Should You Apply for an Online Mortgage?

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Jacksonville FL Real Estate, Jacksonville FL real estate agents, Jacksonville Real Estate, lock-in a good mortgage rate, low mortgage rates, mortgage loan, mortgage rates, real estate, real estate investing, Real Estate Team

A mortgage is a big financial responsibility. Yet, if you’re like half of all home buyers, chances are you won’t shop around for the best mortgage. The result could be the loss of thousands of dollars…both in up front costs and in monthly payments. It pays (a lot) to shop around.

As a home buyer, you have three options for getting a mortgage: a traditional bank, a mortgage broker, and an online mortgage lender. Here’s a quick breakdown of the differences. 

1. The Traditional Bank

A traditional bank offers in-house loans. You may get better rates and closing costs from your own bank if you’ve banked there a long time. On the other hand, you will only get the rates and terms they dictate, which might be limited. You probably won’t have a lot of choices. It pays to check at other institutions to compare the rates and terms of your bank’s offer. 

2. A Mortgage Broker

A mortgage broker’s job is to act as your guide to helping you find a mortgage that fits your needs. The broker can shop around to find banks and other sources of funds that are the best rates and terms, based on your credit and income. 

Brokers are usually experienced loan specialists. Unlike big-bank loan officers, brokers will work with you to answer your questions and look for options. If you bring your big bank’s offer to a broker, he or she can compare for you. 

Brokers promote loan products that provide them with a finders’ fee. Since those fees are already built into the loan products (whether to benefit a broker or a bank’s own loan officer costs), you likely won’t see much of those fees passed on to you. 

3. An Online Mortgage Lender

The great advantage to using an online mortgage lender is that you may get great rates and fees. Online lenders don’t have to cover a lot of overhead, so they can offer discounts to their borrowers through lower rates or closing costs. Even a quarter of a percent lower interest rate can potentially save you thousands of dollars over the life of your loan.

Another advantage is that you don’t need to talk to anyone. How convenient to have a burger, watch TV, and fill out a loan application all at once! Of course, convenience is also a big drawback. 

If you have a question, no matter how small, you won’t be able to get a quick answer, if at all. With online lenders, they will assign someone to work with you (a loan officer). That person has a huge work load and is often fairly inexperienced with nuanced questions. And in my experience, the questions are always nuanced. 

For example, take the question of assets and liabilities. Do you include your child’s college savings account? Is that going to risk you using that account if needed to pay for tuition next month? Should you include the fact that you’re on your nephew’s car loan, even though he’s paid it on his own for years and it’s almost paid off? Is your secret PayPal account going to show up on your assets, even if you don’t want it to?  

So Which Should You Use?

Use at least two sources. Make sure one of them is a mortgage broker. 

The Online Lender: If your situation is relatively straight forward…you have a regular job, a regular pay check, no weird debts or assets, then an online lender can be a great option. Make sure you read about warnings in the section below.

Big Bank or Credit Union: If you have a great relationship already, see if they have special rates and terms for long-time customers. In my experience, you’ll often end up in a situation similar to working with an online lender, because the bank is going to assign a loan officer, who may or may not be able to answer your questions. 

The Mortgage Broker: I highly recommend that one of your comparison points be a mortgage broker. Brokers are usually very experienced and can answer a lot of your questions. They’ll be able to shop around to find loans that might have comparable rates and terms to the ones offered by your bank or online lender. And they’ll let you know if your bank or online lender is a better deal. 

The biggest problem with applying to multiple sources is the fees. You’ll have to fill out the loan application multiple times, and your credit will be pulled multiple times, and you’ll have to pay multiple application and credit report fees. This is the reason most people don’t apply to multiple sources. However, you may be able to do a preliminary application, especially at the online sources.  Find out before completing the application if there are fees.

Warnings about Online Lenders

Most of them are not lenders at all. They might be brokers, they might “non-bank investment companies,” or they might simply be third-party comparison sites. There’s nothing wrong with any of these, but you should know what you’re getting. 

