Eight Things You Need To Know About Your Credit Score (Part 1)

Maybe it’s time to purchase that home. Maybe you want to buy a new car. Maybe you just want to live debt free. Whatever the reason, understanding the impact these activities will have on your credit score is important.

It is important to know how paying off debt or increasing your debt will imapct your credit score. Most people think that paying off debt will automatically increase their credit score, but the truth is, it may actually lower it.

Here are eight things to consider about your credit score that you may not know:

(1) There are many different types of credit scores: There are numerous credit scoring models that lenders use to establish your credit risk or worthiness. Each lender can pick which best fits their wants and needs. Some use blended scoring models such as a combined average from Trans Union, Experian, and Equifax, while others use weighted averages according to their industry.

For example, an auto lender may calculate a credit score differently than a mortgage lender. However, generally speaking, if you have a good credit score it will be reflected as such regardless of the model used.

(2) Understand the credit reporting agency doesn’t determine risk, they simply report your credit activities that results in a credit score: Remember, the credit reporting agencies DON’t determine whether you qualify for an auto loan, or what interest rate you get, the lender does.

The credit reporting agencies collect your credit ativity, good, bad, or none, to those that request it. Based upon that data, the lender determines whether they borrower you money and at what interest rates.

Your “credit activities” are reported to credit reporting agencies by other lenders you have done business with. For example, each of your creditors will report to Experian, Trans Union, and Equifax your borrowing activites and payment history from credit cards, mortgage companies, utilities, prior landlords, auto loans, student loans, etc. Your report will also indicate any accounts that have gone to collections and which accounts have been paid in full, or open accounts. Information from public records may also be included.

Payment history is also essential to a good credit score. Credit reports will show your history of on-time payments, late payments, and defaults. All are negative towards your credit score.

(3) Its common for credit scores to vary between the three national reporting agencies: There are typically differences in your credit score depending on which credit reporting agency is used.

The reason? Not all creditors report their data to all three agencies. Some only report to one agency, while others may report to all three. For example, an auto lender may only report your payment history to Experian, while your mortgage lender may report to all three agencies. Therefore, your credit report/score may be slightly different.

Don’t forget, each credit reporting agency may use different scoring models even if each agency has the same information. The model used can change your score.

Make sure there is no incorrect data. If there is an error on your report, it will adversely impact your credit score. It is important that you file a Uniform Dispute Resolution with the credit reporting agency to correct the discrepancy. In correct information may also indicate potential identity theft.

(4) Certain information may NOT be used in calculating your score: Your age, marital status, race, gender and religion may not be used in calculating your credit score or credit risk.

Disclaimer: The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions.

Production Builders, Semicustom Builders & Custom Builders

When you are looking at purchasing new construction home there are many factors that need to be given consideration. The common decisions like price, area and design all need first consideration, but the next questions become, how quickly would you like to be in your new home, and what type of builder would you like to work with?

Essentially there are four types of home builders but in this article we will be discussing three of the four that home buyers have to choose from; production builders, semi-custom builders and custom builders. Often time’s the desired final purchase price is the deciding factor as to which of these building contractors the buyers end up working with. But having a basic understanding of the differences between them may end up making the decision process simpler.

Production builders, or as they are sometimes called, tract builders usually start out at the entry level price points in residential new construction. In our area over the past few years the price range in homes built and offered on the market by production builders has begun covering a broader price range than it has ever before. With production builders, buyers are at times limited to particular subdivisions, floor plans and designs within these developments. Production builders often translate to few­er choices and decisions for the buyers, but there are still plenty of selections that can, and need to be made. But even these choices may be limited to a smaller group of selections. One of the more common questions buyers ask when considering production built homes concerns the quality and workmanship that goes into the construction of the home. To that question I always remind buyers that production builders adhere to the same minimum code requirements as semi-custom or custom builders. Production builders at times may use a more economical type or quality of materials, equipment, and appliances, in their homes to keep their starting price points affordable. But some products and features offered may also well exceed minimum code requirements. Often time’s production builders offer either a selection studio on site at a model home, or off site at a separate location. The builder utilizes the selection studios to provide buyers a one-stop location to make their available selections. Buyers select items like interior and exterior colors, interior and exterior doors, cabinets, countertops, floor coverings etc. Production or tract builders very much have their place in our real estate market just like the semi-custom, or custom builders. Production builders offer a product to the market that allows many buyers another option other than a resale home that’s best suited to their price range.

