Jennifer has been a licensed Realtor since 1980. She began her real estate career in Dallas and was active in sales as well as mortgage lending for 15 years before relocating to Colorado Springs in 1996. Jennifer is the Employing Broker of Springs Homes overseeing our daily operations, reviews all contracts, counsels Buyers and Sellers, negotiates contracts and manages both the Buy/Sell side of Real Estate as well as Property Management. She graduated from SMU with a degree in Music Education and has been actively involved with the Colorado Springs Youth Symphony. She has been a past member of the Board of Directors as well as the conductor of the Vivace Strings Orchestra.

What is my FICO Score and Why Does it Matter When I’m Buying A House?

If you’re thinking of buying a home in the Colorado Springs area, and you’re not paying cash (and how many of us are doing that?), you will need to know your FICO score.

The FICO score is the most widely used measure of credit worthiness in the U.S. and it is the primary factor lenders consider when you apply for a mortgage. FICO was first introduced in 1989 by the Fair Isaac Corporation—hence the acronym.

FICO scores range from 300 to 850—the higher your score, the more credit worthy you are. Your score is calculated by a mathematical equation that takes into account the weight of many different factors on your credit report. There are actually 27 different scoring models with three main ones used for mortgages, auto loans and credit cards. A median score for a mortgage is 679. The general breakdown is as follows:

  • 50% of your score is based on payment history and length of payment history. This includes loans for cars, homes, tuition and other long-term loans.
  • 30% on the amounts you currently owe
  • 10% on the types of credit you have been extended in the past
  • 10% on new credit.

However, the weight of these factors may vary depending on the length of your credit history.

A sample profile of a high credit score would include at least 2 installment loans with balances (auto, student loans, mortgage); 3 revolving credit cards with balances of less than 30% of the card’s maximum, and no record of collections or late payments. Although it may seem counterintuitive, it is a good idea to keep accounts open, even when you have paid off the balances. Closing accounts tends to negatively affect your score.

The mortgage interest rate for which you qualify is based on your FICO score. Generally, the higher your score, the lower the interest rate and vice versa. Whether or not you are required to have mortgage insurance, the rate may also be based on this score, as well as the amount of your down payment.

If you are applying for a conventional mortgage, the lender will determine what minimum score will make you eligible for the loan, in addition to the price of the home and other financial obligations. Fannie Mae, Freddie Mac, FHA and other government loans have established minimum FICO score requirements.

If you are interested in learning more about FICO scores, visit www.myfico.com.

Coming soon:

  • How to Improve your Credit Score
  • How to Deal With Delinquent Fees
  • How to Resolve Credit Disputes
  • Loan Modification Alternatives
  • Short Sale and Foreclosure and their Effect on Credit Scores
  • Bankruptcy and Your Credit Score
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There is Life After Foreclosure for VA Loans.

VAReUseYou can obtain another VA loan after you have experienced a short sale, foreclosure or deed-in lieu foreclosure with an existing VA loan. But there is no guarantee…you must determine how much (if any) entitlement you have left previous post to learn and meet the necessary salary and credit qualifications. Remember that your credit score will be “dinged” for having undergone a short sale or foreclosure and it may take time to rebuild. However, the VA program is one of the most lenient in granting loans to veterans who are applying for a mortgage after a foreclosure.

First of all, you need to wait 2 years from the time of your foreclosure in order to apply for your new VA loan. Then you must determine your remaining entitlement. The full VA entitlement (the amount the government guarantees the lender) is $417,000, with $36,000 as your primary entitlement and $68,250 as your secondary entitlement. The VA guarantees one quarter of that amount if you should default and does not require you to have mortgage insurance.

Suppose you have $50,000 in unpaid VA loans remaining on your foreclosed property. A VA-approved lender will subtract that $50,000 from $104,250 ($36,000 + 68,250), which is your full entitlement amount. The difference is $54,250. You can then multiply $54,250 by four to calculate how much you may be able to borrow with no money down—a total of $217,000 ($54,250 x 4).

Veterans who want to use their second-tier entitlement must seek a loan amount of at least $144,000. If you are interested in applying for a VA loan, whether it’s your first, or a subsequent one, we at Springs Homes can refer you to a trustworthy lender who is familiar with the process.

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Here's a little secret....You Can Have More Than One VA Loan at a Time.

VA Loan secretMany veterans are not aware that they can qualify for more than one Veterans Administration loan at a time, depending on circumstances. They can take solace in the fact that many lenders are also not aware of this situation.

