Do You Know How Much the Cost of Waiting to Buy a Home Is? Even though home prices have increased by 3.7% this year, according to CoreLogic, mortgage interest rates have stayed at a historic low over the same time. Many buyers have been able to enter the real estate market thanks to those low rates.
As a seller, you are most affected by what home values are going to do over the next six months, or the ‘short-term price.’ When you are a buyer, you should be less worried about the price of the home and more concerned about the total that you will pay for the home, or the ‘long-term cost.’
According to Freddie Mac, Fannie Mae, and Mortgage Bankers Association (MBA), interest rates for mortgages will increase 12 months from now. They will go up by 4.8% over the next year according to the current Home Price Index Report provided by CoreLogic.
4 Reasons Why would someone want to buy a home?
Here are four excellent reasons to think about purchasing a home now rather than later.
1. Costs Keep Going Up:
CoreLogic’s latest Home Price Index shows that the value of homes has gone up by 3.7% in the past year. It also reported that the cost would keep going up at an even higher rate of 4.8% throughout the next year.
Waiting means paying more for your home when you do purchase.
2. Mortgage Interest Rates Are Expected to Go Up
Interest rates for a fixed-rate 30-year mortgage have begun to plateau around 4.3% according to Freddie Mac’s Primary Mortgage Market Survey. Many experts, including Mortgage Bankers Association, Freddie Mac, Fannie Mae, and the National Association of Realtors predict that those rates will go up over the next year.
When mortgage rates go up, your mortgage payment goes up. Waiting means having a higher monthly payment when you do purchase.
3. You Are Paying a Mortgage Already if you don’t buy a home
Many renters justify not purchasing a home because they say they are not comfortable assuming the responsibility of having a mortgage. If you are paying rent to live in a house owned by someone else, you pay your landlord’s mortgage already.
When you rent a home, your monthly payments are building equity that your landlord can borrow against or liquidate later. Purchasing a home puts those payments to work for you, not a landlord.
4. No Time Will Be the GoodTime
The price of a house and the current mortgage rates are the primary factors that determine the cost of a home. Experts predict that both of these will continue to go up.
Would you still wait if those things were not rising?
Think about the real reason you want to purchase a home and then decide if you still think you should wait. If you wish to a safer neighborhood for your family and a fantastic locale for your kids to grow up, this might be the right time for you to buy a home.
You are purchasing a home rather than waiting could provide significant savings if you believe that buying a home this year is the right move for you and your family.
How Does That Impact Buyers?
Assuming that home prices go up by 4.8% over the next year as CoreLogic predicts, this table shows how an interest rate increase could affect the mortgage payments for a home purchased for around $250,000 today:
What It Means
Buying a house sooner instead of waiting could save tens of thousands of dollars over the life of your mortgage loan.
2 Factors to Watch in Today’s Real Estate Market
There are lots of things to think about when you’re considering buying or selling a home. Why do you want to buy or sell? Who will help you along the way? Where do you want to live? The most important things to think about, though, are what interest rates are doing and what kind of inventory is available.
How Interest Rate Impacts Purchasing
The Primary Mortgage Market Survey conducted by Freddie Mac shows that throughout most of 2018, mortgage interest rates were continuously going up before settling to 4.3%.
The rate of interest that you lock in when purchasing impacts both your mortgage payment and your purchasing power.
Purchasing power how much actual house you can afford to buy while staying in the budget you set. When interest rates go up, you cannot afford to spend as much on the house and remain in the same budget you set.
The Buyer’s Purchasing Power chart shows how interest rates could impact your purchasing power. It assumes a $400,000 budget and a desired monthly mortgage payment of between $1,800 and $1900 each month.
Every 0.25% interest rate increase decreases the amount you can afford to pay for a home by the same amount, or $10,000 in this case. Experts agree that 4.6% is the expected rate by next year.
How Inventory Impacts Purchasing
For home prices to increase with only inflation and no other factors, the real estate market needs a 6-month supply of houses for sale. However, the National Association of Realtors (NAR) shows current inventory at a 4.2-month amount. A low list pushes home prices up. The cost of houses has increased for the past 86 months straight.
