Category: Real Estate

Shopping for a new home can be overwhelming. Finding a real estate agent, looking at homes online, and applying for loan approval, there is a lot to do, and it can be difficult to know where to start.

Believe it or not, there is a first step that every home buyer should take–before they start interviewing real estate agents and before they look at even one home online.

Know What You Can’t Live Without

Make a list of everything you want in a home. If you are part of a couple, you should each have your own list.

When you have completed your home purchase wish list, take a look at each item. Ask yourself,

“Is this something that I really need in order to enjoy life in my new home?”

Then, get rid of anything that you know you can do without, and still be perfectly content.

The Tough Decisions

Now it is time to prioritize the wish list. The top two items should be those items on which you will not compromise, as living without them would make you miserable. For some folks that might be a gourmet kitchen or space for a garden.

The bottom two items should be those that you are willing to compromise on.

Now, compare your home purchase wish list with your partner’s. Anything that is on both of your lists is a priority and should probably be moved to the top.

Inevitably, though, there will be items each of you will need to compromise on, thus the little “bargaining chips” at the bottom of the list: sort of a “I’ll give you the garage in exchange for the fireplace” type of thing.

It’s Not Set In Stone

One thing that may surprise you is that this list will change as you begin to actually view homes. You may discover a feature in a home that you didn’t consider when you wrote the original list.

It’s very common that some buyers say they absolutely need to have a certain feature in a home yet the home they finally choose lacks that feature.

Don’t feel as if this list is set in stone, but do inform us if anything changes.

The wish list works well to help cut down your confusion when presented with an array of homes to view. It also helps your agent to keep focused and not waste everyone’s time by showing you homes that don’t fulfill your desires.

You’ve just taken the first step to make sure that your new home is one that fulfills at least most of your wishes. That house is out there. Count on it.

One thing I know for certain: homeowners that sell their homes quickly and for top dollar are happy. Let’s face it, selling a home is hard work and nobody wants to be in that position for any longer than they absolutely have to.

Thankfully, there are steps you can take to get in and out of the selling process quickly and with maximum profit at the closing table.

Tip #1 – How to Maximize Profit

While it’s important to clean and stage a home for maximum profit, it won’t get you anywhere if it’s akin to putting lipstick on a pig.

Squeaky doors, dripping faucets, torn window screens and damaged baseboards all add up to a price reduction. So before you get out the cleaning supplies (or schedule a cleaning crew) fix all the little things that – believe me – homebuyers will notice.

Then you can clean the house – from top to bottom. Make it look like you have a full-time cleaning staff with clean windows, floors and walls.

Clean and organize cupboards and closets – yes, they will look inside. Clear the countertops of anything that isn’t decorative.

Tip #2 – Think like a Homebuyer

Buyers won’t jump through hoops to get information about your house. Most give up after one phone call. While your agent has a lot to do with this, you can do your part as well.

Don’t make it difficult for potential buyers to view the house. Make the home available for showings; even at the last minute and even if it’s not a convenient time for you.

Does your agent answer the phone or return phone calls promptly? You should know this before you even hire an agent. It should be part of the process of elimination.

Call each agent under consideration and never hire one that doesn’t return your call promptly. If they don’t return a potential listing client’s call they will certainly not return a homebuyer’s call.

Here’s a bonus tip: Many agents use their listings to drive traffic to their web site, not to help sell the home.

To accomplish this they put as little information as possible in the ad for the listing, hoping that the potential buyer will want to more and click through to the agent’s website.

When you hire an agent make it clear that your house is not to be used as “link bait” to bring in more customers for the agent. Tell him or her that you want all details of your home listed in all print and web advertising. 

Tip #3 – Always Sell First

I typically advise my clients to sell their home before moving. This is because studies show that vacant houses take longer to sell. This is the same reason many homeowners pay decorators to stage their homes.

Buyers want homes that they feel they can move right into and a vacant home doesn’t give them that feeling.

