Financing

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

New Mortgage Loan Limits

The FHA, Fannie Mae and Freddie Mac all released their new loan limits for 2017 this week. FHA, which insures mortgage loans with down payments of just 3.5%, increased the maximum loan they will insure from $299,000 to 308,200. That will definitely help a good number of central Indiana buyers and sellers. Fannie and Freddie increased their max loan limit from $417,000 to $424,100. There will be a few local buyers that will find that of benefit. (Those numbers are quite a stretch from back when I bought my first house and the max loan was just $33,000!)

I spent 17 years doing mortgages, helping 3000+ home owners to buy or refinance their home mortgages. And I still have a lot of really great contacts. If I can put you in touch with someone who can help you improve your financial future, just say the word!

“I work harder to make good things happen!