Lendingtree or Bankrate are examples of third-party comparison sites. They won’t give you a loan and can’t tell you which loans are best for you. They’ll simply show you funding sources that they have affiliate agreements with. You may find this useful for comparing different lender rates. Google “Mortgage Comparison Websites”.

Most online lenders are non-bank investment outlets. Quicken Loans or Meridian are examples. They’ll process your application and fund the loan using large institutional investor funds. They’ll likely sell your mortgage as part of a package of loans to other investors. There’s nothing wrong with this. It’s very common in the mortgage world. Before filling out any online mortgage application, check on the site’s credentials. You don’t want to start giving financial information online without vetting them first. Google “Non-Bank Mortgage Lenders”.

A few of the online lenders are in fact mortgage brokers, such as Intellimortgage. You’re simply filling out a loan application in advance, and they’ll consult with you to find you the best mortgage. I’d personally rather meet with a mortgage broker in person or talk by phone, rather than using an online mortgage broker. It’s just easier to get answers from a live person. Google “local mortgage brokers in (your location)”. Find a live person to talk to.

And of course, big banks like HBSC and Chase are online, too, so when you get a list of options from LendingTree or you Google “online mortgage,” there’s a very good chance you’ll simply be getting a bank. Double check whether the name of the company you’re shown in any online search or list is a bank, a non-bank, or a broker. 

Will Applying Ruin My Credit? 

It’s true that applying for credit can lower your credit score. However, when applying for mortgage loans for comparison purposes 2-3 times, your credit score will likely not be affected. Even if it is, it’ll usually only drop a little and only after you’ve already applied. If your score drops, a simple explanation that you were comparing lenders will suffice and your original rate at the time of application will stand.

Ask us for some recommendations for mortgage brokers in our area! Kevin and Jennifer Hanley, REALTORS http://www.HanleyHomeTeam.com 904-515-2479 Team@HanleyHomeTeam.com

Fed vows to keep rates near zero until inflation tops 2%, likely keeping meager rates 4 to 5 years

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Buying a home, buying a home for the first time, buying your first home, first-time homebuyer, interest rates, low interest rates, real estate, real estate advice, real estate investing, real estate jacksonville fl, Real Estate Team, Selling a home, selling your home

Paul Davison USA Today Published 2:00 pm ET Sep 16, 2020 Updated 5:17pm ET Sep 16, 2020

The Federal Reserve said Wednesday that it will likely keep its key interest rate near zero until the economy reaches full employment and inflation runs “moderately” above its 2% goal for “some time,” a vow that economists say is likely to keep rates at rock bottom for the next four to five years.

The central bank made the market-friendly commitment sooner than many top economists anticipated and it drove the Dow more than 150 points higher before the market gave back the gains on persistent tech stock jitters. .

The Fed’s assertion is consistent with its new policy framework unveiled last month, which states that officials will no longer preemptively raise rates as unemployment falls to head off a potential spike in inflation. Rather, the Fed will allow inflation to edge above 2% for a time to make up for years of persistently low inflation and to bolster job gains.

The Fed plans to keep its benchmark short-term rate near zero until “labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” the Fed said in a statement after a two-day meeting.”

That, the central bank said, will help ensure inflation averages 2% “over time” and the public cam reliably expect 2% price increases. 

“These are powerful commitments that we think will support the full recovery as long s it takes,” Chairman Jerome Powell said at a news conference.

Previously, the Fed said it would maintain near-zero rates “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The U.S. economy has partially recovered from the coronavirus recession more rapidly than expected, but the Federal Reserve envisions a slog the rest of the way.Get the Coronavirus Watch newsletter in your inbox.

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“The labor market is recovering but it’s a long way — a long way — from maximum employment,” Powell said.

Besides keeping its benchmark rate near zero, new Fed forecasts indicate it likely will stay there at least through 2023, based on policymakers’ median estimate. That’s a year longer than its previous estimate since the Fed’s forecast horizon was extended. But the promise to keep rates near zero until inflation picks up should maintain rock-bottom rates until mid-2024 or possibly longer, says economist Kathy Bostjancic of Oxford Economics. 