Tip #4 – Price it to Sell

Although location, location, location is every real estate agent’s mantra, price, price, price is that of every homebuyer – they simply will not buy an overpriced home.

Determining a price range that will attract buyers while at the same time not “give away the farm,” requires the services of a real estate agent.

Only with access to the local MLS and knowledge of current market conditions and the neighborhood can you be sure that your home is priced appropriately.

I’m happy to meet with you to discuss what I do to sell homes quickly and for top dollar. A consultation is free, there is no obligation to use my services and it’s only a phone call away.

Marcy, a first-time homebuyer, was over-the-moon excited about finally moving into her new home.

The day arrived, the movers were actually on time and, for the first time since the final walk-through, she opened the door to her home.

Since she had a case of water bottles with her, she headed straight for the refrigerator to ensure they were kept cool for her hard-working crew.

But there was no refrigerator – just an empty space where it stood just weeks earlier during the walk-through. Marcy panicked. The stove was there and the built-in microwave above it. The dishwasher was there.

She then ran to the laundry room, only to find empty spaces where that gorgeous washer and dryer once stood. Marcy grabbed her phone to call her real estate agent who told her that those appliances weren’t included in the sale.

“If you wanted them, you should have said something and we could’ve negotiated with the seller.”

Marcy was, again, a first-time homebuyer. She had no idea that appliances were something that needed to be “negotiated.” After all, as a tenant, they were always in the homes she rented.

The tragic fact is that Marcy, like many new homeowners, spent all of her savings on the down payment and closing costs with nothing left to pay for appliances. Thankfully, her parents stepped up with an offer of a loan.

It’s the buyer’s agent’s job to educate his or her clients about a process they may find completely foreign. To have neglected to do so, and then blame Marcy for his shortcomings, is beyond belief.

Why aren’t appliances included in the purchase price?

Sometimes they are. Many times, they are not, and here’s why: if they aren’t built-in, they are considered “personal property.”

When you buy a home, you are buying “real property,” which is the land, the home and anything else permanently affixed to both.

A rose bush planted in the backyard is considered a “fixture,” because it is affixed to the land.

A rose bush planted in a pot on the patio, on the other hand, isn’t a fixture, it is personal property and may or may not be included in the sale of the home.

Other examples of fixtures include:

• Chandeliers that are attached to the ceiling
• An outbuilding, such as a shed
• Wall-to-wall carpeting (but not the Persian throw rug that isn’t glued to the floor)
• Garage door opener

If the item is glued, nailed, bolted or otherwise attached to the home, it is typically considered a fixture and must be included in the sale of the home. But, there’s a “butt.”

The seller can exclude items from the sale by mentioning it in the listing agreement or the purchase agreement. It turns out that the washer, dryer and refrigerator in Marcy’s new home, were excluded in the purchase agreement.

Marcy isn’t a lawyer and was depending on her real estate agent to decipher what she was reading before she signed it.

Yes, you can ask that personal property be included in the sale

Many a real estate agent get-together includes conversations about the crazy things some homebuyers have asked sellers to leave behind.

From wanting the seller’s family dog to requesting that the entire contents of a home (even soap and toilet paper) be included in the sale, everything is negotiable.

The sellers are under no obligation to include any personal property and, depending on the type of market and how motivated they are, they may hold firm during negotiations. But, there’s no harm in asking, right?

Keep this in mind if you’re thinking of selling your home. If you want to hang on to your great-grandmother’s chandelier (or anything affixed to the home), remove it and replace it with something else before the home goes on the market.

More than half of today’s home sellers are selling a home for the first time, according to Zillow’s Consumer Housing Trends Report for 2018.

That’s a whole lot of home sellers who may not understand the pitfalls that await them because they either don’t understand the process or have bought into myths they read on the internet.

If you hope to sell your home during your preferred timeline and for the most money possible, you need to:

• Fully understand the selling process, from the paperwork to marketing methods
• Choose the right real estate agent
• Divorce yourself from your emotions
• Don’t buy into the myths you’ll hear from others

You would be surprised how many first-time and even some repeat home sellers harbor certain myths. Let’s bust some of those right now.

