible for a Freddie Mac conventional mortgage with a credit score as low as 620.
The majority of lenders follow similar requirements, because usually after your loan is closed, the lender will sell it to Freddie Mac or Fannie Mae.
You should be aware that in the eyes of your lender, theres a difference between having a low score because you dont have much credit history and having a low score because of bad credit history. Youre likely to be viewed more favorably with limited credit than with bad credit.
If youre close to the lending cut-off, you should be able to show that you have a debt-to-income ratio of no more than 36. You will probably also need to show that you have at least two months of cash reserves on hand.
What About an FHA Loan?
An FHA loan may be an option for someone with a very low credit score. You can be approved for these loans with a score as low as 500, but youll have to plan to put at least 10 down.
If you have a higher score, you may be able to put as little as 3.5 down.
Aside from VA loans, FHA loans have the least stringent approval guidelines.
As such, FHA loans are often used by people after a foreclosure or bankruptcy.
FHA lenders dont have to follow the above credit score requirements. They can require that your credit score is higher for approval. Many FHA borrowers have a score somewhere between 650 and 699.
For a VA loan, there is no minimum credit score, but you can only get this type of home loan if youre an eligible service member in the military, a veteran, or the surviving spouse of a veteran. While theres no set minimum score, individual lenders can create their own guidelines.
Should You Focus on Improving Your Score?
If you have less-than-perfect credit right now, you might want to focus on building your score. It can take several months, but its very unlikely interest rates will go up anytime soon based on what the Fed has said so far. The Fed says they expect rates will stay around zero through 2021 and maybe 2022, although theres no guarantee.
If you can make even modest improvements in your credit score, not only are you likely to be approved, but you may also get better terms. Focus on paying down your high-balance credit cards, cleaning up any errors, and in the meantime, also try to save for a down payment. If you have at least 10 for a down payment, a lender will see you as less risky.
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Preparing a house for sale in the new year involves more than taking down the holiday decorations. Some of the key steps to take before putting your home on the market in the new year include:
1. Decide on a listing date
One of the first steps is to decide when you want to put your house on the market and create a timeline for all the tasks that need to be completed before this happens. Work backward from the listing date to establish deadlines for each task. Establishing these deadlines can be a great motivator for getting all of the to dos done in order to showcase your house to its best advantage.
2. Hire a REALTOR
A REALTOR will guide you through the selling process and provide a plan for attracting potential buyers to get your house sold for the best possible price. REALTORS have reams of data and calculators at their fingertips to help you make the most strategic choices when selling your house.nbsp;
3. Give the house a deep clean
Deep cleaning goes beyond vacuuming and dusting. Giving your home a deep clean means getting carpets steam cleaned, mopping floors, cleaning windows inside and out, washing walls to remove stains and scrubbing bathrooms. Consider using professional carpet cleaning and maid services to really make your house sparkle and shine.
4. Get rid of all the clutter
De-cluttering will make your house seem more spacious and make it easier for potential buyers to envision themselves in the house. Start the de-cluttering process by cleaning out closets, cabinets, and garages. Donate clothing and other items of use and throw out items that are broken or cannot be used.
5. Make needed repairs and updates
Leaky faucets, chipped paint, running toilets, and squeaky doors may seem minor but really signal to potential buyers that your home has not been well maintained. To help attract buyers and get top dollar for your home, take the time to make needed minor repairs and consider updates such as repainting rooms with neutral paint colors, replacing worn carpeting, and modernizing bathroom and lighting fixtures.nbsp;
6. Spruce up curb appeal
Sprucing up the curb appeal of your home is an important step to take before putting it on the market. In fact, among REALTORS, 94 have suggested sellers improve their curb appeal before listing a home for sale. This recommendation is so common simply because the outside of your home is the first thing buyers see when they pull up to the curb and as the saying goes - you never get a second chance to make a first impression. Painting or replacing the front door, keeping the lawn mowed and weeded, trimming overgrown shrubs and trees, and repairing cracked walkways are just a few things that can go a long way to sprucing up the curb appeal of your home.
7. Stage it to sell
Staging your home can show it in its best light. The National Association of REALTORS Profile of Home Staging found that 40 of buyers agents cited that home staging had an effect on most buyers view of the home, and 83 of buyers agents said staging a home made it easier for a buyer to visualize the property as a future home. Staging a house can involve things like adjusting furniture layouts to make rooms appear larger, repainting rooms, opening curtains and blinds to let light in and adding extras like fresh flowers in vases, a bowl of fruit in the kitchen and folded towels in the bathrooms.
If selling your house is on your list of New Years resolutions, make sure to take the steps outlined above to get it ready to sell. This preparation can help your house stand out among the millions of homes nationwide projected to sell in the new year.
Jeffrey M. Fagannbsp;is the 2019 president of the Orlando Regional REALTOR Association and is regional vicenbsp;president of Watson Realty Corp.
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If youre considering wading into the flipping world, when youre realistic about the challenges, youre already putting yourself in a better position to deal with them.
The following are some of the most significant challenges you might face along the way if you flip a property.
Finding the Right Property
Many homes are not a good investment in terms of flipping. You have to find neighborhoods that will appeal to buyers, but you need properties that are going to be priced below market value in that area. Your goal with flipping isnt to let the property appreciate slowlyits to sell quickly.
Some of the ways you can gain leads for properties well-suited to flipping include looking for probate properties, going to auctions or keeping up with foreclosure lists. Tax lien properties, wholesale properties, and short sales are other options.
You need to do the math before bidding on a property to know the highest price you can pay and still make a profit.
With each home you buy you have to think about the propertys actual value, current conditions of the market, comparable home prices, and how much you think itll cost you to make repairs and upgrades. These considerations have to be weighed against the possible listing price.
Some flippers can pay cash for properties, but if you cant, it can automatically put you at a disadvantage. That doesnt mean you cant work around this, but its something to be mindful of. For real estate investors, its not uncommon for mortgage lenders to want a significant down payment of 25 or more.
Youll also have to come up with the cash to do the work on the property, pay contractors, maintain the utility bills, and cover closing costs.
Along with planning for everything above, youre going to need a contingency to tap into if things dont go according to plan, which is almost inevitable.
You may be able to use equity from a rental property you already own or get an investor for private funding. Otherwise, your two primary options are a traditional lender or using your own cash, both of which have risks.
When youre an investor, and you experience delays on a project, it can be incredibly frustrating. Your contractors may have other jobs theyre working on, materials might not arrive on time, or machines and equipment might break down.
Once theres one delay, it often creates a ripple effect.
To avoid some of the impacts of delays, you shouldnt >
Above, we mentioned the importance of having a contingency cushion built into your budget, and the chances are very high youre going to tap into it when youre flipping a house.
You might not have known there was mold behind a wall, or a pipe in the wall could burst unexpectedly. Weather and delays can also contribute to expenses you didnt initially account for.
The best you can do to plan for the unexpected is to try to budget for them ahead of time.
Not Understanding the Market
Finally, when youre a house flipper, you absolutely have to understand the market, and its not easy. It takes time, experience and research to grasp whats happening in the market at any given time. Many new flippers just dont get it but they jump in any way.
Its not always the prime time to start a new project. For example, demand might be down, or mortgage rates could be high. There can also be external issues in the local area where you are.
You cant just consider the trends when youre already entrenched in them. A good flipper is ahead of the trends, and you can time your purchases and flips accordingly. Factors to understand include local house inventory levels, trends in mortgage rates, and property values.
If youre lucky, youll find an experienced local realtor who can help you a lot as far as understanding local housing conditions.
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