Semi-custom builders often offer a wider variety of designs, floor plans, construction packages and features than production builders. Some semi-custom builders may even market or call themselves “custom builders” because they allow more custom changes than their production builder counterparts. Even so with semi-custom builders the buyers are at times limited to particular design packages, floor plan styles and selections. When it comes to semi-custom built homes the quality and workmanship can often times be very comparable to custom built homes. But in certain areas of the homes construction the builder may also be offering a more economical line of products or finishes. For instance the building contractor may offer mid-grade vinyl windows rather a wood clad window, or drywall cased interior windows and doorways as opposed to interior trim finish windows and doorways, or factory built cabinets and bases rather than custom built. There are many areas in the homes construction where the builder may offer a more affordable alternative in order to keep the homes price point at a more moderate range. At times these alternatives can be so subtle they can go nearly unnoticed by buyers unless pointed out by someone more experienced. Some area builders also offer a production built line of homes along with a semi-custom built line of homes. There are also custom builders that offer a semi-custom built line of homes along with a full custom line. At times these building contractors market and offer these different lines under separate brand names. This allows them the ability to work with a wider range of home buyers, and maintain their relationships with former clients who may be upgrading their homes from one line to the next in the coming years. Some semi-custom builders also offer selection studios for their buyers, others employ a consultant or representative to assist the buyers with their selections, while yet others simply provide the buyers with names and locations of local businesses that the builder works with in order for the buyers to stop in and make their selections. Regardless how the selections are to be made it is always extremely important that the buyers make their selections in a timely manner as to not delay the process. Construction delays caused by the buyers can ultimately lead to charges often calculated per day.

Custom home builders at times feature home designs, or styles that they’ve built in the past on their websites or in their marketing materials, or possibly even as model or showcase home, but with custom builders a buyers abilities to make the changes and selections in their new home is only limited by code restrictions, zoning ordinances, construction guidelines associated with a subdivision and the dollar amount that the buyers want to spend. If you are buyers that have their own design ideas that you want to incorporate in to your new home, than a custom home builder will likely be the way you will want to go. If you are looking at a completely unusual concept in a new home design then you may also be working with an architect and/or drafts person in the initial planning stages. Often time’s custom builders have architects they have experience working with or drafts people and designers as subcontractors or as part of their staff that assist with custom designs. The old joke is bring a custom builder one line floor plan on the back of a bar napkin and they’ll turn it in to a reality. On total custom designs buyers need to also prepare for larger possible builder and plan deposits. Custom builders will also often employ or subcontract the services of an interior designer or design consultant to work directly with the buyers throughout their design and selection process. Depending upon the overall scope and design of the home the custom home building process can also take much longer than say a semi-custom home building process. It may require several meetings with the buyers, building contractor, architect and interior designer to iron out all of the details.

The fourth builder type we won’t be discussing at any detail in this article is factory built homes or as they are sometimes called modular homes or panelized homes. Subdivision covenants and construction guidelines, local building codes and community and/or zoning ordinances at times restrict the use of these types of homes. If you are a buyer considering purchasing one of these homes, make certain there are no restrictions in your area to keep you from doing so.

Nebraska Realty & First Mortgage Take Lead Helping Omaha's Homeless…

An open letter from George Akers, Executive Vice President of First Mortgage:

There is no way I can express the depth of my gratitude for the generosity of the folks at Nebraska Realty.  With the money you raised/donated at your Christmas party, along with First Mortgage Company’s matching funds, the Shelter Funds has been able to do something truly amazing.  Before I tell you what’s been done let me give you some background information.

If you can remember back to Thanksgiving you’ll remember that it was cold – bitterly cold with temperatures down in the 20s.  This is not the kind of weather where you want to be sleeping outside, but that’s what David Busch was doing.  His current home had no address; it was simply a strip of cardboard placed on the ground between two buildings near 73rd and Blondo.  He was living on the streets of Omaha.  Sadly, his body was found Friday morning, the day after Thanksgiving; he died of exposure.  David was only 36 years old.