The VA loan limit for veterans who wish to buy real estate is $417,000. This is the base amount—the limit may be higher in areas where housing prices are more expensive. Here in Colorado’s El Paso and Teller counties, the $417,000 limit applies; in our neighbor to the north, Denver County, it is $425,000. The loan limits are reevaluated every year.

When considering a VA loan, many veterans start by going online at the Veterans Information Portal for their Certificate of Eligibility (COE). If you are applying for your first VA home loan, your entitlement is for a mortgage of $417,000, assuming that you have adequate income and credit to qualify.

VA entitlement has two parts: basic and bonus. If you have not previously applied for a VA loan, your basic entitlement is $36,000—that is the amount the government insures—but is is not necessarily the total amount of the loan for which you are eligible. Lenders will generally loan up to four times your available entitlement without your having to pay a down payment. So if your basic entitlement is $36,00 you are entitled to $144,000 ($36,000 x 4) providing that your income and credit meet the lender’s requirements. Bonus entitlement comprises a loan up to an additional $68,250 x 4 ($273,000). This amount, sometimes referred to as Tier 2 or additional entitlement, is used only for VA loans between $144,000 and the conforming limit of $417,000.

Here are some examples of how veterans can apply for multiple VA loans. If they buy a home for $200,000 and then receive orders to relocate, they are eligible to apply for the remaining $217,000 with 100% financing to purchase a home at their new base. If the home at the new base is $300,000, they can apply for the additional $83,000 if they put down 25% of that amount ($20,750).

If you have a lease in place for your existing home before you move, that amount will be credited to your income you apply for a loan at your new base.

Coming soon: Can you get a VA loan after a foreclosure?

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What is Title Insurance and Why You Absolutely Must Have It.

titleins

One of the questions Colorado Springs homebuyers most frequently ask us is, “Why do I need title insurance?” Title insurance is just one of the many things that appear on your home buying settlement sheet, but it’s also one of the most important.

The Colorado Springs property you are buying has probably gone through several changes of ownership over the years (unless it’s new construction). One of the necessary procedures during the home buying process is a title search.

The search must be done before any property changes owners in Colorado so that the deed can be recorded and registered to the new homeowner. The search reviews the “chain of title”—the history of everybody who has owned the property through its present owners. What title insurance does is protect you against any expected discoveries that may arise during the title search. For example, there may be unpaid real estate taxes or mortgages, outstanding liens, or errors in the legal description of the property.

Title insurance guarantees that, if any issue in the ownership records arises during the search, the insurer will either fix the problem, compensate you for any potential loss or defend you against any action that may occur as a result. Title insurance protects you against matters that have already occurred and that were not caused by any wrongdoing on your part. It gives you peace of mind knowing that once the buying transaction is complete, you are protected against any claims on your property.

There are two basic forms of title insurance: Owners and Lenders. 
Owner’s title insurance covers you as owner of the property, and the policy is generally issued for the amount you paid to purchase the property. Lender’s title insurance covers your lender’s interests in the property and is usually issued in an amount equal to the loan. In Colorado Springs, the buyer and seller may negotiate who pays for the Owner’s title insurance policy. The buyer generally pays for the Lender’s title insurance policy.

Coming soon: How are the rates for title insurance calculated and how much will it cost?

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Do I Need an Appraisal to Sell My House?

Sellers often ask me if they should get their home appraised before putting it on the market.  Here is my answer to that:

An appraisal is an expert estimation of the quality and price of the property. It is more detailed than the market analysis, which your Realtor will do. Typically, appraisals cost around $400.  They are a good idea if you live in an unusual market, one where home values fluctuate a lot.  Let's say you live in a neighborhood where homes range from $200,000 to $650,000.  Then an up-front appraisal is a good idea.  It will help Buyers to see the value in your home without questioning the overall market in your area. 

On the other hand, if you live in a neighborhood where most of the homes are alike, similar in age and size, then an appraisal might not be necessary for you to have done up-front.   Here, it's pretty safe to conclude that your home's value will be consistent with those around you.

Either way, once you have a contract on your home your Buyer will most likely be getting an appraisal done for the purpose of satisfying his loan.  His mortgage lender will order an appraisal prior to closing, to make sure the contract price and condition are satisfactory for the new mortgage.

Ask your Realtor what they think you should do.  A good agent will shoot straight with you and not spend your money unnecessarily!

 

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