Buying a Home with No Credit? Probably Not

businessman holding hammer hitting cracked DEBT ball with sky clouds(TNS)—Some financial gurus say consumers should live 100 percent debt-free. No credit cards. No car loans. No debt of any kind for any reason.

That might seem like smart advice until the question of buying a home comes up. Then, the debt-free life can become problematic.

In 2014, only 5 percent of first-time homebuyers purchased a home without a mortgage, according to a survey by the National Association of REALTORS®.

Some first-timers receive their home as a gift, so those results suggest that even less than 5 percent managed to save up enough cash to buy a home outright. That’s not nobody, but it’s a small slice of the total population of first-time buyers.

Pay cash
Financial guru Dave Ramsey, to take one example, is “a huge fan” of paying cash for a home, according to an article on his website.

The experiences of Ramsey’s fans suggest that “paying cash for a home is the result of hard work and discipline—there’s no magic pill to make it quicker or easier,” the article states.

Indeed, fans reported that they paid cash—or planned to do so—by:

— Financing and paying off a starter home first.
— Building a home themselves and paying cash for materials over time.
— Saving and investing for 10 years before buying.
— Buying a $14,000 fixer-upper and doing the repair work themselves.
—Living in a family member’s home while they tried to save enough to buy.

You Need Credit to Get Credit
If those strategies don’t work out, buyers can have trouble when they eventually try to get a mortgage, says Maura Neill, a Realtor for RE/MAX Around Atlanta.

“They don’t have bad credit, but they have no credit,” Neill says. “They’ve taken a Dave Ramsey course or done some other type of financial planning and the advice is, ‘Don’t use credit cards, pay cash.’ That’s fantastic advice until you talk to lenders to get prequalified and they say, ‘It’s not a problem of you having a 500 credit score. It’s a problem of you not having any credit at all.’”

A Call for Patience
Another article on Ramsey’s website acknowledges that his “100 Percent Down Plan” might be out of reach for some. In that case, homebuyers are advised to wait to get a mortgage until:

— They’re debt-free.
— They have at least three to six months of expenses in emergency savings.
— They have a down payment of at least 10 percent, and preferably 20 percent.
— If married, they’ve been hitched for at least a year.

“If you aren’t paying cash, get a fixed-rate mortgage for 15 years or less. Keep your payment low—no more than 25 percent of your take-home pay,” the article advises.

Moderation in Credit
Financial planners, like Bob Morrison, a principal at Downing Street Wealth Management in Littleton, Colo., say consumers should avoid overusing or underusing credit.

“Normally, (buying a home) requires credit, so establishing credit for that is very important,” Morrison says. “You don’t want to go crazy and buy things that aren’t within your means, but at the same time, using credit prudently is wise.”

Ronit Rogoszinski, wealth adviser for Arch Financial Group in Garden City, N.Y., says being “zeroed out or maxed out” with credit “doesn’t make sense either way.”

“You may be missing the opportunity to maybe buy a home that you can build equity in and maybe have as your legacy to your children,” Rogoszinski says. “The extremes just don’t work.”

2 Credit Score Options
Homebuyers who don’t have credit or whose credit file is too thin to generate a credit score have two options, says Greg Cook, mortgage consultant at Platinum Home Mortgage in Temecula, Calif.

Alternative Credit Option
One option is to create an alternative credit history from other financial records, such as rent checks, insurance premiums and utility bills. This process is time-consuming and can take several months to complete, and Cook says not all lenders have the resources to do it.

What’s more, he says, the result “isn’t going to be a great score” because the alternative credit history won’t date back more than two or three years. That means the buyer will probably pay a higher interest rate for a home loan than someone who has a good traditional credit history.

Credit Card Option
The other option is to get a credit card, charge a modest sum and make at least the minimum payment for at least six months, the minimum time necessary to generate a FICO score.

