Category Archives: For Buyers

Financial Resolutions That Can Help You Buy a Home in 2018

If you want to buy a home this year, you may be in the midst of planning—or perhaps you’re already well on your way. Purchasing a home is a process made up of many moving parts, including your finances, your overall goals, your planning ability and your current financial situation. That said, it’s the season for New Year’s resolutions, right? Start making some financial ones along with your other goals.

To get you started, here are five financial resolutions that can help you reach your goal of buying a home in 2018:

Make a Budget

Just over 40 percent of Americans have a budget. Budgets are invaluable to prospective homeowners, though. Why? Well, you can see how much you spend per month—and you need to know that before deciding on what mortgage payment you can afford.

Many people hazard a guess at their discretionary spending. You may think you spend $200 a month on dining out with friends, for example. But if you totaled it up, you may find that it comes out closer to $300.

That’s important, because those who spend more than they earn, or squeak by financially every month, often do it because they underestimate what they’re paying. So, use a personal finance software like Mint or You Need a Budget and enter everything you purchase for at least a month.

As you build your budget, divide it into categories determined by your monthly expenditures. You can tweak this going forward. Tally together what you need for necessities, like rent and utilities. Add together discretionary spending, like movies and eating out.

How are you doing? If you’re within your earnings, great! If not, review your spending for how you can save. Can you eat out less? Maybe cut down on that second or third video streaming service? Brew your coffee at home?

Save, Save and Save Again

Purchasing a house costs money. If you’ve been diligently saving for the down payment, congratulations. If not, one of the most crucial things you can do to prepare for homeownership is saving for the down payment.

Once you’ve got the down payment, continue to save, as you will need moving expenses and a cash cushion. As a rule of thumb, moving and establishing a household always costs more than you think. You may need new furniture or plumbing repairs, so be sure you have an emergency stash of cash.

Establish a Clear Goal

Like budgeting for your expenses, you also need to know your overall savings goal. It’s like creating a fund in the event of losing your job—you want a six-month cushion, at least. You will find it easier to save if you can visualize yourself reaching your final goal.

Scope out starter homes in your area. Look at neighborhoods you’d like to live in with your family. Use an online mortgage calculator to figure out how much you’d be paying for the average starter home per month.

Once you have a general sense of how much your mortgage would cost, as well as utilities, figure out how much you will need for a down payment. While six months’ worth of your salary is ideal, you can also aim for three months to start.

Get Your Credit Score

Most mortgage lenders will only approve mortgages for people with good to excellent credit scores. Good credit scores range from 690 – 720 and excellent credit scores range from 720 – 850. The average credit score in the United States is 679.

Factors that determine your score include:

  • History of debt payment
  • Total amount of debt
  • Length of credit history
  • Number of credit sources

Credit scores are relatively easy to obtain, whether from banks, financial software or one of the credit reporting companies, such as TransUnion. In fact, you’re entitled to a free credit score each year, or every 12 months from Experian, TransUnion and Equifax.

Find out your score before applying for a mortgage.

If you have a bad credit score, it’s unlikely a bank will approve your mortgage application. But, the great thing about getting your credit report is that you will find out what categories are pulling down the score. Knowledge is power—once you know, you can fix it. If your record of paying bills on time is poor, for example, try to take care of them the minute you get the bill. Your score will go up.

If your score is average, see if you can increase it before you apply. Many lenders give preferential interest rates and other financial advantages to people with high credit scores, so you want the highest credit score you can get before applying.

Pay Down Debt

There are two main reasons you want to pay down debt as much as you can before purchasing a house.

First, the less debt you have, the higher your credit score is likely to be. The higher your credit score, the more likely your lender is to give you preferential treatment, like a lower interest rate or fewer points and fees.

Second, the less debt you have, the lower your money debt obligations are likely to be. Less debt can free up monthly cash that you can put toward your savings, home purchases or other expenses, instead of directing that money toward paying off interest fees.

Ready to become a homeowner this year? With these five resolutions, you can make 2018 your year by boosting your savings and credit score, as well as becoming a go-to candidate for a mortgage with low-interest and fees.

Advertisements

Don’t Get Caught in the Rental Trap!

