Why Getting Pre-Approved Should Be Your First Step

Why Getting Pre-Approved Should Be Your First Step | Keeping Current Matters

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

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How to Find Your Perfect First Home

Buying your first family home can be a monumental event, but it can also be stressful. After all, you may be focused on finding the perfect home to move into that is affordable for your budget. With many factors at play, it may seem challenging to find the ideal new space to call home; however, by using these tips, you could more easily locate the perfect starter home to move into.

Determine Your Budget
Your budget is a critical element that you do not want to overlook. There are two primary aspects of your budget to focus on: your down payment amount and your monthly housing payment. Both factors should be comfortable for you to manage without stressing your finances. Remember that you may want to estimate on the higher end and shoot for keeping expenses as low as possible. In many cases, expenses and payments may be higher than anticipated, so always aim for a lower figure when possible.

Define Needs and Wants
It is easy to let your mind wander as you imagine how grand your new home may be; however, when buying a starter home on a budget, you may need to carefully define the features that you absolutely need versus those that you want. This can help you to more quickly and easily find homes that meet your absolute needs within the budget you have in mind, and you may even benefit from having a few bonus items included in the home you firmly settle on.

Think About Suburban Communities
Many homebuyers who are looking for their first home may be turned off by homes located in the heart of urban areas or in otherwise expensive and high-end communities. If you are having trouble finding a desirable home that meets your needs in the confined search area you selected, consider expanding your search area to different suburban communities. In some cases, suburbs are much more affordable to live in.

Consider All Types of Properties
As beneficial as homeownership can be, remember that you do not necessarily have to buy a single-family home to enjoy these benefits. Another idea is to buy a condo. These may provide you with the space and features you need, but the cost may be much more affordable. In addition, maintenance on the outside of the condo and in your yard may be provided by your condo association.

The quest to find your family’s first home can be exciting, but it can also be demanding in many ways. Rather than get frustrated with your current situation, use these tips to more quickly and easily find the ideal property to move into.

By Hannah Whittenly

Seller Negotiation Tactics That Can Backfire

Homeowners should not become overconfident in a seller’s market, or they might end up sabotaging their sale. Realtor.com® recently featured common home seller negotiation tactics that can backfire, including:

Starting a bidding war.

“If mishandled, people may assume the worst, and the best offer may walk away,” Sep Niakan, broker-owner at HB Roswell Realty in Miami, told realtor.com®. For example, bidding war problems can surface when failing to clearly explain up front how you intend to handle multiple offers or when you give an offer deadline that is too many days away (some buyers may just move on).

Arguing over repairs.

Buyers may walk if sellers refuse to make repairs that turn up during a home inspection. The seller needs to carefully consider how good the offer is before refusing to make repairs, says Lucas Machado, president of House Heroes in Miami. “When the buyer’s offer is high, and the seller tries to negotiate away from legitimate repairs, the buyer may feel the seller is taking advantage of them,” he says.

Staying adamant about the closing date. 

Sellers may be trying to make the closing date so it perfectly aligns when they move into their new home. But buyers have scheduling issues of their own, too. “Sellers need to understand that they may have to move twice, since buyer and seller schedules seldom work out perfectly,” says John Powell, chief development officer at Help-U-Sell Real Estate in Tucson, Ariz.

Getting greedy over fixtures.

Fixture feuds are common ones. Sellers and their real estate agents need to carefully review before they list their home on what stays and what goes with the home. The buyer might “get so upset that a fixture they fell in love with is now missing that they won’t buy the home,” says Michael Hottman, associate broker at Keller Williams Richmond West in Richmond, Va. Replace anything valuable to sellers that won’t be staying with the house before showing it, or be willing to negotiate a comparable replacement. Read more: Fixture Feuds 

Read more negotiation tactics that could sabotage a deal.

Source: “Hardball Fouls: 6 Home-Selling Negotiation Strategies That Can Backfire,” realtor.com® (Nov. 1, 2017)

SBA Lowers 7(a) Equity Requirement

The SBA has finalized a standard operating procedure (SOP) update relating to equity requirements for 7(a) loans from 25% to 10%, beginning on January 1, 2018. This reduction in the equity requirements will open up the program to many more small business borrowers, and may spur small business growth around the country. Though it remains to be seen how the lenders themselves will respond to the lower equity requirements, this will potentially provide greater flexibility and more lending for small businesses who work with the SBA.

The SBA 7(a) loan program is the agency’s most popular program, providing loans of up to $5 million to fund startup costs, including purchasing new land (including construction costs), purchase or expand an existing business, and refinance existing debt. NAR Commercial members frequently work with small businesses as clients, and according to NAR’s Commercial Real Estate Lending Trends 2017 report, 6% worked with the SBA loan programs and 16% used the SBA refinance program. NAR frequently collaborates with the SBA to provide feedback on lending programs and raise awareness among REALTORS® of the options the agency provides.

How to Know a Fixer-Upper Isn’t a Money Pit

With inventories so tight, some home buyers may be giving a fixer-upper home a second thought. The price point and location may attract more buyers to bite, even though the home itself may need some TLC. But how do you tell a hidden gem from a hidden mess when shopping for a fixer-upper?