The Fed now predicts the economy will contract by 3.7% this year, below its 6.5% estimate in June, and the 8.4% unemployment rate will fall to 7.6% by year-end. The Fed previously reckoned the jobless rate would end 2020 at 9.3%.

Yet the economy may be at a crossroads. States are allowing shuttered businesses to reopen, putting furloughed employees back to work and boosting growth. But Congress is deadlocked over a new stimulus to restore enhanced federal unemployment benefits and keep struggling small businesses afloat. The number of permanently laid off workers and bankrupt businesses is rising. And the specter of a second wave of the virus this fall looms.   

A look at the Fed’s views on:

Interest rates

All 17 Fed policymakers prefer no hikes from the near-zero federal funds rate through next year and the median projection is for no increases through 2023. But one official believes a quarter-point rate increase will be warranted in 2022 and four think the first move should come in 2023.

Bond purchases

The Fed said its massive bond purchases are now designed partly to juice the economy by lowering long-term interest rates, such as for mortgages, as well as ensure that markets run smoothly. Previously, the Fed said the purchases — of $120 billion a month in Treasury bonds and mortgage-backed securities — were aimed at reviving markets for those assets that virtually came to a halt early in the crisis.

The change eventually could pave the way for the Fed to buy bonds with longer-term maturities to more effectively push down long-term rates.

The economy

Fed officials predict the economy will shrink 3.7% this year, less than their 6.5% forecast in June. But they forecast growth of 4% in 2021, down from their prior 5% estimate, and 3% in 2022.

Gross domestic product plunged at a record 31.7% annual rate in the second quarter, a bit better than the initial 32.9% forecast.

The economy has bounced back faster than expected, largely as a result of stronger consumer spending, Goldman Sachs says. While COVID-19 surges in the South and West led some states to pause or reverse reopening plans, hospitalizations and death tolls have improved recently. IHS Market predicts growth of about 30% in the current quarter.

But Barclays says the recovery is likely to slow in the months ahead, in part because a snap-back in auto production to pre-pandemic levels has played out. Powell noted that many laid-off workers have stopped looking for jobs.

Jobs

Unemployment is projected to fall from the current 8.4% to 7.6% by the end of the year, 5.5% by the end of 2021 and 4.6% by the end of 2022, according Fed officials’ median estimate.

The economy has regained nearly half the 22 million jobs lost in the early days of the pandemic as businesses have reopen but economists say recouping the remainder will be tougher. The number of workers permanently laid off jumped from 2.9 million to 3.4 million in August, indicating some temporary layoffs have become permanent.

Of the 11 million idled workers who have not been called back or found new jobs, Powell said, “Our commitment is not to forget those people.”

Inflation

The Fed estimated its preferred measure of annual inflation will close out 2020 at 1.2%, up from its 0.8% forecast in June, before rising to 1.7% in 2021. A core measure that strips out volatile food and energy items is projected to end the year at 1.5%, above officials’ previous 1% prediction.

Inflation has picked up recently, chiefly because of a surge in used car prices and a partial rebound in apparel prices and air fares that were depressed by the effects of the pandemic.

Even before the crisis, inflation was held down for years by discounted online prices and the globally connected marketplace.  The Fed’s new policy framework aims to juice inflation but economists say there’s no guarantee it will work.

 While modest price increases are generally a good thing, persistently low inflation can lead to deflation, or falling prices, that prompts shoppers to put off purchases.

Curious about buying or selling a home in today’s market? Give us a call and let’s chat! Jennifer and Kevin Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside http://www.HanleyHomeTeam.com

Pet Doors – From Simple to Smart

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moving with pets, pets, real estate, real estate advice

Does your four-legged friend need a little more freedom? Pet doors offer animals independence and allow their owners more flexibility in their day-to-day schedules. Whether you’re more of a traditionalist, or you’re inclined to adopt the latest and greatest tech, there’s something for you (and your furry friends). 

Classic flap
We’ve all seen this one, a small opening with a flap that allows a pet access in and out of the house. These types of pet doors are popular due to their versatility. They can be installed in a door or cut into the side of a home. They can be positioned to access your home’s interior or just the garage or patio. These can even be installed in screen doors or glass panels. If security is a concern, these can often be outfitted with a sliding insert that will keep out intruders of both the critter and human variety. 