Careful…Don’t Get Caught in the Rental Trap! | Keeping Current Matters There are many benefits to homeownership. One of the top benefits is being able to protect yourself from rising rents by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped

Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

In the Joint Center for Housing Studies at Harvard University’s 2016 State of the Nation’s Housing Report, they revealed that The number of cost-burdened households rose to 21.3 million. Even more troubling, the number with severe burdens (paying more than 50% of income for housing) jumped to a record 11.4 million. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

It’s Cheaper to Buy Than Rent

In Smoke’s article, he went on to say,

“Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.” “While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible for a mortgage.

The ‘REAL’ News about Housing Affordability

1

Some industry experts are claiming that the housing market may be headed for a slowdown as we proceed through 2017, based on rising home prices and a potential jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize that during that time, the housing crisis left the market with an overabundance of distressed properties (foreclosures and short sales). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years (shaded in gray) and look at the current index as compared to the index from 1990 – 2008:

2

Though prices and rates appear to be increasing, we must realize that affordability is composed of three ingredients: home prices, interest rates, and income. And, incomes are finally rising.

ATTOM Data Solutions recently released their Q1 2017 U.S. Home Affordability Index. The report explained:

“Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

Bottom Line

Compared to historic norms, it is still a great time to buy from an affordability standpoint.

Which Homes Have Appreciated the Most?

Which Homes Have Appreciated the Most? | www.EdgemontRealEstate.wordpress.com

Home values have risen dramatically over the last twelve months. The latest Existing Home Sales Report from the National Association of Realtors puts the annual increase in the median existing-home price at 7.1%. CoreLogic, in their most recent Home Price Insights Report, reveals that national home prices have increased by 6.9% year-over-year. The CoreLogic report broke down appreciation even further into four different price categories:

  1. Lower Priced Homes: priced at 75% or less of the median
  2. Low-to-Middle Priced Homes: priced between 75-100% of the median
  3. Middle-to-Moderate Priced Homes: priced between 100-125% of the median
  4. High Price Homes: priced greater than 125% of the median

Here is how each category did in 2016: Which Homes Have Appreciated the Most? | www.EdgemontRealEstate.wordpress.com

Bottom Line

The lower priced homes (which are more in demand) appreciated at greater rates than the homes at the upper ends of the spectrum.

4 Great Reasons to Buy This Spring!

4 Great Reasons to Buy This Spring! | Keeping Current Matters

Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.9% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.8% over the next year. The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4% over the last couple months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by at least a half a percentage point this time next year. An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You are Paying a Mortgage

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s. As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity. Are you ready to put your housing cost to work for you?

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But what if they weren’t? Would you wait? Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Economic Confidence May Be Housing’s Buoy

Consumers are getting more confident about the economy and their finances, and that could bode well for the real estate market, according to the National Association of REALTORS®’ latest Housing Opportunities and Market Experience survey.

Indeed, the share of households who say the economy is improving surged to its highest share in the survey’s five-quarter history, reaching 62 percent (up from 48 percent a year ago).

The majority of positive sentiment about the economy is coming from respondents living in the Midwest and rural areas, according to the survey. Last March, 49 percent of Midwesterners and 35 percent of Americans living in rural areas thought the economy was improving. Today, 67 percent of Midwesterns and 63 percent of rural residents report an improvement to the economy.

“Confidence levels generally rise after a presidential election as the nation hopes for the best,” says Lawrence Yun, NAR’s chief economist. “Even though it is a highly polarized country, consumers for the most part have upbeat feelings about the economy right now. Stronger business and consumer morale typically lead to even more hiring and spending, which in turn encourages more households to make big decisions like buying a home. These positive developments would be especially good news for prospective homebuyers in the more affordable Midwest region.”

Households are also feeling more confident about their finances. Respondents in the HOME survey reported confidence that their financial outlook will improve over the next six months. Financial confidence is at the highest levels in the survey’s history (reaching 62.6 on the index in March, up from a 58.1 reading a year ago).

Renters, however, may not be as confident. Fifty-six percent of renters say now is a good time to buy, down from 62 percent a year ago. Younger households, renters, and Americans living in more pricey areas, like the western region, are the least optimistic about buying. Meanwhile, 80 percent of homeowners say now is a good time to buy a home.

