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Changes To Credit Score Calculations Could Make It More Difficult To Buy A Home

February 20, 2020 by admin

A borrower’s credit score is a key factor in the process of applying and gaining approval for a mortgage. The existing models for calculating credit scores is about to undergo a significant change.

The credit scoring giant Fair Isaac Corporation, commonly known as FICO®, has built a new suite of scoring models that will be available from all three credit reporting agencies (Experian, TransUnion and Equifax) to lenders by the end of 2020, according to the credit agency Experian. The new models will treat late payments and debt more severely, but will also now consider historical information about your credit card balances and payment amounts. Consumer FICO® scores will likely change as a result of the implementation of these new models.

How could these changes this impact borrowers? Consumers with high FICO scores who continue to manage their finances well may actually see an increase in their scores. Consumers with scores in the lower 600’s who struggle to make payments on time may see their credit score can go down further. If you are in the high 600’s and making payments on time and trending toward lower debt levels, your score could actually increase.

FICO has long used five main factors to formulate a borrower’s credit score, and these will remain in place. The main factors used to determine a credit score are:

Payment history
Dollar amount owed
Age of credit history
Credit mix
New credit accounts

The major change to scoring centers around what is called trended credit data. Trended credit data provides a more complete risk assessment, enabling decisions to rely more on actual credit management behaviors of consumers and less on the length and depth of credit use history. Trended data offers a closer look at your financial picture over the last 24 months, specifically focusing on how you have managed your existing accounts.

It is estimated that 40 million Americans are likely to see their credit scores drop by 20 points or more, and an equal number should go up by as much.

Wallingford PA Real Estate – Wallingford, PA 19086

FHA Relaxes Condominum Rules

August 27, 2019 by admin

More condominium projects are expected to gain eligibility for FHA financing under new guidelines issued by the Federal Housing Administration this month. The revised guidelines, set to take effect Oct. 19, are expected to qualify 20,000 to 60,000 more condo units annually for government-insured FHA loans.

FHA loans, which require a 3.5% down payment and have generally looser credit requirements than conventional loans, are popular with first-time home buyers. Condos, too, are popular with first-time buyers because they often offer an affordable price to enter the housing market and require less home maintenance. Yet only about 6.5% of all condo projects in the country are approved for FHA financing because of restrictive policies in place for more than a decade.

Highlights of the new guidelines that should boost condo sales:

· Spot approvals: If an entire condo building wasn’t on the approved FHA list, it was nearly impossible for an individual buyer to obtain FHA financing in the past. The new guidelines allow an individual unit to be approved for FHA financing in a building of 10 or more units, as long as no more than 10% of the units in the building have an FHA-insured loan. In smaller buildings, with less than 10 units, no more than two units can have an FHA-insured loan.

· Mixed–use developments: The amount of commercial space allowed in a condo has been increased, which means more condo units in mixed-use developments will be eligible for FHA loans.

· Certifications: The length of time a certification lasts has been extended from two years to three years, and recertification has been streamlined.

· Owner/occupant ratios: The required ratio of owners vs. renters has been dropped from 50% to 35% to be eligible for an FHA approval.

· FHA loans: Up to 75% of all units in a condo project can now have an FHA loan.

Through July 31 of this year condo sales in Wallingford comprise 9.5% of total sales. The average selling price of the 14 condos sold was $126,561.

These changes take effect in October and will make FHA financing easier for condominium buyers.

Wallingford PA Real Estate – Wallingford,, PA 19086

What Is Title Insurance?

August 26, 2019 by admin

One of the large numbers you see on your ALTA closing statement sheet at the closing table is title insurance. Many people ask just what is title insurance and why do I have to have it?

Title insurance is an insurance policy that protects the insured against financial loss rising through defects in the title to real property. Before a home is purchased it most likely has gone through several ownership changes, and the land on which it is built went through many more. At any point in that ownership chain there may have been a situation that occurred which can cause a title issue. For example, an owner may have forged a signature in the transfer of title, or there may be unpaid tax or mechanic liens against the property. Title insurance covers the insured party for economic loss that is the result of such title issues, which are known as title “defects”. When the title for a property has been verified as insurable, the title company will guarantee against loss due to any title defects, and pay expenses incurred in defense of any lawsuit which challenges the title.