Patio/panel type
This is a good option if your live in a rental or are just weary of cutting a hole in a door or the side of your home. This option is basically a panel that fits within the track of a sliding door and has a pet door flap built-in. If you’re on a tight budget, renting, or the very thought of a drill makes you sweat – this one is for you. 

Smart doors
Electronic or magnetic pet doors come with sensor tags that attach to your pets’ collar, allowing automatic entry or exit when they get close to the door. Only a pet with a sensor tag can enter or exit through them. Some electronic pet doors can be programmed to open during certain times of the day if your furry friend is the schedule-keeping type. There are even doors that connect to your smartphone, so you’ll be notified when Milo or Otis step out. If you can afford it, a smart door is an excellent option that mitigates many of the most common concerns with pet doors – including security, pet safety, and energy efficiency.

You can’t have a pet door without a house to put it in! That’s where our expertise comes in – Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com

Do Open Houses work…Or are they a waste of time?

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home selling strategy, open house, real estate, real estate advice, real estate jacksonville fl, Real Estate Team, real estate tips, selling your home, The best real estate agent in Jacksonville

There are definite reasons to hold open houses, and reasons to not. Read more to evaluate your best course of action!

Photo by Ketut Subiyanto on Pexels.com

When you hire a real estate agent to sell your home, one of the first things they’ll suggest is hosting an open house so that potential buyers can casually check out your property on a weekend afternoon. But while open houses are promoted by agents as a great way of finding a buyer, a US study by the National Association of Realtors (NAR) found that the success rate of open houses is a mere 2% to 4%. Similar studies in other countries have mirrored these results.

That means out of 100 open houses, only 2 to 4 homes are purchased by buyers who came through the open house. Of course, the vast majority of open houses are not conducted well, and many are unnecessary. Out of 100 open houses, perhaps only 20 are done correctly. 

They’re held at the wrong times, wrong days of the week, wrong times of the year. They are not marketed effectively, the homes are not prepared, and the agents are unskilled at communicating value to potential buyers. Eliminating the 80 useless open houses would make the purchase percentages look more like 10% to 20% of homes being sold on open house. In other words, the chances of selling your house based on an open house are higher if the open house is done well, according to best practices. 

Consumer sentiment about open houses has waxed and waned over the years, along with the ups and downs of the real estate market. In 1995, 41% of sellers tried open houses to sell their homes, according to data from NAR. By 2000, it had dropped to 28%. Beginning in 2003, however, as the market started to heat up again, that number began rising. By 2014, 51% of all sellers were using open houses, though not all agreed they were effective. 

Some 45% of sellers have recently found open houses only “somewhat useful” and another 12% didn’t consider them useful at all, according to the NAR. This is survey data, so there is no evaluation of what those sellers meant by “useful” and “somewhat useful.”

So with all the sketchy data, why do real estate agents still promote open houses as a listing and selling tool? Let’s look at a few arguments for and against open houses, and explore the pros and cons.

Reasons not to hold an Open House

There are many people—agents and consumers—who argue against open houses. Some sellers just don’t like the idea of random people and neighborhood “lookie-loos” traipsing through their house. Some are concerned about theft. 

Some agents are concerned about their own safety when holding an open house, especially in out-of-the-way locations. Some agents consider it a waste of their time, based on the low potential results…they’d rather be managing other aspects of their business (or golfing) during that time. 

One of the main arguments used by sellers and the general public against open houses is that agents only use them to find buyers that they’ll take away to other houses. 

But this is not necessarily a bad thing. Real estate is a community product and selling it is a community event. Buyers may meet an agent at your open house, then go buy another house…but another buyer somewhere is meeting another agent at another open house, and that agent is bringing the buyer to your house. 

Open houses bring buyers out. By having an open house, you’re contributing to the overall health of the industry. As many as 45% of buyers use open houses to research the market. Many go to open houses, then discover they like the neighborhood and look for other homes in that area with their agent. Your house might be one of their “test” houses, or it may be one that they decide to buy because of another person’s open house in your neighborhood. It’s a network.