“Inventory conditions are even worse than a year ago and home prices and mortgage rates are on an uphill climb,” says Yun. “These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow. Unless there’s a significant boost in supply levels this spring, these constraints will unfortunately slow or delay some prospective buyers’ pursuit of purchasing a home.”

Source: “2017 Q1 HOME Survey,” National Association of REALTORS® (March 2017)

Do You Know the Real Cost of Renting vs. Buying?

Do You Know the Real Cost of Renting vs. Buying? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Historically, the choice between renting or buying a home has been a close decision.
  • Looking at the percentage of income needed to rent a median-priced home today (30%), vs. the percentage needed to buy a median-priced home (15%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you could use your housing costs to own a home of your own!

Pets Have Pull for Homebuyers and Renters

Three bathrooms? Check.

Garage? Check.

Doggy door? Check.

Pets Have Pull for Homebuyers and Renters

Pets are family—and homes have to accommodate family. According to a recently released report by the National Association of REALTORS® (NAR), 81 percent of Americans say their pets play a role in their housing situation—so much so that 89 percent say they would not give up their pet due to a housing restriction. What’s more: Nineteen percent of Americans say they would consider moving for their pet, while 12 percent have moved for their pet.

Moving is not the only option for pet owners, however. More than half (52 percent) of Americans in the report completed a renovation for their pet, such as adding a dog door, building a fence around the yard or installing laminate flooring.

Pets also have pull when it comes to buying or renting a home, according to the report. One-third of pet owners will not make an offer on a home that does not meet the needs of their pet, while 61 percent have a hard time finding a pet-friendly homeowners association or rental.

“In 2016, 61 percent of U.S. households either had a pet or planned to get one in the future, so it is important to understand the unique needs and wants of animal owners when it comes to homeownership,” says NAR President Bill Brown. “REALTORS® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.”

The Impact of Homeownership on Family Health

The Impact of Homeownership on Family Health | Keeping Current Matters

The National Association of Realtors recently released a study titled ‘Social Benefits of Homeownership and Stable Housing.’ The study confirmed a long-standing belief of most Americans:

“Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.”

Today, we want to cover the section of the report that quoted several studies concentrating on the impact homeownership has on the health of family members. Here are some of the major findings on this issue revealed in the report:

  • There is a strong positive relationship between living in poor housing and a range of health problems, including respiratory conditions such as asthma, exposure to toxic substances, injuries and mental health. Homes of owners are generally in better condition than those of renters.
  • Findings reveal that increases in housing wealth were associated with better health outcomes for homeowners.
  • Low-income people who recently became homeowners reported higher life satisfaction, higher self-esteem, and higher perceived control over their lives.
  • Homeowners report higher self-esteem and happiness than renters. For example, homeowners are more likely to believe that they can do things as well as anyone else, and they report higher self-ratings on their physical health even after controlling for age and socioeconomic factors.
  • Renters who become homeowners not only experience a significant increase in housing satisfaction but also obtain a higher satisfaction even in the same home in which they resided as renters.
  • Social mobility variables, such as the family financial situation and housing tenure during childhood and adulthood, impacted one’s self-rated health.
  • Homeowners have a significant health advantage over renters, on average. Homeowners are 2.5 percent more likely to have good health. When adjusting for an array of demographic, socioeconomic, and housing–related characteristics, the homeowner advantage is even larger at 3.1 percent.

Bottom Line

People often talk about the financial benefits of homeownership. As we can see, there are also social benefits of owning your own home.

Will Housing Affordability Be a Challenge in 2017?

Some industry experts are saying that the housing market may be heading for a slowdown in 2017 based on rising home prices and a jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR). Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Will Housing Affordability Be a Challenge in 2017? | Keeping Current Matters

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify. The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. But, wait a minute… Though the index skyrocketed from 2009 through 2013, we must realize during that time the housing crisis left the market with an overabundance of housing inventory with as many as one out of three listings being a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock. The market is recovering, and values are coming back nicely. That has caused the index to fall. However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008: Will Housing Affordability Be a Challenge in 2017? | Keeping Current Matters

We can see that, even though prices have increased, mortgage rates are still lower than historical averages and have put the index in a better position than every year for the nineteen years before the crash.

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.