It’s sad to think that something like this can happen in our city, but it does…more than most people know.  Now though, thanks to your generosity, something more is being done to help Omaha’s homeless street people.  The Shelter Fund made a donation to the Open Door Mission that allowed them to hire a full-time director for their “Streets of Omaha” program and expand this program’s services from two days a week to five days a week.  The Streets of Omaha program provides sack lunches, toiletries, and other necessities to those living in abandoned buildings, homeless camps along the levy, camp grounds, vehicles, under bridges, crack allies, dumpsters, rest stops, public bathrooms, etc. The issues are as diverse as the people themselves – families, teenagers aging out of foster care, the mentally ill, abused, afflicted, human trafficking and the addicted. More and more elderly, living on a fixed income, will come to the Streets of Omaha van to receive a sack lunch. Many say it’s their only meal for the day.

With the Shelter Fund’s donation the Open Door Mission has re-worked their Streets of Omaha route and, starting February 29th, began reaching farther west, north and south.  And now, by expanding to five days a week, the Open Door Mission’s team of volunteers and staff can cover twice as much ground and find homeless people faster.

Meeting people where they are – geographically, philosophically and emotionally is so important.  Street homeless are often disconnected and disengaged with society; living in survival mode often due to trauma and crisis in their lives. Candace Gregory, the executive director of the Open Door Mission said, “Our goal is to reach the street homeless with food, love and toiletries and then offer the resources of a free hot shower, a hot nutritious meal, clean clothing, safe shelter…the basic necessities.  We will empower our street homeless to know that there are resources available for them when they are ready to accept the help.”

The sad circumstances of David Busch’s death inspired the Shelter Fund to make an effort to help Omaha’s street homeless.  And now, thanks to your generosity, David’s life was not lived in vain.  God bless you for your generosity.

Covenants: What Every Buyer Should Know

Restrictive covenants by design can have an enormous impact on the use and the value of property. Unfortunately, they are often times overlooked by the buyer and their agent. When purchasing property it is important to know what restrictions and obligations are tied to the property you are about to purchase and what potential consequences if you don’t, or can’t, comply with those restrictions and obligations.

Over the past few years, Home Owners Associations (HOA) in the Omaha area have used covenants to enforce rules and regulations upon their residents. HOA’s commonly enforce covenants that restrict the owner’s ability to install items such as fences, solar panels, and landscaping, siding, and color schemes.

When purchasing a property, it is essential that buyers read and fully understand any covenants that will apply to their home BEFORE submitting offers to purchase or at a minimum, a contingency should be included with any offer to purchase a property that makes the purchase offer conditional upon the buyer’s review of any covenants. Remember, restrictive covenants are not limited to areas of new construction. Many subdivision that are decades old can be subject to restrictive covenants. You can obtain copies of covenants from Aksarben Title & Escrow.

How Do Covenants Actually Impact the Property and the Owners?

Collectively, covenants fall into one of two categories: (1) restrictions impacting the use of the property; and/or (2) imposing certain obligations on the property owner.

Restrictions: Covenants can restrict your free use of your property. There are numerous examples of restricted behavior; however, here are a few of the more common ones:

(1) Architectural Review:  If your property is subject to architectural review, any new construction or modification to existing structures on the property will more than likely require pre-approval by an architectural review committee.  This committee is typically established and controlled by the developer of the property and then, after the developer has sold all or a substantial part of its property in the development, controlled by the subdivisions board of directors of the HOA.

Examples of typical architectural restrictions include, but are not limited to, limitations on exterior paint colors, color and types of siding, fencing, landscaping, and design of structures. How much authority do these boards or HOA’s have? Absolute; however, their decisions can’t be arbitrary or discriminatory. For example, a HOA could not deny a handicapped person in a wheel chair a request to install a ramp.

The architectural review committee considers whether the proposed construction or landscaping complies with the architectural guidelines and whether it will be consistent with other structures in the community.  The restrictive covenants typically grants the committee the authority to deny an application on purely aesthetic grounds.