A steady decline of inventory in the real estate market has persisted for 36 straight months. From July 2015 to May 2018, the year-over-year list has gone down – but things have been changing.
Things have shifted over the last 11 months. The chart below illustrates how the housing inventory has changed in the previous year compared to the year before. Starting in June, the housing supply has begun to increase compared to last year.
What’s the Point?
If you decided to buy or sell a home, we can prove how mortgage rates and housing supply could impact your purchasing power.
Looking to Upgrade Your Current Home? Now’s the Time to Move-Up!
‘Premium homes’ are houses in the top 25% of the price range for a particular geographical area. Unlike in previous eras, the high end of the market is where you can make some of the best deals today. For those decided to move up from a starter home into their forever home, this is a piece of excellent news.
In recent years, most of the buyers in the market have been first-time home buyers searching for their ideal starter house. That trend has left a lot of the higher-end homes sitting without very much interest from potential buyers.
According to ILHM’s Luxury Report, this imbalance between supply and demand has turned the premium home market into a Buyer’s Market.
However, the conditions for luxury homes (those valued at $1 million or more), are not a reason to worry about the bulk of the real estate market.
‘Premium’ and ‘luxury’ do not mean the same thing to everyone. One could define it as a quiet mountain getaway with acres of land and privacy. Another could call it a high-rise penthouse in the center of a bustling city. Regardless of what your dream house looks like, knowing what you want can help your agent find the best option what you are looking for.
What’s the Point?
If upgrading from the home you are in now has been on your mind, now is the time to buy!
Why Pre-Approval Should Be Your First Step Before Buy a Home
Obtaining pre-approval or getting pre-qualified for a mortgage loan before you start looking for your perfect place shows sellers that you are serious. It also gives you a better position for bargaining than competing buyers that have not done the same. In today’s competitive real estate market where buyers sometimes exceed the number of homes for sale, this can be a great advantage.
Although not all geographical areas have such competitive markets, you will have more confidence when you know your budget and whether or not you can count on financing for the homes you look at.
They go on to describe the ‘4 Cs’ that contribute to deciding how much you qualify to borrow from banks.
- Capacity: Your ability to make your payments on-time.
- Capital or Cash Reserves: The assets you have and can be pay off your debt quickly for cash
- Collateral: Type of the home, you want to purchase
- Credit: How much you’ve been on-time to pay bills
Your pre-approval from a mortgage lender will demonstrate to sellers that you’re not just browsing; you are serious about buying. It can also help make the buying process move faster after a seller accepts your offer.
Your local real estate professionals have established relationships with mortgages lenders and can help you with the pre-approval process. After you know which lender you will use, they will need to know “your credit, debt, work history, down payment, and residential history.”
What’s the point?
The down payment and credit scores required to qualify for a mortgage loan aren’t as high as many assume. Your ability to qualify might surprise you!
Looking to Buy a Home? Know Your Wants vs. Your Needs
Before you start looking too hard, make sure you know what you want in a home. However, the key here is to be reasonable.
From the crazy Kardashian sink to a fanciful Pinterest walkway, you probably have a long list of items that you think your new house has to have. This is especially true if you’ve been thinking about buying for a long time and have been looking at home listings online, dreaming of every detail.
But do you need to have that five-spray walk-in stone shower now, or could it be a future renovation? Is an attached garage a must-have or a convenient feature? Is a granite island with a bar sink a deal-breaker?
Wishes aside, getting a mortgage pre-approval is the first step. Pre-approval makes sure you know what your budget is before you let your expectations grow too high.
Making a prioritized list of everything you want in a home is the second step.
- ‘Needs’ – if the home doesn’t meet these criteria, it should not be on the list for consideration. (for example number of bedrooms, location)
- ‘Wants’– if the home has all of the ‘needs’ and a few of the ‘wants,’ keep it on the list for consideration. It does not need to include every single feature, though.
- ‘Wishes’ – If you find a home in your price range that has all of the ‘needs,’ most of the ‘wants,’ and any of the ‘wishes,’ it might be the one!
