Credit Scores Can Differ From What Lenders Use

 Daily Real Estate News | Wednesday, September 26, 2012 

 

When reviewing their credit reports, one in five consumers are likely to receive a different credit score from what a creditor will use to price a loan, according to the Consumer Financial Protection Bureau. The discrepancy has the agency concerned.
Lenders use credit scores to help determine the interest rate they’ll charge customers—with higher credit scores often receiving the best rates.
“Many consumers incorrectly believe that the scores they purchase are the same ones used by lenders," according to a CFPB report. As such, a "substantial minority" of consumers are at risk of overpaying for credit or in applying for loans that they’re ineligible for.
Even the slightest variation in credit scores can make a big difference and has the potential to hamper a person’s chances for qualifying for certain kinds of home loans, according to the CFPB.
The CFPB sites FICO scores, which are widely used by lenders, as having different credit scoring models for lenders and consumers that can vary. VantageScore also has different types of credit scores, CFPB says.
CFPB is evaluating the accuracy that credit reporting firms provide to consumers.  It encourages consumers that when they review their credit reports to focus not on credit scores but to check the accuracy of the payment history on the reports because the firms use that to calculate scores. Consumers should take steps to correct any errors they find on the payment history of their reports because it can help improve their scores, CFPB notes.
Source: “Regulator Sees Flaws in Credit-Score Information,” The Wall Street Journal (Sept. 25, 2012)
Source:Realtor Magazine

For Sale: 3BR/2BA Single Family House in Durham, CA, $234,900

For Sale: 3BR/2BA Single Family House in Durham, CA, $234,900

Top 4 Most Common Pricing Mistakes

Determining the Cost and Benefit of a Home Renovation Project

By Erin Devine, DIY Home & Floor Blog
Often, home owners want to update the kitchen with granite countertops, install new flooring or renovate the basement to make their homes more appealing to buyers. Before you begin planning your renovations, however, come up with a blueprint for how much value these will add to your new home.
Here are some tips on what to consider when calculating the costs and benefits of performing a home renovation project:
1. Calculate the costs of your renovation project.
Estimating how much you will spend on installing hardwood flooring or purchasing new appliances is fairly easy to do. However, calculating cost can become difficult if you don’t consider the full scope of the project. Before committing to a renovation, consider the size of your home, the amount of materials needed, and the length of the project. Only after you’ve calculated the total cost can you assess whether renovating is a savvy investment.
2. If needed, ask for professional assistance.
Refusing to hire a professional contractor is another mistake that many home owners make. While it’s possible to successfully complete simple projects on your own, more complex projects like remodeling a basement should be left to a reputable contractor. If you’re anticipating a large renovation project, you need to start pricing the cost of labor through local contractors. If you can’t afford to have a contractor renovate your home, try doing some of the simpler renovations on your own while saving up for the larger projects.
3. Determine how much value the renovations will add to your home.
Only after you determine the cost of the renovation should you estimate how much added value it will bring to your home. If you’re spending thousands of dollars to upgrade your home with features like hardwood flooring and granite countertops, you need to be able to justify the investment.
Select which renovation projects offer a greater return. For example, hardwood flooring usually offers a greater return on investment than granite countertops. According to HGTV, kitchen remodels will help you recoup between 60 and 120 percent of your investment depending on what you renovate, while a bathroom addition can recoup 80 to 130 percent.
But home owners are encouraged to meet with an appraiser or a real estate agent if they really want to know how much they stand to recoup and for help in calculating just how much that renovation project will add to their home’s current value.

Source: Realtor Magazine Blog

Mortgage Rates Fall Back to Record Lows

Daily Real Estate News | Friday, September 21, 2012

Fixed-rate mortgages are back at all-time record lows or hovering near them, Freddie Mac reports in its weekly mortgage market survey. For those who can qualify for a loan, the ultra-low mortgage rates are pushing housing affordability higher.
"Following the Federal Reserve's announcement of a new bond purchase plan, yields on mortgage-backed securities fell, bringing average fixed mortgage rates to their all-time record lows, which should aid in the ongoing housing recovery,” says Frank Nothaft, Freddie Mac’s chief economist.
Here’s a closer look at the national averages with mortgage rates for the week ending Sept. 20:

• 30-year fixed-rate mortgages: averaged 3.49 percent, with an average 0.6 point, matching its all-time low. A year ago at this time, 30-year rates averaged 4.09 percent. 
• 15-year fixed-rate mortgages: averaged 2.77 percent, with an average 0.6 point, setting a new record low this week. Last year at this time, 15-year rates averaged 3.29 percent. 
• 5-year adjustable-rate mortgages: averaged 2.76 percent, with an average 0.6 point, rising from last week’s 2.72 percent average. Last year at this time, 5-year ARMs averaged 3.02 percent. 
• 1-year ARMs: averaged 2.61 percent this week, with an average 0.4 point, holding the same as last week. A year ago, 1-year ARMs averaged 2.82 percent. 

Source: Freddie Mac

Source: Realtor Magazine

HOMEOWNERSHIP 45 PERCENT CHEAPER THAN RENTING NATIONALLY, REPORTS TRULIA

Trulia Research Reveals How Mortgage Rates, Tax Deductions and Time Horizon Affect Rent vs. Buy Decision in New York, Los Angeles, Boston and Atlanta, Among Other Metros

SAN FRANCISCO, September 13, 2012 – Trulia today released its Summer 2012 Rent vs. Buy Report, which provides the inside scoop on whether buying a home is more affordable than renting in America’s 100 largest metropolitan areas. Looking at homes for sale and for rent on Trulia between June 1, 2012 and August 31, 2012, this study compares the average cost of renting and owning for all homes on the market in a metro area, factoring in all cost components including transaction costs, taxes and opportunity costs.