1. Zillow’s “Zestimates” are accurate

Zillow.com, an online real estate aggregator, turns 13 years old this year. From the beginning, consumers have misunderstood the site’s limitations when it comes to home valuation.

In fact, too many buyers and sellers rely on the company’s “Zestimates” when deciding what a home is worth.

Big mistake

Zillow doesn’t employ an army of real estate agents who go through each home on the market, which is what is required to help pinpoint a home’s current market value.

Nor is Zillow able to seek out, via the MLS, valid and relevant comparables of each home, another requirement when determining market value.

Instead, it relies on an algorhythm – an automated valuation tool that uses public records and information from “users.”

Far from exact, Zillow’s Zestimates are frequently way off the mark. In fact, in 2016, former Zillow CEO Spencer Rascoff sold his Seattle, Washington home for 40 percent less than its Zestimate.

That particular Zestimate was off by $700,000

The discrepancy illustrates perfectly why a home must be evaluated in person to come up with an appropriate market value.

That Zestimates are accurate is a myth.

2. Real estate agents are all alike

This is the myth that leads real estate consumers to choose the first agent they speak with, a very common practice according to studies performed by the National Association of Realtors.

In an age when consumers over-research even which toothpaste to buy, this is amazing.

All licensed real estate agents attend real estate school which teaches them the legal aspects of selling real property. That’s it.

It doesn’t teach them how to effectively sell a home. It doesn’t teach them marketing techniques.

So, while an agent will walk away from those classes with an understanding of riparian rights, he or she may be clueless as to how to actually sell a home.

The differences among agents is astounding when you look into it. Some feel that a sign and a lockbox will do the trick. Others do a bit more. Then, there are listing agents who’ve studied and used various marketing methods and, through trial and error, have found one that is proven and effective.

The home seller is paying the same fee for the lazy or novice agent as he or she would for the powerhouse agent.

Not choosing the latter is like paying for a new Rolls-Royce Phantom and driving a 2011 Ford Fiesta off the lot.

Take your time when interviewing listing agents — we are definitely not all alike.

3. Videos are an important aspect of home marketing

While 88 percent of homebuyers use online websites when searching for homes, according to a National Association of Realtors survey, only 26 percent of them say they visited an online video site.

In fact, among the online tools that buyers find “very useful”, “video” didn’t even make the list:

• Photos
• Interactive maps
• Virtual tours
• Neighborhood information

Listing videos don’t offer the flexibility of virtual tours, which is most likely why homebuyers prefer the latter.

With a virtual tour (especially the 3-D tours), buyers are able to perform a virtual walkthrough of the home, viewing what is important to them, not the videographer.

Yes, you’ll no doubt run up against internet claims that all homes must have a listing video – a myth started by the video production industry, with no statistics to back up their claims.

4. I don’t need to replace the appliances, I’ll just give the buyer a credit so he can do it himself

If you plan on including your appliances in the sale of your home, and they need replacing, do so before the home goes on the market.

A recent survey of housing trends finds that nearly half of homebuyers find energy efficiency a desirable feature. Efficiency-rated windows are popular as well as energy-efficient appliances.

These features are strong selling points. So much so that 75 percent of millennial homebuyers place “updated appliances” at the top of their list of “must-haves,” according to a Bank of America survey.

5. I don’t need to clean and/or stage the garage

While you will hear a lot about how bathrooms and kitchens “sell homes,” it’s the garage that nearly half of homebuyers say is their hot button, according to research from Zolo.com

And, believe it or not, 10 percent more women than men name a garage among their must-haves in their new home.

Garages are extremely important to millennia homebuyers as well, according to that Bank of America survey, with 65 percent of them valuing a garage over an extra bedroom.

Yet far too many home sellers use the garage for their excess “stuff” when preparing the home for the market.

It makes more sense to shove all that junk into the master bedroom

In reality, the wisest choice is to rent a storage unit.

