Buying A Home Spring 2018...Here are four great reasons to consider buying a home today instead of...
Transcript of Buying A Home Spring 2018...Here are four great reasons to consider buying a home today instead of...
THINGSTOCONSIDERWHEN
BUYINGAHOME
SPRING2018EDITION
MichaelM.Adams202-656-2891
LicensedBrokerVA,MD&DC
TABLEOFCONTENTSWHAT'SHAPPENINGINTHEHOUSINGMARKET?
WHATYOUNEEDTOKNOWBEFOREYOUBUY
WHATTOEXPECTWHENBUYINGAHOME
4ReasonsToBuyAHomeThisSpring!3
HomePricesOverTheLastYear5BuyingRemainsCheaperThanRentingIn39States!6IsYourFirstHomeWithinYourGrasp?[INFOGRAPHIC]7BuyingAHome?ConsiderCost,NotJustPrice8
10 BeThankfulYouDon'tHaveToPayMomAndDad'sInterestRate
5ReasonsHomeownershipMakes'Cents'11StartingToLookForAHome?KnowWhatYouWantVs.WhatYouNeed132MythsThatMayBeHoldingYouBackFromBuying1461%OfFirst-TimeBuyersPutDownLessThan6%15HowLowInterestRatesIncreaseYourPurchasingPower16WhyPre-ApprovalShouldBeYourFirstStep17
HaveYouPutAsideEnoughForClosingCosts?18GettingAMortgage:WhySoMuchPaperwork?20WhyWorkingWithALocalRealEstateProfessionalMakesAllTheDifference21
ReadyToMakeAnOffer?4TipsForSuccess22
MortgageRatesRising...WillHomePricesFollow?9
Herearefourgreatreasonstoconsiderbuyingahometodayinsteadofwaiting.
1. PricesWillContinuetoRise
CoreLogic’s latestHomePriceIndexreportsthathomepriceshaveappreciatedby6.6%overthelast12months.Thesamereportpredictsthatpriceswillcontinuetoincreaseatarateof4.3%overthenextyear.
Thebottominhomepriceshascomeandgone.Homevalueswillcontinuetoappreciateforyears.Waitingnolongermakessense.
2.MortgageInterestRatesAreProjectedtoIncrease
FreddieMac’sPrimaryMortgageMarketSurveyshowsthatinterestratesfora30-yearmortgagehoveredcloseto4.0%in2017.Mostexpertspredictthatrateswillriseoverthenext12months.TheMortgageBankersAssociation,FannieMae,FreddieMac, and the NationalAssociationofRealtors areinunison,projectingthatrateswillincreasebynearlyafullpercentagepointbythistimenextyear.
AnincreaseinrateswillimpactYOURmonthlymortgagepayment.Ayearfromnow,yourhousingexpensewillincreaseifamortgageisnecessarytobuyyournexthome.
4ReasonsToBuyAHomeThisSpring!
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3. EitherWay,YouArePayingaMortgage
Therearesomerenterswhohavenotyetpurchasedahomebecausetheyareuncomfortabletakingontheobligationofamortgage.Everyoneshouldrealizethatunlessyouarelivingwithyourparentsrent-free,youarepayingamortgage- eitheryoursoryourlandlord’s.
Asanowner,yourmortgagepaymentisaformof‘forcedsavings’thatallowsyoutohaveequityinyourhomethatyoucantapintolaterinlife.Asarenter,youguaranteeyourlandlordisthepersonwiththatequity.
Areyoureadytoputyourhousingcosttoworkforyou?
4. It’sTimetoMoveonwithYourLife
The‘cost’ofahomeisdeterminedbytwomajorcomponents:thepriceofthehomeandthecurrentmortgagerate.Itappearsthatbothareontherise.
Butwhatiftheyweren’t?Wouldyouwait?
Lookattheactualreasonyouarebuyinganddecideifitisworthwaiting.Whetheryouwanttohaveagreatplaceforyourchildrentogrowup,youwantyourfamilytobesafer,oryoujustwanttohavecontroloverrenovations,maybenowisthetimetobuy.
Iftherightthingforyouandyourfamilyistopurchaseahomethisyear,buyingsoonerratherthanlatercouldleadtosubstantialsavings.