Homeownership Affordability Highest in Detroit, Lowest in Honolulu and San Francisco
With a 3.5 percent mortgage, itemized deductions at the 25 percent federal tax bracket, and a seven-year time horizon, homeownership is cheaper than renting in all of the 100 largest U.S. metros by a wide margin. However, relative affordability depends largely on location. Buying a home is 24 percent cheaper than renting in Honolulu, 28 percent cheaper in San Francisco, and 31 percent cheaper in New York, but is 70 percent cheaper in Detroit. However, the actual dollar amount reveals that despite a low 28 percent difference in buying versus renting in San Francisco, the monthly dollar savings is big ($899) because rents and prices are so high in this region.

Top 5 Metros Where Homeownership Affordability Highest
U.S. Metro	Monthly cost of homeownership ($)	Monthly cost of renting ($)	Difference ($)	Difference (%)
Detroit, MI	$349	$1,149	-$800	-70%
Gary, IN	$616	$1,649	-$1,033	-63%
Oklahoma City, OK	$590	$1,576	-$987	-63%
Lakeland-Winter Haven, FL	$495	$1,276	-$781	-61%
Toledo, OH	$476	$1,222	-$746	-61%

Top 5 Metros Where Homeownership Affordability Lowest
U.S. Metro	Monthly cost of homeownership ($)	Monthly cost of renting ($)	Difference ($)	Difference (%)
Honolulu, HI	$1,519	$2,007	-$488	-24%
San Francisco, CA	$2,327	$3,226	-$899	-28%
New York, NY-NJ	$1,857	$2,687	-$831	-31%
San Jose, CA	$1,819	$2,646	-$827	-31%
Los Angeles, CA	$1,379	$2,020	-$641	-32%

Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly costs are based on net present value of costs averaged over 7 years, and based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

Why Mortgage Rates, Tax Brackets and Time Horizon Matter in Rent vs. Buy Decision
For prospective homeowners who are unable to secure the best mortgage rates, fail to itemize their tax deductions or plan to stay in their next home fewer than seven years, the cost of homeownership relative to renting will be greater. The chart below illustrates how each of these factors can change the cost considerations in favor of renting or buying. In the New York metro area, a 4.5 percent mortgage rate, not itemizing one’s tax deductions and staying in a home for 5 years, will make homeownership 3 percent more expensive than renting, instead of being 31 percent cheaper. Meanwhile, homeownership remains 40 percent cheaper than renting in Atlanta, even with the higher mortgage rate, not itemizing and shorter time horizon.  

                                                                                                                                                                                                                                                        

How Mortgage Rates, Taxes, and Time Horizon Affect Renting vs. Buying
SCENARIO	New York	Los Angeles	Boston	Atlanta
3.5% mortgage, 25% tax bracket, stay 7 years (baseline)	-31%	-32%	-41%	-57%
4.5% mortgage rate*	-23%	-24%	-34%	-53%
Not itemizing tax deductions*	-18%	-21%	-30%	-50%
Stay 5 years*	-21%	-22%	-32%	-52%
4.5% mortgage, not itemizing, AND 5 years	3%	-1%	-12%	-40%

*For these scenarios, the factors not mentioned are the same as the baseline.

PRE-APPROVED QUOTES

• “Homeownership is cheaper than renting in all of the 100 largest metros, by a wide margin,” said Jed Kolko, Trulia’s Chief Economist. “Despite the recent price rebound, rents continue to rise faster than prices, and mortgage rates are near record lows. Homeownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes.”

• ”If buying a home is cheaper than renting in every major metro and makes financial sense in most situations, then why aren’t more people buying? The reason is because many people can’t take advantage of today’s affordability,” said Jed Kolko, Trulia’s Chief Economist. “It takes years to save enough for a down payment, and it takes a high credit score to even qualify for a mortgage, let alone to get the best rate. In the recession, many people found it harder to save – and harder to keep up their credit scores.”

MULTIMEDIA

• To view an interactive map illustration how mortgage rates, tax brackets and timing horizon can impact the rent vs. buy decision, click here.
• To view a full list of the rent vs. buy cost considerations for the 100 largest metros, click here.

METHODOLOGY
Trulia looks at homes for sale and for rent and calculates the average rent and sale price across all listed properties in a metro area. Then, Trulia factors in the total costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc) and total cost of renting (e.g., renter’s insurance and security deposit). It assumes that a prospective homebuyer can get a low mortgage rate of 3.5 percent, itemize their federal tax deductions and are in the 25 percent tax bracket, and will stay in their home for seven years. To account for the opportunity costs, Trulia calculates the net present value of the payment streams for renting and owning. Click here to read the full methodology.

Source: Trulia News Room Press Release

Homebuilder Confidence Bounces Back to 2006 Levels

Daily Real Estate News | Wednesday, September 19, 2012

Homebuilders haven’t been this confident about sales, the outlook of future sales, and buyer traffic since June 2006, which is right before the housing crisis took hold, a new index shows.
For September, the National Association of Home Builders/Wells Fargo builder sentiment index, which measures builders’ outlook on current sales, future sales, and buyer demand, reached its highest level in six years. Plus, homebuilders expect the housing recovery to strengthen within the next six months.
Homebuilders say they’ve experienced some of the best sales levels than they have in six years, and buyer traffic has returned to May 2006 levels, the index shows.
"We think things have turned around and this recovery is sustainable," Patrick Newport, an economist with IHS Global Insight, told the Associated Press.
The index has been edging higher since last October, coinciding with reports that show sales and home prices inching up too.
Source: “Index of US Homebuilder Confidence Improves; Builders Anticipate Sales Strengthening into '13,” Associated Press (Sept. 18, 2012)

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