The premium for title insurance is paid once at the time of closing, and is based upon the purchase price of the property. The insurance protects the insured for as long as they or their heirs maintain an interest in the property. Coverage protects against losses that arose prior to the issuance date of the policy, and ends on the day the policy is issued and extends backwards in time for an indefinite period of time. This is a marked departure from most insurance policies, which protect the insured against future events that occur after the policy is issued.

Insurance is mandatory and required by the lender when purchasing a home that involves a mortgage. The purchase of title insurance is not required when purchasing a property with cash, but it is strongly recommended that the buyer do so.

Title insurance rates are set by the Pennsylvania Insurance Commission, and all policy pricing is uniform across the state. For example, a Wallingford home that is being purchased for the average 2d Quarter 2019 quarter price of $358,286, the price of a standard title insurance policy would be $2,501.30

Wallingford PA Real Estate – Wallingford, PA 19086

Is Knob And Tube Wiring Lurking In Your Home?

March 14, 2018 by admin

Knob And Tube Wiring

Knob and tube, often referred to by it’s acronym K&T, wiring was an early method of wiring that was in common use in the country from the 1880’s to the 1930’s. A single insulated copper conductor was run within wall or ceiling cavities and through joists via a protective porcelain insulating tubes. Porcelain knob insulators fastened by nails into the structure support the wire over it’s length.

K&T often still lingers in older homes in hard to access areas like attics, wall cavities, and crawl spaces, and it not uncommon to find knob and tube wiring in older homes in our area today.

This early form of residential wiring was intended only for lighting purposes and has quickly become outdated as the electrical requirements of a modern home have increased tremendously. The lack of a ground wire in the system is one of it’s drawbacks as well as it’s outdated method of insulation.

The insulation used in the K&T era was asphalt-saturated cotton cloth or rubber, both of which degrade over time and can pose a significant safety hazard. This early wiring system was never envisioned to carry the power loads of modern day homes require.

While you can choose to purchase a home that has K&T wiring many insurance carriers will not insure homes that have it and any policy that you may find will come with a significant price premium.

Wallingford PA Real Estate – Wallingford, PA 19086

A Buyer’s Secret Weapon – The Escalation Clause

February 15, 2018 by admin

As the Spring market heats up and the supply of homes is being outstripped by buyer demand it is not uncommon for desirable listings to receive multiple offers. Buyers must be ready to make the best possible offer in order to secure their dream home. It is a big letdown when you lose a house to a better offer.

In an ultra competitive market a buyer can unleash a secret weapon that when executed properly will ensure their offer gets accepted. It is known as an escalation clause.

An escalation clause is an addendum to the Agreement Of Sale in which a prospective buyer says:

I will pay X dollars for this house, but if another buyer submits a bona fide offer that is higher, I will raise my offer in increments of Y dollars to a maximum price of Z

An escalation clause states that you are willing to outbid any other offers on the home by a predetermined amount, up to a ceiling price.

Example:

You offer $400,000 on a home with an escalation clause stating that you will outbid other offers by $5,000 up to a maximum offer price of $420,000. So if another buyer makes an offer of $405,000, your escalation clause will increase your offering price by $5,000 up to $410,000 for the home. If a buyer offers $425,000, then according to your escalation clause you are out of the bidding, because the offers have gone over your $420,000 cap.

The escalation clause addendum also requires the seller to produce the competing offer in writing that triggered the price escalation so you can verify that an additional offer did indeed exist.

An escalation clause is particularly useful when you have been informed that you are in a multiple offer situation for a home. The escalation clause will automatically raise your offer on the house by the predetermined increment, up to the maximum amount that you have authorized. It eliminates the back and forth of offer and counteroffer and can wind up saving you money by having a “floating” offer price instead of a fixed price.

I have successfully used the escalation clause in order to secure a property for several of my clients in multiple offer situations. Some agents shy away from it’s usage but maybe you should shy away from them.

Wallingford PA Real Estate – Wallingford, PA 19086

S. Clark Kendus