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5 Advantages of Buying A Home Instead of Renting

Bridge to Own® | 0 comments | by newman

5 Advantages of Buying A Home Instead of Renting

Here are some advantages of buying a home instead of continuing to be a renter:

There are many advantages to buying a home instead of being a renter. It’s key to achieving the American Dream. An overwhelming majority of Americans still believe that buying a home is a key part of living the American Dream. More than ever, though, Americans also see that dream as increasingly unattainable. Rising house prices in big metropolitan areas make owning a home even more financially difficult than it was 20 years ago. This has led many Americans to choose to rent a house over buying.

 

Despite this, many Americans still want to own a home. According to the 2018 Bank of the West Annual Study, 57% of Americans still believe the American Dream of owning a home can be achieved. Millennials, in particular, are skeptical of achieving the dream, but the majority of millennials still aspire to own their own home.

 

Should you buy a home instead of renting? It depends on your finances and your lifestyle, but here are the top five reasons Americans want to buy a house instead of renting.

 

Written by Matt Lavinder, President of New Again Houses®

 

buying a home vs renting

 

#1 To Feel A Sense of Stability

 

Studies consistently link the stability of an individual’s happiness and children’s financial future with the stability of their home. This certainly isn’t the only indicator of success for children, but few would deny its significance. Plenty of families provide stability in rental housing but renting ultimately leaves another party in ultimate control of your home.

 

#2 It Makes More Financial Sense Than Renting

 

Many renters grow weary of “throwing money away every month”. They equate paying rent with a transfer of wealth from the renter to the landlord. In many ways, this is true. But, it’s also more complicated than that.

 

Owning a home involves “throwing some money away”, as well. Property taxes, homeowner’s insurance, mortgage interest/insurance, and maintenance are all expenses involved in owning a home. These are the reasons landlords aren’t putting as much of your rent in their pockets as you would imagine. In reality, most of the rent you pay goes toward the cost of their ownership. A common rule of thumb for landlords is that 50% of the rent goes toward non-mortgage costs of ownership and most of the remaining 50% goes toward mortgage payments and interest.

 

So, how is your landlord winning? The answer is wealth. While most landlords aren’t pocketing income from your rent payment, they are accumulating wealth as you pay off your landlord’s mortgage. After 20 years, the renter has zero equity and the landlord often has 100% equity in the house. The tenants have paid off the landlord’s property. As long as you remain a renter, you will be transferring your wealth to your landlord.

 

#3 So I Can Modify My Home And Make It My Own

 

Our home is a key part of our identity as humans. It’s understandable that we have an innate desire to make it our own. Renters often feel frustrated that they cannot paint or make improvements to their home. The endless loop of home improvement shows on television are a constant reminder of our human desire to buy a house and transform it into a home.

 

Of course, there are costs involved in the transformation. Many new homeowners underestimate the costs involved in making their house their own. Paint, design elements, new furniture, and landscaping can be more costly than renters expect.

 

#4 Want More Space

 

While a studio apartment might be the American Dream at 22 years old, life happens and we end up needing more space. It’s important to understand there is a direct correlation between space (i.e. square footage) and cost. Every additional foot of space, whether it’s a rental or your own home, will cost additional money in cost, utilities, taxes, and maintenance.

 

If you choose to acquire that additional space by buying your next house, understand that you will still have an additional cost in the form of utilities, property taxes, and maintenance costs.

 

#5 It’s A Good Financial Investment

 

The monthly costs of renting and owning aren’t that different. Mortgage payments might be a bit lower, but experts project you will spend 1% of the home’s value per year on maintenance. Add property taxes and insurance and your monthly costs of owning likely won’t be that different than monthly rent would have been. It’s the accumulation of wealth that makes homeownership a cornerstone of the American Dream and upward mobility.

 

If you give up some freedom of mobility when you buy a home, you give up wealth when you rent one. The standard mortgage is set up for 30 years. If you make payments for those 30 years, you will owe nothing at the end. The majority of wealth in America is made up of home equity. For generations, Americans have been able to retire because they’ve made 30 years of payments and own their homes. People in their 60’s have been able to survive on a fixed retirement income because they bought a home in their late 20’s and no longer have to pay rent or mortgages. The Baby Boomers began taking out “second mortgages” or home equity lines to fund a higher standard of living. This extends the 30 years of mortgage payments indefinitely, making retirement an elusive dream.

 

How can you retire on a fixed income if you spend your life renting? Rents keep increasing and retirement incomes decrease. Social security helped bridge the gap for past generations, but no Generation Xer or Millennial really expect much to be left over.

 

So, how will millennial renters ever retire? That’s the question with few good answers and the strongest case for buying a house rather than renting. Want to retire at 60? Buy your first home before 30 and don’t dip into the equity.

 


Buying And Renting Have Their Advantages And Also Their Disadvantages

 

There are many advantages to buying a house instead of renting. You will likely feel a stronger sense of stability and have more space when you purchase a home. In addition, buying a home is a sensible financial investment for your family and your future. However, buying a home isn’t right for everyone, and you should consider your needs and financial situation before you make a decision.

Interested in Buying A Home instead of continuing to Rent?

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The State of the Real Estate Market in Knoxville in 2019

Buyer Tips | 0 comments | by newman

The State of the Real Estate Market in Knoxville in 2019

It’s hard to believe it has been ten years since the Great Recession and the collapse of the real estate market.  However, in Knoxville, Tennessee it seems surreal that it ever happened. Take a stroll through Market Square or run errands through Turkey Creek shopping center, and it is easy to see the economy in Knoxville is doing well and the result – a strong a real estate market. Forbes recently named Knoxville as a Recession-Resistant City for real estate, along with neighboring city, Nashville, Tennessee. Forbes isn’t the only organization recognizing the southern city. CNBC recently named Knoxville as a top 10 Slump-Proof City, and Livability.com listed it as one of the Top Best Places to Live.

real estate knoxville Tennessee

Photo by David McBee from Pexels

‘After the recession hit, it was a really rough time in real estate. I witnessed people who lost it all, however, the dynamic has changed significantly since then,’ said Knoxville real estate agent, Dustin Weaver. ‘When I first started, foreclosures and short sales were enough to keep anyone busy full time, but now those are few and far between due to the robust economy.’

