I have some very exciting news!

I am proud to announce that I have become an affiliate real estate specialist with a national program called Homes for Heroes


Homes for Heroes was established shortly following the tragic events of 9/11 as a way to give back and say “Thank You” to our nation’s heroes. When heroes work with Homes for Heroes affiliate real estate specialists and local businesses, they receive Hero Rewards® which are easy ways for firefighters, law enforcement, military (active, reserves and veterans), healthcare workers, EMS and teachers to save significant money when buying, selling or refinancing a home; or when making every
day home-related purchases.


HERO REWARDS
BUY A HOME – receive a check from Homes for Heroes in the mail.
SELL A HOME – receive reduced real estate service fees at closing.
MORTGAGE or REFINANCE – receive reduced lending fees.
LOCAL BUSINESS AFFILIATES also provide special hero discounts.

The Circle of Giving
Every time a hero uses Homes for Heroes, they help other heroes in need. A portion of Homes for Heroes’ earnings is donated to the Homes for Heroes Foundation, a nonprofit 501(c)(3) that provides assistance to heroes in need
.

Why am I telling you this?
Because this program is available everywhere in the United States, and you may be a hero or you may know a hero that would benefit from this program. By working with me on the sale, or purchase of their house, I am able to donate a portion of my commission to the Hero, as well as the Homes for Heroes cause.

For more information about Homes for Heroes (or the Foundation), please visit HomesForHeroes.com/affiliate/Liz-Purdy or to sign up contact me at 508-658-0153 or email LizPurdy@ERAKey.com.

Thank you for your time, and for helping to say “Thank You” to each and every community hero. Because Service Deserves Its Rewards®!

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Don’t lose your loan!

If you have worked hard to overcome your past credit problems in order to purchase a home it can be a huge relief when you finally receive that pre-approval letter from your mortgage loan officer. A pre-approval is your next big step toward purchasing the home you have been dreaming about, but it is not a golden ticket either.

Once you are pre-approved for a mortgage the next step is generally verification (aka underwriting). You will be required to supply a number of documents to your lender in order to verify your income, employment history, and other information which is relevant to your loan. Assuming that you are able to pass successfully through the verification process your loan status should move from “pre-approved” to “approved.” 

Yet just because a lender has issued you a pre-approval does not mean you are guaranteed financing. There are still a number of ways to mess up your loan before your closing date rolls around. Keep reading for a list of ways to mess up your mortgage approval. Hopefully you will be able to learn from the mistakes of others so that you never have to find yourself in the same unfortunate situation.

Apply for or Open New Accounts

Even though your credit was checked as part of the pre-approval process, your lender is most likely going to check your credit report again prior to closing. They do this in order to be sure you have not experienced a change in “borrower circumstances.” If credit or financial changes occur between pre-approval and closing (such as a drop in your credit scores) then you could lose your loan.

Applying for or especially opening new accounts is one potential way to kill your mortgage before you ever make it to the closing table. When you open a new credit obligation while your mortgage loan is in underwriting, especially a large obligation like an auto loan, you could raise your debt to income ratio as well. An increase in your debt to income ratio could financially disqualify you from closing on your loan even if your credit scores are not an issue.

Run Up Your Credit Card Balances

Another potential way to mess up your mortgage closing is to run up your credit card balances. As is the case with opening new accounts, when you run up higher balances on your credit cards you have the potential to both raise your debt to income and to lower your credit scores simultaneously. You may not realize it, but your credit card balances have a big influence over your credit scores. As your credit card balances climb your credit scores will generally begin to fall – sometimes significantly. In fact, your credit card balances can have a negative impact upon your credit scores even if you keep your accounts paid on time each and every month.

Close a Credit Card Account

When you close a current, positive credit card account that action has the potential to drive your credit scores downward. Closing a credit card does not cause you to lose credit for the age of the account (that is a myth), but a freshly closed account can increase your debt to income ratio. When your debt to income ratio increases, your credit scores will most likely be impacted negatively. If your credit scores fall because of a credit card closure then there is a chance you may no longer qualify for the mortgage you had been approved for previously.

Pay Off a Collection

You would think that paying off old collection accounts is a positive move when it comes to your credit scores. However, due to a deficiency in some of the older FICO credit scoring models which are used by mortgage lenders, paying off an old collection can sometimes be interpreted as new derogatory activity. As a result, there are instances when paying off an old collection account could actually have a negative impact upon your FICO credit scores. Even if that impact is only temporary those newly lowered credit scores could be enough to cheat you out of your home loan.

