Homeowners who spent a lifetime working, raising families and paying mortgages have a greater net worth later in life. Among U.S. families who own rather than rent, a primary residence accounts for 90% of total wealth – and 99% for the bottom 20% of low-income owners.
Due to COVID-19, the migration from cities to suburbs has accelerated; multifamily developers no longer have amenity wars to attract new residents; and health and wellness movements are emerging in hotels, offices and more.
REALTOR® Magazine’s Styled, Staged & Sold blog counts down some of the cringeworthy decorative choices people are making while hunkering down at home.
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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:
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.
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.
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.
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.”
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
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).
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.
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.
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
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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.
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:
- Maybe you should wait until you’ve saved up enough down payment.
- Maybe you should buy a cheaper home, where you have a 20% down payment.
- Maybe you can put 15% down…that will help.
- 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
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While the real estate market in general is adapting to new challenges and market conditions, one segment of the market is going strong. Home flipping is boasting its best numbers in 14 years.
The newly released first-quarter 2020 U.S. Home Flipping Report from ATTOM Data Solutions shows that “53,705 single-family homes and condominiums in the United States were flipped in the first quarter. That number represented 7.5 percent of all home sales in the nation during the quarter, up from 6.3 percent in the fourth quarter of 2019 and from 7.3 percent in the first quarter of last year.” Those are the highest numbers since the second quarter of 2006.
The gross profit for home flips across the country also rose over the same time period, to $62,300. “That was up slightly from $62,000 in the fourth quarter of 2019 and from $60,675 in the first quarter of last year,” the report said.
If you’re looking to get in on the flipping trend, here are a few insights:
- You don’t need to buy a million-dollar fixer. “Homes flipped in the first quarter of 2020 were sold for a median price of $232,000.”
- Profits will be larger where the home prices are higher. “The highest first-quarter 2020 profits, measured in dollars, were concentrated in the West and Northeast. Among metro areas with enough data to analyze, 13 of the top 15 were in the those regions, led by San Francisco, CA (gross profit of $171,000); San Jose, CA ($165,000); Los Angeles, CA ($145,000); New York, NY ($141,899) and Honolulu, HI ($140,190).”
- The lowest profits were generally in southern metro areas, such as “Springfield, MO ($20,203); Daphne, AL ($20,650); Raleigh, NC ($21,250) and Durham, NC ($25,000).”
- Don’t think you have to turn the home around and sell it in 30 days. “The average time to flip nationwide is 174 days.”
- You don’t need to pay cash upfront for the home, as the percentage of flipped homes purchased with financing in the first quarter of 2020 was 40.5 percent.
Need some advice on investing and flipping? Get in touch today! 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
Whether you’re planning to sell or refinance, a home appraisal is a necessary step in determining the true value of your home. This means your home should be in the best possible condition, so it will be appraised at the highest potential value. While it may be tempting to swing for the fences with big-ticket renovations, there are smaller things you can do to efficiently raise the market value of your home.
Start Small with a Little Spackle
If you’ve lived in your home for any length of time, you’ve probably hung things on the walls, put up shelves, or simply had accidents that resulted in minor damage. Now is the time to repair those blemishes. Filling these holes and crevices with a little spackle and painting over the area will leave your walls looking like new. While this may not boost the value of your home, it will keep the appraiser from deducting for the damage.
As Long as You’re Painting…
After you’ve touched up your walls, you might want to consider freshening up the paint. Repainting worn trim and moldings around the home can give it a fresh look. Venture outside and touch up the trim around the windows and doors too. This will boost curb appeal and help you add value to the home. Any area where the paint is peeling, chipping, or simply has lost its luster should be retouched with a fresh coat.
Update Your Crawl Spaces
An upgrade that’s growing in popularity (and will grow your home value) is crawl space encapsulation. Crawl spaces are essential for providing homeowners and contractors with access to important systems of the home. However, these spaces are vulnerable to moisture and water damage caused by humidity and harsh weather conditions. In drier climates, dust and insects can interfere with HVAC systems. To protect crawl spaces, homeowners have started sealing these spaces with polyethylene barriers to keep out moisture, dust, and pests.
Do a Deep Clean
This is also the time to really clean your home from top to bottom. If you have young children and pets, there may be odors and damage that might not be noticeable to you, but strong odors and scuffed hardwood floors will be the first things your appraiser notices. Consider hiring professionals to wax the floors, shampoo the carpets, and conduct an intensive cleaning of the entire home.
Conduct Other Repairs
At some point, you should tour your home with the mindset of a home buyer. This will help you identify problems that you live with every day but just don’t notice anymore. Look for things that need to be repaired, such as a loose handrail, a leaky faucet, or a shorted electrical outlet. Repairing these problems ahead of time will ensure you won’t lose money on the appraisal.