Dustin is right: The Knoxville housing market is booming. According to the US Department of Housing and Urban Development Comprehensive Housing Market Analysis of Knoxville, TN, the average price for new and existing homes sold was $172,800. Zillow reported a ten percent increase in the home value forecast over the past year and shows an upward trend of 6.5 percent over the next year.

Even though Zillow lists the Knoxville seller’s housing market as ‘very hot,’ it’s affordable. Livability also gave Knoxville a number eight ranking in Top 100 Best Affordable Places to Live. With the median home sales price of $172,800, the estimated monthly mortgage payment in Knoxville would be roughly less than $900. This figure doesn’t include taxes, insurance, or private mortgage insurance (PMI), but is subjected to the down payment along with other variables. Even with those variables, Knoxville’s monthly mortgage payment is less than the national average. (Zillow.com has a great Mortgage Calculator based on national interest rates. Input all mortgage variables to calculate an estimated monthly payment at www.zillow.com/mortgage-calculator.)

In 2017, the United States Census Bureau listed Knox County’s population as 461,860. Knoxville’s ability to provide job security to its residents plays an equally important role in the housing market. The Knoxville area is home to multiple successful, well-established corporations including the US Department of Energy, University of Tennessee, Covenant Health, McGhee Tyson Air National Guard Base, DENSO Manufacturing Tennessee, Inc., and Alcoa Inc. According to the US Bureau of Labor and Statistics, the Knox County unemployment rate was at 2.7 percent in May 2018, down 7.2 percent from 2010. The vitality of the Knoxville real estate market is in large part due to job security and the increasing ability to work remotely.

Dustin went on to say,

‘I have listed many houses that have gone pending within hours of listing or have gone multiple offers and sold well over the asking price. While no city is completely recession proof, it is easy to see why the Knoxville area real estate market has flourished. It is a great area and it has a lot to offer people of all ages.’

Simply put – the Knoxville real estate market is thriving and affordable.


Dustin Weaver is a licensed real estate agent with The Real Estate Firm® in Knoxville, Tennessee. Dustin has been working in real estate for several years and services Knox, Blount, Sevier and surrounding counties. He sold approximately 6 million dollars in real estate in 2018 and has started 2019 off with a bang! Along with his passion for real estate, Dustin loves his family and is an advocate for foster care and adoption. Follow Dustin’s real estate journey and ‘dadisms’ at www.Facebook.com/Realdadrealtor.

Written by Jessica Winspear of New Again Houses® Knoxville

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3 Things To Keep In Mind If Your Goal Is To Buy A Home In 2019

Buyer Tips | 0 comments | by newman

3 Things to Keep in Mind if your goal is to buy a home in 2019

Buying a home can be one of the most gratifying gifts you can give yourself and your family. It can feel like a rite of passage ushering you into many new and exciting seasons of life. It’s a goal for many, but it is only attainable for few. But why? Today we are going to unpack 3 things to keep in mind if your goal is to buy a home in 2019.

Written by Katie Harlow, Showing Assistant of New Again Houses®

buy a home in 2019

  1. Start Early and be Educated.

It’s a common misconception that you can wake up one day, decide that you are ready to buy a house and then go put an offer on one the next day. In reality, it’s not that simple. Before buying a house, there is some groundwork required in getting prepped to buy. Nothing is too tricky or complicated, but buying a home needs some simple prep work beforehand that can transform your experience. First, know your credit score (thank you, Credit Karma!) and try to get a little understanding of how credit works. A quick google search can go a long way to understanding credit score. Your credit score may be awesome or it may need a little work. Either is okay, but know what you’re working with and then do any necessary work to get it where it needs to be. A credit score of 620 should be a minimum goal and then build from there. The better the score, the better the interest rate, the better the payment. It’s a domino effect.

  1. Talk to a lender, and choose what you can afford.

The first thing I want to know when working with a new homeowner is if have they talked to a lender and if their lender suggested a monthly amount they can pay. Talk to a lender and get an idea of how much house you can afford. Honestly, deciding what you can afford each month is the most important part of buying a home. Every so often, a lender can approve someone for way more than they could ever afford, but the buyer goes with what the lender says anyways. And yeah, if you’re okay living on ramen then that huge house price can be possible, but I doubt many of us want to give up our fun lifestyles!

Don’t be house poor! My suggestion is to be payment-based when talking a house purchase amount. By doing so, you will be less likely to over-extend yourself and more likely to make a wise decision in your home purchase. It’s easier to start with less and go up in both price, size, and features – then go backward!

  1. Avoid big purchases!

This one is HUGE, and I can tell you from experience it’s crucial to think about! If you want to buy a house within the year, avoid making big purchases on cars, boats, RV’s, you name it! When I bought my last house, I had also bought a new car a few months prior, so I had extra hoops to jump through because of that purchase. It messed up my DTI (debt to income ratio) along with having a credit ding, and I had to do some switching around to make the pre-approval process go more smoothly. My simple advice: Avoid those purchases until AFTER you buy your house! Drive the clunker a few extra months – I promise it will be worth it in the end! Another thing? Keep the design plans on your Pinterest board until after you close. Don’t finance furniture or any other big home projects until after you have the keys in your hand! Any pull of your credit can derail the loan process, so it’s best to just avoid it altogether!

Not too hard right?! These are some simple tools that I hope make the goal of home ownership a tad easier for you! Always keep the end in sight because owning that home will be worth ALL the work you put in to get there, and you’ll enjoy it all the more!

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Should I Buy A House?

Buyer Tips | 1 comments | by newman

Should I Buy A House?

4 Financial Factors That Determine If You’re Ready to Buy a House

 

There will likely be a time in your life where you’ll ask yourself, “Should I Buy A House?” You may have a baby on the way, or you may just need more space for your family. Many Americans have the dream of owning a home, and it may be the right choice for your lifestyle.

 

Before you decide to buy a house though, you should take a look at your financial situation. There are four primary variables that will determine whether you can buy a house, and they are often more daunting to first time home buyers than they should be. These variables are income, debt, downpayment, and credit score.

 

should I buy a house?

Written by Matt Lavinder, President of New Again Houses®

 

Income

 

As a rule, your mortgage or rental payment should not exceed 30% of your gross income. The housing payment (mortgage or rental) includes the monthly payment, property taxes, and insurance. This is often referred to as PITI, meaning Principle, Interest, Taxes, and Insurance. The gross income is your monthly gross wages BEFORE taxes are taken out of your paycheck. It’s typically the top line “Gross Wages” on your W2.