Of course you should not assume that paying legitimate old collections is necessarily a bad idea. However, if you were already approved for a mortgage with those old collections present on your credit reports then you might want to consider waiting until after your home closing before paying or settling any old accounts.

Make Late Payments

Making late payments on any of your credit obligations while your mortgage is in the underwriting process is a huge mistake, a mistake which could easily put the brakes on your home loan.

A late payment could potentially cost you up to 50 points per credit bureau. At best, your closing date could be pushed, at worst, you no longer qualify for your loan.

Report your gross income, not your net income

While this doesn’t happen often, it does happen. Make sure when you enter your income on the application, you enter your gross income. This will go into the calculation for your debt-to-income ratio and if it isn’t entered correctly will not show the whole picture.

Document all the ways you earn money

Often people just submit a W2 form showing their annual salary, but if your debt-to-income ratio is too high, the lender will have to go back and ask you for more—such as documentation of 401k, IRA, stocks and bonds. Submit everything. More information is better.

Prepare to explain big deposits in your bank account

Banks will scrutinize your checking account history for the past two months. You’ll need to produce a paper trail for any out-of-the-ordinary, large amounts of money deposited into your bank account, such as the check your parents gave you to help with the down payment or the time your boss finally reimbursed you for that business trip. In the latter case, for instance, you might be asked to submit a copy of your expense report and evidence of your credit card payments for the expenses. Many times, a borrower has a very kind and generous family member who is excited to help them get in to a home. This kind hearted person reaches in to the old cigar tin under the mattress and pulls out a couple thousand dollars of cash to give to their favorite loved one

The borrower, all excited about now having the cash to put in the new kitchen or bathroom, puts the money in their account a few days before the closing. As with all loans, the lender will ask for updated assets, or as such bank statements to ensure the borrower has the cash to close. The underwriter will see this large deposit and ask for it to be sourced. Meaning, we have to prove where the money came from. We have to prove this to meet government requirements of insuring that the lender is not funding terrorism or laundering money. All deposits must have a paper trail of their source of origination. A note from Uncle Ernie will not do.

The Takeaway

Just because your 3 credit reports and scores were checked by your lender prior to receiving your initial pre-approval does not guarantee you the money in hand to purchase your home. Yet if you can avoid the 5 mistakes above you should have little to worry about, at least from a credit perspective.

Let’s talk about closing costs

  It’s an important part of ever Real Estate transaction, but what are they for? Why doesn’t my cash back at closing cover everything? How much do they cost? Hopefully after reading this you will understand them a little more and why we have them.

What are closing costs?

Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. Closing costs are incurred by either the buyer or seller.

Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose. Here is a list of fees that may be included in closing.  The list is inclusive of fees you may see, but it’s not likely that your loan will include all of the fees listed here.

  • Application Fee
  • Appraisal
  • Attorney Fee
  • Closing Fee or Escrow Fee
  • Courier Fee
  • Credit Report
  • Escrow Deposit for Property Taxes & Mortgage Insurance
  • FHA Up-Front Mortgage Insurance Premium (UPMIP)
  • Flood Determination or Life of Loan Coverage
  • Home Inspection
  • Home Owners Association Transfer Fees
  • Homeowners’ Insurance
  • Lender’s Policy Title Insurance
  • Lead-Based Paint Inspection
  • Loan Discount Points
  • Owner’s Policy Title Insurance
  • Origination Fee
  • Pest Inspection
  • Prepaid Interest
  • Private Mortgage Insurance (PMI)
  • Property Tax
  • Recording Fees
  • Survey Fee
  • Title Company Title Search or Exam Fee
  • Transfer Taxes
  • Underwriting Fee
  • VA Funding Fee

How much are closing costs?

Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees.

Your lender will give you a Loan Estimate for your loan, which will include what the closing costs on your home will be, within three business days of receiving your completed loan application. But these are just an estimate, and many of the fees listed can change. If they do change, you may receive a revised Loan Estimate so there are no surprises along the way.

Often, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative, mailing or courier costs charged by your lender. Remember that you can shop around and you may be able to find other lenders who are willing to offer you a loan with lower fees at closing.

At least three business days before your closing, the lender should give you Closing Disclosure statement, which outlines closing fees. Compare this to your Loan Estimate and ask the lender to explain what each line item on your closing costs is and why it is needed. There are limitations on the amount a number of fees can increase from the Loan Estimate to the Closing Disclosure so there really shouldn’t be any surprises on closing day. But if there are, you can still walk away at closing.

How can home buyers avoid closing costs?

Some banks allow you to avoid upfront fees on your loan by getting a no-closing cost mortgage, in which you don’t pay any of the closing costs when you close on the mortgage.