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Everyquarter,theFederalHousingFinanceAgency(FHFA)reportsontheyear-over-yearchangesinhomeprices.Below,youwillseethatpricesareupyear-over-yearineveryregion.
HomePricesOverTheLastYear
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Year-over-YearPricesRegionally
Year-over-YearByState
Lookingatthebreakdownbystate,youcanseethateachstateisappreciatingatadifferentrate.Thisisimportanttoknowifyouareplanningonrelocatingtoadifferentareaofthecountry.Waitingtomovemayendupcostingyoumore!
InthelatestRentvs.BuyReportfrom Trulia, theyexplainedthathomeownershipremainscheaperthanrentingwithatraditional30-yearfixedratemortgageinthe100largestmetroareasintheUnitedStates.
Theupdatednumbersshowthattherangeisanaverageof6.5%lessexpensiveinSanJose(CA),allthewayupto50.1%lessexpensiveinDetroit(MI),and37.4%nationwide!
AstudybyGoBankingRates lookedatthecostofrentingvs.owningahomeatthestatelevelandconcludedthatin39states,itisactually ‘alittle’or‘alot’cheapertoown(representedbythetwoshadesofblueinthemapbelow).
Oneofthemainreasonsowningahomehasremainedsignificantlycheaperthanrentingisthefactthatinterestrateshaveremainedatornearhistoriclows.FreddieMacreportsthatinterestratesfora30-yearfixedratemortgagehavehoveredaround4%.
Nationally,rateswouldhavetoreach9.1%,a122%increaseovertoday’saverageof4.1%, forrentingtobecheaperthanbuying.Rateshaven’tbeenthathighsinceJanuaryof1995,accordingtoFreddieMac.
BottomLine
Buyingahomemakessensefinancially.Ifyouareoneofthemanyrenterswhowouldliketoevaluateyourabilitytobuythisyear,let’sgettogetherandfindyouyourdreamhome.
Rent vs.Own
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A lot cheaper to own
A little cheaper to own
A little cheaper to rent
A lot cheaper to rent
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BuyingRemainsCheaperThanRentingIn39States!
IsYourFirstHome
Forthelongesttime,manyexpertsdoubtedwhethermillennials(ages18-36)valuedhomeownershipasapartoftheirAmericanDream.
LookingatthelateststatisticsfromtheNationalAssociationofRealtors, wecanseethat‘oldmillennials’(ages25-36) aredominatingthefirst-timehomebuyercategory.
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WithinYourGrasp?
%ofBuyers MedianAge
2%offirst-timehomebuyersdonotfitintothecategoriesaboveandrepresentan“Other”category.Themedianageofthisgroupis37yearsold.
32100%AllFirst-TimeHomebuyers
3257%MarriedCouples
3518%SingleFemales
3016%UnmarriedCouples
317%SingleMales
Mortgage InterestRate* Payment (P&I)**
Today $250,000 4.3% $1,237.18
2019 $260,750 5.1% $1,415.74
$178.56DifferenceinMonthlyPayment
Monthly Annually Over30Years
$178.56 $2,142.72 $64,282
Asaseller,youwillbemostconcernedabout‘short-termprice’– wherehomevaluesareheadedoverthenextsixmonths.Asabuyer,however,youmustnotbeconcernedaboutprice,butinsteadaboutthe‘long-termcost’ofthehome.
TheMortgageBankersAssociation(MBA),FreddieMac,and FannieMaeallprojectthatmortgageinterest rates willincreasebyclosetoafullpercentagepointbythistimenextyear.AccordingtoCoreLogic’smostrecentHomePriceIndexReport,homepriceswillappreciateby4.3%overthenext12months.
WhatDoesThisMeanasaBuyer?
Ifhomepricesappreciatebythe4.3%predictedbyCoreLogic overthenexttwelvemonths,hereisasimpledemonstrationoftheimpactanincreaseininterestratewouldhaveonthemortgagepaymentofahomesellingforapproximately$250,000today:
*RatesbasedonFreddieMac’spredictionattimeofprint
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BuyingAHome?ConsiderCost,NotJustPrice
Mortgageinterestrateshavealreadyrisenbyoveraquarterofapercentagepointin2018.Manyareprojectingthatratescouldincreaseto5%bytheendoftheyear.
