Building your Credit Score

In today's market, unless you have tons of cash, having an excellent credit score is paramount to securing a good loan for your next home purchase. This blog will discuss how to track and build your credit to help you achieve your future homeownership goals.

To start with, in order to build your credit you need a credit history. If you have no credit cards or loans then you can't build credit. The place to start is opening up a basic credit card, using it for purchases, paying most all of the balance but leaving a little to roll into the next statement period so there is something positive to report. I recommend starting with Capitol One, they have options for everyone and many excellent features.

Knowing what impacts your credit score and by what degree helps you to keep on track with how you use your credit. Consider the following impact graph:

Make the following your personal goals in order to build credit.

• Never spend more than you have. If you can't buy it with cash, don't use credit. You want to keep your balance low, because a high balance tears your credit score down very quickly!
• Do not open too many accounts. You will receive tons of credit card offers. Ignore them, and even opt out so you are not tempted. Don't have more than one or two credit cards.
• Never miss a payment. Always make your payments on time because this has a high impact on your credit score. If you can't make a payment, borrow from family or find a way to post payment on time.
• If you get a car loan, be sure you are stable in your job and make more than enough to cover all monthly expenses and be able to save each month as well. Some people have not been able to get home loans because of car loans, so keep this in mind and prioritize your finances for what really matters.
• Track your credit score regularly and look for any new accounts or unusual activity that you did not authorize. Always protect your login, password and credit information. Theft and fraud can do a lot of damage to your credit. Many credit companies will have automatic alerts for any new activity, Capitol One is great with this.

Here is a basic breakdown of how the scoring system works...

Be sure to keep things simple. Basically, don't have too many credit accounts, track your spending and keep all balances low, and your credit will grow! For more advice and information comment or send me a message and I will be happy to get you going down the right path.

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Where is the Housing Market Going?

When considering the housing market trend over these past few years in the Bay Area, the answer is UP! Many cities are seeing home prices close to or even above 2006-07 values before the crash. Does that mean that there will be another crash? No, probably not. There were a lot of questionable lending practices in the past and new laws along with Federal regulation will keep such circumstances from happening again. I wrote about this in a previous blog post.

The price trend, though it has increased greatly in the past few years, is set to increase slightly in the span of this year, indicating a healthy, steady growth which may be leveling off. Market conditions in the future may be more balanced in favor between both buyer and seller, but don't count on that to make your real estate decisions. One of the large factors that influence home value is the job market, and the Bay Area's job market is still booming. There are many jobs in tech in the Silicon Valley and with innovation and expansion that will continue to drive the demand for real estate and provide the means to purchase it.

Let's look at a few local market examples of where prices have gone...

In May of 2006 Fremont's median home sales price was $675,000. The most recent lowest point was in December of 2011 when it dipped into $504,000. February 2016? Well, it's now $889,000!

For San Jose in March of 2007 the median price was $694,000. In September of 2011 they went as low as $420,000. Now in February of 2016? They are at $815,000.

Keep in mind that many factors affect home value, both on a macro and micro level. Even neighboring regions within the same city can experience very different levels of growth. For specific information pertaining to your neighborhood and home send me a message, call me, email me or visit my office. I'm always busy but I am never too busy to have a discussion or share some helpful information!

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Do You Know Your Floor Options?

Hi everyone!

     Today we will be looking at some different options for home flooring. This will serve as a good reference point and you may see an option or two that you didn't know you had.

Hardwood

Hardwood is a classic choice that works with any architectural style and can last for more than a century with the right care. Maintenance is simple and repairs are easy enough when normal wear occurs or pets leave their mark. That said, keep in mind that wooden floors can be cold and loud if they're not accessorized with rugs. Carpet      Carpet, whether natural or synthetic, is one of the more versatile flooring options. Wool carpeting is durable and resists moisture and stains better than synthetic fibers like nylon and acrylic. Easy cleaning and natural insulation properties for both sound and temperature are upsides, but carpet can also turn into a mildew nightmare if water damage occurs. Cork      Looking for a more sustainable flooring option? Cork flooring offers a warm look and spongy comfort underfoot, plus the irregular grain hides imperfections. Though it's easy to install, cork flooring can be damaged by pets' claws, heavy furniture and sharp items. Laminate      Good quality laminate floors are an economical alternative to hardwood. They resist scratches and discoloration and typically work well in moist environments like bathrooms and kitchens. Unlike true hardwood floors, laminate flooring can't be sanded and refinished though, and it may offer a lower resale value when it's time to sell a home. Tile      This versatile flooring option not only lasts a long time and is easy to clean, but it also offers serious design flexibility. Tile's resistance to scratches, stains and moisture is a major plus, but it doesn't offer any insulation properties and installation can be difficult. My Website

How to Buy a House When You Need to Sell Yours First

I have been asked this question many times, "I want to buy a home, but I need to sell mine first, how can I do that?" If you're thinking that sounds a bit challenging, it can be, but it doesn't have to be. It's best to learn your options and build realistic expectations. As a realtor I see that each transaction has its own set of unique challenges, so regardless of the terms or circumstances it's going to take some work.

