Your credit reports are a key factor in determining whether or not you can get a mortgage. There are three different bureaus that collect and report information regarding your overall credit situation. They are Equifax, Experian and Transunion. They all rate you by using a scoring system called F.I.C.O, which stands for Fair Issac Credit Organization. Your F.I.C.O score can range anywhere from 400 to 850 (a higher score is more desirable). Only F.I.C.O employees know exactly how they calculate their scoring system, but recent external pressure has forced them to reveal some of their secrets. I will pass what information I have learned on to you latter in this Blog.

When you are ready to buy a house, you need to shop for a mortgage first. After you have found a lender, they will pull your credit reports. They are looking for three basic things. First, they will look at your F.I.C.O scores from each of the three bureaus (if you are applying for a conventional mortgage). They usually take an average of the three scores or your mid F.I.C.O score. Most conventional mortgages have a F.I.C.O score minimum requirement, if you don’t make it up to that number, you don’t get that particular mortgage. There is generally no room for negotiation on this point. Second, they are looking for any derogatory credit. Derogatory credit are things like late payments, car repos, foreclosures, bankruptcies, tax liens, back child support, bounced checks, collection accounts, etc. Any one of these can be a deal breaker or the lender might accept a letter of explanation as to what caused the derogatory credit to occur. Third, they are looking at all your debt (as reported on your credit reports) and calculating your debt to income ratio. The amount of money you spend on bills vs. the amount of money to take in as income. They have various percentages (based on different loan products) that they deem to be acceptable. If you exceed these ratios, they may be willing to negotiate a little if you are strong in other areas (ie. if you have been at your job for a long time or if your F.I.C.O scores are high).

If you find information on your credit reports that is inaccurate, you can request that it be corrected. You need to send a letter to each credit bureau (that has incorrect information reported) and ask that it be corrected. Write one letter identifying yourself and the information you think needs to be corrected. Make sure you send any evidence you have that supports you request. Photo copy the letter/evidence and sign your original signature to each copy. The bureaus usually have 30 days to investigate your claim. If they can’t verify the information they have reported, they have to delete it from your file. This process also works well if you want something added to your credit. If you have limited credit, send in information that shows you pay your bills on time. For example, if you have a department store charge card and it doesn’t show on your credit reports (ask that it be added to your file).

Here are three other tips that may improve your F.I.C.O scores. One, don’t close open credit card accounts/liens of credit just because you paid off the balance. The fact that you have access to (but are not using) credit/money shows you have some reserves if you need them in a pinch. Two, if you do carry balances on your credit cards/liens, try to pay them down below 50% of your available credit line. There is no set reason as to why this works, it is just one of F.I.C.O’s quirky methodologies. Third, avoid allowing to many companies to pull your credit. In general, each time you have your credit pulled your F.I.C.O score drops. The logic being that a company that pulls your credit MAY extend credit to you and you could run up your debt (before it actually shows on your credit report). The exception to this rule is having companies that are designated mortgage companies pulling your credit. In a 30 day period, mortgage designated companies can pull your credit and your F.I.C.O hit will only be from the first mortgage company.

My name is Greg Hoffman. I have live in Las Vegas since 1990 and I have been a Realtor here since 1999. I also have worked in forward and Reverse Mortgages with major national banks.

I have received many emails and phone calls lately with this question. “In your opinion, should I sell my Las Vegas Home or rent it out?” As much as I want to help and give my opinion, my opinion really doesn’t matter.  What matters is that I provide you with all the facts and information that will help you make a decision for what’s best for you and your family. Only you know your true financial situation.

What we do with our clients that have questions like this is break down the Las Vegas Rental Market and the Las Vegas Real Estate Market.

Las Vegas Rental Market:

• Increase supply of properties for rent
• Rental Prices have fallen
• More Tenants have credit issues due to foreclosures
• If you purchased your home between 2004 – 2007 with 80% to 100% financing, the rent you collect will not cover your mortgage payment.

We are seeing an increased amount of rental inventory which has caused rental prices to drop a bit.  We are also seeing an increased amount of potential tenants with foreclosures on their credit history.  With Las Vegas being an epicenter in the foreclosure market, you can expect many of these previous homeowners entering the rental market.

Las Vegas Real Estate Market

• Buyer’s Market
• Most homes on the market for sale are either a REO (Bank owned home) or a short sale.
• Chances are you owe more on your Las Vegas Home than it is worth if you purchased your Las Vegas home between 2004 – 2007.