Whatimpactwillrisingrateshaveonhousevalues?
Manyquicklyjumptotheconclusionthatanincreaseinmortgagerateswillhaveadetrimentalimpactonrealestatepricesasfewerbuyerswillbeabletoqualifyforaloan.Thisseemslogical;ifthereislessdemandforhousingthenpriceswilldrop.
However,inagoodeconomy,risingmortgageratesincreasedemandasmanyprospectivepurchasersimmediatelyjumpoffthefencetoguaranteetheygetthelowerrate.
Let’slookathomepricesthelastfourtimesmortgageratesincreaseddramatically.
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MortgageRatesRising...WillHomePricesFollow?
Ineachcase,homepricesAPPRECIATEDanddidnotdepreciate.Nooneisprojectingasdramaticanincreaseinratesastheexamplesabove.Mostareprojectinganincreaseofapproximately1%bytheendoftheyear.
Thelasttimemortgageratesincreasedby1%overatwelve-monthperiodwasJanuary2013(3.41%)toJanuary2014(4.43%).Whathappenedtohousepricesduringthatspan?Theyappreciatedby9.8%.
Recently,RickPalaciosJr.,DirectorofResearchat JohnBurnsRealEstateConsultingexplained:
“Mortgagerateshaverisen1%ormoretentimesinthelast43years,withlittleimpactonhomesalesandpriceswhentheeconomywasalsostrong…Historically,risingconfidence,solidjobgrowth,andhigherwageshavemorethanoffsetreduceddemandforhousingresultingfromhighermortgagerates.”
BottomLine
Whenmortgageratesincrease,historyhasshownthatpricesappreciate(anddonotdepreciate)duringthatsametimespan.
Interestrateshoveredaround4%forthemajorityof2017,whichgavemanybuyersrelieffromrisinghomepricesandhelpedwithaffordability.Expertspredictthatrateswillincreasebytheendof2018andwillbeafullpercentagepointhigher,at4.9%,bytheendof2019.
Therateyousecuregreatlyimpactsyourmonthlymortgagepaymentandtheamountyouwillultimatelypayforyourhome.Don'tletthepredictionthatrateswillriseto4.9%stopyoufrombuyingyourdreamhomethisyear!
Let’stakealookatahistoricalviewofinterestratesoverthelast45years.
BottomLine
Bethankfulthatyoucanstillgetabetterinterestratethanyourolderbrotherorsisterdidtenyearsago,alowerratethanyourparentsdidtwentyyearsago,andabetterratethanyourgrandparentsdidfortyyearsago.
BeThankfulYouDon'tHaveToPayMom&Dad'sInterestRate
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TheAmericanDreamofhomeownershipisaliveandwell.RecentreportsshowthattheU.S.homeownershipratehasreboundedfromrecentlowsandisheadedintherightdirection.Thepersonalreasonstoowndifferforeachbuyer,buttherearemanybasicsimilarities.
Todaywewanttotalkaboutthetop5financialreasonsyoushouldownyourownhome.
1. HomeownershipisaFormofForcedSavings
Payingyourmortgageeachmonthallowsyoutobuildequityinyourhomethatyoucantapintolaterinlifeforrenovations,topayoffhigh-interestcreditcarddebt,orevensendachildtocollege.Asarenter,youguaranteethatyourlandlordisthepersonwiththatequity.
2. HomeownershipProvidesTaxSavings
Onewaytosaveontaxesistoownyourownhome.Youmaybeabletodeductyourmortgageinterest,propertytaxes,andprofitsfromsellingyourhome,butmakesuretoalwayscheckwithyouraccountantfirsttofindoutwhichtaxadvantagesapplytoyouinyourarea.
3. HomeownershipAllowsYoutoLockinYourMonthlyHousingCost
Whenyoupurchaseyourhomewithafixed-ratemortgage,youlockinyourmonthlyhousingcostforthenext5,15,or30years.Interestratesremainedaround4%alllastyear,
5ReasonsHomeownershipMakes'Cents'
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markingsomeofthelowestratesinhistory.Thevalueofyourhomewillcontinuetorisewithinflation,butyourmonthlycostswillnot.