Typically, when a lender offers a deal like this, it does end up costing you in the long run: The lender may charge you a higher interest rate on the loan for not paying closing costs, or the lender may wrap the closing fees into the total mortgage owed, in which case you end up paying interest on the closing costs.

More commonly, home buyers can negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in exchange for a higher offer price.

As with everything, as a professional before making a decision. There are programs that assist buyers with closing cost. Ask your Realtor (or myself) if there are any in your area that you might qualify for.

Why should you use a Realtor?

Have you ever thought about WHY you should use a Realtor?

As you may have guessed, I meet a lot of people every week. Someone asked me why he should get his Real Estate License so he can have access to the MLS (Multiple Listing Service) rather than use a Realtor. So here is my opinion on why you should use a Realtor, rather than doing it yourself.

Education and Experience

You don’t need to know everything about buying and selling real estate if you hire a real estate professional who does. Henry Ford once said that when you hire people who are smarter than you are, it proves you are smarter than they are. The trick is to find the right person. For the most part, they all cost roughly the same, so why not hire a person with more education and experience than you? We’re all looking for more precious time in our lives, and hiring pros gives us that time.

Neighborhood Knowledge

Agents either possess intimate knowledge or they know where to find the industry buzz about your neighborhood. They can identify comparable sales and hand these facts to you, in addition to pointing you in the direction where you can find more data on schools, crime or demographics. For example, you may know that a home down the street was on the market for $350,000, but an agent will know it had upgrades and sold at $285,000 after 65 days on the market and after twice falling out of escrow.


Price Guidance

Contrary to what some people believe, agents do not select prices for sellers or buyers. However, an agent will help to guide clients to make the right choices for themselves. If a listing is at 7%, for example, an agent has a 7% vested interest in the sale, but the client has a 93% interest. Listing Agents will ask buyers to weigh all the data supplied to them and to choose a price. Then based on market supply, demand and the conditions, the agent will devise a negotiation strategy.

Market Conditions Information

Real Estate Agents can disclose market conditions, which will govern your selling or buying process. Many factors determine how you will proceed. Data such as the average per square foot cost of similar homes, median and average sales prices, average days on market and ratios of list-to-sold prices, among other criteria, will have a huge bearing on what you ultimately decide to do.

Professional Networking

Real estate agents network with other professionals, many of whom provide services that you will need to buy or sell. Due to legal liability, many agents will hesitate to recommend a certain individual or company over another, but they do know which vendors have a reputation for efficiency, competency, and competitive pricing. Agents can, however, give you a list of references with whom they have worked and provide background information to help you make a wise selection.

Negotiation Skills and Confidentiality

Top producing agents negotiate well because, unlike most buyers and sellers, they can remove themselves from the emotional aspects of the transaction and because they are skilled. It’s part of their job description. Good agents are not messengers, delivering buyer’s offers to sellers and vice versa. They are professionals who are trained to present their client’s case in the best light and agree to hold client information confidential from competing interests.

Handling Volumes of Paperwork

One-page deposit receipts were prevalent in the early 1970s. Today’s purchase and sale agreements run ten pages or more. That does not include the federal- and state-mandated disclosures nor disclosures dictated by local custom. Most real estate files average thicknesses from one to three inches of paper. One tiny mistake or omission could land you in court or cost you thousands. In some states, lawyers handle the disclosures—thank goodness!

Answer Questions After Closing

Even the smoothest transactions that close without complications can come back to haunt. For example, taxing authorities that collect property tax assessments, doc stamps or transfer tax can fall months behind and mix up invoices, but one call to your agent can straighten out the confusion. Many questions can pop up that were overlooked in the excitement of closing. Good agents stand by ready to assist. Worthy and honest agents don’t leave you in the dust to fend for yourself.
 

Develop Relationships for Future Business

The basis for an agent’s success and continued career in real estate is referrals. Few agents would survive if their livelihood was dependent on consistently drumming up new business. This emphasis gives agents strong incentives to make certain clients are happy and satisfied. It also means that an agent who stays in the business will be there for you when you need to hire an agent again. Many will periodically mail market updates to you to keep you informed and to stay in touch.

I am the first one to understand wanting to do something myself for fear that someone else will not do it as well as I could, but I have learned to pay for the services I am not proficient in. If you are interested in having access to MLS, get involved with a Realtor who can get you set up with an online search. As a buyer, the cost of using a Realtor is NOTHING. As a seller, you will get your money back in the sale of your largest asset.

Appraisals: Why They Shouldn’t Scare You

Understanding Property Appraisals

  Over the last few months I’ve been spending a lot of time with my clients. Now that they are all under contract, each of them are at the appraisal step. There are quite a few myths about home appraisals and it’s time we address some of them.