We’re happy to answer any questions you may have about the home selling process. Reach out to us anytime.

One of the most common questions we hear from our listing clients is whether or not they should renovate or remodel their homes prior to putting them on the market.

Whether your goal is to make more money off the sale of the home or to help it to sell faster, part of our services to our clients is to help you figure out where to focus your time, energy and money.

Make repairs first

Concentrate first on making needed repairs. The buyer will most likely ask for these fixes, especially if they are for problems that show up on the home inspection report, so making them before listing the home helps avoid delays during the transaction.

Being proactive is always a smart move in real estate

Some of these tasks include fixing peeling paint, broken windows, torn screens, dripping faucets and loose or missing handrails.

Any problems that affect health and safety should be addressed first. Then, use what’s left of your budget to make the cosmetic fixes that are attractive to homebuyers in your home’s price range.

 Consider minor upgrades

“Don’t spend money that won’t yield a return on the investment. The best expenditures for most markets are paint, carpet, light and plumbing fixtures,” Matthew George, the chief appraiser of Eagle Appraisals Inc. in Denver, Colo. tells The Wall Street Journal.

Decide which room or rooms require the most updating and start with those. Minor upgrades, such as new appliances or kitchen and bathroom countertops will do more to change your sales price compared to redoing the kitchen or bathroom entirely.

In fact, a major kitchen or bathroom remodel is a money pit, according to Remodeling Magazine. The magazine’s 2019 Cost vs. Value Report warns that you’ll spend $ 66,196 on a kitchen remodel, on average, yet you’ll only recoup 62.1 percent of that when you sell the home.

You’ll do better on a minor kitchen remodel, spending $22,507 and realize an 80.5 percent return.

There is simply no way you will make back what you spend when it comes to remodeling or room additions.

In fact, the repair or renovation task that returns the most is a new garage door (97.5 percent). To get the details about the study, visit remodeling.hw.net.

Save money or time?

In a real estate transaction, time is most definitely money. The longer a home sits on the market, the better the chances that the homeowner will end up taking less than planned to get it sold.

The most common reason a home doesn’t sell is that it’s overpriced. Second to that, however, are homes that aren’t in decent condition.

Keep in mind that the first week that the house is on the market is known in the industry as “the honeymoon period.” This is when new listings receive the most attention and the more people that view the home, the quicker it will sell.

A recent study from a large real estate analytics firm finds that homes get four times as many visitors in the first week they’re on the market than they do one month after listing.

With repairs and cosmetic fixes out of the way, your home may be the belle of the real estate market during that first week.

We’re happy to meet with you and offer suggestions on which repairs to make first and on which tasks to focus on after that.

We recently received an email from a former client. He’s considering selling his home and, like many home sellers do, he went online to see if he could figure out how much the home is worth.

“Zillow values my home at $325,000,” he writes. “Yet, one of my neighbors recently sold his home, which is almost identical to mine, for $365,000.”

He went on to say that he is quite confused about the home-pricing process and wondered if we could help him out.

First, the online real estate portals offer only “estimates” of a home’s value. They have never seen your home or any other home for which they determine an estimate, so they are rarely correct.

It’s all about market value

One thing Mark got right is that he understands that the price he sets for the home should reflect its current market value.

The only way to know what that is – what a willing buyer will pay to a willing seller for a home like his – is by figuring out what they’ve paid for similar homes in the recent past.

This means we need to look at sales prices of similar homes. And, there’s more that goes into determining if a home is comparable to yours than meets the eye. We look at the same criteria that professional appraisers do.

• The age of the home: Sold homes that are within three years (either side) of the age of your home.
• The size of the home: Yes, we look at the sold homes’ square footage, but the number of bedrooms and bathrooms also plays a role in determining market value.
• The home’s location: We try to find sold homes in close proximity to the subject property, but will consider a wider range, if necessary. The location within your particular neighborhood may also impact its market value.
• Upgrades, amenities and condition: We’ll compare your home to the sold homes with an eye toward any upgrades performed, whether similar amenities are offered and, most important, how the condition of the homes compare.