4. BuyingaHomeIsCheaperThanRenting
AccordingtothelatestreportfromTrulia, itisnow37.4%lessexpensivetobuyahomeofyourownthantorentintheU.S.Thatnumbervariesthroughoutthecountrybutrangesfrom6.5%cheaperinSanJose,CAto50.1%cheaperinDetroit,MI.
5. NoOtherInvestmentLetsYouLiveInsideofIt
Youcanchoosetoinvestyourmoneyingoldorthestockmarket,butyouwillstillneedsomewheretolive.Inahomethatyouown,youcanwakeupeverymorningknowingthatyourinvestmentisgainingvaluewhileprovidingyouasafeplacetolive.
BottomLine
Beforeyousignanotherlease,let’sgettogethertohelpyoubetterunderstandallyouroptions.
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Inthisdayandageofbeingabletoshopforanythinganywhere,itisreallyimportanttoknowwhatyou’relookingforwhenyoustartyourhomesearch.
Ifyou’vebeenthinkingaboutbuyingahomeofyourownforsometimenow,you’veprobablycomeupwithalistofthingsthatyou’dLOVEtohaveinyournewhome.ManynewhomebuyersfantasizeabouttheamenitiesthattheyseeontelevisionorPinterest, andstartlookingatthecountlesshomeslistedforsalewithrose-coloredglasses.
Doyoureallyneedthatfarmhousesinkinthekitcheninordertobehappywithyourhomechoice?Wouldatwo-cargaragebeaconvenienceoranecessity?Couldthemancaveofyourdreamsbeafuturerenovationprojectinsteadofamakeorbreaknow?
Thefirststepinyourhomebuyingprocessshouldbetogetpre-approvedforyourmortgage.Thisallowsyoutoknowyourbudgetbeforeyoufallinlovewithahomethatiswayoutsideofit.
Thenextstepistolistallthefeaturesofahomethatyouwouldlike,andtoqualifythemasfollows:
• ‘Must-Haves’– ifthispropertydoesnothavetheseitems,thenitshouldn’tevenbeconsidered.(ex:distancefromworkorfamily,numberofbedrooms/bathrooms)
• ‘Should-Haves’– ifthepropertyhitsallofthe'must-haves'andsomeofthe'should-haves,'itstaysincontention,butdoesnotneedtohaveallofthesefeatures.
• ‘Absolute-WishList’ – ifwefindapropertyinourbudgetthathasallofthe‘must-haves,’mostofthe‘should-haves,’andANYofthese,it’sthewinner!
BottomLine
Havingthislistfleshedoutbeforestartingyoursearchwillsaveyoutimeandfrustration,whilealsolettingyouragentknowwhatfeaturesaremostimportanttoyoubeforeheorshebeginstoshowyouhousesinyourdesiredarea.
StartingToLookForAHome?KnowWhatYouWantvs.WhatYouNeed
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Whetherbuyingyourfirsthomeormovinguptoyourdreamhome,knowingyouroptionswillmakethemortgageprocesseasier.Yourdreamhomemayalreadybewithinyourreach.
Tohelpdebunkthismyth,let’stakealookatEllieMae’slatestOriginationInsightReport,whichfocusesonrecentlyclosed(approved)loans.
Asyoucanseeontheright,53.5%ofapprovedmortgageshadacreditscoreof600-749.
UrbanInstituterecentlyreleasedareportentitled,“BarrierstoAccessingHomeownership,”whichrevealedthat“eightypercentofconsumerseitherareunawareofhowmuchlendersrequireforadownpaymentorbelievealllendersrequireadownpaymentabove5percent.”
Myth#1:“INeeda20%DownPayment”Buyersoftenoverestimatethedownpaymentfundsneededtoqualifyforahomeloan.AccordingtothesameUrbanInstitutereport:
“Consumersareoftenunawareoftheoptiontotakeoutlow-down-paymentmortgages.Only19%ofconsumersbelievelenderswouldmakeloanswithadownpaymentof5%orless…While15%believelendersrequirea20%downpayment,and30%believelendersexpecta20%downpayment.”
Thesenumbersdonotdiffermuchbetweennon-ownersandhomeowners;39%ofnon-ownersbelievetheyneedmorethan20%foradownpaymentand30%ofhomeownersbelievetheyneedmorethan20%foradownpayment.