 

Self-employed or 1099 income? Well, lenders don’t like either. But don’t give up on the American Dream. Lenders will typically want to see two years of 1099 or self-employed income in the same line of work. They’ll average those years to determine your gross monthly income. Once you have your gross monthly income, multiply it by 30% to find the maximum amount lenders will be comfortable allowing for your monthly housing payment, property taxes, and insurance (PITI). $3,000 per month of gross income? Lenders will assume you can afford $900/month for payments, property tax, and insurance (3,000 x .3 = $900). Lenders might allow more than 30%, but you will need to show some offsetting factors like a high credit score, additional down payment or cash reserves.

 

What if you have a spouse or partner who will be buying the house with you? You can put anyone on the deed with you. If you include them on the mortgage and count their income, you’ll also need to count their debts and credit score. If the two of you have combined gross income of $6,000 per month, your maximum PITI will be $1,800 ($6,000 x .30 = $1,800). If your partner has a disastrous credit score, you probably won’t be able to count their income for purposes of the mortgage.

 

Debt

 

Lenders calculate your debt by a calculation called Debt to Income Ratio, commonly referred to as DTI. DTI is the percentage of your income that is used to make debt payments. Debt payments include payments for a car, student loans, mortgages (PITI), minimum credit card payments, personal loans, and any other debt payment. This does not include utilities, taxes, personal insurance, or other similar expenses. Debt payments are only payments owed to others as opposed to living expenses. Here is the calculation:

 

Total Monthly Debt Payments / Monthly Gross Income = DTI

 

For example, let’s assume you have the following situation:

W2 Year Income = $48,000 ($4,000 per month)

Car payment = $400/month

Minimum Credit Card payments = $100/month

Student Loan payment = $300/month

Personal Loan payment = $200/month

Total Monthly Gross Income = $4,000/month

Total Debt Payments = $1,000

 

DTI = 1,000/4,000 = 25%

 

Now, let’s see how much house payment (PITI) you can afford. Lenders differ, but most lenders are comfortable with a DTI up to 41%, meaning 41% of your income can go toward debt payments. This includes your mortgage payment.

 

Here is the calculation:

 

Income x .41 – Existing Debt Payments = Allowable Mortgage Payment

 

4,000 x .41 – 1,000 = $640

 

A $640 house payment might not get you the house of your dreams, so let’s add your partner’s $3,000 income and $500 of debt.

 

7,000 x .41 – 1,500 = $1,370

 

Better, right? If you use your partner’s income, you must also use their debt and credit score. If your partner has a low credit score, you might not be able to add their income to the calculation. If you use an individual’s income for the mortgage qualification, they will also have to sign on the loan and bear equal responsibility if it defaults. Some lenders will allow you to have a cosigner, such as a parent. If they co-sign and add their income to the equation, they will be personally responsible for the mortgage if you default. The PITI payment will also be included in your co-signer DTI as well as the mortgage. That means their ability to borrow money for their own house could be severely limited because they have co-signed for your mortgage.

 

Some mortgage products will allow your DTI to go as high as 50%+, but most lenders will only be comfortable up to 41-43%. If you need a higher DTI, your best option might be an FHA loan that can go up to 50% or higher. These federally backed mortgages typically allow for the highest DTI.

 

Downpayment

 

Your grandparents likely needed to save up 20% before they could get a mortgage. 20% down is still the ideal, but it is not required to buy a house today. There are many options that require as little as 0% down to buy a house. Here is a list of federally backed available mortgages and the required minimum downpayment:

 

FHA Mortgage – 3.5%

VA (Veterans Administration) Mortgage – 0% (Must be a qualifying veteran. Check this link.)

USDA Mortgage – 0% (House must be located in a rural area. Check this link for eligibility.)

95% Conventional – 5%

State Funded Mortgages – These are state funded second mortgages that cover the down payment required by the first mortgage.

 

In addition to these widely available options, individual banks and credit unions offer their own “in house” portfolio mortgages. Since the local lenders typically hold these mortgages long term, they have some discretion in the qualification requirements. It’s not unusual for local banks and credit unions to offer 0% down mortgages for applicants with strong credit scores, typically over 660. These products are unique to each local lender so it’s okay to shop around to local banks and credit unions to understand the options. The interest rates are often a bit higher, but they usually don’t require mortgage insurance.

Mortgage insurance is often required on mortgages with less than 20% down payments. The mortgage insurance can equate to an additional 1-1.5% interest increase. USDA and VA mortgages are especially valuable because they are 100% options with minimal mortgage insurance.

 

Explore 1st time home buyer grants

 

In addition to low down payment mortgages, there are a lot of first time home buyer grants available. Such grants are usually federally funded through Economic Development Districts throughout the country and are between $3,000 – 15,000 toward a down payment or principal reduction. These grants typically have income caps that are around 80% of the median household income in the county. If your income is below the median in your county, these are certainly worth looking into. They often require a half or full day of homebuyer education class. These funds are often funded by the federal government on July 1 and often run out by winter. Late summer and fall are the best times to secure these first time home buyer grants. Other grants, referred to as the Hardest Hit Fund, are available for specific zip codes in 18 different states. These grants go up to $15,000 and can be added to other grants.

 

The FHLB (Federal Home Loan Bank) is mandated by law to fund homebuyer assistant grants in each of its regions. It does so through various agencies, lenders, and nonprofits. The Welcome Home grant funds $5,000-7,500 toward purchases. These grants are funded in March by various approved lenders and credit unions. The funds are typically exhausted within 30-60 days and aren’t available again until the following year. Every lender has access to different grants, so do your research and don’t depend on one lender to educate on all the options available.

 

Credit Score

 

Credit scores are one of the most important variables involved in getting a mortgage and they are shrouded in mystery. Your credit score is a measurement of your likelihood to pay your debts. It’s based on your payment history, the number of accounts, and utilization rates of credit cards. Credit scores range between 300 and 850. Any credit score over 660 is good and over 700 is an excellent score that will get you the best options for mortgages. Credit scores over 630 should be eligible for some, but not all, mortgages. Many first time home buyers have minimal to no credit history, which results in a low credit score.

 

There are ways to build on a shallow credit score. The most important thing is to get a credit card and keep a low utilization rate. If your credit card limit is 1000, pay down the balance to under $100 each month. This will tell the credit bureaus you have access to funds and don’t need them. If your scores are low, it may be because your utilization rate is high. The easiest way to move a credit score is by adjusting the credit card balances to under 10% of the limit.

