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How Buyers Pay for Homes

I came across a headline, “All Cash Buyers Dominate Florida and Midwest.” Really? I’m thinking you’ve got to be kidding. I mean, who has cash to buy a new home outright? Turns out, there’s more of that going on than you might imagine. From 32% in Chicago, to 45% in Cleveland, 31% Nashville, to 42% of Orlando home sales and 54% of Miami’s! That’s a lot of cash sales. For sure, those aren’t the result of a tidal wave of working stiffs all of a sudden becoming ultra savers and stockpiling cash for down payments. Nor have multitudes won the lottery of late. No, a very large percentage of these purchases arose as a result of the Fed’s easy money policies. Basically, the money moved from the Fed to the big banks, and from there to hedge funds- all at ultra low rates (like lower than anything you or I have ever seen when taking out a mortgage). The hedge funds then bought up the bulk of the foreclosures at rock bottom prices along with some other good deals, and converted these to single-family rentals. They’re now the biggest landlords in the country. And the infusion of these outside funds into the home market has pushed prices higher and higher.

Here in Indianapolis the story has taken a different twist. The percentage of cash buyers actually decreased this past year, from 26% to 22%. I guess we must not be as attractive a market as some of those other places.

Meanwhile, the rest of us have bought homes the old fashioned way- with a mortgage. Most recently, 46% of local buyers used a Conventional mortgage. 21% took out a FHA mortgage. (That number actually surprised me as I would’ve guessed it to be higher in this market.) Just 5% used a VA mortgage, and even fewer RD or contract financing.

If you have questions how financing might help you buy or sell a house… call, text or write. I work harder to make good things happen!

How to Manage Credit Cards

When it comes to how to increase your credit score, there is a lot of misinformation out there. But never fear! Here’s a well thought out post from Mike Wickham, who does a great job for people needing a mortgage to buy a new home…

“Avoid delinquent payments and maintain low utilization ratios.

Delinquent payments reduce your score. Eliminating the delinquency does not restore your score to where it was, it merely prevents a further decline. Delinquencies stay on your record for 7 years, although their force will gradually weaken as on-time payments come in.

Shoot for low utilization ratios, below 33% on all your cards. The utilization ratio is the outstanding debt relative to the maximum amount of debt that the credit grantor has set on that card. For example, if the balance on a card is $2,500 and the maximum balance is $5,000, the utilization rate is 50%.

A card holder can reduce his utilization ratio by reducing his balance, and also by increasing the maximum balance. If a borrower has had a good payment record, the maximum can often be increased simply by asking.

If your card issuer does not report a maximum, your score will be calculated on the assumption that the highest balance ever reached in that account is the maximum, when in fact it could be well below the maximum. This raises your utilization rate (and lowers your credit score) for no good reason.

If a card has no reported limit, you can either request that the limit be reported, or terminate the relationship. Alternatively, you can shift all your balances into this account temporarily so that the highest balance comes closer to the unreported maximum.

In addition, don’t have too many cards or too few, about 4 or 5 old cards that you actively use is about right. New cards can reduce your score. Avoid department store cards, which will reduce your score.”

Have a great week and stay warm!

Mike Wickham
Loan ConsultantNMLS: 505614

Caliber Home Loans, Inc.
10022 Lantern Road Suite 600

Fishers, IN 46037

Mobile: 317-260-1563 |Office: 317-576-4115

EFax: 877-673-0432

E-Mail: mike.wickham@caliberhomeloans.com

Apply On-Line @ http://caliberhomeloans.com/mwickham

How Long Have You Been in Real Estate?

You know, that’s a question newbies to the biz are reluctant to answer. (And given how real world experience helps deliver on client needs, that’s no surprise.) As 2016 draws to a close, I’m reminded I started out in the real estate industry in Bloomington 40 years ago. A college buddy and I pooled what cash we had and borrowed off our credit cards to scrape together enough to buy a duplex. What lessons we learned on that one small property! I still remember going over there to begin remodeling, only to discover the water pipes and toilets had froze and burst, spewing water all over the floors. Boy, what fun that was to clean up! And then there was our first experience with gas lines- definitely not something we were prepared for. Flames!! And then Gil grabbing the nearest bucket (which just happened to contain the filthy water from cleaning the floor) and tossing it on me. We were really lucky not to blow the place up. But somehow we managed to get it fixed up and rented out to a couple international students. Back then none of us even knew what the word Diversity meant in today’s context, but I guess when we walked in one day to make a repair and found a live chicken in the kitchen cabinet, well, that was Diversity! But hey, we stumbled through it all and sold the property for a nice little profit. And off we went to buy another, bigger and better property.

I’d like to say I learned it all on that first property. But not so. In fact, I’ve learned a ton of lessons since. Wearing a lot of different hats has sure helped. Over the years I’ve been a remodeling contractor, property manager, builder, developer, appraiser, mortgage lender, inspector and realtor. And whenever the situation arises I employ the lessons learned from whichever hat I was wearing at the time— to help clients improve their future. But truth be told, I’m hoping I don’t come across anymore chickens in a kitchen cabinet!