FORECLOSURE

Okay, so it is not the best topic for a blog, but is one that is essential to discuss.

The U. S. had more than 600,000 foreclosures in 2018.  That is the lowest number since the financial crisis of 2008 when you consider foreclosures peaked in 2010 to 2.9 million. 

As one writer stated, "Foreclosure is the flip side of the American dream."  The impact of foreclosure can erase your home equity, destroy personal credit for years, and can uproot a family from their neighborhood, family and friends.

So, what exactly is foreclosure?  It means the property owner has stopped making mortgage payments and the lender has given notice of default that unless the payment are brought up to date, the lender will take legal action to take the property from the owner.  The lender may file a notice of default when the borrower has at least two payments in arrears.

For those who have gone through a forclosure there are some interesting things you should know.  A recent study by Lending Tree researchers analyzed how credit scores trend after a foreclosure by assessing the loan terms offered to borrowers with a foreclosure on their record compared to those without.

 1. Foreclosure does not affect a credit score report forever, after seven (7) years they totally drop off the report.

 2. Initially, a foreclosure can cause your credit score to drop 150 points or more, but many borrowers still maintain a high score afterwards.

 3. Credit scores tend to increase by 10 points per year after a foreclosure.  More that 30% of consumers have a credit score of 640 or higher within a year of the foreclosure.

 4. Consumers were able to re-emerge as homebuyers in as little as two years, though they tend to pay a premium.

The Lending Tree research concluded, "The foreclosure dominates your credit score in the first two years after.  This is evident from interest rates not correlating to credit scores when borrowing two years after foreclosure. However, when borrowing after three years or more, the expected pattern emerges with higher credit score borrowers paying lower interest rates."

As noted above foreclosure does not destroy everyone's credit score and re-establishing one's credit score can take as little as two years.  Good news indeed. 

WHAT IS A FICO SCORE?

Pondering buying a new house, new car or even a refinacing your home, someone is going to ask, "What is your FICO score?"

First things first, what is FICO?  FICO stands for Fair Issac Corporation.  In 1956, William Fair and Earl Issac developed a software program for assessing credit risk and determining credit worthiness.   Today, FICO is the most widely used tool financial institutions use to determine whether to lend money or issue credit.

FICO scores range between 300 to 850 and in general scores above 650 indicate a very good credit history.  

Achieving a high FICO score is based on having a mix of credit accounts and maintaining an excellent payment history.  A low score is based on maxing out credit cards, paying late and applying for excessive credit.

In calculating FICO scores the following factors are taken into consideration:

  A. Payment history - whether an individual pays his credit accounts on time.
  B. Accounts owed - the amount of money an individual owes or the ratio of money owed to the amount of credit available.
  C. Length of credit history - takes into account how long the oldest account has been open and the age of the newest account and the overall average.
  D. Credit Mix - looks at the types of accounts - retail, credit cards, installment loans, vehicle loans and mortgages.
  E. New Credit - to recently opened accounts in a short period of time.

Knowing and understanding the factors that determine FICO scores is important when it comes time to buy a new house or refinance your current home. 

Do you know your FICO score?

CRITERIA FOR PRICING A HOME

You have been thinking about selling your home; and you have a figure in mind for asking price; but will it be the right price.  One of the best ways to determine asking price is to look at comparable sales.  There are rarely a perfect apples-to-apples comparison, so pricing decisions often rely on comparisons to several recent sales in the area.  Here are five criteria to look for in sales comparisons.

1. Location: Homes in the same neighborhood typically follow the same market trends.  Comparing your home to another home in the same neighborhood is a good start, but comparing it to homes on the same street or block is even better.

2.Date of Sale: It varies by location, but housing markets can see fluctuation in a short time period.  It is best to use the most recent sales data.

3. Home build: Look for homes with similar architectural styles, number of bathrooms and bedrooms, square footage, and other basics.  

4. Features and Upgrades: Remodeled bathrooms and kitchens can raise a home's price, so can less flashy upgrades like a new roof or HVAC (heating, ventilation and air conditioning) systems.  Make sure you are looking for similar "bells and whistles".

5. Sale types:  Homes that are sold as short sales or foreclosure are often in distress or sold at a lower price than they'd receive from a more typical sale.  These homes are not as useful for comparisons.

By doing your "homework" on pricing you can position your home for a timely sale and recieve a great price for your home.

CREATE AN EVACUATION PLAN FOR YOUR PETS

Whether it is a hurricane in Florida or a wildfire in California, one understands the importance of creating an evacuation plan in the event of impending danger.  Many homeowners create evacuations plans and practice them with their children, but far fewer have considered one for their pets.  Here are a few steps to add you pet to your "evac plan".

1. Assign pet evacuation to an adult.  Everyone should know how to act during an evacuation, and that includes assigning one parent or adult to the pets.  This allows the other parents and the children to focus on their part of the evacuation plan, so there's no confusion during a high-stressed moment when time is of the essence.

2. Keep evacuation maps and pet carriers readily accessible.  If you need to evacuate, you should know exactly where every important item is.  If your pets require carriers, keep them in a place that you can access easily.

3.  Practice your plan. Include your pets in your home evacuation drills.  It'll help you see how they will respond and make changes to your plan if necessary.  Getting your dog out of a window may not be as simple as you think!

4.  Be prepared in case you get separated from your pet. No matter how much you drill, it is possible that a dog or cat will run off while you're focusing on keeping your family safe.  A microchip or GPS-compatible tag can help you locate your pets once it is safe to return to the area.

Keeping your pets safe and healthy in the event of evacuation should be a part of your plan.  One final item to include in your "pet evac plan" is an "away bag" of dried or canned food and treats for your pet.  Keep it near your pet carrier and be sure to secure it when you practice your drill.

10 HACKS TO MAKE YOUR NEXT MOVE SEAMLESS (PART 2)

Are you dreading the thought of moving?  Here are 5 additional hacks for you to help make your next move seamless.  Check out last week's blog to read the first 5 of the 10 hacks shared.

6. Save your back! Unless you have a professional moving company making the move for you, remember good body mechanics.  Pack heavy items in small boxes or in rolling suitcases.  Use counters or table tops when packing.  Don't forget to pack by room, and label your boxes on top and all sides.

7. Use drawers to pack clothing and other unbreakable items then seal the drawers with masking tape.  Don't over pack!

8. So you thought you were Superman!  Improper lifting of heavy items can cause serious damage to your back.  Rent a hand truck or furniture dolly or furniture straps to lessen the physical strain on back and knees. 

9. Hire a sitter to take care of children and pets or both.  Prevent accidents and injuries to yourself, your children or pets by having a sitter occupy them with activities.  

10. Load smart - it bears repeating when you are DIY moving to stack lighter boxes on top of heavier boxes. Place the "essentials" in last so you can remove them first upon arrival at your new home.

Make your next move a safe move by implementing these 10 hacks.  

If you have any other "hacks" that you used in your last move, let other readers know about them by sharing your comments with Inside the Open Red Door.