Let's discuss your first option. Once you find a home you really like, you can make a purchase offer contingent on the sale of your property. This means that if the offer gets accepted, you will need to list your home for sale (if you have not already), agree on terms with a buyer and close escrow on it. The process of making the initial offer and taking possession of your new home can take 2-3 months if all goes well. The challenge of this approach is that many selling their home want to close escrow quickly, and so they are more likely to accept an offer without such a heavy contingency. It is, however, still possible. In a hot market it's important to have everything together and be ready to execute and minimize delays. Padding other terms of the offer in the seller's favor can also help.

Here's another option, sell your home first. Don't worry, you won't be homeless, and you don't have to move twice either. This is how it can be done... make the rent-back option a term of the sale. Rent-back is when the buyer closes escrow but the seller remains in the home and pays monthly rent to the buyer. No matter what condition the home is in, this is an option. I have seen sellers do rent-backs in excellent condition homes as well as homes in need of many repairs. As long as you stay active in looking for a home and let your real estate agent advise you so you can make a competitive offer to buy your new home, it won't take too long. In ideal conditions the rent-back option can take 1.5-3 months. Not bad, and you only have to move once!

Thanks for reading, and feel free to ask me any questions or suggest another topic!

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Waiting for The Next Big Market Crash?

What memories do you have of 2007? Some have good memories of this year, but for others (especially homeowners) this was one of the worst years. Around this time the housing market crashed and home values plummeted. For some, their home value was far below the mortgage they owed. Many homeowners were not able to get affordable refinancing and were no longer able to pay their mortgages. Foreclosures and short sales left sellers at a loss, losing their equity of thousands, tens of thousands and even hundreds of thousands. For first time buyers and lenders that were able to purchase with cash or somehow secure a loan, they were able to buy homes at an incredibly low price. Home prices eventually came back up and those that took advantage of the crash saw tens and hundreds of thousands of value increase over the span of just 4-7 years.

Here's something important to consider if there is another crash:

Unless you do not own a home during such an event, you will probably not be in a good financial position. Also, in 2007-08 banks were losing a lot of money and some were closing their doors permanently. They were very reluctant to give home loans during this time. In the event of another crash, unless you had all cash or outstanding credit and a steady well paying job, you would have difficulty buying a home. In the case you were able to get a loan and an offer accepted, you would probably have to wait for some time before you knew for certain the home was yours. Foreclosures can take longer than normal sales. Short sales, which are also done when the homeowner can not afford loan payments, can take 3-6 months.

Do you still want to wait to buy a home during a market crash to get a great deal? Ok, but you will be waiting for an extremely long time, for years, maybe even decades. Do you know why there was a market crash back in 2007? Inflation? Artificial prices? Bubble burst? Ok, here is what was going on... many banks were issuing mortgages when they KNEW that the purchasers were not able to afford payments. Why would they do that when they would have to foreclose and lose out? Well, soon after issuing the mortgage, they would turn around and sell it on the market to investors. Here is what was happening: 1. Issue a high risk mortgage 2. Group with other mortgages as a package and sell to investors 3. Repeat. This terrible practice was happening well before 2007, but too many dishonest lenders jumped on board in the years preceding. Bad lending practices coupled with a combination of other economic factors, and it all blew up.

Since that time, the U.S. government made some huge reforms in the financial industry. They put stricter regulations on lenders which set a standard for underwriting practices (criteria used to determine loan eligibility) and required lenders to be clear and upfront with rates and fees. This caused banks and other lenders to conduct business in the highest ethical standards that this country has seen. The government also changed the market positively by regulating bank reserves, offering assistance to them and special loan options to buyers, and regulating loan rates, changing them slowly to allow a steady and much safer economy.

If you're waiting for the next crash, I hate to break your bubble, but it probably won't come soon. A lot of changes were implemented when the government intervened which safeguarded us from the same circumstances happening again. Let's enjoy a steady market and transparent lenders. Buy a home when you are ready. Don't pay rent, build equity!

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How Much is Your Home Actually Worth?

This is for all the current and aspiring homeowners out there. How exactly is the price of a home determined? Perhaps you've noticed a home which seems to be a good price but no one buys. Maybe you've seen a home that sells for thousands above asking after just a few days on market. There is quite a wide range of factors that go into play, both on a macro and micro level. A book could be written on this complex system, but to make things simple we will look at the heart of the matter, what it really comes down to.

How exactly is the value of anything decided? Value, as with price, is subjective. In order to get the right price there must be an agreement between the buyer and seller. For the same home, someone may not even want it if it were free whereas someone else is willing to pay $400,000. In the simplest terms, value is in the eye of the beholder and therefor the right price is generally determined by that one person who is willing to pay more than anyone else (of those that know about it).

