Your Credit Score Is Very Important

Most people think that their Credit Score is all about getting a mortgage to buy home.   And, while that is true, your credit score is used related all purchases that involve credit of any kind along with the rental of a house or apartment.  It does not take much to impact your credit score negatively.  If you miss payments or are consistently late on payments, it will negatively impact your credit score.  If you default on a loan or file bankruptcy, your credit score will go down dramatically.  

The agencies that monitor credit scores usually use the following ratings:

800 - 850 Exceptional

740 - 799 Very Good

670 - 739 Good

580 - 669 Fair

300 - 579 Poor

In order to get preferential interest rates on loans, your credit score would have to be Good or Above.  It is possible to get a loan at a Fair rating; but interest rates will be higher because you would be consider a credit risk.  Obviously people in the Poor category are probably not getting loans and or if they do get loans, the interest rates would be outrageous.  

It is important to recognize that when renting a home or apartment as part of the application process, the owner or landlord will run a credit report.  In choosing who to rent to, the owner will choose the tenant with the highest credit score.  It is possible that unless the rental is in a bad area or in a less desirable location, an owner will not rent to anyone with Poor credit.  So, it is really important to maintain as high a credit rating as possible by paying your bills on time.  

Estate Planning Before It Is Too Late

 Surprisingly, some couples with considerable assets do not have their affairs in order meaning they do not have good estate plans in place.  It is important to sit down with family members, sons or daughters and have the What If discussion.  What if Mom dies.  What if Dad dies.  Things can change very suddenly if someone falls ill especially if that someone is the spouse that handles all the couple's finances and the other spouse is clueless.  

Ideally, most if not all payments should be on automatic debit from a checking account so that at least necessary payments will continue without late penalties.  If one spouse dies, the other will get the higher of the two Social Security payments; but it still means a sudden loss of income.   The time to deal with housing issues is while both spouses are healthy.  If living in a multi story home, maybe its time to downsize to a one story house that would be suitable for the surviving spouse.  

Fortunately, we moved my parents into a 55 or older gated community long before my Dad passed away.  Since my Mother handled their financial affairs, she experienced no real disruption in her life when my father died.  Had my Mother died first, my father would have needed assistance, but at least the housing situation would have been fine.  

Once someone turns 70 every year is like a dog year meaning the equivalent of 7 years.  Health circumstances can change suddenly, which requires a quick reaction from family members to deal with the medical issues at hand.  Most important, every couple of any means should have a good estate plan in place to deal with the What If's.  And, families need to be involved to best understand what could happen when the first parent suddenly passes away.  

Older High Rise Buildings - More Inspections Needed

 It is safe to say that after the collapse of a 40 year old high rise condo building in Florida and the deaths that followed, values for similar properties have probably plummeted.    No one would buy a condo in a like building without significant inspections, structural analysis etc.  Home owner associations would be wise to get engineering reports and quickly first to make sure buildings are safe and any remedial work needed is done fast,  but also to make any sales that might otherwise occur even possible.

There is a pretty good chance that lenders will stop lending on purchases in many of these buildings and insurance may be impossible to get without significant assurances that these structures are safe.  To be clear, aside from the tragic deaths that occurred from the collapse of the building in Florida, from a real estate perspective,  it has created one big mess. 

Buildings in Florida built after Hurricane Andrew have been built with standards to withstand a category 5 hurricane.  That means a whole lot more cement block construction, more cement in general and more steel for strength.  These older buildings are just not built to these standards.  My guess is that upon further inspection, many of these buildings will have to be torn down because the remedial expense will just be too great.  That probably leaves lenders holding the bag because people will just walk away and default on their mortgages if condos are uninhabitable.  If that happens, lenders may refuse to do new mortgages on buildings with similar construction.  That will make these condos worthless.  It is clearly a disaster for all concerned.   

Bidding Wars To Purchase A Home Slowing Down

For the past six months since there has been so little inventory in many real estate markets, homes have been selling above list price as a result of bidding wars taking place.  There is now buyer fatigue and a little more inventory hitting the market so though still happening bidding wars are slowing down.  This is good news for first time home buyers in particular, who just can't compete with all cash offers and or high down payment offers.  Those making offers trying to buy a home with nothing down, or just 3% down were not even considered by sellers.   They have been out of luck. 

Money talks so all cash offers with no contingencies and a quick closing date are always at the head of line related to offers.  After those, people who can put 20% or more down would be given preference.  And, of course the deal always goes to the highest bidder all other things being equal.  This is what happens in a seller's market. 

But the tide will eventually turn.  If mortgage interest rates do back up, it will cool the real estate market.  When that happens we will see more inventory and prices will go down some; though since the country is short 5 million homes, this could take a few years.  In real estate, timing is everything.  It is always best to sell when there is a seller's market and buy when it is a buyer's market.  Unfortunately, things don't always work out that way for everybody.   

Inflation Is Coming - What It May Mean To You

Many economist are predicting that we will see major inflation in the United States because of all the money the federal government is pumping into the economy.  Home prices have been going through the roof because there is not enough supply to meet demand and the price of materials has sky rocketed related to the building of new homes.  We need 5 million more homes presumably built in the US to keep up with demand.  It could take 3 - 5 years for that to happen so home prices should continue to remain high unless and until mortgage rates go up dramatically, which would cool the market down.  

However, inflation related to the purchase of goods and services is a threat to all Americans.  We see the cost of gasoline going up dramatically, which eventually ties to the cost of everything because most goods are eventually shipped by truck to your neighborhood.  If you commute long distances, it will cost you more to go to work, as well.  Most important, if your income is not going up to pay for higher prices, it means you will ultimately have a lower standard of living.  

The good news is that if you locked in a low fixed interest rate mortgage, at least your house payments will not be going up.  The same could be true for a car payment.  But, if your home appreciates dramatically, in many cities, your property taxes could go up.  You can also expect to see higher premiums for home insurance, since replacement value cost would go up with the higher cost of materials to rebuild your home in the event of a disaster.  All of us will have to adjust to higher prices.  It could mean eliminating various unnecessary discretionary expenses just to pay for day to day goods and services.