Whilemanybelievethattheyneedatleast20%downtobuytheirdreamhome,theydonotrealizethatprogramsareavailablethatallowthemtoputdownaslittleas3%.Manyrentersmayactuallybeabletoenterthehousingmarketsoonerthantheyeverimaginedwithprogramsthathaveemergedallowinglesscashoutofpocket.
Myth#2:“Ineeda780FICO®ScoreorHighertoBuy”Similartothedownpayment,manyeitherdon’tknoworaremisinformedaboutwhatFICO®scoreisnecessarytoqualify.
ManyAmericansbelievea‘good’creditscoreis780orhigher.
2MythsThatMayBeHoldingYouBackFromBuying
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BottomLine
AccordingtotheRealtorsConfidenceIndexfromthe NationalAssociationofRealtors,61%offirst-timehomebuyerspurchasedtheirhomeswithdownpaymentsbelow6%.
Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2017 was just 10% and that percentage drops to 6% for first-time buyers.
Zillow’s SeniorEconomistAaronTerrazas recently shedlightonwhybuyerdemandhasremainedstrong,
“Lookinginto2018,rentisexpectedtocontinuegaining.Morewidespreadrentgrowthcouldmeanhomebuyingdemandsstayhigh,asrenterswhocanafforditmoveawayfromtheunpredictabilityofrisingrentstowardtherelativestabilityofamonthlymortgagepaymentinstead.”
It’snosurprisethatwithrentsrising,moreandmorefirst-timebuyersaretakingadvantageoflow-down-paymentmortgageoptionstosecuretheirmonthlyhousingcostsandfinallyattaintheirdreamhomes.
BottomLine
Ifyouareoneofthemanyfirst-timebuyerswhoisnotsureifyouwouldqualifyforalow-downpaymentmortgage,let’sgettogetherandsetyouonyourpathtohomeownership!
61%OfFirst-TimeBuyersPutDownLessThan6%
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AccordingtoFreddieMac’sPrimaryMortgageMarketSurvey, interestratesfora30-yearfixedratemortgagehoveredaround4%in2017andarestillnearrecordlows.
Theinterestrateyousecurewhenbuyingahomenotonlygreatlyimpactsyourmonthlyhousingcosts,butalsoimpactsyourpurchasingpower.
Purchasingpower,simplyput,istheamountofhomeyoucanaffordtobuyforthebudgetyouhaveavailabletospend.Asratesincrease,thepriceofthehouseyoucanaffordwilldecreaseifyouplantostaywithinacertainmonthlyhousingbudget.
Thecharttotherightshowstheimpactrisinginterestrateswouldhaveifyouplannedtopurchaseahomewithinthenationalmedianpricerange,andplannedtokeepyourprincipalandinterestpaymentsbetween $1,850-$1,900amonth.
Witheachquarterofapercentincreaseininterestrate,thevalueofthehomeyoucanafforddecreasesby2.5%(inthisexample,$10,000).Expertspredictthatmortgagerateswillbecloserto 5%bythistimenextyear.
HowLowInterestRatesIncreaseYourPurchasingPower
Actnowtogetthemosthouseforyourhard-earnedmoney.
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Inmanymarketsacrossthecountry,thenumberofbuyerssearchingfortheirdreamhomesgreatlyexceedsthenumberofhomesforsale.Thishasledtoacompetitivemarketplacewherebuyersoftenneedtostandout.Onewaytoshowyouareseriousaboutbuyingyourdreamhomeistogetpre-qualifiedorpre-approvedforamortgagebeforestartingyoursearch.
Butevenifyouareinamarketthatisnotascompetitive,knowingyourbudgetwillgiveyoutheconfidencetoknowifyourdreamhomeiswithinyourreach.
FreddieMaclaysouttheadvantagesofpre-approvalinthe'MyHome'sectionoftheirwebsite.
“It’shighlyrecommendedthatyouworkwithyourlendertogetpre-approvedbeforeyoubeginhousehunting.Pre-approvalwilltellyouhowmuchhomeyoucanaffordandcanhelpyoumovefaster,andwithgreaterconfidence,incompetitivemarkets.”