Paul Skema, president of the architecture and construction firm Roth Design + Build, and Jean Brownhill, founder of Sweeten, an online contracting service, recently shared important considerations for home shoppers looking at a fixer-upper. Here are a few of their tips, via Curbed.com:

Determine the scope of the project.

Are the renovations mostly cosmetic or are they structural? “Before you even look for an apartment or home, you want to understand what type of project you’re comfortable with,” says Skema. Projects where owners start making additions or knocking down walls can add a lot of money, time, and risk. “One small bathroom renovation is hundreds of decisions you’re going to need to make,” says Brownhill. “You have to understand who you are as a person and how easily you make decisions.”

Set a budget.

After the down payment, how much money will your buyers set aside for the fixer-upper? Factor in unexpected costs, such as planning an alternative living situation while the work is being done on the home. The architect and contractor should be able to provide you with estimates. “By setting the price, you’re setting the approximate level of craft, finishes, and customer service that you’re looking for,” Brownhill says.

Establish a team.

Larger projects require an architect, who will then hire a general contractor and then subcontractors. Homeowners will need to establish a communication path to prevent delays or budget pitfalls. And don’t just hire the lowest-bidding architect or contractor, Skema warns. “Higher-quality firms limit the risk of the project,” Skema says. “Cheaper firms, many with less knowledge and less experience, will require more involvement from the homeowner and ultimately bring more risk.” Select a team with the right experience, solid references, and a communication style that is complementary with yours.

Meet the neighbors and the building association.

Significant renovations may require approval from the homeowner’s association. Meet your neighbors beforehand and warn them about the home renovations so as not to aggravate them. Learn about the permit process through your city’s building department ahead of time. Upgrading plumbing and electrical systems, moving walls, or changing structural elements will likely require permits.

Protect yourself.

Make sure the contractor has both liability insurance and workman’s compensation. Also, ensure your homeowner’s policy will protect you from any contractor-caused issues.

See more tips on buying a fixer-upper at Curbed.com.

Source: “Considering a Fixer-Upper? Here’s What You Need to Know,” Curbed.com (Dec. 6, 2017)

Mortgage Interest Rates Are Going Up… Should I Wait to Buy?

Mortgage Interest Rates Are Going Up… Should I Wait to Buy? | Keeping Current Matters

Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.

This has caused some purchasers to lament the fact that they may no longer be able to get a rate below 3.5%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades:

Mortgage Interest Rates Are Going Up… Should I Wait to Buy? | Keeping Current Matters

Bottom Line

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.

Multigenerational Households May Be the Answer to Price Increases

Multigenerational Households May Be the Answer to Price Increases | Keeping Current Matters

Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. According to an article by Realtor.com,Nearly 1 in 5 Americans is now living in a multigenerational household – a household with two or more adult generations, or grandparents living with grandchildren – a level that hasn’t been seen in the U.S. since 1950.”

Another report that proves this point is the National Association of Realtors’ (NAR) 2017 Profile of Home Buyers and Sellers which states that 13% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:

  1. To take care of aging parents (22%, up from 19% last year)
  2. Cost savings (17%)
  3. Children over the age of 18 moving back home (16%, up from 14% last year)

Valerie Sheets, Spokesperson for Lennar, points out that,

“Everyone is looking for the perfect home for any number of family situations, such as families who opt to take care of aging parents or grandparents at home, or millennials looking to live with their parents while they attend school or save for a down payment.”

For a long time, nuclear families (a couple and their dependent children) became the accepted norm, but John Graham, co-author of “Together Again: A Creative Guide to Successful Multigenerational Living,” says, “We’re getting back to the way human beings have always lived in – extended families.”

This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living; “Data suggest that multigenerational living is more prevalent among Asian (28%), Hispanic (25%), and African-American (25%) families, while U.S. whites have fewer multigenerational homes (15%).”

Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (12% vs. 10%, respectively). Last but not least, basic economics.

Valerie Sheets brings to light the fact that home prices have been skyrocketing in recent years. She says that, “As home prices increase, more families tend to opt for living together.”

Bottom Line

Multigenerational households are making a comeback. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.

Feeling ‘Stuck in Place’? You Aren’t Alone… And There’s Hope!

Feeling ‘Stuck in Place’? You Aren’t Alone… And There’s Hope! | Keeping Current Matters

Whether you are a renter who is searching for your dream home or a homeowner who feels like your only option is to renovate, you have at least one thing in common: feeling stuck in place.

According to data from the National Association of Realtors’ Profile of Home Buyers & Sellers, the average amount of time that a family stays in their home remained at 10 years in 2017. This mark ties the highest marks set in 2014 and 2016. Back in 1985, when data was first collected on this subject, homeowners stayed in their homes for an average of only 5 years.

There are many reasons why homeowners have decided to stay and not to sell. A recent Wall Street Journal article had this to say,

“Americans aren’t moving in part because inventory levels have fallen near multidecade lows and home prices have risen to records. Many homeowners are choosing to stay and renovate, in turn making it more difficult for renters to enter the market.”

