Real Estate Analysis and Commentary

FICO has unveiled a new credit analysis tool for mortgage professionals as it comes under scrutiny over potential price increases.

The FICO Score Mortgage Simulator allows lenders to see potential impacts on a borrower’s credit score through various simulated changes in their report data.

Changes like reduced credit card debt, paying off a loan, or deleting a collection account can be applied to produce the likely outcome on a borrower’s score. This way, brokers and lenders can help borrowers gauge what actions would help open up more loan options and better rates.

FICO says it will ultimately help more people qualify for mortgages, with the best product and best rates available to them.

“FICO is continuously working on innovative product offerings that can responsibly expand credit access to more people,” said Geoff Smith, VP and general manager of Consumer Scores at FICO. “Even a few additional points in a potential borrower’s FICO Score can have a material impact on the mortgage loan terms offered. Ultimately, the FICO Score Mortgage Simulator will prove to be a powerful tool that can enable more people to achieve the dream of homeownership.”

It is the only score simulator that uses FICO scores and the actual FICO algorithm. Verification fintech Xactus is the first company to bring this product to the market.

“The FICO Score Mortgage Simulator is an innovative new tool, and we are thrilled to be at the forefront of bringing it to the mortgage market. This tool brings a unique opportunity to allow both lenders and consumers to not only have a deeper understanding of FICO Score dynamics but provide a better experience and return for everyone,” said Shelley Leonard, President of Xactus.

FICO is a leading analytics software company best known for credit scoring. It’s recently come under fire for jacking prices, however. The industry has reacted strongly to rumors that the company will raise the price of a credit score from $3.50 to at least $5 next year.

A group of Congressional lawmakers sent a letter to President Joe Biden urging an investigation as to whether the company constitutes a monopoly, violating anti-trust laws.

FICO isn’t the only game in town for credit scoring, however. FormFree released the Residual Income Knowledge Index (RIKI), its alternative to the traditional credit score model, in October 2021.

RIKI uses bank and credit card statements procured directly from financial institutions to give lenders an understanding of a borrower’s discretionary funds after mandatory monthly expenses.

“What RIKI does is it looks at all the transactions, income and expenses, calculates income, identifies if it is consistent monthly income or if it is a one-off transfer, and then the lender can see that,” FormFree’s Chief Customer Officer Christy Moss told The Mortgage Note.

HousingWire recently highlighted RIKI as an example of an open banking framework that could transform the industry.

Daylight savings time ends this weekend. Don't forget to change the clocks back one hour

Tips for Lowering Energy Costs During the Winter Months

Winter is coming. You know what that means. Sweaters. Socks. Falling leaves and the smell of snow or rain depending on your location. Crackling fires in the fireplace, oh we can paint quite a picture. Let’s not forget it also means higher home heating bills. Keeping energy costs down is always a priority. In the winter, though, it takes on a new urgency, whether you’re filling an oil tank or heating your home with an electric or gas furnace. Here are the best tips we have for you: It’s All About Insulation Imagine if you could put a big winter coat around your home. That’s exactly what you’re doing when you invest in good insulation. This helps retain heat, keeping the warm air indoors and creating a comfortable climate for your tenants without requiring them to turn up the heat to the point that their energy bill gives them a shock. Heat rises, so make sure your attic and roof is well-insulated. Check your walls. Is cold air penetrating them? Windows and doors will need some attention too. Seal gaps with weather stripping. Consider insulating curtains. How Smart is Your Thermostat? Smart thermostats can tell when someone is home and optimize heating and cooling according to time of day, day of week, and the presence of people. They’ll save energy and bring down those energy bills. While investing in a smart home thermostat will be costly upfront, making the switch to a smart thermostat can also lead to an average annual saving of up to 10-12% on heating bills. That’s a huge selling point.

First day of Fall. Cooler weather on the way. Not soon enough

Appreciation is a Secret Weapon

It’s easy to focus primarily on the monthly cash flow properties generated. Indeed, this is a tangible and immediate benefit. However, appreciation, or the increase in your property's value over time, can often be where the most significant financial gains are made. Unlike cash flow, which can fluctuate with market rental rates and operational costs, appreciation tends to trend upwards over the long haul.

Slow and steady isn’t always sexy, but it does usually win the race.
 

How to Harness the Power of Appreciation

To truly capitalize on appreciation, here are some of the tips we’re always sharing with our investors:

• Adopt a Long-Term Perspective. Real estate is typically not a get-rich-quick scheme. A long-term viewpoint allows you to weather market fluctuations and realize significant gains.
• Pay Down that Debt. For leveraged properties, appreciation increases your equity, even as you pay down debt. This leverage can amplify your return on investment.
• Take those Tax Bennies. Remember to consult with a tax advisor on how property appreciation affects your tax situation, especially regarding deductions and capital gains.

There are a few more months left to this year. Let’s appreciate our appreciation and put some practices into place that will grow the long-term value of your investments, whether it’s improvements, upgrades, or a strategy towards tenant retention.

•  Increasing Property Values
• Curb Appeal

It’s the first impression your property gets from prospective tenants. Of course you want it to look good. Let’s improve the landscaping, the lighting, and even the front door so prospective and current tenants feel good about walking through it.

• Smart Home Tech

It was once a luxury, but it’s now a requirement. Whether we’re talking about tenants or buyers, anyone moving into a new home wants the convenience and, honestly, the thrill that smart home technology provides. Smart thermostats, video doorbells, digital keypads…there are so many ways to get started and increase your property value.

• Energy Efficiency

We’ve never met a person who shrugged off rising utility bills. Everything is more expensive than it once was. You’ll have a more valuable property on your hands when there are systems and functions in place to conserve energy and money. LED lights, updated appliances, and low-flow plumbing fixtures are all good ideas.

• Hard Surface Flooring

Carpet has been canceled. Tenants are looking for hard surface floors. They’re more attractive, easier to maintain and clean, and less likely to trigger an asthma attack thanks to the dust and allergens that get trapped so easily in those carpet fibers. Think about vinyl, laminate, or even hardwoods for better property values.

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