Bucks County Home Sales: January, 2012

The number of homes sold and the average price of sales increased during the first month of 2012 compared to January 2011.  We'll have to wait and see whether a trend is developing. 

                                      

              

Credit Scores and Interest Rates

Most people realize that credit scores have a major impact on whether they can obtain loans and whether they can obtain favorable interest rates; but, credit scores can also impact insurance rates and even how you are perceived by a potential employer. A good credit score is key to obtaining a mortgage, favorable insurance rates and maybe even getting a job.

So, what is a credit score? A credit score is a number assigned to individuals and is meant to predict the likelihood of their repaying a loan.  The formula was developed by a company called Fair Isaacs, and the result of the formula is called the FICO score.

The intricacies of the formula remain a company secret, but its general components are well known. Here is the weighting given to each of the factors:

1)      35%  Bill Payment History- If you pay your bills on time you will rate high in this category.  Those who pay late, have had bills sent to collection agencies or have had bankruptcies will be rated lower.

2)      30%  Amount of Debt Outstanding-The ratio of debt to available credit should not be great.  Persons who max out their credit cards will rate lower in this category than someone who maintains a ratio of 10-30%.

3)      15%  Length of Credit History-Being a responsible credit card user over a long period of time increases your score as does maintaining credit with the same credit card issuers for a long time.

4)      10% Credit Mix-If you have had several types of credit, for example, a mortgage, car loans, student loans and credit cards, you will score higher than if you just had credit cards. This factor assumes a mix of credit demonstrates that you can handle various types of debt.

5)      10%  New Credit and Credit Inquiries- A number of inquires about your credit in a short period of time, suggests you may be in financial difficulty and trying to increase your credit limits.  It’s prudent to avoid opening up new accounts unless you need to, and to avoid doing so within a short period of time.

The national average credit score is around 690 and the median score is around 710. 

If you are thinking of refinancing a mortgage or buying a new home and are concerned about your credit score, a good mortgage broker may be able to help you.  Many are knowledgeable about credit scoring and may be able to help with a strategy that will have the greatest impact on improving your score. There is no quick fix, but paying down some debts will have a greater impact on your score than others.

Get A Mortgage Preapproval Before Your Home Search

Most home buyers need to finance their purchase with a mortgage.  Unfortunately, many don't realize they should obtain a mortgage preapproval before they seriously look for a home. Sellers today usually insist on seeing a preapproval before negotiating the sale of their property.

I'm working with a couple now that had an idea of the price of the home they could purchase, but found a home they wanted to look out before getting a mortgage preapproval. They loved the house, but needed a preproval to make an offer. They obtained a preapproved, but found that they can only make a very low offer on the home.  They may get lucky and the seller may accept their offer; but, they were looking for homes above their price range.  I fear they will be disappointed.

To avoid disappointment and wasted time looking at homes above their price range, buyers should get a mortgage preapproval before shopping for a home. 

A mortgage preapproval does not lock a buyer into a specific mortgage company.  Buyers can still shop around for the best rate.  It will help them to know their price limitations and allow them to move quickly when they find the home of their dreams.  

Upper Makefield Township's Top Realtors

Coldwell Banker Hearthside Realtors sold more homes in Upper Makefield Township in 2011 than any other Realtors.  With 28.8% of market share, Coldwell Banker Hearthside Realtors is the # 1 realtor in Upper Makefield.