Next, we’ll do the number crunching to determine if your home is worth more or less than the sold homes.

WWTAS?

What will the appraiser say? He or she, after all, has the final say in how much your home is worth in today’s market. No lender is going to approve a loan for more than a property is worth.

This is why we are so thorough in our determination of the appropriate price for your home. An inaccurate evaluation on your agent’s part can lead to a failed real estate transaction, just when you thought it was a done deal.

The appraiser will visit your home to perform an inspection. He or she may or may not take photos while in the home. The appraiser will certainly consider the home’s landscaping, “location, structure and even appliances,” according to the pros at LexurAppraisal.com.

The inspection process can take “anywhere from 20 minutes to 3 hours depending on the size and details of the property,” according to Rachel Guthrie at GoHomeside.com.

If you hire an experienced listing agent, the suggested list price should match or come very close to the appraised value of the home. This is why it is so important to interview more than one agent for the job of selling your home.

Unless you’re Jeff Bezos, Bill Gates or Warren Buffet, your home purchase may be the biggest financial investment you make during your lifetime.

Scary thought, isn’t it? Not if you approach this investment as the three wealthiest Americans would.

Buying a home is a business transaction and, to avoid costly mistakes, it needs to be addressed as one. This means performing careful research, absorbing knowledge and keeping your emotions at bay.

Let’s take a look at the five most common mistakes that homebuyers tend to make.

Buyer Trap #1- Not Getting your Financing in Order

Obtaining loan pre-approval is the most important step to take during the home purchase process. It should be the first step you take as well, and for several reasons.

First, the mortgage pre-approval process lets you know how much you can realistically and comfortably pay for a home.

Just as you wouldn’t go car shopping without a clue as to how much you can spend, don’t look at one house until you know your limit.

Additionally, in a fast-moving seller’s market, most homeowners don’t even want a non-pre-approved homebuyer to look at their homes.

It’s not a stretch, then, to understand that they most likely won’t entertain an offer from one.

Without that preapproval letter, you may just lose the home of your dreams to another, pre-approved buyer.

The process is relatively painless and not overly involved. It’s free, too, so there is no reason not to make your first home buying step one that leads you over the doorstep of a mortgage broker or bank.

Buyer Trap #2- Not Understanding the Loan Process

Ask the lender about any charges and fees that you don’t understand. This way, there will be no surprises at the closing table. If a fee or charge sneaks into the closing documents you’ll notice it and can take action.

Standard fees include document preparation fees, underwriting fees, loan disbursement charges and others.

By law, the lender is required to provide you with a form called the “Loan Estimate” that includes a listing of all fees in advance of closing.

Never hesitate to ask if you don’t understand anything on this form and don’t assume that there won’t be additional fees at closing.

Then, at closing, you’ll receive the “Closing Disclosure” form that you can use to compare to the Loan Estimate.

Buyer Trap #3 – Not Performing Due Diligence

While the seller has a duty to you to answer any questions you have about the home honestly, you have a duty to protect yourself by performing various inspections before you fully commit to purchase the home.

Hire a professional home inspector to go over the home’s major systems. While these inspections are visual (nope, the inspectors don’t open walls), a capable and experienced inspector may notice problems that the untrained eye won’t.

Even if you decide that you want to purchase the house no matter what, it’s much better to know about these problems up front so that we can negotiate a lower price or cash back at closing for repairs.

Buyer Trap #4- Judging the Book by its Cover

It’s easy to fall in love with décor. This is why new home developments feature model homes. These homes are carefully staged to appeal to the consumer’s emotions.

By the same token, it’s easy to dislike a house because it’s messy, dirty or has dated furnishings and features.

It’s so important to remove your pre-conceived notions of what the perfect house will look like. Only then can you truly see a home for what it offers – both the good and the bad.