Oneofthemanyadvantagesofworkingwithalocalrealestateprofessionalisthatmanyhaverelationshipswithlenderswhowillbeabletohelpyouwiththisprocess.Onceyouhaveselectedalender,youwillneedtofillouttheirloanapplicationandprovidethemwithimportantinformationregarding“yourcredit,debt,workhistory,downpaymentandresidentialhistory.”
FreddieMacdescribesthe'4Cs'thathelpdeterminetheamountyouwillbequalifiedtoborrow:
• Capacity:Yourcurrentandfutureabilitytomakeyourpayments• CapitalorCashReserves:Themoney,savings,andinvestmentsyouhavethatcanbesold
quicklyforcash• Collateral:Thehome,ortypeofhome,thatyouwouldliketopurchase• Credit:Yourhistoryofpayingbillsandotherdebtsontime
Gettingpre-approvedisoneofmanystepsthatwillshowhomesellersthatyouareseriousaboutbuyinganditoftenhelpsspeeduptheprocessonceyourofferhasbeenaccepted.
BottomLine
Manypotentialhomebuyersoverestimatethedownpaymentandcreditscoresneededtoqualifyforamortgagetoday.Ifyouarereadyandwillingtobuy,youmaybesurprisedatyourabilitytodosoaswell.
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WhyPre-ApprovalShouldBeYourFirstStep
Therearemanypotentialhomebuyers,andevensellers,whobelievethatyouneedatleasta20%downpaymentinordertobuyahomeormoveontotheirnexthome.Timeaftertime,wehavedispelledthismythbyshowingthattherearemanyloanprogramsthatallowyoutoputdownaslittleas3%(or0%withaVAloan).
Ifyouhavesavedupyourdownpaymentandarereadytostartyourhomesearch,oneotherpieceofthepuzzleistomakesurethatyouhavesavedenoughforyourclosingcosts.
FreddieMacdefinesclosingcostsasfollows:
“Closingcosts,alsocalledsettlementfees,willneedtobepaidwhenyouobtainamortgage.Thesearefeeschargedbypeoplerepresentingyourpurchase,includingyourlender,realestateagent,andotherthirdpartiesinvolvedinthetransaction.
Closingcostsaretypicallybetween2&5%ofyourpurchaseprice.”
We’verecentlyheardfrommanyfirst-timehomebuyersthattheywishedthatsomeonehadletthemknowthatclosingcostscouldbesohigh.Ifyouthinkaboutit,withalowdownpaymentprogram,yourclosingcostscouldequaltheamountthatyousavedforyourdownpayment.
Hereisalistofjustsomeofthefees/coststhatmaybeincludedinyourclosingcosts,dependingonwherethehomeyouwishtopurchaseislocated:
HaveYouPutAsideEnoughForClosingCosts?
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• Governmentrecordingcosts• Appraisalfees• Creditreportfees• Lenderoriginationfees• Titleservices(insurance,searchfees)
• Taxservicefees• Surveyfees• Attorneyfees• Underwritingfees
Isthereanywaytoavoidpayingclosingcosts?
Workwithyourlenderandrealestateagenttoseeifthereareanywaystodecreaseordeferyourclosingcosts.Thereareno-closingmortgagesavailable,buttheyendupcostingyoumoreintheendwithahigherinterestrate,orbywrappingtheclosingcostsintothetotalcostofthemortgage(meaningyou’llenduppayinginterestonyourclosingcosts).
Homebuyerscanalsonegotiatewiththeselleroverwhopaysthesefees.Sometimesthesellerwillagreetoassumethebuyer’sclosingfeesinordertogetthedealfinalized.
BottomLine
Speakwithyourlenderandagentearlyandoftentodeterminehowmuchyou’llberesponsibleforatclosing.Findingoutyou’llneedtocomeupwiththousandsofdollarsrightbeforeclosingisnotasurpriseanyoneiseverlookingforwardto.
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Whyistheresomuchpaperworkmandatedbylendersforamortgageloanapplicationwhenbuyingahometoday?Itseemsthattheyneedtoknoweverythingaboutyouandrequirethreeseparatesourcestovalidateeachandeveryentryontheapplicationform.