Sam Khater, Deputy Chief Economist for CoreLogic, equated the lack of inventory to “not having enough oil in your car and your gears slowly [coming] to a grind.”

Historically, a normal market (in which prices increase at the rate of inflation) requires a 6-7 month supply of inventory. There hasn’t been that much supply since August of 2012! Over the course of the last 12 months, inventory has hovered between a 3.5 to 4.4-month supply, meaning that prices have increased and buyers are still out in force!

Challenges in the new-home construction market have “helped create a bottleneck in the market in which owners of starter homes aren’t trading up to newly built homes, which tend to be pricier, in turn creating a squeeze for millennial renters looking to get into the market.”

“Economists said baby boomers also aren’t in a hurry to trade in the dream homes they moved into in middle age for condominiums or senior living communities because many are staying healthy longer or want to remain near their children.”

So, what can you do if you feel stuck & want to move on?

Don’t give up! If you are looking to move-up to an existing luxury home, there are deals to be had in the higher-priced markets. Demand is strong in the starter and trade-up home markets which means that your house will sell quickly. Work with your real estate professional to build in contingencies that allow you more time to find your dream home; the right buyer will wait.


Despite Odds, Ownership Rate Moves Higher

Despite tight housing inventories and rising home prices, the homeownership rate rose slightly in the third quarter and reaching the highest level since 2014, the U.S. Census Bureau reported Tuesday.

The homeownership rate rose to 63.9 percent in the third quarter, up slightly from 63.5 percent a year ago, the Census Bureau reported.

While the uptick isn’t considered statistically significantly, economists were still somewhat upbeat that the homeownership rate has now moved up for a second consecutive quarter. Also, more Americans are showing a preference for owning: The number of owner households increased by 755,000 from a year ago, while the number of renter households fell 348,000, according to the Census Bureau report.

Still, finding a home remains a challenge for many Americans. The inventory levels for both new and existing single-family homes is about 20 percent below the long-term average.

The homeownership rate sank to a 50-year low in the second quarter of 2016. It still remains below its historic norm of around 65 percent. In the years leading up to the housing bubble, the homeownership rate set a high of more than 69 percent.

The homeownership rate is showing the largest rebound in the Midwest, where the ownership rate climbed to 69.1 percent from 68 percent in the second quarter. The Midwest is also considered a place where home prices remain relatively affordable compared with other regions of the U.S., The Wall Street Journal reports. The homeownership rate mostly remained flat in other parts of the country that have seen home prices rise more quickly.

“The American dream of homeownership remains elusive, as the third-quarter figure shows little change in the overall  rate,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “The reason is simple. There is just not enough supply of homes to fully satisfy the desire to own. The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent.”

Source: “U.S. Homeownership Rises Slightly in Latest Quarter,” The Wall Street Journal (Oct. 31, 2017)

Meager Sales Rebound Underscores Tough Market

Following three consecutive months of declines, existing-home sales ticked up in September from the previous month—but ongoing inventory shortages, coupled with recent hurricanes, muted any annual gains, the National Association of REALTORS® reported .

Total existing-home sales, which include single-family homes, townhomes, condos, and co-ops, increased 0.7 percent to a seasonally adjusted annual rate of 5.39 million in September, 1.5 percent below a year ago. September also marks the second slowest month for sales in more than a year, behind August, NAR notes.

“Home sales in recent months remain at their lowest level of the year and are unable to break through, despite considerable buyer interest in most parts of the country,” says NAR Chief Economist Lawrence Yun. “REALTORS® this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings—especially at the lower end of the market—and fast-rising prices that are straining budgets of prospective buyers.”

Sales activity likely would have been stronger if not for Hurricanes Harvey and Irma, which struck Texas and South Florida in late August and early September, Yun says, adding that both areas saw “temporary but notable declines.”

5 Stats to Gauge the Market

Key indicators from NAR’s September existing-home sales report:

  1. Home prices: The median existing-home price for all housing types was $245,100, up 4.2 percent from a year ago. “A continuation of last month’s alleviating price growth, which was the slowest since last December, would improve affordability conditions and be good news for the would-be buyers who have been held back by higher prices this year,” Yun says.
  2. Days on the market: Forty-eight percent of homes sold were on the market for less than a month. Properties typically stayed on the market for 34 days, down from 39 days a year ago.
  3. All-cash sales: These transactions comprised 20 percent of sales, down from 21 percent a year ago. Individual investors accounted for the biggest bulk of cash sales; they purchased 15 percent of homes, which was the same level as a year ago.
  4. Distressed sales: Foreclosures and short sales accounted for 4 percent of sales, unchanged from a year ago. Broken out, 3 percent of sales were foreclosures, and 1 percent were short sales.
  5. Inventory: Housing inventory at the end of the month increased 1.6 percent to 1.9 million existing homes available for sale, but it still remains 6.4 percent lower than a year ago. Unsold inventory is at a 4.2-month supply at the current sales pace, down from 4.5 months a year ago.

Source: National Association of REALTORS®