 

Another shortcut is to have someone with a low utilization credit card add you as an authorized user. Oftentimes, you’ll piggyback on the history of strength of that account immediately. If you don’t have enough history to get approved for a credit card, you can get a secured credit card. This is a prepaid card offered online and through many local banks and credit unions. You can get one with no credit history and it will report to the credit bureaus like a credit card. Over the course of several months, a secured card can significantly raise your score.

 

Once you determine your house payment budget and qualification status, shop around for a quality lender with multiple mortgage options. If you are denied by your own bank, don’t panic. You may need to build your credit, pay down some debt, or simply find a different lender with different requirements.

 

Should I Buy A House?

 

These 4 financial factors will help you determine if you should buy a house. Buying a home is a key part of the American Dream that can help you build wealth, but there are many hurdles to jump through before you can own a home. However, it’s definitely not impossible.

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The Ultimate Guide to Buying A House

Buyer Tips | 0 comments | by newman

The Ultimate Guide to Buying a House

 

buying a house

Let’s talk real estate: Buying a house is one of the biggest decisions of your life. Here’s the ultimate guide to making the important decisions and navigating the process.

 

The first part is understanding your own motives for buying a house as those motives should determine many of the early choices.

 

Many people go into the process hoping to achieve too many life goals with the first purchase and set themselves, or their partners, up for failure. Is this a house you need for less than 5 years or do you want to stay put in one location and raise a family there?  If it’s the latter, space should be a priority. If it’s going to be a short term home, other priorities should prevail. Do you want the home to give you a higher quality of life and time with your family? If so, commute time and turn-key condition are going to be important. Want to use the home to add sweat equity? Perhaps you want a house you can add value to by remodeling or updating. It’s important to understand what you want from the house. It’s just a house and can’t possibly solve every problem. Understand why you and your partner are buying a house so you can begin finding the right fit.

 

Written by Matt Lavinder, President of New Again Houses®

 

So, what DO you want?

Most buyers’ answer is “everything” and it sets them up for a disappointing home search. Like everything else in life, the search will become a process of deciding what is important to you AND your partner. Take much of the stress out of the process by making these decisions before you start looking at houses.

Here is the smartest thing you can do to start your search: Go online with your partner and together find the answer to this question, ‘If we can only see three houses of all the houses online, which 3 would we choose to look at?’ This will force the two of you to decide both what is important to you and what is not so important to you. Chances are you are incorrectly assuming what is important to your significant other. If so, this will come out quickly and it will spark some much-needed conversations. This only works if you choose 3 (and only 3) houses that you both agree on. It’s cheating for each of you to choose 3 because you’ll eventually have to buy a house together. You will have to go through this relationship introspection at some point and it’s better to do it before you start looking at houses in person. It’s not easy though, because below is a list of some of the bigger items you’ll have to prioritize.

  • Maximum Price
  • Location Requirements (include school districts)
  • Minimum Bedrooms
  • Minimum Bathrooms
  • Minimum Square Footage
  • Parking Situation
  • Minimum Quality of Yard
  • Level of Updates
  • Curb Appeal or Style

There are certain needs and an unlimited amount of wants. It’s important to identify the needs first and then tackle the wants.

Your budget will force you to prioritize. Once you agree to what you NEED on this list, start identifying houses online that meet the needs. The process of narrowing the search to 3 houses will be a process of prioritizing the wants. If you’ll force yourselves to limit the first list to 3 you could both be happy with, you’ll set yourselves up for success rather than failure. Having answered the “Why do I want to buy a house?” question first will make this negotiation easier.

For example, if you currently have no kids but want to have 3 kids, how many minimum bedrooms? Well, is this house for the next 3 years or 10 years? If only 3, you may only need 3 bedrooms. What about the importance of a guest room? Is it a want or a need? Perhaps Air BnB’s are always available nearby and it’s just a want. Start with the needs and then see how many wants your budget will allow.

Here is why this initial process is especially important: If you don’t define your own needs and wants together, others will do it for you.

Your real estate agent will be happy to tell you what you need if it’s clear you haven’t decided. Even worse, family members will assert themselves. If you think it’s difficult for the two of you to identify needs and wants, try adding the opinions of in-laws into the mix. It’s hard enough for a single house to satisfy two people. No house can satisfy the wants of those two AND extended family with strong opinions. Do your relationship a favor and spend time on the front end narrowing down the list to 3. You’ll learn a lot about yourself and your partner. Then, once you understand what the two of you want, start looking for a house that can give you those things.

How much space do I want and need?

Everyone wants more space, but this is an important question. The cost of housing is often a direct correlation with square footage. Real estate agents might push back, but square footage is the most important filter because every additional square foot will have a corresponding cost of purchase, updates, maintenance, and utility bills.

There’s no way around the fact that every additional square foot comes with a set of costs now and for as long as you own the home. The costs of updating or remodeling a home are directly related to the number of square feet. Flooring, painting, electrical systems, plumbing drops, windows, roofs, and HVAC systems are all costs based on square footage. For a light remodel of just paint, carpet and fixtures, figure $10/sq ft and closer to $30/sq ft if you want to get into any bathrooms and kitchen. When it comes to remodeling costs, square footage is not your friend. Want a 2000 square foot house that needs to be updated? Be prepared to pay $40,000 for that in most markets. If you aren’t disciplined and set limits, make it $50,000 – $60,000. If it’s 1000 square feet you can cut those costs nearly in half.

Agreeing on your minimum square footage is one of the first decisions you need to make as that is going to dictate many of the other options. Remember, sellers don’t give away square footage. If you think you are getting additional square footage for a deal, you probably aren’t. Instead, you are likely getting square footage that you will need to remodel at $30/ft.

How much can you afford?

One of the most important questions is “how much house can you afford?” As a rule of thumb, your house payment should be somewhere below 31% of your gross monthly income. Make $4,000 per month like most Americans? Your maximum house payment (including property taxes and insurance) should be less than $1200. Most financial advisers would encourage you to be under 25% of your gross monthly income, but that’s just not possible in some markets.

Don’t trust the online mortgage calculators because they will lead you to inflated expectations. Most of the interest rates advertised online are teaser rates and probably don’t include things like mortgage insurance, property taxes, insurance, and other fees. The best way to find out what you can afford is to go through a prequalification process with a quality local lender.