What’s the point?
Having your needs wants, and wishes listed before you start looking will save time and headaches. It will also help guide your agent when finding properties to show you.
Buying a Home? Do You Know What is the Lingo?
Here are some standard terms you’ll hear when buying a home.
Appraisal – An estimate of a home’s value based on professional analysis. This step validates the home’s value for you and the lender. It is required to secure mortgage financing.
Closing Costs – The total amount of money needed to complete the home purchase. The costs are paid from escrow at the time of closing and include things like taxes, title insurance, and realtor fees. Your lender will provide a detailed list of all closing costs.
Credit Score – A numerical score between 300 and 850 that estimates how worthy you are to receive financing based on your credit history. There are minimum qualifying scores for different types of investment.
Down Payment – The amount of cash needed up-front when purchasing a home. Down payments are usually 3-20% but can be as low as 0%. Talk to your lender for more information.
Mortgage Rate – The rate of interest you pay a lender to borrow the money to finance your home. Lower interest rates are better.
Pre-Approval Letter – This is the letter provided by a mortgage lender stating that you are qualified for a specific mortgage amount.
Real Estate Professional –Someone who specializes in providing home buying and selling services. Confusing paperwork, tense negotiation, seemingly endless searches – a real estate professional helps you through all those things and more. Realtors are experts in the housing market, and it is their job to help you through the buying or selling process.
Do everybody needs 20% Down payment to buy a house?
No, you do not need 20 percent down payment to buy a home
Again: You Don’t Need 20% Down to Buy a House! Here is why:
The biggest problem renters have when they want to buy a house is they need to save for a down payment. The problem is made worse by increasing rent, which leaves less and less to save each month by paying for utilities and other expenses.
Together with increased rent, endless surveys have demonstrated that people who don’t own a home believe they need to have nearly 20% for an initial down payment!
A study by “Barriers to Accessing Homeownership,” requested in partnership with Freddie Mac, and Urban Institute, Down Payment Resource states that 39% of those who do not own a home as well as 30% who already own a home think they must have 20% or more as a down payment.
Only 12% of those who do not own a home and 13% of those who do own home are aware of low-down-payment financing programs that require a 5% or lower down payment.
Convergys Analytics recently reported that 49% of renters think they have to have a minimum a 20% down payment.
What many people don’t know is that the median down payment on mortgage loans in 2018 was only 5%! Anyone waiting until they have saved 20% has probably already saved what they need!
Believe it or not, over 45 million millennials are ready for a mortgage right now. That means that 33% of them have the income, debt, and credit scores needed to qualify for a mortgage today!
What’s the Point?
You might be closer to purchasing your dream home that you think! Let’s get together and see what it will take to make your plans a reality.
The Real Cost of Renting instead of Buy a Home
Many people keep renting, even though owning a home has incredible financial benefits. Here are a few reasons why part of the American Dream has always been to own your own home.
Where’s the proof?
- Here are five great benefits to owning your own home:
- Equity is essentially an involuntary savings account
- Owning your home comes with tax breaks
- Your monthly payment is never a surprise
- Owning is less expensive than renting
- A home is the only investment you can live inside of
- A homeowner’s net worth is 44 times greater than a non-homeowner according to studies.
- Projected price appreciation alone will earn $42,000 in wealth for a family that purchased a median-priced home in early this year.
- Just because you aren’t paying home repair costs and taxes yourself as a renter doesn’t mean it isn’t coming out of your pocket. Those costs plus additional profit are already baked into your monthly rent payment!
What’s the Point?
Homeownership comes with financial benefits that you can’t get from renting.
Having a Professional On Your Side Makes a Difference
You may be wondering by now what a real estate professional can do for you that Google cannot. The reality is, information overload is real, and too much information without context just creates more confusion.
Having an expert to help guide you past the fantasy and toward the reality of your dreams is absolutely essential, now more than ever before. The real estate market is definitely not a place for DIY (do-it-yourself)!
Here is why you need a pro in your corner:
Real estate isn’t just searching online for a house you like!