The account must be undisputed and reported to the credit bureaus and cannot be associated with any account holder who has been reported as deceased, according to MyFICO.com.

“Unlike alternative credit, it is real credit,” Cook says. “If you have a six months’ history with two active trade lines and everything else is in order, you could very well get a (loan) approval.”

Marcie Geffner writes for Bankrate.com.

©2015 Bankrate.com
Distributed by Tribune Content Agency, LLC.

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Paul McCartney Wings Into Manhattan Penthouse

Paul McCartneyMaybe Paul McCartney can’t buy love, but he did just land a Manhattan penthouse with views fit for a knight, the New York Post’s Page Six reports.

The duplex has 5 bedrooms, 5-plus baths and 40 feet of floor-to-ceiling windows with a terrace of glass overlooking Central Park.

White marble floors start in the foyer and continue through a formal dining room into a double-height living area that features a brass-and-floating-glass staircase. A living room and library face the park on the first floor, while a master suite shares the same striking views from the second floor.

The Beatle’s new home is in a boutique, mid-century building and was listed for $15.5 million by Deanna Raida of Douglas Elliman.

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Katharine Hepburn’s Lifelong Connecticut Estate on the Market at $14.8M

The Connecticut seaside home where Katharine Hepburn spent family vacations and returned often throughout her life, and where she spent her final days, is on the market for $14.8 million.

The acting legend’s parents bought the property in the Fenwick section of Old Saybrook, CT, around 1913, when Hepburn was a child. The home was washed away by a hurricane in 1938, several years after she’d won her first Academy Award. The actress dug her mother’s silver service out of the sand and rebuilt the home, creating the brick structure that still stands along the banks of Long Island Sound.

According to the listing from Colette Harron of William Pitt Sotheby’s International Realty, Hepburn used a large set of building blocks from FAO Schwarz to construct a model of the house.

Bathed in white with stunning water views, the home’s interior encompasses 8,368 square feet over three floors. It has 6 bedrooms, each with its own bath, plus 1.5 more bathrooms and 7 fireplaces.

The current owners renovated the home and lifted the structure 5 feet to protect it from water damage. The estate has been on and off the market since 2011.

The home sits on 1.47 acres with a private beach where The New York Times says Hepburn took a daily dip no matter the season. There’s also a private dock and pond.

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The Homeowner’s Guide to Land Use Laws

By Stephanie Reid, Avvo attorney and NakedLaw contributor

Land use law is a huge library of legal doctrine dating back centuries, covering everything from water and mineral rights to real estate planning and zoning. But how do these laws impact the average urban, suburban or rural homeowner, and what sort of liability could someone face if they accidentally or purposefully violated local land use laws?

What exactly is land use law?

The term refers to the body of real estate law that regulates the development and conservation of privately owned land. Government properties are not subject to land use restrictions.

Land use laws are controversial because the U.S. Constitution guarantees our liberty, which has always been interpreted to include the free use and control of one’s land. However, land use regulations have become increasingly necessary to curtail the environmental impact of growing populations, and to maintain order in certain urban and suburban areas.

What is an example of a land use law?

While many land use regulations are complex, interwoven labyrinths of local, state and federal laws, planning and zoning legislation is one type of land use law familiar to most people. These laws ensure that businesses are built in one area, residences in another — and that gentlemen’s clubs stay on the outskirts of town.

Are land use laws different from deed restrictions?

Land use laws are imposed by the government, whereas deed restrictions are defined by community associations. However, the two sets of laws can, and should, overlap on common issues, with deed restrictions possibly imposing greater regulations than the local government.

A violation of local land use laws could result in criminal fines or penalties, while a deed restriction violation is a purely civil matter.

What should urban residents know about farming and land use regulation?

Urban farming has become a hot topic within the realm of land use law, and local zoning laws are of significant importance when planning an urban farm. Depending on the location and size, an urban farm may be as small as a patio garden or as large as a city block, and it may encompass both produce and animal production.