Reasons to Hold an open house

In addition to being part of a network of buyers and home sellers, consider these five additional reasons to hold an open house:

1. Get “shoppers” out of the way

A lot of buyers will want to see your house as soon as it’s listed. You can quickly become overwhelmed by the repeated appointment requests. Showing your home is disruptive and quickly becomes annoying. Having to keep the place clean and be ready to vacate on the spur of the moment may seem fine for the first two days or so, but you’ll quickly lose patience. 

A better approach would be to take a day trip away from your home on the first weekend of your listing and let your agent hold an open house. 

Your agent can get a ton of those early “shoppers” through your house at one time, rather than bothering you with appointment after appointment. Most of those buyers (99.9%) will eliminate your house as an option during the open house. Some will want to view it again. And some very small percentage may want to make an offer. But the biggest reason to hold the initial open house is to get the lookie-loos and initial round of buyers out of the way. They’re just shopping, not buying.

You may want to ask your agent to hold the house open on both Saturday and Sunday of that first weekend. By doing a “new listing” open house, you won’t eliminate all appointments (some people can’t come during the open house time), but a large percentage will come during the open, and that means those people won’t be bothering you during the week to set appointments.

2. Create an “auction effect”

There is a principle in psychology called scarcity – it’s the desire that’s in all of us to want to get something valuable before someone else does. For instance, have you ever heard of a situation where more than one person was interested in a house? In those situations, there was a bidding war, where several buyers competed for the same house. In most cases like this, the house sold for more than the owners were asking – and the buyers felt great about it because they won. Someone else wanted the house, but they got it first!

Situations like this are called the auction effect. Your agent can orchestrate a sense of scarcity using an open house as the centerpiece of a plan to generate a lot of interest very quickly.  Again, this is best done at the start of the listing period, or at a significant price reduction if the house hasn’t sold yet.

3. Raise the profile of a community

While open houses may be declining in many parts of the country, some neighborhoods are finding them effective ways to raise the profile of an entire community, if a number of open houses are all done at the same time. 

Recently, four neighborhoods in the Lemon Grove area of San Diego teamed up for a joint open house with 25 of the area’s homes open for viewing on a single day. The result was that the entire area saw a spike in sales of 20%.

4. Get valuable feedback

A new listing open house is a great time to get feedback on the property. Information is valuable. Your agent should be asking things like, “How does this house compare to others you’ve been seeing?” “What do you like about the home?” “What would prevent you from making an offer?” Your agent can use different techniques to gather feedback, such as surveys, direct conversation, feedback forms, etc. 

It’s very important that you then take that information to heart. If you keep hearing the same messages over and over again, then those things are real. Those are the very things MAY prevent your home from selling for as much as you’d like, or as quickly as you like. It doesn’t hurt to listen and then have an open-minded discussion with your agent about how to remedy those issues.

Contrary to popular opinion, most agents are not trying to keep your house price artificially low in order to move it out of inventory and get paid faster. Most agents will just tell you the truth, and back it up with evidence, including comments by buyers. 

5. Showcase a unique property

In some cases, a house is just too unique to market without an open house.  Art professor Mercedes Teixido and her husband had three open houses in six weeks showcasing their Pasadena, California home. Their house, they say, was the kind you had to see to believe. “It had a unique sensibility,” Teixido said, with spacious rooms and a large amount of built-in furniture that was crafted by hand. Sometimes you have to get people into a house in order to get them to fall in love with it. Many houses in less desirable locations have sold because someone went inside on an open house and fell in love with it.

Final Word

When you hire us to represent you in the sale of your home, we’ll discuss the pros and the cons to having open houses as part of your marketing plan.

We’ll let you know what’s happening in the market—whether open houses are effective right now or not—and whether your house would benefit from open houses, given its style, price, and location.