Don’t allow the dazzling décor to make you forget what it is you want in a home. Don’t let the mess cloud your vision of a home’s possibilities. Carpet can be replaced, walls can be painted.

Focus on the layout of the house, and not the cosmetics.

Buyer Trap #5- Not Considering Additional Expenses

When you’re pre-approved for a home it’s tempting to buy at the top of your limit. Don’t give in to the temptation.

When you purchase a home, you take on expenses you didn’t have when you rented a home.

If the house is in a managed community you will likely have monthly home owner’s association dues. If the home has a pool you will pay for maintaining it.

Many renters don’t pay for water but homeowners typically do. The ongoing maintenance of the home falls on your shoulders, so it’s important to leave enough room in your housing budget to take care of them.

I always counsel my clients to ask the seller for copies of utility bills for the past year to get an idea of how much they can expect to pay if they purchase the home.

While these are the most common mistakes homebuyers make they are in no way indicative of all of them. I’d like to help you develop a home purchase strategy that will avoid all of these mistakes and more.

Call me for a free home buying consultation and I’ll show you:

– How to get pre-approved for a mortgage

– How to buy the right home for your needs

– What to put on your wish list

– The entire home buying process, from start to finish, in plain English.

That letter from the bank: You know the one — it says you’re approved to buy a home for a certain amount of money. It’s burning a hole in your pocket.

Now it comes down to deciding what type of home to buy, within your budget. Condo or townhome? Existing home or a newly constructed house?

The latter is a question we hear frequently from our clients. Let’s take a look at the differences between buying a new home and an existing home.

The Basics

A brand-new house gives you a blank canvas on which to create your dream home. And, while an older home can be remodeled to suit your lifestyle and tastes, it requires time and lots of money.

If you like the idea of being part of the numerous decisions that go into building a home from the ground up, new construction may be right up your alley.

Keep in mind, however, that there are typically delays, so if you’re easily frustrated, consider an existing home.

Cost

When you buy a new home, you’ll pay more for it compared to similar existing homes. This is known as the “new home premium” or “new construction premium.”

While there is no set amount, last summer, new homes sold for 28 percent more (nationwide average) than existing homes, according to Prashant Gopal at Bloomberg.com.

In a 2018 National Association of Homebuilders (NAHB) poll, 31 percent of the homebuyers surveyed said they prefer new homes, while 46 percent said they prefer existing homes.

Yet, when a Harris poll asked those who prefer new homes if they were willing to pay a new construction premium most respondents said they were not.

You’ll need to decide if the new home premium is in your budget and you’re willing to pay it.

Ongoing costs of home ownership, however, are typically lower in a new home, at least for the first four years, according to the American Housing Survey from the U.S. Census Bureau.

For instance, the owner of a newly-constructed home most likely won’t be faced with unexpected repairs and, at least for the first few years, maintenance costs will be negligible.

“In fact, 73 percent of new homeowners spent less than $25 a month on routine maintenance costs,” suggests Peter Bennett at MyBankTracker.com.

New construction homes may have energy efficient features — another money-saving aspect of choosing new over old. Monthly savings on utility bills further decrease the new home premium.

Finally, many new home developers offer incentives when the buyer agrees to use the in-house lender. Incentives may include a significant closing cost credit or points paid on the loan, further bringing down the new home premium.

There is one significant financial drawback: new construction homeowners usually pay higher property taxes. Because new home communities are usually built in less-developed areas, property taxes subsidize development of the area’s infrastructure.

Taxes will be part of your monthly mortgage payment, so pay close attention to this detail when making your decision.

When weighing the pros and cons of buying new construction, crunch all the numbers before making your choice.

Location, Location, Location

Sure, it’s a well-worn mantra, but location usually is the most important consideration when shopping for a home.

The reality is that location determines whether a home will hold its value and appreciate over time. Homes in some school districts, for instance, hold their value better than those located in others.

With existing structures, what you see is what you get when it comes to the neighborhood. You can tour the area and get a feel for the type of neighbors you’ll have if you choose to purchase there, how well they maintain their homes, helping or hindering the area’s home values.