The first type of zoning ordinance an urban farmer should consider pertains to the commercial aspect of urban farming. In other words, can the urban farmer sell crops, meat or eggs for money and, if so, where?

Secondly, farmers must be aware of zoning regulations related to raising animals, primarily those rules concerning neighborhood safety, noise ordinances and cleanliness standards.

Every local jurisdiction maintains its own unique set of zoning laws and conditional exceptions to those laws. For urban farmers interested in starting a community project, the first step is to meet with the local zoning and planning board to present your ideas and determine whether urban farming is feasible in your neighborhood.

Am I allowed to add a mother-in-law suite to my home?

A mother-in-law suite, or an accessory dwelling unit, will likely require a permit from the local municipality prior to construction. In many jurisdictions, this suite is actually considered a separate dwelling unit and, as such, requires issuing notice to the community prior to assembly. While some jurisdictions require a simple explanation of the proposed building, others need to see official building plans prior to approval.

Failure to obtain the proper permit to add an accessory dwelling unit can result in major fines — up to $500 per day or more — for each day the building remains unapproved.

What does the term ‘attractive nuisance’ mean?

An attractive nuisance is any sort of structure, manmade or natural, on your property that may entice children to trespass and play, putting them at risk of injury.

To avoid injuries, many localities have enacted attractive nuisance ordinances to prevent landowners from leaving swimming pools, ponds, trampolines or other known attractions open for danger.

Nuisance abatement ordinances generally impose common-sense regulations on homeowners, including mandatory fencing around pools, safety measures around wells or excavations, and rules against abandoned or vacant buildings.

What are the penalties for ignoring land use laws?

For violators of land use laws, local governments can impose daily fines ranging from a few dollars to several hundred dollars. If the violation presents a major safety issue for neighboring residents, the city may also seek an injunction, or legal order, against the property owner.

If fines and penalties add up past a certain point, the city may initiate a civil lawsuit against the homeowner, which could result in the loss of the property by government reclamation — a drastic, but realistic outcome in certain circumstances.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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Housing Less Affordable for Military Families Than for Civilians

Rachel and John Zohn are hopping from their home on an Air Force Base in Mississippi this summer to one in Montgomery, AL.

Although Montgomery has a neighborhood they like, it would cost more to live there than on base — even after they factor in their “Basic Allowance for Housing.” Landlords are often other military families who know precisely how much the local BAH is for various ranks and will charge that amount for rent, Rachel said.

Buying a home in Montgomery might make more financial sense on a monthly basis, she said, but not when you figure that, like most military families, the Zohns don’t expect to be there much longer than three years.

“I’ve been married eight years, and I have two children, and I’d love to buy a house and have a home to decorate,” Rachel said. “But it’s never worked out for us, mostly because, financially speaking, it’s not really the smart choice.”

It’s a widespread quandary for people in the military.

Nationally, service members can expect to pay 31.5 percent of their income toward mortgage payments — twice what civilians pay — according to new Zillow research. That’s all branches of the military combined and includes the BAH for those not living on base.

Renting is even more expensive. Members of the military can expect to pay 41.6 percent of their income on rent payments, compared with 30 percent for civilians nationwide, Zillow research found.

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The situation varies considerably depending on where they’re based.

Service members living off base in San Diego should expect to pay a whopping 65.5 percent of their income on mortgage payments or 59.6 percent on rent. At Fort Hood, TX, they’d pay just 15.1 percent of their income toward a mortgage or 29.1 percent on rent — more in line with national averages for civilians.

Although the Zohns wanted to live in their favorite Montgomery neighborhood, they’re not fretting about the base housing. In Mississippi, their home on base has been a “standard suburban kind of home,” Rachel said — 3 bedrooms and about 2,100 square feet.

“In Montgomery, it could be even bigger, because there are historic homes on base,” she said.

For more information, check out Zillow Real Estate Research.

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