(2) Rentals: Restrictive covenants may prohibit the owner from renting the property or place certain restrictions on the way your property may be rented.  For example, the restrictive covenants may provide that your property may not be leased for a term shorter than 6-months or 1-year. Why is that important to a buyer? If you are purchasing property on a beach or in the mountains, you may be purchasing it with the intention of leasing the property on a weekly basis.  A restriction prohibiting leases with a term shorter than 6-months would reduce the value for your particular plan.

(3) Home Usage: It is common for restrictive covenants to prohibit home based businesses such as a daycare or operating a garage. It may also prohibit the storage of RV’s or boats and may require homeowners to park in their garages.

Owner Obligations: another aspect of covenants is to obligate the owner to do or perform certain things:

The most common obligation is the requirement to pay HOA Dues or Assessments. The dues or assessments fund common expenses of the HOA.  Common expenses incurred by the HOA may include maintenance of the common areas, lawn service, snow removal, insurance, painting of structures, concrete maintenance, painting or siding maintenance, pool maintenance, etc. Keep in mind, that your lack use of these common items such as the pool, does not remove your requirement to pay the dues or assessments. You are obligated to pay these dues or assessments regardless of usage or complaints you may have against the HOA.

What Happens If I Don’t Pay My Dues or Follow The Covenants?

Most enforcement of restrictive covenants is carried out by the HOA. In an area with restrictive covenants, but no owners association, an individual owner may enforce the restrictive covenants against other property owners. Usually, this means that an offended owner must sue the offending owner to obtain an injunctive relief order preventing the offending owner continuing to violate a covenant. For example, an owner may sue another owner that has violated the covenants by building a fence, or shed, or installed solar panels, if such structures are prohibited by the restrictive covenants.

In most cases however, there is a HOA that monitors the subdivision and levies any complaints against the homeowner that is breaking the rules. Typically, the HOA will first provide the offending owner a notice of the alleged violation and provide an opportunity to cure the infraction. If the owner fails to respond to the notice or cure the issue the HOA may file a law suit against the offending owner to force compliance with the covenants. The offending owner may be responsible for HOA’s legal costs.

If an owner fails to pay their dues or assessments, the HOA can place a lien against the owner’s property and may ultimately foreclose on the property to enforce the claim of lien.

Are Covenants Good or Bad?

Depends on your point of view. Some people will intentionally purchase property with no covenants so they may have broader freedoms to use the property. Some find that restrictive covenants preserve the value of the subdivision; therefore, preserves the value of their home by providing a certain level of uniformity. Others simply don’t care one way or another. However, one thing is for sure, when purchasing a property you should absolutely know if there are covenants on the property and what those covenants require and if any dues or assessments apply. In order to make an informed decision, you, as a purchaser of restricted property, should carefully review all of the covenants affecting the property prior to purchasing it and consider the effect of their restrictions and obligations on your intended use of the property.  A little bit of research now may prevent a great deal of heartache in the future.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

What You Need to Know About Mortgages BEFORE You Buy

Buying a home is one of the most exciting events in your life and is likely to be the most expensive purchase that you will ever make. Here are some things to consider before you make the commitment:

  • Have you saved enough money for the down payment? You must have job stability and a steady income.

  • What is your estimated monthly payment for the home? In addition to the monthly payment foe principal and interest, you will have to pay for taxes and insurance, and possibly homeowner association dues.
  • What is your estimated monthly payment for the home? In addition to the monthly payment foe principal and interest, you will have to pay for taxes and insurance, and possibly homeowner association dues.
  • What are the other costs of owning a home? Be realistic about costs such as heating, air conditioning and other utilities.
  • What can you afford? Be confident that you can make the monthly payments.
    The Total Cost of a Mortgage

These four cost components equals the monthly mortgage payment you will pay each month:

Principal + Interest + Taxes + Insurance (PITI) = Total Cost of Your Mortgage

Principal (P) represents the amount of money you borrow, which has to be repaid over time. Interest (I) is the cost that lenders charge for the use of their money. Taxes (T) is an assessment that local governments collect on property to pay for local services. Property tax rates will vary by location and can affect your total cost and affordability. Homeowners Insurance (I) will be required to replace the value of the loan in the event of a disaster such as fire, hail, flood, etc. Many times buyers ignore these additional costs when figuring how much of a home they can afford.