More than 230 steps are involved in a successful real estate transaction. Would you rather do it yourself or have someone who has been through the processing time and time again? A real estate professional knows what it takes to do things the right way and make sure you can achieve your dream.
Negotiation is important.
You could save thousands of dollars or more by having a talented negotiator work with you. Beginning with the first offer, renegotiating after home inspections, and more, a real estate professional can keep a deal together until it closes.
Do you know what the home is really worth?
Home sales, mortgage rates, and prices, oh my! There’s so much information (and misinformation) out there – how can you be sure what’s right for you and your area? Who can tell you how to price your home correctly when you decided to sell competitively? How can you be sure you don’t pay too much for your dream home or even offend a seller with an insultingly low offer?
Having an agent who knows what’s going on in the current local market will make your real estate experience a well-informed one. A true real estate professional won’t just tell you what they believe you want to hear – you’ll get the truth from beginning to end.
What’s the Point?
The real estate market is a competitive place. When you have a professional to help guide you through, the complicated process becomes amazingly simple.
4 Tips For Success if you are Ready to Make an Offer to Buy a Home:
So you’ve finally found your place, your perfect one to call home. The price is on point, and now you want to make an offer that ensures that your dream home becomes your home!
The four steps below from Freddie Mac are provided to help buyers make the right offers:
1. Set Your Offer: Your agent will help you decide what to offer based on his or her experience and things like comparable home sales in the area, the condition of the home, and what you can afford.
Having a pre-approval on hand will show sellers that you are a serious buyer as well as allowing you to submit an offer with confidence. You’ll know that you already have the financing available for the amount you plan to offer.
2. Submit Your Offer: Discuss different ways to make your offer stand out with your agent. A licensed real estate professional will be absolutely essential in helping you submit a solid offer.
3. Negotiate Your Offer: Freddie Mac recommends that you “it’s better to get an independent home inspection, so you will know the exact condition of the home.” If there are problems or issues you didn’t know about, you have an opportunity to talk about repairs with the seller or even cancel the contract entirely.
4. Act Quickly
The number of houses available for sale has been significantly lower than the usual market average of a 6-month supply. Buyers have continued to outnumber the supply of houses for sale, meaning that they have to compete with one another for the homes they want.
As soon as you choose to make an offer, work with your agent to get it presented as soon as possible!
What’s the Point?
If you’re thinking about buying your first home or your fourth home, a local real estate agent will help make sure the experience is smooth from start to finish. Talk to a real estate professional today about turning your dream into a reality!
7 Things to Avoid After You Apply For a Mortgage When You Want to Buy a Home:
Great news! In the end, if you found your dream home, and applied for mortgage financing. Making that new house your home is sure to be exciting, but be sure to consult your loan officer before making any significant money moves. They will be able to tell you if it will impact your home loan and describe precisely how.
To start with, check out the list below of 7 Things to Avoid After You Applying for a Mortgage! Some items are more evident than others
- Don’t change employers or how you are paid. The amount and source of your income must be trackable 100% by your lender. Avoid switching from commission to salary or starting self-employment during this time also.
- Don’t put cash in the bank. Your lender needs to know where all of your money comes from, and cash cannot really be traced. Talk about the right way to document transactions with your lender prior to putting any amount of cash into your bank account.
- Don’t make large purchases. New car, new furniture for your new home – new debt and new monthly payments come right along with them. Any new obligation could change your qualifications, creating higher debt ratios, which could mean disqualification for financing.
- Don’t co-sign for anyone. Co-signing is another form of obligation. Just like a large purchase, that obligation comes with a higher ratio. It doesn’t matter if you’ll be the one making payments or not, your lender will have to consider the payment as a debt.
- Don’t switch banks. Don’t forget. Your lender needs to source and tracks your assets 100%. Consistency among your accounts makes that much easier. Talk to your loan officer before even transferring money between accounts.
- Don’t petition for new credit. Whether it’s a store account or a new truck, don’t do it. In order to grant a new account, creditors run your credit report, which will negatively impact your FICO® score. A lower score could increase your interest rate or even disqualify you for mortgage approval.
