Real Estate | Lake Norman Real Estate

Buying a House with Bad Credit

June 22, 2022 by Kristen House Leave a Comment

One of the first things you’ll learn about buying a home is that you need the following things to secure a mortgage: good credit, stable income, and minimal debt. If you’ve got bad credit, don’t despair! We’re here to help!

What is the first step of buying a house with bad credit?

One important thing to remember is that when a lender looks at your mortgage application, they won’t just look at one factor, they consider the entire application wholly. So if you’ve got a bad credit score, or a slightly higher debt-to-income ratio- it won’t necessarily count you out.

The very first thing you should do if you have bad credit and are trying to secure a mortgage is getting an official mortgage preapproval. Your preapproval will not only show what your current score is, but give you an idea of what your mortgage options are, and a roadmap to improve your credit score. This should be done as soon as you begin thinking about buying a home. Its never too early to get started!

What is the lowest acceptable credit score to buy a house?

This completely depends on what type of mortgage you’ll be seeking out, but for conventional mortgages the minimum sits at 620. However, there is an exception to this rule for other loan types such as FHA loans and VA loans. These loans can approve a borrower with a credit score as low as 500. The caveat with these types of loans is that while they are insured by the government and can set recommendations for lenders, the lender still gets to decide it’s own parameters for acceptance. So all in all, we recommend a credit score of around 580-620.

Best mortgage lenders for those with bad credit

Most lenders have great options for those with different needs, especially those with bad credit scores. Our top three are as follows:

Rocket Mortgage

Rocket Mortgage has options for conventional loans, FHA loans, and VA loans. It takes only a few minutes to gain preapproval, and each borrower receives a customized mortgage rate. Rocket Mortgage will consider loans for borrowers with credit scores as low as 580-620

Citi Mortgage

Citi mortgage, like Rocket, has options for conventional, VA, and FHA loans. Borrowers can choose between fixed-rate or adjustable- rate mortgages. Depending on your qualification- you can be approved for a down payment as low as 3%. The lowest acceptable credit score for Citi mortgage is 580.

New American Funding

New American Funding has options for conventional, FHA, VA, and USDA loans. The lowest acceptable credit score for a loan with this lender is 620, and may only require a down payment of 3%.

Some additional resources for mortgages for borrowers with less than perfect credit scores here!

Homeowner’s Equity has Dramatically Increased

June 22, 2022 by Kristen House Leave a Comment

The red-hot housing market we’ve experienced recently has skyrocketed property values…therefore increasing homeowner’s equity.

What does it mean when homeowner’s equity goes up?

Home equity is the difference between what you owe on your mortgage and what your home is currently worth. The more you pay on your mortgage, the more your home’s equity increases. It represents your stake in the property versus the lender’s stake in the property. For most homeowners, over time you home equity will increase as you make mortgage payments.

It’s great to have equity in your home, increasing it will allow you to pay less interest on the loan over time, or even take out home equity loans. Access to these loans are great if you find yourself needing to do a big home improvement project or refinancing a loan when interest rates are low.

What happens to your equity when your home value increases?

Equity can increase over time as your home value increases. The increase may come from a home remodel or merely owning a home in an appreciating real estate market.

Over time, your equity increases as your home’s value increases. in recent times, we’ve seen equity rising as value increases because of the hot housing market. Home values have appreciated significantly during the recent seller’s market. Value can increase even more in areas with highly-sought after properties, or neighborhoods with appreciating value. For example the Charlotte housing market has seen appreciation as high as 25% in the past year (2021-2022) and is forecasted to still rise at a rate of 21% on the next year (2023).

How can I build home equity?

There are three main ways to increase your home’s equity:

Purchasing a home in an appreciating market
- We briefly discussed this point in the paragraph above, but this point should not be ignored. While we can’t exactly predict which markets will appreciate the most, it’s important to look into previous year’s housing index for a given area to evaluate just how much these markets have increased in values
Paying off more of your mortgage
- If equity is important to your home-owning goals, try to pay as much towards your down payment as possible. You’ll be required to borrow less money than if you offered a small down payment, this will give you instant home equity. You can also pay extra on your mortgage when you can, just beware of prepayment penalties.
Make home improvements
- The two home improvements that increase value the most are kitchen and bathroom remodels, but understand that not all improvements need to be huge, expensive ones. Keep curb appeal in mind- and while you’re at it read our post about how to increase your home’s curb appeal.