Real Estate Appraisal Myths

Sometimes in real estate there are certain things that people say and do that somehow become facts in the minds of not only consumers but real estate agents as well. A couple of these are that real estate appraisers take into consideration a home assessed value when figuring out appraised value. Wrong they do not! Assessed value has nothing to do with market value and is just a measuring stick for how much a municipality needs to collect for their tax roles. Realtors unfortunately often times perpetuate this myth in their marketing. “Come take a look at this incredible value under priced a hundred thousand below assessed value”. The assumption the agent would have you believe is that the assessed value is the market value. Sorry guys it isn’t!

Real Estate appraisers also do not look at the Zillow value of your home either! This is another appraisal myth that seems to be making the rounds. Do you seriously believe a competent appraiser would ever look at what a computer thinks your home is worth? Believe it or not some folks do. Appraisers understand that Zillow real estate values are not accurate. In fact in many markets they are so far off you wonder why on earth Zillow would want to have such inaccurate information on an otherwise excellent site for providing real estate data.

What Is The Appraiser Appraising?

  A visit from an appraiser is an inevitable part of selling your home. Even if your buyer is happy to pay what you ask and loves the place, the lender will still require that an objective third party – in the form of a professional appraiser – come through the home to determine its value. Because the appraiser operates independently, his or her opinion will be based purely on the market and the state of your property. But, while you may not be able to sway the final verdict, it is certainly worthwhile to know what an appraiser will look for. The questions that many home owners ask me is “how does the appraiser determine the value of my home”?

The fear of course on the sellers part is that there home is for some reason not going to appraise. Keep in mind folks that a home not appraising is a rarity!

In order for the appraiser to be able to do his or her job in figuring out the value of a property they must understand quite a bit about the construction and maintenance of a home to do a good job. He or she will be looking at a number of different things in order to get an accurate real estate appraisal, including:
 

Your Home’s Exterior

At its most basic, a home is made up of a foundation, walls and a roof. All three of these play major roles in the functionality and the reliability of a dwelling and the appraiser will pay serious attention to all of them. He or she will be looking for defects in the general construction of the home, as well as for any damage to these components.

A problem with a roof or a foundation can quickly make a home inhabitable, so be aware that the appraiser will focus intensely on these. Remember the appraiser is there to report back to the lender who will be providing the buyer with a mortgage. The primary purpose of the appraisal is to make sure the mortgage holder is not lending money on a property that does not have the necessary equity.

Size of the Property

The size of your lot and the size of your home are both important considerations for the appraiser. People tend to prefer larger homes and larger lots, so you can expect these to come into play when your home is evaluated. The more bedrooms and bathrooms you have, the more you can expect the house to be worth – especially if they are large and accommodating. Home buyers like the opportunity to expand and are more likely to desire a property that will allow this. The square footage of the home will make up a large portion of what goes into figuring out the appraised value of the home.

Condition Of The Interior

Even if the roof, siding and foundation are all in excellent shape, the interior of your home is just as important to the appraiser when assessing value. Things like windows and doors, flooring, walls, plumbing, electrical, kitchen and bathroom are all important parts of a home. The appraiser must know about all of these and be able to tell good from bad, and you can rest assured that he or she will look closely at yours. This is true even down to the appliances your home includes and the light fixtures you have installed.

Home Improvements

The value of a home does not stop at its original construction. The appraiser will be very interested at any improvements you have made and the quality of those improvements. A new floor, a renovated bathroom or kitchen, new appliances, or an HVAC system – all of these are considered by the appraiser to determine overall value.

Buyers and lenders love newer appliances and quality renovations because they contribute to the lasting value of the property. A new dishwasher and kitchen renovation may add another 20 years to the life of a kitchen, something that is good for everyone involved. Home improvements will certainly be a factor in how an appraiser determines the value of a home!

Extras and Additions

The extra things that make your home special will also be appraised. A home may be very basic or it may have a number of additions that make it more appealing. Air conditioning in a cooler climate, for instance, may be unusual for the area but fantastic for the homeowner during the few hot months of summer. A swimming pool is another example. If the pool is in good shape and in an area where people are willing to pay for them, it could add to the value of your home.

Even things you might consider basic like insulated windows, fireplaces, a garage or a security system can all add value to your home during the appraisal process. These are all critical elements for what appraisers look for during the home appraisal process.

How do Appraisers Calculate my Homes Value?

How do real estate appraisers determine market value? Now that you understand what appraisers look at during a real estate appraisal you probably want to know how they calculate the actual market value from this information. The way most residential property is evaluated is by following what is known as the comparable sales price approach.