- Don’t close old credit accounts. Many buyers mistakenly think that having fewer credit accounts makes them more attractive to creditors and more likely to get mortgage approval. Not true. Payment history isn’t the only important factor in your credit score – credit depth and length are also important, as well as your total usage of available credit. Closing credit accounts isn’t good for either of those scoring factors.
What’s the Point?
Review even the smallest changes or potential changes in your income, credit, or assets with your loan officer to make sure it doesn’t negatively impact your mortgage financing. Make sure you are completely candid before moving forward financially and remember that your loan officer is there to help.
What to Expect From Your Home Inspection
Congratulations! Your offer has been accepted! Hopefully, as agents often recommend, your offer is contingent on an acceptable home inspection – which is the next step in the home buying process.
Having a home inspection contingency built into your offer means that you can renegotiate the price you offered if there are repairs that need to be made or something comes back so bad that you no longer want to purchase the home. After the report is filed, your agent can help you choose the best course of action.
Choosing Your Home Inspector
Your agent has probably worked with several inspectors in the past and can recommend a few of the best to you. When choosing the right home inspector, HGTV recommends that you consider the following:
- Qualifications – What does the inspection include? Does the age or location of your home require special inspections?
- Sample Reports – How thorough are they? The more detailed they are, the better.
- References – Have past clients had good experiences?
- Memberships – Is the inspector a member of any state or national association? Although it’s not the only way to be sure of your choice, membership usually means continued education and training.
- Errors & Omission Insurance – What is the liability of the inspector or company after the inspection is complete? Are you covered if they missed something they should have noticed?
Find out if the inspector will let you observe the inspection. Then they can show you specifically anything that needs to be fixed or addressed.
An inspector’s job is to protect you and the mortgage company from making an unwise investment. They will be on the roof, in the attic, and all over, looking for issues in areas such as the roof, electrical system, ventilation, windows, chimney, plumbing, foundation and more.
What’s the Point
Ignorance may be bliss in rare instances, but not when you are making the biggest investment of your life. Work with your agent to find a professional inspector or inspection company that you can trust to provide the most accurate information about your possible new home so you can make the best decision about your purchase!
Have You Saved Up Enough For Closing Costs?
Too many potential buyers and sellers believe that they must have a 20% down payment saved in order to purchase a home or find their next house. This myth has been dispelled countless times with loan programs that offer terms as little as 3% or even 0% down.
After saving enough money for the down payment, make sure you have also saved enough money to pay for the closing costs that come with buying or selling a home.
The number of closing costs can be a surprise to many first-time home buyers. In fact, sometimes closing costs are equal to the amount of down payment, depending on the loan program you used.
Depending on the location of the home you wish to purchase, these are some of the fees and costs that could be included with your closing costs:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services (insurance, search fees)
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting fees
Can you get out of paying closing costs?
Your loan officer and your real estate agent may be able to reduce or defer some of your closing costs. There are mortgages loans available that don’t have any closing costs, but have a higher interest rate or include the closing costs into the total financed amount – but that means you’ll pay interest on those costs.
It’s also possible to ask sellers to pay all or a portion of the closing costs when negotiating the deal. Real estate and mortgage professionals can help you find the best solution for your needs.
What’s the Point?
Talk to your loan officer and real estate agent often and early to see how much of the costs you’ll have to pay at closing. Suddenly needing to come up with thousands of dollars at the last minute is not a nice surprise.
Here are some reasons to work with a real estate professional when you want to purchase a house:
- Paperwork: They will help with the legal aspects of the heavily-regulated field of real estate.
- Knowledge: They are experienced and well-trained in every aspect of the complicated sales process.
- Mediation: They stand as an intermediary during negotiations throughout the entire process.
- Value: They make understanding real estate values easier for you when setting a sale price or making a purchase offer.
- Preparing: They explain current real estate trends in a way that is simple and easy to understand.
CONTACT ME TO TALK MORE
You may have additional questions or concerns. That’s why I’m here.
I would be happy to discuss what you read here and help guide you on the path toward purchasing your new home. I look forward to talking with you soon!