Please call to set a listing appointment, if possible at least 2 months before your planned move. Kevin and Jennifer Hanley, REALTORS http://www.HanleyHomeTeam.com Keller Williams Realty Atlantic Partners Southside

7 WAYS HOME BUYERS LOSE MONEY BEFORE THEY EVEN BUY A HOME

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buy now, buyer home hunting tips, buyer market, Buying a home, buying a home in Jacksonville, buying new construction, Buying new construction; working with a real estate agent; Buying from a builder; negotiating with a builder; having someone on your side, real estate

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A MORTGAGE IS THE BIGGEST DEBT MOST OF US WILL EVER HAVE. BECAUSE THE NUMBERS ARE SO BIG, THOUSANDS OF DOLLARS (OR POUNDS, SHEKELS, OR OTHER MONETARY SYMBOLS) CAN SLIP AWAY WITHOUT A BORROWER EVER NOTICING. HERE ARE 7 MONEY-DRAINING CRACKS THAT HOME BUYERS NEED THINK ABOUT.

1. Ignoring the true cost of home ownership

Owning a home comes with new expenses that surprise many buyers. Even experienced home owners can forget how much it costs to upgrade a home, improve outdated features, and fix hidden problems. It’s wise to take these costs into consideration before signing on the dotted line.

Before purchasing, calculate realistically what you’ll need to spend to get the home up to your standard. In some cases, you may be better off paying more for a home that’s already been upgraded than paying for a cheaper home that needs more work. 

On the other hand, if you are struggling to make a down payment on a more expensive home, then buying cheaper and putting money into it over time and using your own sweat (“sweat equity”) might offset the higher down payment you would have had to make on the more expensive home. 

A 20% down payment on a $300,000 is $60,000. If you can’t afford that, consider buying a nearby fixer-upper. That home might only cost $225,000, with a down payment of $45,000. The extra $15,000 might be enough for you to do many upgrades that would bring it close to the standard of the more expensive home, but you won’t need to come up with that extra $15,000 up front. This might be a good investment option—as long as you go into it with eyes wide open…along with a really good home inspection.

Ongoing Maintenance

The longer you own a home, the more you’ll want or need to make expensive fixes. A new roof may be in your future, as well as repairs to a cracked driveway or installation of a new fence. Some items can sneak up on you, like tree removal service, a broken water main, and termites!

As a rule of thumb, budget 1 to 2% of your home’s purchase price annually for maintenance. If your home will cost you $250,000, expect to spend $2,500 to $5,000 annually on unglamorous purchases like a new water heater or having your furnace serviced. The older your home and the larger it is, the more you’ll spend. 

Also consider a savings fund for big ticket items. If your roof has a life expectancy of 5 years, start putting aside a little each month now.

2. Becoming house poor

There are many places in your life where you’ll need to put money besides your house. Replacing a worn-out car. Saving for retirement. Building a college fund for the kids. Life-altering vacations. Even buying furniture for your home. If you’re spending too much on a mortgage, you won’t have money for these other investments.

A general rule for housing affordability is to spend no more than 28% of your gross income on a mortgage. So, if you earn $75,000 a year, you should spend no more than $1,750 a month on payments, including insurance premiums and association fees. You can use a mortgage calculator to see how much house you can buy for the amount you can afford monthly, and how much down payment money you’ll need.

3. Not shopping around for loans

While it may seem to the average consumer that all mortgage loans are alike, and a loan broker may not even offer any options, the truth is that you do have options. You may be more or less qualified for some kinds of loans that offer better rates or terms. A military veteran’s loan is a good example of this, offering a zero down payment for some people. There are also loans for teachers and other job types, and loans for buying in certain areas.

Aside from special loans, your standard loans also come with different price tags…

According to Sergei Kulaev on the website, Consumer Financial Protection Bureau, “Our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, while making lower payments.”

To compare prices, you can use one of many websites that allow you to request bids from mortgage brokers. One broker may know of a special loan that another doesn’t know about, and all may have different fees. The fees and interest rate differences between these loans can be huge, especially over the life of the loan. 

You can also compare loans by calling different loan brokers personally. Be sure to include one or two bank lenders and credit unions on your list. Many of these bankers have in-house loans that might be better than another company’s loans. 