Manybuyersarebeingtoldbyfriendsandfamilythattheprocesswasahundredtimeseasierwhentheyboughttheirhometentotwentyyearsago.
Therearetwoverygoodreasonsthattheloanprocessismuchmoreonerousontoday’sbuyerthanperhapsanytimeinhistory.
1.Thegovernmenthassetnewguidelinesthatnowdemandthatthebankprovebeyondanydoubtthatyouareindeedcapableofpayingthemortgage.
Duringtherun-uptothehousingcrisis,manypeople‘qualified’formortgagesthattheycouldneverpayback.Thisledtomillionsoffamilieslosingtheirhomes.Thegovernmentwantstomakesurethiscan’thappenagain.
2.Thebanksdon’twanttobeintherealestatebusiness.
Overthelastsevenyears,bankswereforcedtotakeontheresponsibilityofliquidatingmillionsofforeclosuresandalsonegotiatinganothermillion+shortsales.Justlikethegovernment,theydon’twantmoreforeclosures.Forthatreason,theyneedtodouble(maybeeventriple)checkeverythingontheapplication.
However,thereissomegoodnewsaboutthissituation.
Thehousingcrashthatmandatedthatbanksbeextremelystrictonpaperworkrequirementsalsoallowedyoutogetamortgageinterestratearound4%.
Thefriendsandfamilywhoboughthomestenortwentyyearsagoexperiencedasimplermortgageapplicationprocess,butalsopaidahigherinterestrate(theaverage30-yearfixedratemortgagewas8.12%inthe1990sand6.29%inthe2000s).
Ifyouwenttothebankandofferedtopay7%insteadofaround4%,theywouldprobablybendoverbackwardtomaketheprocessmucheasier.
BottomLine
Insteadofconcentratingontheadditionalpaperworkrequired,let’sbethankfulthatweareabletobuyahomeathistoricallylowrates.
GettingAMortgage:WhySoMuchPaperwork?
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Ifyou’veenteredtherealestatemarket,asabuyeroraseller,you’veinevitablyheardtherealestatemantra,“location,location,location” inreferencetohowidenticalhomescanincreaseordecreaseinvalueduetowherethey’relocated.Well,arecentsurveyshowsthatwhenitcomestochoosingarealestateagent,themillennialgeneration’smantrais,“local,local,local.”
CentSai,afinancialwellnessonlinecommunity,surveyedover2,000millennials(ages18-34)andfoundthat75%ofrespondentswouldusealocalrealestateagentoveranonlineagent,and71%wouldchoosealocallender.
Surveyrespondentscitedmanyreasonsfortheirchoicetogolocal,“includingpersonaltouch&handholding,longstandingrelationships,localknowledge,andamountofhassle.”
Doria Lavagnino,Cofounder&Presidentof CentSai, hadthistosay:
“Weweresurprisedtolearnthatonlineprovidersarenotyetasbigadisrupterinthissectoraswefirstthought,despitepurportedcostsavings.Wefoundthatmillennialsplaceahighvalueonthepersonaltouchandknowledgeofalocalagent.Buyingahomeforthefirsttimeisdaunting,andworkingwithalocalagent—particularlyanagentreferredbyaparentorfriend—couldprovidepeaceofmind.”
ThefindingsoftheCentSai surveyareconsistentwiththeConsumerHousingTrendsStudy,whichfoundthatmillennialspreferamorehands-onapproachtotheirrealestateexperience:
“Whileoldergenerationsrelyonrealestateagentsforinformationandexpertise,Millennialsexpectrealestateagentstobecometrustedadvisersandstrategicpartners.”
Whenitcomestochoosinganagent,millennialsandothergenerationssharetheirtoppriority:thesensethatanagentistrustworthyandresponsivetotheirneeds.
Thatsaid,technologystillplaysahugeroleintherealestateprocess.AccordingtotheNationalAssociationofRealtors,94%ofhomebuyerslookforprospectivehomesandneighborhoodsonline,and74%alsosaidtheywoulduseanonlinesiteormobileapptoresearchhomestheymightconsiderpurchasing.
BottomLine
Manywonderedifthistech-savvygenerationwouldprefertoworkwithanonlineagentorlender,butmoreandmorestudiesshowthatwhenitcomestorealestate,millennialswantsomeonetheycantrust,someonewhoknowstheneighborhoodtheywanttomoveinto,leadingthemthroughtheentireexperience.