If you have children, you have no way of knowing if other families will be drawn to the community, providing playmates for your kids.

In new home subdivisions, especially in brand new ones where sales are few, the neighborhood is a wildcard. Only when all the homes are sold will you know what type of neighborhood you have on your hands.

In many cases, but not all, new neighborhoods are located on the outskirts, while established ones frequently are located nearer to town.

Choosing between these two locations is a lifestyle decision that requires factoring in your daily commute and determining how important proximity to town is to you.

It’s a matter of taste

If you need a home with lots of space for storage, hobbies or a home office, a customized, new construction home may be the ticket.

If your wish list includes a home with mature landscaping in an established neighborhood, older homes may work better.

The decision between old and new may just come down to whether your lifestyle includes walking to the movies and to dinner at your favorite downtown restaurant or having an extensive hiking trail right outside your door.

Should you decide to go the new construction route in your home purchase, go into the process with representation. Make no mistake – the builder’s real estate agent represents the builder’s best interests.

Although it may seem easier to use the same agent, it isn’t wise. Feel free to reach out – we’re always available to answer questions.

Three digits. They may be all that is standing between you and your own home or continuing to rent. Known as your “credit score,” those digits reflect how risky it will be to lend you money. The score may also impact other aspects of the homebuying process as well.

 How your credit score is calculated

The road to your credit score, also known as a FICO® Score, begins with the credit reporting agencies. Known as “the big three,” they include Equifax, TransUnion® and Experian®.

The information the agencies collect ends up in the hands of the Fair Isaac Corporation (or, the aforementioned FICO®, for short), one of the nation’s top two credit scoring companies.

Ninety percent of what FICO calls “top lenders” rely on your FICO score to determine your credit risk and how much they will charge you for the money you borrow.

FICO’s score calculation is complicated and secret. What they end up producing, however, is a three-digit score from each of the reporting agencies.

“Mortgage lenders usually take the middle score” from this subset, according to Craig Anthony at investopedia.com.

“For example,” he continues, “if your credit scores from the above agencies are 710, 690 and 610, the lender typically makes its decision based on the 690 score.”

Learn more about how FICO determines your score at myfico.com.

What is considered “good” credit for a mortgage?

FICO Scores can range from a low of 300 to a high of 850. According to FICO, about 1.4 percent of Americans with credit scores have a perfect 850.

Last summer, however, the company announced that the average score in the United States reached an all-time high of 704, up four points from 2017’s average.

So, what’s the magic number you’ll need to buy a house?

It depends on the type of loan you’ll be pursuing.

• FHA – 580 and above to qualify for the 3.5 percent down payment and 500 and above with a 10 percent down payment.
• Veterans Administration (VA) – The VA doesn’t loan money so it doesn’t mandate a minimum credit score. Most VA lenders want to see at least a 620 score, although some lenders may approve a borrower with a 580 score.
• Rural Development (USDA) – 640 and above.
• Conventional loans – 620 and above

Since requirements change occasionally, use the above minimum scores as a general guideline and consult with a lender for current requirements.

How does a low score impact the homebuying process?

If you find your credit score on the borderline, just barely acceptable to a lender, you may run into the following problems along the road to homeownership.

You’ll pay more for your house payment every month

First, your credit score will determine the interest rate on your loan.

Use  FICO’s Loan Savings Calculator to determine how much money you can save by raising your credit score before applying for a loan.

Home insurance rates are higher for those with poor credit

If you won’t be paying cash for the home, the lender will demand that the home be insured. And, if you’re credit is poor, you’ll pay more than homeowners with good credit pay.

“People with poor credit pay at least twice as much as people with excellent credit in 37 states and Washington, D.C.,” according to Laura Adams, InsuranceQuotes’ senior analyst.

Live in West Virginia? A poor credit score may doom you to paying more than twice the rate (208 percent).

And, since insurance is one of the four components of your mortgage payment (principal, interest, taxes and insurance), a higher premium will impact how much you pay for the home each month.

