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.

The Dilemma of the Bucks County Home Buyer

The baby boom generation was fortunate.  During their prime home buying years, home prices were rising. Their starter homes generally increased in value, and they had sufficient equity to purchase their move up homes.

Today's buyers in their 30's and 40's may want to purchase larger homes, but frequently find that their starter homes have lost value and they have insufficient equity to pay for the down payment plus the closing costs required to purchase a more expensive home.

The traditional four bedroom Bucks County colonial may sell for $300,000 to $500,000.

With a conventional mortgage requiring a 20% down payment plus closing costs, a buyer needs about $75,000 to $110,000 in cash to purchase a home. These costs may be prohibitive, but before giving up the dream of a larger home, there are options that should be considered.

 It may be possible to purchase a home with a 10% down payment, or with an FHA mortgage which requires a lesser down payment.   Also, the buyer can  request the seller contribute towards the closing costs. Buyers should discuss financing options with their agent and a good mortgage broker to determine whether the home of their dreams is affordable.

 I've heard some buyers say their current  home needs to appreciate before they can buy a new home, and they are unwilling to take a loss on their current property.  That may be a mistake. If their starter home appreciates, the larger home they would like to purchase will have appreciated as well.  Also, with inflation, mortgage rates generally rise; so, buying power decreases.  Buyers waiting for their first homes to appreciate may find themselves priced out of the move up market.

Buyers wishing to purchase more expensive homes, who can afford the down payment and closing costs, are probably better off selling their starter homes at a loss and purchasing larger homes while prices are low and mortgage rates are at record lows.

 Buyers who would like to purchase a new home, but cannot afford to put 20% down plus closing costs, should discuss their financial situation with their agent and a good mortgage broker before ruling out it out.

Bucks County Single Home Sales Through 2011

The calendar year home sales statistics for Bucks County have just been released by the local MLS service.  Home Sale Statistics through 12/31/2011 are as follows:

Bucks County Single Family Home Sales 2011 Calendar Year Statistics Compared to 2009 and 2010 Statistics
	2009	2010	2011	2009/2010 Change	2010/2011 Change
Settled Units	4,829	4,560	4,423	-5.57%	-3.00%
Average Sold Price	$329,000	$343,000	$324,000	4.26%	-5.54%
Median Sold Price	$284,000	$295,000	$275,000	3.87%	-6.78%
Average Sold Price/ Original List Price*	92.28%	92.35%	90.88%	.08%	-1.59%
* “Original List Price” is the price at which a property is listed under the current listing contract.  If there is a price reduction, it would not be reflected in the original list price.
Source: MLS Trend

Home sales during 2010 were affected by the federal homeowners tax credit.  Sale numbers and prices in that year may have been affected by homeowners seeking to take advantage of the credit.

Short Sale Advise in Bucks County

Many people assumed large mortgages during the real estate boom of the last decade.  When job losses or unplanned expenses occurred, they were unable to keep up with their mortgage payments.

When the mortgage amount exceeds the net proceeds that would result from selling a property, some homeowners can not afford to sell and pay off their mortgage debt. Homeowners who find themselves in this predicament should investigate whether a “short sale” would make sense for them.

 A “short sale” is the term used when a lender agrees to accept less than the full amount owed on a mortgage to satisfy the debt, and the lender writes off the excess.  This process is frequently better for the lender because it can be less expensive than foreclosing on a property.  It can be beneficial to the homeowners because their credit rating may be less affected than it would be if they were subject to a foreclosure.

Until recently, short sales were uncommon in our area, so few local real estate firms have a lot of experience in this specialty.  Coldwell Banker Hearthside is an exception.  We have a short sale specialist who has completed over 2000 short sales during the past 30 years, and another specialist who has completed 400.

In addition to the assistance of an experienced agent, such as our specialists, we always advise a client to seek professional advice from both a financial expert and an attorney before and during the short sale process. 

We can arrange a confidential conversation with one of our specialists who can provide objective information on how the process works and whether it makes sense in a particular situation.  If you are looking for Short Sale Advise in Bucks County, PA, we are happy to help you.