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Buying a Home When Your Spouse Has Poor Credit

by Bill Nelson

Buying a Central Coast home on two incomes can be difficult enough, and it can be even more demanding if one spouse has poor credit.

A poor credit score can make it difficult to qualify for a mortgage and can lead to a higher interest rate on a home loan. A spouse with poor credit could be left off the loan application entirely, requiring the other person to have a high credit score and a high enough income to afford the loan on their own.

If a spouse with poor credit does qualify for a loan, the lender could require a bigger down payment on the house.

FHA loans, for example, which are backed by the federal government, require a 10 percent down payment with a FICO credit score lower than 580, while a credit score above 580 only requires a 3.5 percent down payment.

A credit score is just part of the financial background a lender looks into. Income and a debt-to-income ratio are also considered, though a high income by itself won’t overcome a poor credit score.

Credit scores range from 500 to 850. A low score of 650 can be a predictor of making late loan payments, while a 550 score means you’re not likely to pay at all.

A couple’s credit scores aren’t averaged together in a home loan application. Lenders will use the lower of the two credit scores. If a husband has a 620 score and the wife has 700, then the lower score will be used in the mortgage application and an interest rate of three-eighths to half a point higher will be charged.

Options for those with poor credit

There are ways to get around one spouse having a low credit score. In the above example, the wife with the 700 credit score can get a home loan if she qualifies on her own.

Both spouses should be listed on the home’s title or deed, but only she would be listed as the borrower. The husband’s name could be added to the deed later when his credit score improves.

Buying a home on one income, however, can be difficult. The best solution is to improve the lower credit score, something that should be done months before applying for a loan.

Just a 10-point credit score improvement by paying down credit cards could be enough to get a better interest rate and can be done quickly.

Even minor credit improvements can take 30 days or more to fix, such as closing all but one credit card. Most fixes can take three to four months to show up on a credit report, so repairs should be made before applying for a loan.

For more information and connection with a Central Coast Lender Call Bill Nelson at (805) 610-8552.

Outdoor Redo Projects Both Valuable Now, and Later

by Bill Nelson- Past President NCAOR®

Remodeling your SLO County home? Add an outdoor redo to the project.

According to a report from the National Association of REALTORS® (NAR) and the National Association of Landscape Professionals (NALP), an outdoor renovation can add significant value to a home come resale. The most valuable updates, per the report, are:

• Seeding the Lawn (Reaps 417 percent of its cost)
• Implementing a Standard Lawn Care Program (303 percent)
• Sodding (143 percent)

An outdoor renovation can also up the enjoyment factor—the “Joy Score,” according to the report. The highest project on the Joy Score scale? A pool, though it is one of the least profitable at a 50 percent return-on-investment.

The most appealing projects following a pool, the report found, are an overall landscape upgrade and a new wood deck.

“Realtors® know first hand the importance of curb appeal because when it is time to sell, a home's exterior is its first impression to potential buyers,” says North County Association of Realtors ® Past President Bill Nelson. “Realtors® also know that these projects—from flower beds to fire pits—can bring homeowners who have no plans to sell even more enjoyment and satisfaction in their home.

"Homeowners looking spend money on large, expensive outdoor projects should do it for themselves, for the enjoyment they and their family will gain from the finished results, and not only to improve the value of their home for when they sell,” Nelson cautions. “Smaller projects will bring potential sellers the most value back upon resale—and have the benefit of costing less up front.”

“Homeowners working with a landscape professional to embark on renovations—whether that means enhancing their turf and growing a lush lawn, rehauling their entire landscape, or incorporating new features like patios and exterior fireplaces—can rest assured that they are making a smart, worthwhile investment,” adds Nelson “Further, that investment is coupled with the immediate happiness received by beautiful landscaping and the long-term enjoyment of outdoor living spaces, which are priceless.”

Source: National Association of REALTORS®

Displaying blog entries 1-2 of 2