With the final quarter of 2021 under way, we expect to see a lot of forecasts and announcements around changes as we head into another new year.  Over the next month, 2022 loan limits will be announced, lenders will begin to make a final push to finalize their loans needing to close before year’s end, and planning and speculation for the new year will begin.  Much of that speculation and forecasting is already underway.

One forecast that is consistent across many economic experts is one showing home appreciation forecast to increase through 2022.  With 2021 being a tremendous year for appreciation and supply & demand metrics out of whack and heavily favoring sellers in most markets, it’s no surprise appreciation is expected to continue.  With many markets in 2021 seeing nearly 20% appreciation rates, 2022 is expected to be another big year, with forecasts coming in from Goldman Sachs with an expectation of 16% appreciation.  With the median US home price around $300,000, that would mean purchasing a home at $300k today would have a home worth $348,000 at the end of 2022!

Not all forecasts are quite as optimistic though, with Zillow’s forecast model predicting a jump of 11%, and Corelogic much lower at 2.2%.  It should be noted though, that Corelogic has pretty consistently missed the market on home value forecasts, actually forecasting a drop in home values for 2021.  A few other economic hubs have forecasts in between Zillow & Corelogic’s guesses.  Bottom line, though, is that just about everyone in economic circles believes home prices will continue to rise in the new year.

What Does This Mean For You?

If you’re a homeowner, it means you’ll enjoy a nice bump to your home equity position and have some options if you need to access home equity for things like renovations or to pay off other outstanding debt.  If you’ve recently purchased and have PMI, it may also mean you’ll have an opportunity to reduce your PMI or get rid of it altogether should your home appreciate enough!

If you’re a potential home buyer, it means that acting sooner rather than later is in your best interest.  Homes will likely be more expensive as the months go on, and with supply chain troubles still occurring, odds are that there will not be nearly enough supply of new homes coming to meet current demand.  This could mean another year of limited inventory and competitive situations, but the upside is that once you own, the appreciation begins to work for you, and no longer against you.  With rates on mortgage loans also expected to rise in 2022 (the MBA has forecast that rates will approach 4% in the new year), making a purchase with rates still near historic lows and with values where they sit currently, savings could be substantial for those who buy early in the year rather than waiting.

How We Can Help You

At MasonMac, we’ve invested in modern tools and have access to data nationwide, so we can look at data down to the zip code to provide you with solid advice and show you what home values are likely to do in a specific area.  We also have no- and low-down payment mortgage options so that even while home values climb, we can offer loan products that don’t require breaking the bank to get into a new home.  With tools like our “cost of waiting”, “buying power”, “rent V buy”, and “bid over ask” platforms, we can show you how to be a savvy buyer and structure a great offer to increase your odds of getting your home in a competitive situation.  And with full underwriting approval available before you find a home, you can rest assured you’re in the best possible position to become a home owner.

How else can we help you?  Contact us today with any questions, or if you’d like to see market data for your area (or any area in the US!) or be connected with a loan officer that can guide you down the path to home ownership.  In 2022, owning a home is forecast to be solid ground financially, and will be another year of proving that your financial security begins at home!

The post Homeowners Should Expect Appreciation in 2022 appeared first on Mason-McDuffie Mortgage Corporation.

If you’ve shopped around for a mortgage loan, one of the things you’ve likely seen is that credit scores lenders pull tend to be different (sometimes by quite a lot) from what you see when tracking your own credit scores.  Why is that?  It comes down to how credit information is reported, which scoring models a lender uses, and how the algorithms work within that scoring model.  Seem confusing, and maybe a little bit more than a little complicated?  It can be!

How Information Is Reported

Most people know that there are 3 major credit bureaus – Experian, Equifax, and Transunion, but many people don’t realize that scores vary, sometimes by a large margin, between the 3.  The biggest reason is that not every creditor reports to every credit bureau.  For example, if you have an account go to collections for non-payment, it’s  possible a collection agency might report to 1 credit bureau.  Assuming your credit is otherwise in good standing, this could result in 1 bureau (the one with accurate collection data) providing a score much lower than the other bureaus.  This can be a benefit in situations where a lender uses a middle score where really 2 of 3 scores are important.  It can also be a problem in situations where a lender pulls just one bureau, and they happen to pull the worst score, leaving out higher scores completely.

Which Credit Scoring Model Is Used To Determine Credit Scores?

Most lenders in the mortgage world rely on Fair Isaac Corporation’s scoring algorithms and resulting scores when running your credit.  You may know them by the acronym FICO.  FICO, however, charges others to use their proprietary algorithms, and for that reason, many credit monitoring services and consumer “perks” they get with credit cards for example, use their own, separate algorithm to generate a score.  These scores are often more difficult to predict, and can be very close to a FICO score or sometimes very far off.  For example, some lenders use a “Vantage” score instead of a FICO score.  To make things more confusing, scores can use completely different metrics to determine if someone has good or bad credit, too.  For example, some industry-specific scoring models use a score range up to 900, while mortgage lenders traditionally use scoring models that go up to 850.  For this reason alone, someone may believe their credit is better (or worse) than it actually is, with the only difference from what they and their lender see being the model being used.

How Algorithms Determine Credit Scores

Algorithms are used by all of the credit scoring models, but each model uses different algorithms that put different weight on the multiple factors that determine a credit score.  For example, one algorithm out there will ignore any and all collection accounts with a balance of $250 or less.   If a consumer pulled a score through that model they might believe they have excellent credit, while a lender using the FICO model might see low scores as a result of collection activity.

While the algorithms weigh factors differently, they all have some things in common.  Of course, an on time payment history is very important to all of the scoring models.  Having a long credit history, regularly using credit, having various types of credit (mortgage, installment loans, credit cards), and keeping credit balances low compared to credit limits are generally habits that all credit scoring models reward consumers for.  Maxed out credit cards, late payments, and major derogatory events like bankruptcy or foreclosure are penalized pretty much across the board as well.

We Can Help Answer Your Questions

Your MasonMac loan officer can help answer any questions you may have about your credit, and fill you in on your FICO scores when you apply.  FICO scores are one of the major factors in determining what loan options you’ll have, and the pricing/rates you’ll be offered when applying for a loan, so it’s important to understand how the scoring works to avoid any surprises.  Just as important is knowing that while your consumer-access scores that you get on free credit monitoring services can be a great gauge of the direction your credit is headed and where you stand, the scores your lender will pull are likely going to be a bit different.

With more information and a more in depth explainer, Andrew Yamilkoski of Heartland Credit Restoration put together this helpful video with more insight:

The post Why Credit Scoring Models Show Different Scores appeared first on Mason-McDuffie Mortgage Corporation.