Essentially an appraiser will use market data of most similar homes that have sold within a certain distance of your home over the last six months. Appraisers generally will not use any data longer than six months. The older the data the less accurate it is in determining current real estate values. Ideally the data should be three months or less if possible.

These homes that they are using will be what is considered most similar to your home. So for example if you are selling a ranch home, the comparable sales should be other like ranches, not colonials.

Appraisers will then make adjustments based on the features and characteristics of the other homes. For example, lets say your home has 3 bedrooms and one bath. One of the comparable homes in the neighborhood is very similar in size to your home but has a 4 bedrooms and 2 full baths. The appraiser could use this property as a “comp” but would need to adjust for the fact there was one more bedroom and bath.

As previously mentioned above there are all sorts of adjustments that appraisers can use to determine the value of a home. Location, age, condition, amenities are all part of what goes into determining residential real estate value.

How to Avoid a Low Real Estate Appraisal

Nobody wants to be faced with going though a low appraisal when selling a home. The appraiser may be immune to your opinions on your home and unconcerned with your need to sell for a higher price. However, you can still do a few things to improve your odds of a favorable appraisal.

Are there things you can do to avoid getting stuck with a low appraisal of value of your home? Of course and it starts with paying attention to the condition and presentation of your home!

List Improvements and Extras

The appraiser may be highly trained and have a sharp eye, yet still fail to see certain things. One of the things real estate agents should be doing is making the job of the appraiser easier. Make a list of all the home improvements you have done to the house and any extras you think he or she might want to know about. This will make the appraiser’s work easier to get done and will ensure that nothing is missed in the appraisal.

Some of the things that will be important to an appraiser are major structural or mechanical additions like a new kitchen or bath. If you have upgraded the heating system, replaced the roof or installed new siding these things are worth noting as they will have an impact on the home value.

Clean The Home Up

Make sure your home is uncluttered and clean before the appraiser visits. The appraiser is going off of a lot of information, but he or she is also making judgment calls about what is good or bad about your home. Help those judgments along by presenting a sparkling appearance that is free of junk and anything unsightly. While there are some appraisers who are strictly bean counters don’t think that a home in great showing shape does not make a difference.

Years ago when I got into the real estate business I neglected to tell a seller the importance of having a clean and tidy home. When the appraiser and I arrived at the home there were dishes in the sink, food on the counter, clothes on the floor and beds unmade. The home looked like a disaster area. From that day forward I always remember to make sure I let my seller client know how important appearances can be.

Lets face it there is a psychological aspect when we visit homes. You either feel good or you don’t when you enter a property. You want the real estate appraiser to have great feeling when they leave your home. When they are back at their office creating the appraisal, the last thing you want them thinking about is your mess.

Landscape

You do not have to be a gardener or landscape professional to clean up the yard, cut the grass, trim the hedges and throw down a layer of mulch in the flowerbeds. You may be thinking to yourself why does this matter? Isn’t the appraiser only concerned with square footage and other more tangible things like bedroom and bath counts? Sure those are really important but don’t think for a minute that an appraiser is not human! The appraiser is going to be taking mental notes of everything. You don’t want your yard to look like Sanford and Son! Making an effort for your yard to look great will pay dividends.

Repair What You Can

Any small issue may be noticed by the appraiser, so do what you can to fix them. Replace the toilet flap so it does not leak and replace the missing board in the fence. Thirty minutes of repair work here or there could make a difference in the ultimate value the appraiser comes up with for your home.

Be Helpful

Answer questions honestly and make sure the appraiser has easy access to all areas of your home. The real estate appraisal is something that you want your Realtor to attend. The appraiser more often than not is going to have questions about the property.

As Your Realtor, I make a point of being there to represent your best interests in the sale! One of the things a Realtor can do that is helpful to a real estate appraiser is to have comparable properties on hand. As the selling Agent, I can bring the listing sheets to the appraisal and hand them to the appraiser.

Most appraisers will love the fact I am making their job easier for them! A Realtor should never assume the appraiser knows the comparable properties better than they do. Oftentimes the appraiser has not see the comparable properties but the Realtor has! This can be a big advantage to helping the appraiser do their job correctly.

An appraisal is a big hurdle you need to clear so it only makes sense you will give this step in the home selling process the needed attention it deserves. Knowing how the appraiser determines the value of your home goes a long way in making sure there will be no issues with the home appraising properly.

Have You Ever Wondered How to Improve Your Credit Score?