Choosing a Lender

The lender is one of the most important partners in the home buying process. Like you’ll find in most areas of real estate, there are a lot of people, including lenders, who just aren’t very good at what they do. Don’t choose people you know. Choose people who are the best at what they do.

 

At New Again Houses®, we work closely with many different lenders so that we can find the best fit for you and your situation when it comes to getting approved for a mortgage.

Do you need help finding the right lender for you? Contact us today and let us help you put together a personalized strategy for buying a home.

CONTACT

 

Lending options fall into two large groups: secondary market mortgages and portfolio mortgages. Secondary market mortgages are backed by a federally insured agency so they must be conforming. This means the lending guidelines have to meet certain requirements. As a result, most secondary market mortgages look very similar, regardless of the lender that is selling the loan. For example, if you are getting an FHA loan, the requirements are going to appear fairly similar at every bank and mortgage lender in town. On the day your loan is closed, it is typically packaged with thousands of other such mortgages and sold on the secondary market to another lender. Since all these secondary market loans ultimately end up with the same investor, the bank selling the loans (i.e. your loan officer) has very little discernment over the guidelines. Those guidelines are set by the secondary market and every mortgage being sold on the secondary market must “conform” to those guidelines. There are many different types of conforming mortgages, including USDA, VA, traditional, and many others. Each has its own unique guidelines, but those guidelines will be similar from lender to lender.

Portfolio mortgages are different. Portfolio mortgages are mortgage products, sometimes referred to as “In House Mortgages”, that are held by a particular credit union or bank. Since they are not sold off to the secondary market, the lender keeps the loans in house and, therefore, has more discretion over the guidelines and lending decisions. Each local bank or credit union will have its own set of portfolio mortgages and most will also offer secondary market mortgages. Keep in mind that all mortgages, including portfolio products, are highly regulated and most of the lender’s discernment is limited by federal regulations.

All lenders are not the same.

Most banking institutions offer mortgage lending and will have loan officers who sell both their portfolio products and some secondary market (conforming) mortgages. The advantage of working with a bank lender is you will have access to their unique set of portfolio loans. Keep in mind that each bank or credit union’s portfolio loans are unique and it’s beneficial to shop around for products that might fit you better. The disadvantage of such lenders is they run at the speed of a large organization, meaning slow.

The other option is to work with a mortgage broker. Mortgage brokers typically offer the widest range of secondary mortgage products, because they can shop amongst multiple investors. Banks, on the other hand, are typically locked into their own particular mortgage offerings. Brokers have the ability to find a mortgage product that will best fit your particular situation. Since they typically work on commission, they can also be faster and have less bureaucracy to deal with when there are problems with the loan. The downside of brokers is they have little to no access to portfolio products.

Spend some time researching lenders in your area and talk to at least two of them so you can compare offerings and rates. The mistake many people make is to go to the loan officer of their personal bank and assume this is their best option. It’s often not the best option. Be honest with the lenders about your income and downpayment so they can best match with a product that fits your particular situation. They will collect your w2’s, paystubs, and tax returns so don’t exaggerate your financial situation. As you begin thinking about purchasing a house, keep a folder with any new pay stubs and bank statements. This will be helpful as the lender will request updated documents throughout the process.

There are three levels of mortgage approval. The first and most basic is pre-approval. This often consists of an online form or telephone conversation based upon the financial figures you submit. The process is quick and none of the claims are reviewed or validated.

Pre-qualifications typically require more documentation. For a pre-qualification, lenders will often require paystubs and a w2 along with a hard credit pull. Good agents will require a pre-qualification letter before showing you houses as they don’t want to show you houses that you can’t acquire financing on.

Don’t have your credit pulled until you are serious about buying a house.

The credit pull will ding your credit as it alerts the credit bureaus that you are looking to borrow money. Once you do pull your credit the first time, the credit bureaus will not penalize you for shopping around and having other mortgage lenders pull your credit, so it shouldn’t hurt your credit anymore to have 3 mortgage lenders pull your credit than just having one do so as long as they are all done in the same window of time. If you are getting your credit pulled every 30 days, that will be a problem. Mortgage lenders can use a credit report for 30 days. This is another good reason to know what you want in a house before you start the process of shopping for one. You don’t want a lender to have to update your credit report three times while you figure out what you want in a home. This is very important.

Never allow your credit to be pulled online.

There are online brokers who will take your permission and shop your file to multiple online lenders. You don’t want your information shopped around online and it’s unlikely there are better mortgage options online than there are locally. Remember, most of the mortgages end up with the same investors so the guidelines and rates will be similar. There’s really no need to share your financial information on the web.

If you are denied qualification for a mortgage, don’t panic. There are many lenders and each has its own set of qualification standards. It might be that you went to a lender that didn’t fit you. For example, some lenders are far more accommodating of self-employed workers than others. If your credit score is lower than you expected, there are some simple things to do first on your own.

  • Check your credit card balances and try to get them all under 7% of the credit card limit. If you can’t pay them down, ask for a limit increase so it reduces your utilization rate (balance divided by limit) as low as possible. Credit scores can be affected significantly by credit card utilization percentages and this is one of the easiest ways to move a credit score.
  • If you don’t have enough credit history, consider getting a secured card with a local bank to add a credit line to your history. This can have a significant positive effect after a few months as long as you keep the balance at a minimum amount.
  • Check CreditKarma or equivalent to see if you have any recent late payments in the last year. If you do, call the source of the loan (doctor’s office, auto dealership, etc) and offer to pay the amount in full if they will remove the delinquency with the credit bureaus. Mistakes, especially with medical collections, are often made so be proactive about getting those mistakes removed.

Be very careful with hiring credit repair companies on a contract. They like to file disputes on all negative credit files on your report. This will give you a bump in credit score, but you will have to take those files out of dispute before you can get a mortgage. Oftentimes, the credit score will fall when those items are taken out of dispute. You will have spent months of time and money and be in a worse place than before. Do your own research on fixing your credit. If you do need help, make sure you work with an excellent credit repair company with solid reviews.

Using a Real Estate Agent or Not?

You can purchase a house without a real estate agent. You can purchase For Sale by Owner houses or any house that is not listed with an agent. There is nothing wrong with doing so and the process can be easier without agents involved because you can negotiate directly with the seller. There are online tools that will help you through the process, but you should consider using a good real estate attorney if you are buying a house without an agent.