How quickly can I raise my credit score?

The first step to take when trying to raise your credit score quickly is to look for errors in your credit reports. You are entitled to a free copy of your reports every 12 months, from all three credit reporting bureaus.

The Federal Trade Commission recommends that you order these reports from annualcreditreport.com, the only agency authorized by the U.S. government.

Items to look for in your credit report include:

• Personal information – Ensure that your name, address and Social Security number are accurate.
• Check all listed account numbers for accuracy.
• Check that there are no accounts listed as closed which are actually open.
• Look for accounts that are incorrectly listed as delinquent.

You will find more tips on what to look for in your credit report online, at consumerfinance.gov. If you find errors, dispute them according to the bureau’s instructions. These are listed on each credit report.

In the meantime, don’t open any new credit accounts. Since the credit bureaus don’t know how you’ll use this credit, they consider you a higher credit risk with new credit and it may result in as much as a 10-point reduction in your score.

Don’t close any credit card accounts, either. The lack of installment credit makes you appear riskier.

Pay your bills on time

Since your payment history accounts for 35 percent of your credit score, late payments are brutal on your credit score. Start meeting those payment deadlines.

Consider putting the accounts that you typically pay late on an automatic payment schedule with your bank.

Don’t be shy about obtaining financial counselling. You’ll find a list of approved credit counseling agencies on the Department of Justice website.

Or, consider meeting with a non-profit housing counselor in your area. You’ll find a list of U.S. Department of Housing and Urban Development-approved counselors online at consumerfinance.gov.

Buying a home isn’t as easy as walking up to a lender and requesting a mortgage. You’ll need cash for a down payment and the loan’s closing costs, unless you’re applying for a VA or USDA loan.

If you’ll be going after a conventional loan, you’ll typically (but not always) need 20 percent of the loan amount as the down payment.

Right now, the median sales price of a home in the U.S. is $240,000. Based on that price, you’ll need to come up with between $8,400 and $48,000 (depending on the loan program) just for the down payment.

Then, there are closing costs to consider. These vary, but they are typically between 2 and 5 percent of the loan amount.

Unless you have a stack of cash sitting around, you’ll need to start saving, and that takes careful planning. A well-though out budget is your road map.

The Budget

It’s important to get your budget in writing, whether that means using a spreadsheet, paper and pencil or personal finance software. Financial guru Dave Ramsey recommends the free budgeting software at everydollar.com or try Microsoft Money Plus Sunset Deluxe

The most basic of budgets includes your income and your outgo. Income should include all money from all sources.

Outgo includes not only your fixed expenses, such as rent or mortgage payments and installment loan payments, but variable expenses (utilities, telephone, etc.) and every single penny you spend on a daily basis.

Some spending that is frequently overlooked by budgeters includes:

• Money given to charity
• Dining out (yes, even that bagel and coffee you stop for each morning)
• Transportation expenses (fuel, insurance, tolls and parking)
• Auto maintenance
• Pets (food, accessories, vet visits)

Keep a small notebook on you while you’re away from home so that you can quickly jot down the small purchases we all make every day. These may include items such as coffee and bus fare.

Give it a Trial Run

Take the new budget for a spin for a month or two and see how it fits and adjust where necessary.

Your budget will show you where you spend your money every week. More important, it will show you areas you can cut ― unnecessary spending that you can add to your house fund instead.

By the way, open an online savings account in which to stash your house fund and forego the debit card. Without a debit card, these accounts are a bit harder to access than a brick and mortar bank so you’ll be less tempted to raid the account.

Choose a fee-free account such as those offered by:

• Ally Bank
• Barclays
• Discover Bank

Today’s homebuyer has options when it comes to buying a home for the least amount of cash out-of-pocket. Go for one of the low-down payment programs and ensure your real estate agent requests that the seller pay a closing cost credit.

These two items alone will slash your cash out-lay tremendously and you’ll be in your new home sooner, rather than later.