Las Vegas Home prices have fallen significantly over the last year and a half due to the amount of foreclosures.  Banks and Lenders have placed these foreclosed homes back on the market and priced them well below market value which has driven down home prices.

Chances are you owe more on your home than it is worth, but you can still sell your Las Vegas Home.  This is called a short sale. A short sale is where the Lender/Bank agrees to take less than you what you owe.

If you would like to keep your Las Vegas Home but can’t afford to keep making the payment, you can always try to get a Loan Modification.  A loan modification is where the Lender agrees to modify your existing terms of your mortgage agreement.  However, before you go and contact your Lender/Bank to look into this option, remember the person you are speaking with is an employee of the Lender/Bank.   Their job is to get the best deal possible for the Lender/Bank, not you.  That’s why we recommend having an Attorney represent you on a Las Vegas Loan Modification.

If you have any questions, please call us at 702.376.7379 or fill out our contact form.

This is part two of a two part blog on buying Las Vegas residential property. By now it is assumed you have a lender and I am your Realtor (if your in Southern Nevada), so it is time to start deciding your priorities. What are the most important things you want in a house?

The old joke is, what are the three most important factors in buying a house are——–location, location, location! Do you want to be close to certain schools? Do you want to be close to your work? Do you want to be far away from freeways, airports, fire stations (noise), 24 hr stores (lights), etc. How did the neighborhood look as you drove to the property? Are there cars on blocks in some drive ways nearby? Is there graffiti on the walls everywhere you look? What about having to many two story house around yours (privacy)? Do the neighbors dogs bark uncontrollably every time you go near your potential house? These are all important factors when deciding if a houses location is right for you.

What kind of amenities do you want in a house? Most people can quickly decide how many bedrooms, bathrooms and garage spaces they want. They can also determine story preference and minimum square footage they are looking for. What about minimum square footage for your yard? What direction you want the house to face (important in this climate)? Pool or no Pool? Grass or desert landscaping? Maximum age of the house? The more of an idea of what you want before you start looking, the better the Realtor can filter the choices presented to you.

The next step is to search for properties via the Multiple Listing Service (MLS). The MLS is a Realtor produced database of all properties (for sale by Realtors) in a given area. Take the time to sit down and review the pictures of prospective properties before you start driving all over town. Many times properties can be eliminated from consideration just by looking at the pictures on the computer. This is a huge time saver for everyone involved.

Now it is time to go physically look at properties. Pay attention to the condition of the neighborhood, especially everything directly around your potential house. If the neighbors are around, ask them what they think of living there. Look at the house for obvious problems like water stains, major cracks in the frame or foundation, unpermitted additions, etc. Are the problems you find structural or cosmetic? Do you want to take the time and expense to fix said problems? If the answer is no, move on, there are plenty of houses to choose from.

After you find a house you want to make an offer on, you have to go back to the computer to see what a reasonable estimation of it’s value is. Your Realtor should be able to SHOW you  (on the MLS) similar houses that have sold recently in the neighborhood. Remember to look at SOLD prices and to have your Realtor factor in Seller’s contribution to Buyer closing costs (if any) for a more accurate estimation of value.

Now that you have an estimation of value for your potential future home, it is time to write the offer. How bad do you want this house? You can start with a low offer and go up from there (but there are risks to doing so). How upset would you be if you lost the house to a higher offer? If the answer is VERY, start with a stronger offer. If you have looked at many houses and this is your dream house, is it worth losing for a few thousand dollars? Expect a counter offer and be prepared to negotiate (remember the seller wants to get as much as they can when they sell). Always make sure your offer is contingent on a professional inspection. This probably is the most expensive purchase of your life, don’t skimp on an inspection that might cost a few hundred dollars.

Now you have an accepted transaction, but the work isn’t over yet. Make sure you get every scrap of paperwork the lender asks for (in a timely manner). If you delay the closing because your lender didn’t have everything  he/she needed, it could cost you a lot of money. You could even lose your earnest money deposit and the house to another buyer. Don’t let anyone else (except your second opinion lender) pull your credit until close of escrow (COE). Your loan could be credit score driven and (most) times when your credit is pulled your score drops. Don’t buy any big ticket items on credit prior to COE  because it could effect you ability to get your mortgage (by changing your debt to income ratio). Most lenders will pull your credit right before COE to make sure nothing has changed to make you a credit risk. Don’t quit your job or change careers prior to COE, it may disqualify you for your mortgage. When in doubt, ask your lender for guidance before you do ANYTHING that may jeopardize your loan.