Your credit score—a three-digit number lenders use to help them decide how likely it is they’ll be repaid on time if they grant you a credit card or loan—is an important factor in your financial life. The higher your scores, the more likely you are to qualify for loans and credit cards at the most favorable terms.

If your credit history is not where you want it to be, you’re not alone. Improving your credit scores takes time, but the sooner you address the issues that might be dragging them down, the faster your credit scores will go up.

How Credit Scores Are Calculated

You likely have dozens, if not hundreds, of credit scores. That’s because a credit score is calculated by applying a mathematical algorithm to the information in one of your three credit reports, and there is no one uniform algorithm employed by all lenders or other financial companies to compute the scores.

You don’t have to get hung up on having multiple scores, though, because the factors that make your scores go up or down in different scoring models are usually similar.

Most scoring models take into account your payment history on loans and credit cards, how much revolving credit you regularly use, how long you’ve had accounts open, the types of accounts you have and how often you apply for new credit.

Steps to Improve Your Credit Scores

To improve your scores, start by checking your credit scores online. When you get your scores, you will also get information about which factors are affecting your scores the most. These risk factors will help you understand the changes you can make to start improving your scores. You will need to allow some time for any changes you make to be reported by your creditors and subsequently reflected in your credit scores.

Of course, certain credit score factors are typically more important than others. Payment history and credit utilization records are among the most important in many critical credit scoring models, and together they can represent up to 70% of a credit score.

Focusing on the following actions will help your credit scores improve over time. A credit score reflects credit payment patterns over time, with more emphasis on recent information.

1. Pay Your Bills on Time

When lenders review your credit report and request a credit score for you, they’re very interested in how reliably you pay your bills. That’s because past payment performance is usually considered a good predictor of future performance.

You can positively influence this credit scoring factor by paying all your bills on time as agreed every month. Paying late or settling an account for less than what you originally agreed to pay can negatively affect credit scores.

You’ll want to pay all bills on time—not just credit card bills or any loans you may have, but also your rent, utilities, phone bill and so on. It’s also a good idea to use resources and tools available to you, such as automatic payments or calendar reminders, to help ensure you pay on time every month.

If you’re behind on any payments, bring them current as soon as possible. Although late or missed payments appear as negative information on your credit report for seven years, their impact on your credit score declines over time: Older late payments have less effect than more recent ones.

2. Pay off Debt and Keep Balances Low on Credit Cards and Other Revolving Credit

The credit utilization record is another important number in credit score calculations. It is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. For example, if you typically charge about $2,000 each month and your total credit limit across all your cards is $10,000, your utilization ratio is 20%.

To figure out your average credit utilization ratio, look at all your credit card statements from the last 12 months. Add the statement balances for each month across all your cards and divide by 12. That’s how much credit you use on average each month.

Lenders typically like to see low ratios of 30% or less, and people with the best credit scores often have very low credit utilization ratios. A low credit utilization ratio tells lenders you haven’t maxed out your credit cards and likely know how to manage credit well. You can positively influence your credit utilization ratio by:

  • Paying off debt and keeping credit card balances low.
  • Becoming an authorized user on another person’s account (as long as they use credit responsibly).

3. Apply for and Open New Credit Accounts Only as Needed

Don’t open accounts just to have a better credit mix—it probably won’t improve your credit score.

Unnecessary credit can harm your credit score in multiple ways, from creating too many hard inquiries on your credit report to tempting you to overspend and accumulate debt.

4. Don’t Close Unused Credit Cards

Keeping unused credit cards open is a smart strategy, because closing an account may increase your credit utilization ratio. Owing the same amount but having fewer open accounts may lower your credit scores.

5. Don’t Apply for Too Much New Credit, Resulting in Multiple Inquiries

Opening a new credit card can increase your overall credit limit, but the act of applying for credit creates a hard inquiry on your credit report. Too many hard inquiries can negatively impact your credit score, though this effect will fade over time. Hard inquiries remain on your credit report for two years.

6. Dispute Any Inaccuracies on Your Credit Reports

You should check your credit reports at all three credit reporting bureaus (TransUnion, Equifax, and Experian) for any inaccuracies. Incorrect information on your credit reports could drag your scores down. Verify that the accounts listed on your reports are correct. If you see errors, dispute the informaiton and get it corrected right away.

How Long Does It Take to Rebuild a Credit Score?

If you have negative information on your credit report, such as late payments, a public record item or too many inquiries, you should pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores.

The length of time it takes to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.

  • Delinquencies remain on your credit report for seven years.
  • Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years.
  • Inquiries remain on your report for two years.

