Virginia Beach homebuyers need to know the rules of credit reporting in this marketplace where lenders are demanding record-high FICO scores.
Given the importance of maintaining high scores, we thought it would be helpful to go over the key rule concerning inquiries that affect Virginia Beach homebuyers, since Fannie Mae and Freddie Mac are now averaging around 760 scores on approved mortgages this year.
FICO Inquiry Rules Affecting Virginia Beach Homebuyers
Racking up large numbers of inquiries can lower your score. The FICO models consider such numbers significant because extensive behavioral research has shown that "consumers who are seeking new credit accounts are riskier," more prone to defaults. Statistically, people with six or more inquiries on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports, so inquiries do matter.
This doesn't mean if you're shopping for a mortgage or looking to refinance that your score will drop if you have 6 lenders pull your credit reports. The FICO models ignore all mortgage-related inquiries during the 30 days immediately preceding the computation of the score. All mortgage inquiries during the 45 days preceding your loan application count as no more than a single inquiry. The same goes for shopping for auto loans and student loans, but no other forms of credit fall under this buffer zone.
Fannie Mae and Freddie Mac have begun requiring lenders to pull a second set of credit reports immediately before closing to ensure that applicants' FICO scores haven't changed significantly. Depending on when the first reports were pulled, you could be hit with two inquiries for the same loan. That could cost you 5 to 10 points on your score.
Virginia Beach homebuyers need to keep in mind, if you're shopping for a mortgage, avoid all other credit-related shopping until your mortgage is approved and closed. Avoid shopping for furniture, home improvements, credit cards, you name it, in the weeks before your home closing. A string of inquiries can mount up and knock your home purchase right out of the water.
If you're checking your own credit, either through AnnualCreditReport.com (where they are free once a year) or by buying them from Equifax, Experian or TransUnion, your FICO score goes untouched.
Virginia Beach housing is finally recovering as conditions have boosted affordability to an all-time high. At the same time, a new study shows that lenders' unwillingness to loosen their qualifications may be slowing down the recovery.
The latest data from the annual Harvard Joint Center for Housing Studies report shows that, in general, the Virginia Beach housing market is in better shape than it has been in years, as employment continues to grow and home prices have rebounded — or at least stopped falling — over the past few months. Sales of existing homes have been on the rise for the last 10 months, and bottomed-out prices suggest a full recovery may come over the next few years or so.
Virginia Beach Housing Loans
People are becoming more and more confident in their abilities to afford a home, but many mortgage lenders are keeping tight wraps on home financing.
Home prices are down some 35 percent nationwide, interest rates are below 4 percent and have been for some time, and at the same time, renting is becoming more expensive. But with loans harder to get, the reality of owning a home is becoming even more cloudy for some would-be home buyers.
Experts generally agree that this continued tight policy on lending is an overreaction to the downturn seen in the last few years, which led to millions of people becoming delinquent and later defaulting on their home loans, and it cost banks billions.
Many lenders are still requiring credit scores well above what would have been needed to qualify for a mortgage just a few years ago, and most also require larger down payments from those who would otherwise qualify, making it still difficult to afford Virginia Beach housing.
If you've been watching mortgage rates plummet, and rents going up, and think now may be the time to look into the Virginia Beach housing market, give us a call. We'll be happy to sit down with you and discuss your options.
Virginia Beach home prices have edged up for the third month in a row, albeit ever so slightly.
According to the Federal Housing Finance Agency's (FHFA's) monthly House Price Index (HPI), home prices rose 0.8 percent between March and April, on a seasonally adjusted basis. Previously, the FHFA had reported a 1.8 percent price increase in March, which has been revised to a 1.6 percent increase. Over the last year the Agency reports that home prices have risen 3.0 percent.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Virginia Beach Home Prices, Sales and Inventory
The U.S. index is down 17.6 percent from its April 2007 peak and is now roughly the same as the April 2004 index level. The National Association of Realtors reported recently that in May, home prices rose, and sales slowed slightly.
Inventory shortages in certain areas have been developing since the beginning of the year. The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. Even with May's decline, existing home sales have recorded 11 consecutive months of gains over the same month a year earlier. The normal seasonal upturn in inventory did not occur this spring as it has typically in years past.
Meanwhile, banks are looking to alternatives to foreclosures that continue to punish home values, as seen in the reduced number of seizures. According to RealtyTrac, foreclosures fell 18 percent between May 2011 and May 2012.
The recovery continues despite excessively tight credit conditions and higher down-payment requirements, which are negating the impact of record high affordability conditions.
If you'd like to discuss Virginia Beach home prices, we'd like to invite you to contact us for a no obligation consultation into the current market conditions and how they may benefit you if you're looking to buy a home in today's Virginia Beach housing market.