4. Ignoring the APR

Some lenders advertise low interest rates but make up for the low rates with high up-front fees. If you were to spread the cost of those fees out over the life of your loan, you might discover that your effective interest rate is actually higher than you could have gotten with another mortgage. Sometimes a lower rate loan has a higher “effective” APR…making your loan more expensive over time.

APR means Average Percentage Rate and includes all the fees as though spread over the life of the loan. For instance, imagine a $100,000 30-year fixed-rate loan with an interest rate of 3.85%. Now imagine the lender charges two points (a 2% buy-down of the interest rate), a 1% origination fee, and $1,500 in other closing costs. That brings the “real” interest rate from 3.85% to 4.215% APR.

Next, imagine a $100,000 loan at 4.05%, but with no points (no buy-down), a 1% origination fee, and just $800 in other closing costs. That loan’s “real” rate is 4.199% APR.

The first loan looks cheaper on the surface, but it’s really more expensive. The difference may only amount to $10 or $11 per year, but that’s your money, year after year. If you paid your mortgage for 30 years, you would pay an additional $3,650. That’s money you could have in your hand at the end to pay off another bill, put into your retirement account, or take a vacation!

Of course, if you plan to sell in 5 years, the extra $50 might not matter to you, in exchange for working with a broker you like, or someone more willing to give you a loan based on your credit rating.

5. Making a small down-payment

Most loan programs require a 20% down payment to get the best rates and avoid paying mortgage insurance — an extra cost that typically adds $100 or more to your monthly payments! You want to avoid paying that extra premium if possible. It goes away after the home’s value rises to more than 20% of the loan value, but until that time, you could be paying an extra $100 per month for many years, with nothing to show for it.

If you can’t afford 20% down, consider three things:

1. Maybe you should wait until you’ve saved up enough down payment.
2. Maybe you should buy a cheaper home, where you have a 20% down payment.
3. Maybe you can put 15% down…that will help.
4. If you have to buy now and pay the mortgage insurance premium, but you plan to make renovations, consider getting a reassessment of value as soon as possible. Ask the lender how soon you can do that…some loans won’t reassess under two years, leaving you stuck with $2,400 in extra payments! 

6. Not checking and fixing credit reports

Checking your credit report should be a part of your annual financial health checkup anyway, but when you are about to apply for a mortgage, it’s extra-important. Why? Because credit rating equals interest rate. 

A low or poor credit rating will result directly in higher interest rates and higher monthly payments. The worse your credit, the higher the rate. Conversely, a lower rate might mean you can buy a more expensive (nicer) house. 

But many credit reports make mistakes. Sometimes it may be a legitimate financial shortcoming on your part, but one that you “fixed” a long time ago, such as an unpaid library bill. It should have been removed from your report, but lingers. You have a right in most countries to contest that item and have it removed. Then have your credit rating rebalanced. 

Doing this can mean the difference of many thousands of dollars, and even determine whether or not you get the home of your dreams.

Also, keep an eye on your credit usage. A high credit usage will cause lenders to be concerned that you are over-extending yourself. Lower credit usage demonstrates wise or controlled spending, which they like. However, don’t pay off or close your credit lines entirely. Keeping some credit also demonstrates credit-worthiness more than keeping no credit at all.

7. Not waiting until you’re more financially stable

As alluded to earlier, sometimes a buyer just needs to wait until they have more money before buying a home. 

Down Payment—Coming up with a 20% down payment can be financially wise. It will result in less to pay off, and a lower monthly payment, and it will save on the mortgage insurance premium. It can be hard to wait, to delay gratification, but it can make a huge difference over the years to come.  

Quality of Life—Also, making sure there is enough income to afford the maintenance, and be able to enjoy life besides, are strong reasons to plan long term for a home purchase. 

Balance of Interests—However, there are legitimate reasons to buy a house, even if it stretches you financially. If it seems that house values are rising fast, or you’re able to score a great deal, or you need to purchase for another personal reason, then you may be better off jumping now, rather than waiting for the perfect financial picture.

Contact me for smart home buyer representation BEFORE YOU START HOUSE HUNTING! WE’LL HELP YOU AVOID SOME OF THE HIDDEN EXPENSES.  Simply reach out to Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com Team@HanleyHomeTeam.com