Homeowner’s equity increases in 2022

During the first quarter of 2022, home equity increased significantly. However, experts are predicting this trend will slow during the rest of the year. At the beginning of 2022, home owners had a national average if $178,000 in equity, making owners “equity rich”. If you’re looking to tap into you home’s equity in order to renovate, pay off high interest debt, or sell your home while value is high, don’t delay!

How to Deal with a Bidding War

June 14, 2022 by Kristen House Leave a Comment

How to Deal With a Bidding War

Bidding wars have become more common in recent years as a response to real estate market conditions. To put it simply, a bidding war happens when two or more potential homebuyers are interested in purchasing the same property, and one or both buyers attempt to offer more money to the seller to secure the sale of the home.

How do you win a bidding war before it starts?

There’s no guarantee that if you get involved with a bidding war, you’ll win. However, there are a few things you can do to give yourself a competitive edge over your competition :

Get pre-approved for a mortgage
Try to find out what the seller wants
- The seller may want to close quickly, or even occupy the home for longer than usual
Offer a large earnest money deposit
- This shows the seller that you have more confidence in your offer
Offer concessions to the seller
- This can be offering to buy the home ‘as-is’, offering to pay for the seller’s closing costs, or even allowing the seller to stay in the home for a set period rent-free
Offer an appraisal gap guarantee
- If the negotiated price exceeds the home’s appraised value, you’ll need to make up the difference
Write a nice letter to the seller
- Let them know why you want the home. Will you be buying this home to raise a family? Take care of elderly family members? Just finally have a place to call your very own? Tell them!
Offer cash if you can
- After all, cash is king

Read more about winning a bidding war with this article from Business Insider

Mistakes to avoid

Bidding every cent you have
- You may need to cover a huge repair or encounter some unforeseen circumstances
Bidding with too many contingencies, or none at all
Assuming you’ll get another chance to bid
- Write your offer as if it’s the last one
Saying your bid is your last and final offer
- The listing broker will not likely take you seriously if you submit a counteroffer again
Using an escalation clause
- Escalation clauses will automatically increase your purchase offer a certain amount above a competitor’s. This takes away your control and cause you to bid far higher than you can afford in some cases.
Not knowing a home’s value
- Sellers often will intentionally price their homes lower than the perceived value to encourage bidding wars

When should you walk away from a bidding war?

When should you let go of a bidding war and move on?

When the home was overpriced to begin with
- It won’t be worth it to outbid a contender if the house is way over your budget or the home’s value, especially if you end up selling the home later down the line. Additionally, the property may not even appraise for the price you’ll be paying, and you won’t be able to get a mortgage for the high amount on the price tag.
If there is more than one buyer competing against you
- A bidding war is hard enough when you’re competing against ONE other buyer, let alone several. There is also a higher chance that the sale price will go above your comfort level.
The home isn’t truly the one you want
- It’s hard not to give in to market pressures. Maybe there’s a lack of inventory on the market, interest rates are low, etc. But just because a home ticks a few of the boxes on your wish list doesn’t mean it’s the full package. If a home is not everything you ever wanted, don’t succumb to the pressure and buy it because it’s ‘good enough’.

Bidding wars are much more common during seller’s market, for more information about buyer’s markets vs seller’s markets, read this post.

Buyer’s vs. Seller’s Market

June 13, 2022 by Kristen House Leave a Comment

Buyer’s vs. Seller’s Market

When should I sell my house? When should I buy a house? Should I wait for prices to go down? Do we wait for a seller’s market or buyer’s market? We’ve heard a lot of these questions in the past few years, so we decided to put our answers here, but readers beware: the best time to buy or sell is when you’re ready.

What is the difference between a buyer’s and seller’s market?

To make it simple: a seller’s market happens when there are more buyers than there are houses for sale. On the other hand, a buyer’s market occurs when there’s an excess of homes for sale and fewer buyers looking to scoop one up. Let’s do a slightly deeper dive:

Buyer’s Market:

In a buyer’s market, potential buyers will most likely spend a lot more time shopping around for home and weighing their options, as there is no need to be in a rush. There is plenty of inventory on the market and more options to consider. Home prices are usually stable, or even dropping as buyers have more leverage.

Seller’s Market:

In a seller’s market, the prices of homes will likely increase, as sellers can expect multiple offers or even bidding wars on their homes. The seller holds more negotiating power and the lack of inventory on the market can help them leverage the price.

Is a seller’s market a good thing?

A seller’s market is a great thing for sellers, but buyers…not so much. It isn’t a bad idea to buy a home during a seller’s market, as sometimes influencing factors can favor the buyers. However, since sellers can raise their prices due to the lack of inventory, buyers may not be able to afford the high prices. Buyers must also compete with each other for bidding on a home, and some may outbid others by a large margin to make sure they secure the home.