Establishing or Building Your Credit Scores

If you simply don’t have a credit score because you have little experience or history with credit, you likely have a thin credit file. That means you have few (if any) credit accounts listed on your credit reports, typically one to four. Generally, a thin file means a bank or lender is unable to calculate a credit score because there is not enough information in a user’s credit history to do so.

There are things you can do to fix this, such as applying for a secured credit card, becoming an authorized user on someone else’s credit card or taking out a \credit builder loan.

How Changes Affect Scores

One common question involves understanding how specific actions will aftect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may seem easy to answer, there are many factors to consider.

  • Credit scores are based entirely on the information found on an individual’s credit report.
  • Any change to the credit report could affect the individual’s credit score.

Simply closing two accounts not only lowers the number of open revolving accounts, but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).

One change can affect many items on a credit report. It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.

What You Might Not Know About Credit Scores

Credit scoring involves complex calculations, and the more you know about how credit reports and credit scores work, the more you can take control of your own credit. In addition to knowing the most important factors considered in credit scoring, it can be helpful to know a few other facts about credit reports and credit scores. These components tend to be the most important:

  • Negative information on your credit report can lower your credit scores. That information remains on your credit report for a set period of time. For example, late payments appear for seven years from the date you first missed a payment. Paying off a collection account won’t immediately remove it from your credit report. Bankruptcies can remain on your report for seven to ten years, depending on the type of bankruptcy. The good news is, all negative information will eventually cycle off your credit report. Until it does, focus on the things you can positively influence, including paying all your bills on time.
  • You don’t need to carry a monthly credit card balance to build your credit history. You can pay off your credit card bills every month and positively affect your credit standing.
  • Settling accounts for less than the full amount you owe can harm your credit score. Any time you fail to repay a debt as you originally agreed, it can negatively affect your credit. That said, the negative impact of settlement is still less than the negative effect of not paying a debt at all or declaring bankruptcy.

A good credit score can open doors for you. From helping you qualify for the best interest rates and terms when you borrow money to influencing how much you pay for life insurance, some might be doors you never even dreamed existed. Landlords will consider your credit scores when you apply to rent, and even telecom companies might look at your scores before you lease your next smartphone.

Things Buyers Do That Real Estate Agents Hate

Hiring a real estate agent involves entering into a relationship. While Realtors are eager to get new clients and buyers are anxious to find the house of their dreams, there can still be serious problems in such relationships.

This is especially true when one party has unreasonable expectations.

When it comes to the relationship between buyers and Realtors, the real estate agent has a pretty good idea of what they can offer.

But for buyers, this may be the first time they have ever worked with an agent before. Because of this, sometimes these buyers can do things that frustrate real estate agents.

Fortunately, most of these can be avoided, as long as you know about them beforehand and you understand at least a little of how the buying process works.

