Lake City Blog

As home construction has dropped 10% in the last month, it appears that the entire housing market is slowing down. With both the home buyer tax credit and extremely low interest rates in the beginning of the year, the housing market seemed to have begun the early stages of recovery. However, as interest rates are back on the rise and with the tax credit ending on June 30th, it looks like we’re taking steps backward to where we were. These two variables affect everyone in the housing market as a whole. Moreover, it affects those buyers who were planning on that tax credit but have been unable to close before June 30^th.

Fortunately, action has been passed to help all buyers who have been under contract before April 30^th. The Senate has adopted an amendment to the tax extenders bill that would extend the original closing deadline of June 30^th to September 30^th. This amendment is targeted to help all buyers who were under contract before April 30^th, and due to various circumstances were unable to close before June 30^th. Through this amendment, a buyer under contract will have additional time to close on their home.

Once the final vote is finished in the Senate, the House will have to approve of the proposed changes. Afterwards, the final bill will be sent to the white house for the President’s signature.

Assuming the amendment is passed, a lot of questions regarding substantiating which contracts begun before April 30^th needs to be addressed. What keeps a contractor from not back-dating the contract to be before April 30^th, thus maintaining eligibility for the tax credit? Without question, these questions will be addressed as the bill passes through each branch of government, but it will be interesting to learn what their answers will be.

On April 5^th the Federal Government launched a new program designed to help homeowners facing foreclosure Short Sell their homes.  Under HAFA, (Home Affordable Foreclosure Alternatives program) a variety of provisions exist to help incentivize lenders, speed up the short sell process, and lessen the blow for the borrower.

This economy has caused many people's credit scores to fall.  With creditors reducing available credit, while raising their qualification standards, getting a loan is harder than ever.  I found this list of 10 steps on www.creditscoreplus.net

1) Know Your True Credit Scores and Reason Codes
Surprise! Consumer credit scores are not the same as lender credit scores. Consumer credit scores pulled online are considered educational and are different from those used by lenders. You can go online to www.myfico.com and pull the more accurate credit scores used by the majority of lenders. In most cases, there is a cost for these scores.

Be aware that your credit scores are pulled when you apply for a loan! Ask the loan officer for your credit scores and the reason codes that go with them. The reason codes provide valuable information by which you can identify problems affecting your credit score. They are your road map to improving your credit. Mortgage lenders are required to give you a copy of your credit scores and usually the reason codes that go with them. MYFICO only provides generic explanations of problems impacting your credit scores. It is much more informative if you can get your actual reason codes from the lender!

2) Generate Golden Accounts
A Golden Account is any account you have that remains open for many years (ten or more) and can drive credit scores to higher levels. Once such accounts are identified, leave them open and periodically use them. If you can, establish multiple golden accounts in your credit profile. They will add substantial value to your credit scores for months and years to come.

3) Work with Quality Lenders
Many consumers fail to realize that credit scores give differing values for different types of lenders. Banks and national credit card companies are on one end while finance companies and payday lenders are on the other end. Most can identify a bank, but many fail to recognize finance companies. Such lenders usually finance many auto loans and merchant purchases for 90 to 180 day “Same-as-Cash” options. Many finance companies are even owned by banks; but, they are considered high-risk lenders and create a drag for credit scores.

4) Establish Quality Loans
Some loans are considered more valuable, such as a mortgage. This type of loan shows a person is usually more responsible. The system also requires a minimum amount of activity for revolving and installment loans. Some payment activity from both types of loans is critical to raising credit scores.

5) New Accounts
Once you have an established credit profile, avoid opening new accounts at every opportunity. Opening multiple accounts within a 12-month period can beextremely detrimental to credit scores. We should pay particular attention to the number of loans we have opened in the last year. Any new loan adds risk and lower credit scores. Space them out to avoid sudden declines in your scores.

6) Create Depth
Depth is created by how long our accounts have been open. Depth with our accounts determines how high our credit scores can go. Review your credit file and identify how long your accounts have been open. Higher scores will be realized when most of your accounts have been open for at least four years.

7) A Reserve
Before we take out any loan, we should have a reserve already establish. No one knows when there may be an accident, a loss of a job, some health issues or another unfortunate event. We need to establish a cushion so that we can offset any decline in income. If we are taking out a new loan to cover our expenses until the next pay check, we are in serious trouble. Before we incur any debt, set aside a sufficient cushion that can be readily accessed in case trouble arises.

8) Make Timely Payments
Most consumers think that just making timely payments is the sole reason a credit score increases. The credit scoring system is much more complicated than just making payments on time. However, making timely payments on all loans is the master key to raising your credit score. Without it, the other strategies are less meaningful. If you have a perfect record, great job! If you have had past issues, address them and make every effort to make payments on time going forward.

9) Recognize Critical Ratios
The system measures our reporting balances to high credit limits on lines of credit such as credit cards and merchant accounts. The system also looks how much we paid down our loan balances from the initial loan amounts on installment loans such as auto and mortgage. Lowering these ratios is critical to raising credit scores. If possible, pay extra to lower your balances on credit cards and your installment loans.

10) Reduce Loans with Balances
Less is more in the credit scoring system. To have less means having fewer accounts with a reporting loan balance. When we have an excessive number of loans with balances whether they have a $10,000 or $10 balance, they all can count towards a credit score. We should look to consolidate accounts when we can and pay off those accounts with small balances.

We attended the St. George Parade of Homes last weekend.  Once again, the Southern Utah Home Builder's Association pulled off a great event.  Even in this difficult housing market they pulled together 25 true parade homes (no builder models or spec homes from 2 years ago).  Every home was furnished.  It proves why this is one of the best parade's in Utah. 

Split Rock Homes, for the 4th year in a row, showcased my favorite home.  Located in Entrada, St. George's most prestigious community, Split Rock seems to deliver year after year.  What impressed me most this year was the way the Split Rock architects and designers blur the line between indoor and outdoor space.  They use a ton of glass, so the dramatic redrock cliffs are always in sight.  The exterior stone and flooring extend into the interior.  And they've integrated lava rock from the home sight into the stone walls.  Even the pool was built around 4 pillars of lava rock.  They certainly received my Best of Show vote.  Congratulations to the Split Rock team.

The photos in this post feature a few of my favorite images I captured while touring the homes.  The other great part of last weekend was the weather.  We've been attending this parade for 10 years and this was the best (warmest) weather we've ever had.  What a nice break from the winter up north.