 

We have fantastic real estate partners that we work with who will make your home search fun and exciting.

When you work with New Again Houses®, we will be beside you every step of the way, from getting approved for a mortgage to signing the contract on your new home.

WORK WITH US

 

You cannot purchase a house that is listed on the market without an agent. If you contact the agent listing the house, she can show it to you, but she will then expect to represent you as the buyer’s agent. This puts her in a dual agency situation where she is representing both the buyer and seller. Agents like this because they can collect double the commission, but it’s not always in the buyer’s best interest. Don’t call the phone number on the sign of a house you are interested in. Select your own buyer’s agent to represent you and your agent will contact the listing agent of any house you want to see.

“Calling the sign” is one of the biggest mistakes first time home buyers make. There’s just no advantage to contacting the listing agent. It’s better to have your own agent who is representing your interests and not the sellers.

 

How do you find a good real estate agent?

Don’t search for them at church, work, or Thanksgiving dinner. It is not difficult to obtain a real estate license so the market is littered with part-time agents who are not very skilled or experienced. Chances are you have at least a couple agents within your family or circle of friends.

The quality of your agent matters a lot. You do not want to go through this process with an unskilled agent. In reality, a bad agent is going to cost the same in commissions as a good agent, so seek out a good one.

Spend the time to find a full-time agent that does real estate for a living.

This is a common theme, but it should be repeated. Real estate professionals are not all the same. There are a few really good ones and there are a lot of low-quality people. This is because the barrier to entry is low. Surround yourself with the best people. There are different profiles of real estate agents. Here are the most common:

  • The single agent. This is the most common type of agent. He is under a brokerage like Keller Williams or Remax because all agents must be affiliated with a brokerage. The single agent is a one-man team. He will list houses and he will represent buyers. This type of agent has minimal support and must do everything on his own. As a result, his time is often limited. The advantage of this type of agent is they will work with you directly and they might be highly skilled. They also might be a novice. Ask good questions about their process and look at review sites.
  • The real estate team. These are becoming more and more popular. When a single agent gets maxed out, she’ll often form a team around her. A team will normally include a showing agent and, oftentimes, a team of showing agents. The team leader will normally focus on listings or lead generation and will have minimal contact with buyers. Buyers will be assigned to a showing assistant who will get a portion of the commissions. Showing assistants on teams can be entry level agents with little experience or they can be seasoned buyer’s agents. If you choose to work with a team, make sure you know who the showing assistant will be as that will be your primary representative. Teams can have the advantage of having a transaction coordinator and other specific support roles which make the operation more professional and efficient. The downside is the risk of being pawned off to a green showing assistant who got her license last week.
  • Mega agents. Mega agents are similar to teams but larger. They might have a large marketing budget and a team of showing assistants with high-pressure sales goals. Just don’t expect to talk to the agent whose picture and name are on all the billboards.

One of the most important characteristics in a showing agent is her ability to listen to you. A good showing agent will spend a lot of time listening to what you want as opposed to telling you what you should want. A poor showing agent will jump in the car before listening to you and waste everyone’s time showing you houses that don’t fit what you want or need. If you feel as though your agent is doing more talking than listening in the initial conversation, keep looking. A good showing agent will spend at least an hour listening to what you want and looking with you online before ever showing you the first house in person.

You’ll also want to know who handles the process after you have a contract. Does the buyer’s agent stay with your file and negotiate the inspection process, or will you be passed on to a transaction coordinator? That’s not necessarily a bad thing, but it’s something you’ll want to know at the beginning because you’ll want to make sure there is someone representing you through the difficult post-contract phase of the transaction.

The buyer’s agent fees are paid by the seller. In a typical transaction, the seller will pay a 5-6% commission at closing. Half will go to the listing agent and half goes to your buyer’s agent. The percentage is dictated by the seller so there’s no need for you to negotiate a percentage commission with your buyer’s agent.

Shopping for Houses

Shopping for houses can be stressful and exhausting if you don’t approach it the right way. Start by coming to a shared vision with your partner as to what you need and want. If you show up to the first half with two sets of wants, this process will turn ugly. Sort out the different expectations before you go to your first house. Once that is complete, narrow down the list to a few prospects you both agree on.

When you get to a house, make a general walk through the house gathering a feel for the “big picture”, including the overall curb appeal, layout, and feel of the house. Avoid getting bogged down in the details and focus on the overall feel of the house. If that’s not right, the details don’t matter. It’s easy to get focused on details in every room when the overall feel of the house isn’t the right fit.

Once you’ve walked through the house and like the general feel, spend time in the rooms that matter the most to you. Make notes somewhere, because the details of the individual houses will get blurred after a few houses.

Don’t take the family along with you to look at houses. It’s hard enough to find a house that meets the needs and wants of two people. Adding a third person’s desires just makes it even more difficult. Parents are especially difficult. They are at a different place in life with a different set of expectations for a house. While their approval might be important to you, wait until you are further along in the process to ask them their opinion. Be warned: If you do ask family their opinion, be ready for them to have one.

 Making an Offer

When you find the right house, it’s time to make an offer. If you have an agent, she will guide you through this part. The main decisions you’ll have to make on the contract offer are:

  • Offer amount
  • Earnest amount
  • Inspection period
  • Closing costs

There is more to the contract than these and it will differ from state to state, but these will be the most difficult parts of the contract. The offer amount is obviously the price you are willing to pay for the house. Your offer will depend on many things, including the length of time the house has been on the market (days on market).

As a rule, you’ll have a better opportunity to negotiate the price if it’s been on the market longer. Your lender will order an appraisal and most contracts are contingent upon the property appraising for the amount offered. If a property appraises for less, there will be an opportunity to negotiate again at that point. The earnest amount is the amount you place as a downpayment with the closing attorney. Those funds will be held and credited toward the purchase amount. If you fail to execute the contract, the seller is entitled to keep the earnest amount.

You should make the contract contingent upon a property inspection and financing. If you can’t follow through on the contract for either reason per the contract terms, you would receive your earnest amount back. $500 – $2,000 earnest amounts are normal, but a higher earnest amount will tell the seller you are serious and may make them more likely to accept your offer.

The inspection period is the amount of time you have to do a property inspection. The normal length is 10-14 days as inspectors must be scheduled out.