Things Realtors Wish Buyers Wouldn’t Do

  • Call listing agents on your own – This is a free country, and you have the option of doing a lot of stuff on your own, even if you shouldn’t. There is a reason you hired a buyers agent. This person has the skills and expertise you need to get you what you want. Why not use them? If you don’t trust your agent to do a good job, you should probably hire another Realtor instead. And if you are happy with the one you have, tell him or her when you are interested in a property and let him or her do the calling for you.
  • Ask the listing agent to show you a home when you have a buyers agent – If you have a buyers agent use them! Don’t call the listing agent to show you properties because your Realtor isn’t around. Showing a home to someone who is not a client is not the listing agent’s job. If your buyer’s agent can never accommodate your schedule, it’s time to find another agent. If your agent is going away for the weekend and you want to see a home that just came on the market, talk to your agent about having another Realtor from their office fill in for them.
  • Ask Realtors to show properties without being pre-approved – Real estate agents are busy people. It takes a lot of phone calls and a lot of miles to do what they do. This is why they want to know that the time they spend with you is worth it. If you are not pre-approved for a home loan, what incentive does the real estate agent have to show you homes? It may take hours to view a single house, hours that could be spent on clients that can buy a home. A real estate agent doesn’t want to waste their time showing a bunch of homes to you at a price point that you are not qualified for. Before asking to see home make sure you get a pre-approval letter. 
  • Request to look at homes outside of your price point – If you are only approved for the purchase of a $400,000 home, what is the purpose of looking at a home that is listed at $500,000? No one is ever going to negotiate down on their price that far. Again, you are asking the agent to do things that serve no purpose for him or her and only serves to satisfy your curiosity. Look at properties that make sense based on your budget, not fantasy land.
  • Not respecting our time by calling last minute – If you are working with a professional, they will want to be treated as such. Not respecting another persons time isn’t fair. Real Estate agents have schedules, lives, and family just like everyone else. Don’t expect an agent to drop everything they are doing on a whim because you want to look at a home in an hour. Treat your agent like a professional, and you should get the same respect back from them. Deciding the world revolves around you will not help your cause in the long run.
  • Look at a home five times and don’t make an offer – If you are going to drag a Realtor to the same house five times, including bringing your favorite aunt Mildred, having a contractor to get a quote on re-finishing the hardwood floors, and the local Feng Shui expert along to say everything is swell, you better make sure you are going to make an offer!
  • Not doing any research on where you want to live – If you are going to be looking at homes, you at least should have a general understanding of where you want to live. Asking a real estate agent to show you a bunch of houses in a town that you really wouldn’t consider living in just doesn’t make a lot of sense. Do some research on the communities and your commute first before asking an agent to show you homes.
  • Making unjustified low ball offers – Before you make an offer on the home, your agent will do a considerable amount of research to determine what that offer should be. Part of this process will be looking at comparable sales – the prices of other homes sold recently that had similar characteristics. This is information he or she can show to you so you understand why the offer should be what it is. Some buyers will still insist on making low ball offers, which are both insulting and a waste of time. Writing an insulting offer is the quickest way to get a seller pissed off to the point they will want to have nothing to do with you. If you love the home, you are making an offer on you best be sure that your offer is not insulting. There is a way of testing the waters without making an offer so little you come across as a fool. There is a fine line – make sure you don’t cross it!
  • Making an offer contingent on selling your current home – Sellers are not going to accept an offer with a home sale contingency 99% of the time. This is something your agent will explain to you as soon as you mention the idea. Sellers naturally prefer to sell to someone ready to buy, not someone that will only buy if their home sells. As much as we explain this, some people just won’t listen. They have to learn the hard way because they feel they know more than we do as agents. An offer contingent on selling another home is real estate fools gold. It’s like not having a real offer. So if you are serious about buying a home and need to sell yours first, get it on the market!
  • Negotiating home inspection items that were visible pre-inspection – If the deck on the house is sagging or there is a leak in the basement that you can see, your agent will craft your offer around this fact. You both saw the problem, and you made an offer anyway. Some buyers will try to negotiate on those same issues after the home inspection is finished. Some will even do this if the problem was pointed out in a sellers disclosure. People do negotiate after a home inspection. If the home inspector finds a mold infestation or termite damage or anything else that neither you nor your agent was aware of when you made the offer, then negotiation is expected. But do not try to negotiate on things that were readily apparent before you made your offer. It just makes you and your agent look bad and has very little chance of succeeding.
  • Expecting the home to be perfect after the inspection – some buyers will ask the seller to fix ridiculous things after the home inspection because they want to move into a house that seems brand new. If the home was built in 1980, it’s not going to feel brand new. And the seller cannot be expected to make it that way, especially after you have already made an offer. There will be minor problems with most older homes. Heck, there are even homes that are only a few years old that won’t be perfect – very few homes are. Just be aware of this. It’s important to understand what’s important to negotiate after a home inspection. Bringing a punch list of minutia to the listing agent after a home inspection is not going to be looked at favorably. Understand what is reasonable and what isn’t. Your real estate agent should be able to guide you on this.
  • Work with a buyers agent for months and then buy with someone else at an open house – real estate agents work on commission. They do not get paid a dime unless they make a sale. Do you think it’s fair to have a Realtor tote you around for months showing property, only for you to decide one day to walk through an open house and buy from the listing agent? This is about as despicable as it gets. Your agent probably has shown you homes at all times including nights and weekends giving up time away from family and friends. This is the way you repay them? Don’t do it! This probably tops the charts of things buyers do that real estate agents hate.
  • Work with more than one agent – As mentioned above real estate agents don’t get paid unless they make a sale. You should not be working with multiple agents at the same time in the same area. While you may think this is super convenient for you, it is not fair to either of the other parties involved. If this is something you plan on doing it should be discussed up front with both agents. Let them decide if they are comfortable with such an arrangement. The only time this is to be considered kosher is when you are looking in two different areas and have not decided on one yet.

Be a Reasonable Buyer

Buyers agents love to help people find homes. They like to help them get a good deal. But like anyone else, they prefer to work with people that have reasonable expectations.

No one can honestly expect an old home to be perfect, and no established professional can be expected to work for free. This is still a business, and the best deals are made between reasonable people.

Work with your agent so you have the right expectations about your home shopping experience and do your part of buying the best house you can for the price.

If you are not serious about the purchase of a home, don’t be the “lookie lou” that every real estate agent hates to deal with. Treat your Realtor like you would want to be treated. When you establish a great relationship with an agent, you will be paid back in kind!