For sellers, a seller’s market is great! It is very likely that their home will sell very quickly, as there are more buyers than sellers. Sellers are also very likely to get top dollar for the sale of their home, and may receive multiple offers.

Is it better to wait for a buyer’s market?

Waiting out a seller’s market is a risky game to play. While it is true that inventory will rise and builders catch up with demand, it isn’t likely that home prices will fall significantly. If you’re truly eager to buy a home as soon as possible, don’t hold out hope that prices will drop as interest rates continue to increase. However, don’t let FOMO (fear of missing out) drive your desire to buy quickly if you’re truly not ready to buy a home. Just because the market is hot, doesn’t mean you need to play a role in it.

When it comes to the timing of buying a home, don’t follow the market. Follow your finances. If you’re credit score is lower than you’d like, or you don’t have a down payment saved, or if your debt-to-income ration is high? Wait it out. Your positioning is far more important to your homebuying experience than what the market is doing.

Read one of our recent posts: Is competition slowing?

Is an FHA Loan Right for You?

June 10, 2022 by Kristen House Leave a Comment

Is an FHA Loan Right for You?

What is a FHA loan and who qualifies?

An FHA loan is a home mortgage that is insured by the government. A bank that is approved by the Federal Housing Administration (FHA) will actually serve as the lender, but since they are insured by the FHA, it is much easier for lower-income borrowers to gain approval for the loan. The bank doesn’t actually bear the risk FHA loans, the FHA does.

FHA loans are designed to help lower-income borrowers, or those with less-than-perfect credit scores secure a home loan.

FHA Loan Requirements:

In order to qualify for an FHA loan and borrower may need to meet the following:

Proof of income – paystubs and at least one year of W2’s
Current debt information
Debt-to-income ratio of less than 43%
The home considered must be appraised by and FHA-approved appraiser, and inspected
The home considered will be used as a primary residence, and you must occupy it within 60 days of closing
Credit scores 580 and above will require a 3.5% down payment, while those between 500-579 will require a down payment of 10%

How exactly does a FHA loan work?

An FHA loan works much like a conventional loan, the process isn’t much different. The loan won’t come from the Federal Housing administration itself, but rather a lender approved by the FHA. Conventional mortgages are not backed by the government and therefore are harder to obtain for those without the resources for a full down payment and high credit score. The FHA essentially takes on the risk for the lender in the event that the borrower is unable to make payments and defaults on their loan.

What will disqualify you from an FHA loan?

There are a few things that can disqualify you from obtaining an FHA loan:

Having a credit score that is too low: while the FHA recommends a score of 500 or higher, lenders are allowed to set their own standards, meaning that they like to see a score of at least 600
Too much debt: for the best chances of being approved for your FHA loan, it is important that your debt-to-income ratio falls below 43%. For more information on what a debt-to-income (DTI) ratio is and how to calculate yours, click here
Insufficient income: even though FHA loans only require a down payment of 3.5%, you will need to have that payment ready at the time of purchasing your home. Many borrowers also forget to factor in closing costs, which are needed to secure the loan. Additionally, is some certain criteria isn’t met, the lender may require a higher down payment of 10%

Is Competition Finally Slowing?

June 3, 2022 by Kristen House Leave a Comment

The housing market has thrown a lot of curveballs at buyers and sellers alike in the past two years, but perhaps the tide is turning.

Reasons to believe the market is shifting

During the year 2020, active listings in the United States declined throughout the year. 2021 followed the same trend, with the number of active listings continuing to fall. In years before, the number of active listings tends to rise in the spring, and generally fall again into the winter months.

2022 is already proving to be totally different than previous years, as right now the number of active listings is going UP, rather than following trends in years past.

Here’s a handy graphic to illustrate what we’re talking about:

For a more comprehensive understanding of what’s happening here, visit Realtor.com’s article

On top of unusual listing activity, we are seeing a shift in demand as well.

“April buyer activity was rather unusual, since it typically matches March levels,” said ShowingTime Vice President and General Manager Michael Lane. “But this year, April traffic was slower across all markets, pointing to competition softening. It contrasts with last year’s dynamic, when demand reached a feverish peak in April.”

The ShowingTime Showing Index® measures showing traffic per residential property for sale
by agents and brokers utilizing ShowingTime solutions for property-access management.

By using this graphic we can see that the number of traffic per property fell by nearly 12%. Fewer buyers are interested than buyers in years past.

Check out a recent post: Is the Housing Market Correcting?