The value of a home will be determined by that buyer who wants it most, but before they show up, a decent price point must be set. Too high of a price will detract buyers, too low will confuse them (but definitely attract attention). A good price point is determined by looking at the nearby factors and recent comparable sales data. Most of the time finding a perfect comparable recently sold home is not possible. When I create CMAs (comparative market analysis), I look for the closest most similar house that sold within the last three months. Going too far back in history greatly skews price because home values can change very rapidly. If a comparable home was sold close by, it doesn't necessarily mean that the home in question is worth the same. Consider the following major factors:

What school districts are associated with the home and each comparable sale?

What years were the homes built? Generally home ages will be similar or same in the same or a nearby neighborhood, but not always.

Are there missing or extra rooms or features? You can determine how much a room or pool would add or deduct by comparing those with and without and noting the sold price differences. This is not an exact science, because many factors affect each home sale.

What were the circumstances of the sale? If it was a foreclosure and the home was trashed and needed a lot of repairs, obviously the price will be much lower than what it could have been in better circumstances and conditions. It's best to only compare homes that were sold in similar circumstances if possible.

Next let's look at the different perspectives, sometimes almost polar opposites, between buyers and sellers. Buyers will immediately scrutinize potential homes and look for defects and needed repairs. They are concerned with cost. Sellers want to spend the least amount and make the most possible. This creates difficulty which the real estate agent must masterfully negotiate. With a minimally invested sale, homes can sell for thousands less. Real estate agents must ensure that the home to be sold is in attractive condition, is highly presentable and that it is marketed through the best conduits pertaining. With that being said, home owners often want to list at a high price and buyers want it for less.

You may have noticed on various websites such as Zillow an estimate of home values. I have examined many of these estimates in cities all over California and have found them to be unreliable. Sometimes the estimates are fairly close to actual value, and sometimes they are off by tens of thousands. As of 2015, developers have failed to create a highly effective computer algorithm that measures all of the factors and generates consistently excellent estimates. For now, the best way to get an estimate is with good old brain power and common sense.

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Preparing For Your Future: Your First Home Mortgage

This is for all the prospective home buyers who want to be in the position to buy in the future. In order to prepare for your future, you must understand your own perspective. This will enable you to take the proper approach and make your dream a reality.

Approximately 80% of Americans report themselves to be optimistic. The rest? Well, pessimistic. How is this relevant? You'll see... Most people are generally optimistic, which means they want to look for the good things in life, focus on positive, and overall have positive and hopeful attitudes toward their future. This can be a good thing, but it is also bad. Pessimistic people, although sometimes unpleasant, tend to make more careful and calculated moves. They are less likely to spend, more likely to save and put themselves in better financial positions for the future. I am speaking in generalities of course, but there is a real science behind someone's attitudes and how that affects their behavior. Since being optimistic can make us want to spend, a little bit of pessimism can help to balance things out. Pure determination is not enough, you must understand your attitudes and make calculated and conscious efforts toward building your future! Take a moment to reflect on your own perspective and attitudes, and how that affects your finances.

The next step is to understand what lenders will look for when you meet with them to see what you can qualify for. They will ask you for: (A) Last two years of your W-2 income statements, (B) Last two months of full bank statements, (C) Last thirty days of pay stubs. The underwriting process varies between lenders, but all will look for job stability, amount of income, history of consistent earnings, and amount of reoccurring expenses.

Knowing this, following a plan to make all of these look promising to a lender will get you that loan. First, try to get some history with your work. Of course, always be looking for opportunities to advance or change companies/ positions for the sake of considerably higher pay. If you do make a transition between companies, it is best to do it quickly. Months of unemployment in your record can be enough for the loan to get rejected. If your job is more entrepreneurial in nature, then consistent and high earnings will help you out. Consistency is generally the most important of the two.

In the two years you are building your financial position, try to keep costs to a minimum. Make a budget and follow it closely. You can go old school, and write everything in your balance sheets at the end of your check book, or you can get an application on your phone like Level or Sweep, link it to your accounts and track your spending and remaining budget. No matter what you do, start a system to budget, and follow it closely. If you start to waver, don't go for broke, just get back up and try something different if your current system is not working. Best you can, stay away from any and all loans. Car loans, personal loans, student loans, just say no. If you want a home mortgage, you can't have added liability. You may still be able to get the mortgage, but even if you are, the added loan may reduce how much the lender is willing to lend you.

During the preceding two months before you apply, run over your budget and try to cut some extra spending. Eating more meals at home and going out for entertainment less will help. Maximize your income and minimize your spending so when you deliver your bank statements, they will be looking good.

When you finally do apply for pre-approval, if you get rejected or don't get as much as you'd like, don't dismay. Keep at it! Always look for opportunities to advance, creative ways to save, and keep your eyes on the housing market. You may just find something in your budget that you love. When you do, give me a call and I will advise, submit your offer and negotiate on your behalf.

For more information on how optimism and pessimism affect us, click here.

For information about Level Money, click here.

For more information about Sweep, click here.

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