Types of Home Loans

Conventional and Government Loans. FHA and VA loans are government loans. All other loans are generally classified as conventional loans.

FHA Loans

The Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development (HUD). FHA administers various mortgage loan programs that have lower down payment requirements and can be easier to qualify for than conventional loans. FHA loans have certain loan limits that do change from time-to-time. Your loan officer will keep you informed of those limits.

VA Loans

VA loans are guaranteed by the U.S. Department of Veterans Affairs allowing veterans and service persons to obtain home loans with favorable terms and often without a down payment. While it’s easier to qualify for a VA loan than a conventional loan, lenders generally limit the maximum VA loan to $417,000. The VA doesn’t make the loans, but recommends you via a certificate of eligibility to your lender.

Fixed Mortgages

Any Fixed Mortgage locks in the interest rate for the length of the loan. While you can always refinance, a fixed rate insulates you from increasing rates, but keeps you from automatically enjoying rate declines.

Mortgage Insurance

A government-backed or privately-backed policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price. The cost for mortgage insurance is usually built into the monthly payment made to the lender. Mortgage insurance makes it possible to buy a home with as little as 3.5% down.

Escrow Accounts

A mortgage escrow account is an easy and simple way to manage your annual tax and insurance payments and put them on autopilot. The biggest advantage of using an escrow service is not having to come up with large payments once a year to pay your bills. It is much easier for most people to pay $200 per month into a forced savings account instead of paying $2400 at once. Mortgage escrow accounts also guarantee your bills are paid on-time. Your payments have already been budgeted for you and the money is waiting and available in your account. When the bill is due, the escrow account takes care of everything for you. It is nice not to have to remember payment dates, amounts, etc.

There are advantages to the lender and county as well. The lender is assured your insurance premiums will always be up to date, so their asset (your house) is protected in the event of destruction. The county is assured they receive their property tax payments on time.

There are disadvantages though – most escrow accounts do not earn the account holder interest, though some earn interest at a low rate. For someone with a large house and a $10,000 property tax bill, that adds up to a lot of lost opportunity every year. There are also associated fees which cut into your bottom line.

Can you avoid using an escrow service?
Yes, but not always. Some mortgages require escrow accounts, especially for first time home buyers or home buyers with small down payments. There are some advantages for going without an escrow service – your money can earn you interest and you may be eligible for early payment discounts for some bills. But the disadvantages are obvious – you are required to pay your tax bills and insurance payments on time or risk losing your house.

Loan Pre-Qualification

Loan Pre-qualification will strengthen your negotiating position with the seller. Ask at least one lender to pre-qualify you for a mortgage. The lender will analyze your credit position, current income, and outstanding debts to give you a reasonable estimate of your borrowing amount. There is no obligation on you to obtain a loan from that lender, nor does it obligate the lender to provide a mortgage loan.

Shopping For A Mortgage

Shopping for your loan is probably the most important step in your home-buying process. Mortgage brokers and lenders have a wide variety of mortgage products. The type of loan product and your interest rate will not only influence your total settlement costs but will determine the amount of your monthly mortgage payment. A great rate on the wrong loan can cost you thousands. That is why working with an experienced Loan Officer is key.

Selecting a Loan Officer

The right loan officer helps you secure the best possible financing for your loan, and also plays a vital role in assuring a smooth home buying experience. We are pleased to have formed a preferred partnership with First Mortgage Company, the largest independent FHA lender in Nebraska. The loan officers at First Mortgage Company are experts at helping you pick the right mortgage and walking you through the entire purchase process.

When you work with First Mortgage Company, we know you’ll experience personal attention and professional service in handling your loan transaction.

Amy Hayes-Preucil
First Mortgage Company
Mortgage Consultant
P: (402) 431-4309

Megan Woelfel
First Mortgage Company
Mortgage Consultant
P: (402) 431-4308