Closing costs are different from the real estate agent commissions which are paid by the seller and any downpayment. Closing costs include the legal costs of the transaction, title insurance, recording fees, state transfer taxes, document preparation, and fees associated with your mortgage.

There are also prepaid insurance and property taxes the lender will require you to pay up front. These are your insurance and taxes for the coming year, so the lender will be able to keep a year’s worth of tax and insurance payments on hand in an escrow account.

Closing costs and pre-paids will typically be between $5,000 – $12,000, depending on the price of the house. A $150,000 house would normally be in the middle of this range, but that depends on the state. Your lender will be able to tell you exactly what your closing costs will be early in the process.

In some markets, it is expected that sellers will pay the buyer’s closing costs, but this will vary from market to market. If you don’t expect the seller to pay your closing costs, you can increase the amount of the offer by the amount of closing costs and then ask the seller to pay for them. For example, if you want to make a full price offer on a $150,000 house with $7,000 in closing costs, you can offer $157,000 with the seller paying $7,000 in seller paid closing costs. This way, you don’t have to come up with $7,000 in cash for closing costs. The property must appraise for the full $157,000 rather than just $150,000. Otherwise, your lender won’t loan on the additional $7,000.

Once the seller receives your offer, she will have three options. She can either reject the offer, accept the offer, or make a counteroffer. If a counteroffer is made, it will terminate your offer and replace it with the counteroffer. You, the buyer, will then have the same options. You can reject the counter offer, accept it, or make your own counteroffer. This back and forth continues until one party rejects or accepts the contract. When a contract is accepted, the contract to close period begins.

Choosing a Title Agent

The title agent’s role is to facilitate the transfer of ownership and ensure you get a clean title to the property. A clean title means there are no liens or interests that are transferred with the property. The title agent ensures the seller has paid off any loans or judgments against the property. If the house has ever been foreclosed upon or part of probate, the chain of title can get tricky. The lender will most likely require you to purchase title insurance. Title insurance steps in if there were any issues your title agent missed. There are other issues, as well. A good title agent will check for right of ways and other issues that could affect access to your property or that of neighbors.

A quality title agent is really important. You might not discover a title agent has been negligent until you try to sell the property and the next title agent discovers a title issue. It could cause significant problems for selling your house. Here again, not all title agents are the same. Some states require title agents to be licensed attorneys and others don’t. In such states, there title companies with various levels of expertise. Don’t trust your real estate agent on this decision. Agents are incentivized to use title companies that get contracts closed. You don’t want the title company who has a reputation for getting contracts closed.

You want a real estate attorney who is going to make sure you get a clean title and won’t close a house with a clouded title.

A real estate attorney will also be better equipped to solve title and other problems that can come up during the contract to the close period. Typically, the costs aren’t that much more to use a quality real estate attorney, so work with the highest quality people.

The Inspection Process

The most perilous part of the house buying process is the inspection period. This is where most deals fall apart. As soon as a contract is accepted, you can hire a property inspector. The property inspector will typically spend 4-8 hours in a house and produce a detailed report. It’s common for you to meet the inspector at the house at the end of the inspection so he can go over the report in person. Stay calm during this. Property inspectors are by nature very detailed individuals and not known for their delivery or bedside manner. You will likely get a very long report with room by room items that have been identified as possible issues.

Inspection reports can intimidate first-time buyers by the sheer volume of items. Typically, the report will include a summary of important items at the end. This is where you should focus your attention so you aren’t overwhelmed. Take special note of foundation issues, electrical systems, plumbing systems, water intrusions, and other systems related issues.

At this point in the process, you can normally terminate the contract if you choose to do so. This will likely be your last opportunity to get out of the contract. Don’t panic. The inspection will trigger a second round of negotiations. You can submit a list of things to be repaired or a cash sum to repair them yourself. The seller can again choose to accept the repair addendum, reject it and terminate the contract, or submit a counteroffer.

Appraisals

If a proposal or counter is accepted and the contract survives the inspection period, the lender will typically order an appraisal. Independent appraisals ensure lenders are not loaning more money than a house is actually worth. Some lenders require you to pay for the appraisal at that time and others will allow it to be paid as part of closing costs.

The appraisals are typically a blind process where neither the lender nor the buyer has any control over the selection of the appraiser.

If the appraisal comes in under the contract price, the lender will typically only loan a percentage of the appraised value rather than the contract price. The buyer can renegotiate the price, cancel the contract, or pay the difference between the appraisal and the contract price. Most sellers will be willing to renegotiate the price when there is a low appraisal, but it is at the discretion of the seller. Technically, appraisals can be appealed but they are typically upheld.

There are two professions that have very little accountability: sports referees and appraisers. There are times when two appraisals are required, but the lender will often pay for the second appraisal in these situations. In the case of a low appraisal, a second appraisal doesn’t normally help because the lender will normally only take the lower of the two. Portfolio lenders may have some discretion here, but secondary market lenders are typically bound by the appraisal value.

Closing

The appraisal is one of the final hurdles to overcome. Once the inspection period is over and the appraisal has come in, the closing agent will order the title work. Once that is complete and there is a clear title, the file will return to the lender for final approval. At this time, the lender may do a work verification to make sure the buyer is still employed.

It’s really important not to make any major life changes during the process.

Don’t quit your job and don’t take on any additional debt for furniture or anything else. The lender will likely request your credit information again at the very end to make sure nothing has changed. The final step for the lender is to issue a clear to close, which gives the title agent permission to close the sale of the house. At the closing, you will sign transactional documents along with the seller that transfers the ownership of the property. You will then sign the loan package, which is significant. Once that is complete, you will receive the keys to your new home.

Keep the gutters cleaned and enjoy until it’s time for a bigger house with more bedrooms.

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3 Steps to Prevent Loan Default

Buyer Tips | 0 comments | by newman

3 Steps to Prevent Loan Default

 

prevent loan default

As I reflect back on my work experience in the mortgage and construction industry, I would have to say the most uncomfortable position I have ever held was working in collections for a manufactured home lenderMy company coined the position as ‘Financial Counselor.’ I think that term makes it sound nicer, but at the end of the day, I was a debt collector for loan default. At times, I did feel like a financial counselor, and I felt like I was making a difference. However, it was not the type of interaction I had in mind with clients.