WhyWorkingWithALocalRealEstateProfessionalMakesAllTheDifference
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Soyou’vebeensearchingforthatperfecthousetocall‘home’andyou'vefinallyfoundit!Thepriceisrightand,insuchacompetitivemarket,youwanttomakesureyoumakeagoodoffersothatyoucanguaranteethatyourdreamofmakingthishouseyourscomestrue!
FreddieMaccovered “4TipsforMakinganOffer”intheirlatestExecutivePerspective.Herearethe4tipstheycoveredalongwithsomeadditionalinformationforyourconsideration:
1. UnderstandHowMuchYouCanAfford
“Whileit'snotnearlyasfunashousehunting,fullyunderstandingyourfinancesiscriticalinmakinganoffer.”
This‘tip’or‘step’reallyshouldtakeplacebeforeyoustartyourhomesearchprocess.
Gettingpre-approvedisoneofmanystepsthatwillshowhomesellersthatyouareseriousaboutbuying,andwillallowyoutomakeyourofferwiththeconfidenceofknowingthatyouhavealreadybeenapprovedforamortgageforthatamount.Youwillalsoneedtoknowifyouarepreparedtomakeanyrepairsthatmayneedtobemadetothehouse(ex:newroof,newfurnace).
2. ActFast
“Eventhoughtherearefewerinvestors,theinventoryofhomesforsaleisalsolowandcompetitionforhousingcontinuestoheatupinmanypartsofthecountry.”
Theinventoryofhomeslistedforsalehasremainedwellbelowthe6-monthsupplythatisneededfora‘normal’market.Buyerdemandhascontinuedtooutpacethesupplyofhomesforsale,causingbuyerstocompetewitheachotherfortheirdreamhome.
Makesurethatassoonasyoudecidethatyouwanttomakeanoffer,youworkwithyouragenttopresentitassoonaspossible.
ReadyToMakeAnOffer?4TipsForSuccess
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3.MakeaSolidOffer
FreddieMacoffersthisadvicetohelpmakeyourofferthestrongestitcanbe:
“Yourstrongestofferwillbecomparablewithothersalesandlistingsintheneighborhood.Alicensedrealestateagentactiveintheneighborhoodsyouareconsideringwillbeinstrumentalinhelpingyouputinasolidofferbasedontheirexperienceandotherkeyconsiderationssuchasrecentsalesofsimilarhomes,theconditionofthehouseandwhatyoucanafford.”
Talkwithyouragenttofindoutifthereareanywaysthatyoucanmakeyourofferstandoutinthiscompetitivemarket!
4. BePreparedtoNegotiate
“It'slikelythatyou'llgetatleastonecounterofferfromthesellerssobeprepared.Thetwothingsmostlikelytobenegotiatedarethesellingpriceandclosingdate.Giventhat,you'llbegladyoudidyourhomeworkfirsttounderstandhowmuchyoucanafford.
Youragentwillalsobekeyinthenegotiationprocess,givingyouguidanceonthecounterofferandmakingsurethattheagreed-tocontracttermsaremet.”
Ifyourofferisapproved,FreddieMacurgesyouto"alwaysgetanindependenthomeinspection,soyouknowthetrueconditionofthehome."Iftheinspectionuncoversundisclosedproblemsorissues,you candiscussanyrepairsthatmayneedtobemadewiththeseller,orcancelthecontract.
BottomLine
Whetherbuyingyourfirsthomeoryourfifth,havingalocalrealestateprofessionalwhoisanexpertintheirmarketonyoursideisyourbestbettomakesuretheprocessgoessmoothly.Let’stalkabouthowwecanmakeyourdreamsofhomeownershipareality!
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CONTACTMETOTALKMOREI’msureyouhavequestionsandconcerns…
Iwouldlovetotalkwithyoumoreaboutwhatyoureadhere,andhelpyouonthepathtobuyingyournewhome.Mycontactinformationisbelow.Ilookforwardtohearingfromyou…
EqualHousingOpportunity
Michael M. AdamsLicensed Broker VA, MD & DC202-656-2891 | Direct