I want you to let that sink in. If you are behind on your mortgage, please remember you are a client of your lien holder. It’s a mutually beneficial relationship. Yes, you borrowed money from an institution, but they wouldn’t be there without clients like you.

Guess what? The mortgage company doesn’t want to foreclose on your home because of loan default! That’s right. It costs a lot of money for them to foreclose. They have to pay for a collection agency, go through a lengthy legal process to take possession of the home, and then try to sell the home to recoup losses.

If you are in a situation where you are potentially going to fall behind on your mortgage or are already behind, here are a few suggestions – from a former debt collector.

Written by Jessica Winspear of New Again Houses® Knoxville

 

Contact is Key.

I cannot stress this enough. It is not comfortable. In fact, it can be downright scary, but I hope at this point you have an understanding that this is a consumer relationship. Not every person you speak with will be understanding, and I have heard plenty of negative stories that I’m sure you have as well. However, a financial institution is going to be more likely to work with you if you contact them before they contact you. They want to help you get out of loan default.

If you are still apprehensive about contacting them, there are non-profits and other organizations that will act as third-party mediators. There is actually a federal law mandating lenders to advise people of loss mitigation. The catch is you will already be behind at this point. However you chose to contact them, do it! I highly recommend you to initiate the contact. No matter what the circumstance, they cannot work with you if you avoid them.

 

No, not a power of attorney, but a

Plan of Action.

You may be in a situation where you think ‘I have zero options,’ but you may be surprised. Start by evaluating what happened to put you in this situation.

In my experience, more times than not, clients were headed towards loan default due to poor financial planning. I suggest writing out your finances – income and bills. We called this a debt analysis. It was one of the first things we did with our customers with their consent. It sounds so simple, but it’s actually not. Unless you’re a Dave Ramsey guru, you probably don’t know where all of your money is going. I know I don’t. I guarantee there will be items you can cut out of your monthly spending. Tell me you can’t live without cable, and in the nicest way possible I will tell you to try having cable without a house. You must prioritize needs over wants, set goals, and stay disciplined. You can find debt analysis templates online to fill out or download apps that will follow your spending.

One of my favorite apps is Mint by Intuit. If you don’t want to use it through an app, you can also set up an account on your home computer. Mint will help you keep track of all of your finances by linking all of your accounts into one place – checking accounts, savings accounts, credit cards, loans, 401k, etc. It will let you set goals for yourself and give you easy to read pie charts of where your money is going every month.

 

Research Resources – National & Local.

This one goes hand in hand with a Plan of Action. Whether national or local, there are so many resources available to you! After evaluating a client’s situation, I would look into programs that would possibly be able to help them work out of loan default. I know this can be tough without any experience, but there are so many resources at your fingertips.

My first suggestion is the Hardest Hit Fund. It has over $7.6 billion of federal funding and is available in 18 states – including Tennessee and Virginia. They paid some of my client’s loans for up to 6 months! It’s a great resource and your mortgage company may even be willing to help you with the application process.

The current application deadline is December 31, 2020. There are multiple national resources, and this is just one example. You can get with your local chapter of the US Department of Housing and Urban Development(HUD) or the Consumer Financial Protection Bureau (CFPB) to learn about other resources available to you.

 

Don’t be nervous to look into local resources

I know it isn’t ideal to let organizations in your community know that you are struggling, but it can be very helpful both financially and emotionally. There are organizations that are there to help, and you just have to be willing to find them. Many organizations have funds set aside for local assistance. Some organizations may even be national chains with local chapters. Looking local can be one of the best options because people are more willing to help out their neighbors as opposed to an organization that isn’t giving back to the community.

I know getting behind on your mortgage can be a terrifying situation. I have seen people lose their homes over not communicating, not having a plan, or just not being willing to put in the work. More often though, I have seen people keep their home and most of the time it came down to these key steps. While it is easier said than done, I feel confident that if you are taking these three steps, you can prevent a tough situation.

 

Please Note: If you feel you are being treated unfairly, you can submit a complaint to the CFPB (https://www.consumerfinance.gov/).

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3 Ways to Invest Your Tax Refund

Bridge to Own® | 0 comments | by newman

bridge to own ®, bridge to own

3 Ways to Invest your Tax Refund

It’s no question that most people would rather own a home than rent. You can choose your own paint colors, have all the dogs you want, and not have to worry about sharing walls with another family.

So what’s keeping you from buying a home?

MYTH: There’s a perfect buyer that the lenders are looking for, you have to have perfect credit, and you can’t have messed up once in your life, because if you do, a lender won’t take you.

Our advice: Don’t focus on the negative!

We love to solve real estate problems. From buying your unwanted home to helping first-time homebuyers navigate the unknowns, we love a good challenge!

We believe in investing – In your family, your future, and yourself. What could be a better investment than a fully remodeled home?

With tax refunds coming in, we think this is a great season for investing. If you’ve been thinking about purchasing a home, consider using your tax refund to help you get closer to your goal!

We know that saving your tax refund for a down payment sounds ideal, but sometimes it is not what is really needed. You can instead use your tax money to pay down other debt. This can help bring money back into your budget and increase your buying power.

 

3 Ways to use your tax refund if your goal is to own a home:

 

1. Use your tax refund to increase your credit score. 

Pay balances down on some credit cards to increase your credit score. You want to keep a little bit of revolving debt, so it’s best to keep your balance just under 10%.

Pro tip: If you have 3 different cards that are all maxed out or have high balances, it’s best to spread out the payments. So having all three cards at 50% is better than having one card at 10%. This can be hard to keep under control because sometimes you can have good intentions. But paying off debt has to be done strategically when you are looking to buy a home.

 

2. Use your tax refund to pay off high-interest payday loans.

You could be paying upwards of 60-70% on these loans, which means you are paying a lot for a little bit of money that you have been given access to. You want to go after these loans first if they are there, and this will free up money to be able to pay off other debt or put down on a mortgage.

 

3. Use the tax refund to pay off collections.

This is where it can get tricky, so it’s important to have a strategy in place! Sometimes, you don’t want to jump on an older collection. It looks better on the front end to pay off credit from the earliest to the oldest.

 

Coming in for an initial consult with us is important! When you come in for a consult, we are able to look at your specific situation and put a strategy in place that is best for YOU. We said that we love problem-solving, so we offer in-house credit repair services.

Start your journey home today! Schedule your free consultation with us below.

Schedule Consult
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