By taking the time to spruce up the home ahead of the appraisal, you may be able to increase the value by thousands of dollars. The suggestions offered here should give you a head start, but if you have additional questions on how to add more value to your home, please don’t hesitate to reach out us – Kevin and Jennifer Hanley, REALTORS, The Hanley Home Team of Keller Williams Realty http://www.HanleyHomeTeam.com 904-515-2479
This choice often comes down to a financial decision: Can you afford what you want? But that’s not the whole story. There are more things to think about when trying to decide if it’s time to take your first real estate plunge.
Cost-Benefit Analysis is the term for figuring out if something is worthwhile doing or not. When you analyze a situation and decide that the benefits are greater than the cost, then you may want to go forward. Conversely, if the cost exceeds the benefits, you may decide to wait.
Sometimes when you weigh the benefits against the cost, the benefits are higher, but not high enough. In that case, you might want to increase the benefits or lower the cost before taking action. These are exactly the thoughts you should be having as you plan to buy your first home.
To help you weigh the benefits and costs of buying vs. renting, this report offers key elements to think through, including evaluating the monthly payments correctly, estimating home ownership costs, weighing location against price, evaluating purpose and home investment strategy, and improving credit and interest rate to decrease payments.
The most important factor when thinking about buying is to not “panic buy.” Don’t jump in just because interest rates might rise or prices might rise. Buy when you are ready and don’t let the market dictate your timing.
What are the benefits of renting?
- One benefit is living in a property without having to spend great chunks of money to replace the roof or fix the plumbing.
- Another benefit is that you may be able to rent a type of home or in a location that you could never afford to buy.
- You have no stress or worry about maintenance. That’s the landlord’s job.
- You can pick up and move without wondering if you can sell your house.
- If your income drops, you can rent somewhere less expensive. It’s a pain to move, but you won’t face a foreclosure or fire sale.
- If you are late with a payment, you can discuss it with the landlord.
- You probably won’t get a serious ding on your credit if you’re a month late.
- In many places, renting is the only option because there isn’t enough housing for sale, or the prices are beyond reach for the average mortal.
What are the costs of renting?
The landlord charges you X amount and as long as you pay that amount, you get to live in that property. The cost is X. But there are other costs:
- By renting, you lose the opportunity to build equity (the money you gain if you sell the property). So when you move, you move with no money in your pocket.
- You lose the opportunity to pay off the house and eventually own it outright.
- You lose the opportunity to put down permanent roots, do what you like to the property, and raise capital by getting a second mortgage or home equity loan.
What are the benefits of owning?
- Build equity through rising values and making payments.
- Pay off the home and eventually have the security of owning outright.
- Be able to increase your wealth…by selling and profiting, by renting it to someone else, or by getting a home equity line to use the money in some other way.
- Put down deep roots in the house and community.
- Do what you want to the house…paint it orange and pink if you want (as long as you don’t live in a Planned Community or Condominium).
What are the costs of owning?
- Monthly fixed and variable maintenance costs are significantly higher than renting.
- Interest on your mortgage loan (which may be a tax deduction, so that may actually be a benefit)
- Time involved in maintaining a home that would not be involved when renting.
- Possible falling values making it harder to sell when you want to.
- Inability to work with the loan holder when you’re late with a payment.
- Possibly higher monthly payments than would be with renting.
- Possibly not being able to live in the community you want because you can’t afford to buy there.
Compare Costs and Benefits
Here are several questions that will help you decide if it’s time to buy, or if you should keep renting.
What can you REALLY afford to pay each month?
Let’s look at an example. (This example uses US$.)
- Suppose you feel that you can afford to comfortably pay $1,500/mo. in a mortgage payment.
- Now, imagine putting aside a little each month to pay for maintenance and improvement projects (painting, new roof, new kitchen, emergencies, etc). Let’s say 10% per month for homes in decent condition. That’s $150/month, based on your $1,500 comfort level.
- Now, instead of paying $1,500/mo, you’re really looking at paying $1,500 + $150 = $1,650. Can you afford $1,650? If not, then you need to be looking at a monthly mortgage closer to $1,350.
- That small difference in monthly payment can mean a difference of $30,000 in your purchase price, so it is important to calculate maintenance costs before buying.
If you don’t include maintenance costs up front, then the costs will come from somewhere else after you buy—your vacation budget, your new car budget, etc. You could become what’s known as “house poor,” a term that means you have a house, but a lower quality lifestyle.
So before you buy, try to look at you monthly payments realistically, inclusive of your lifestyle goals.
What mortgage would you qualify for?
You may feel comfortable paying $1,500/mo, but the important question is ‘What loan amount will that qualify you for?’
Several factors go into determining what the lender will decide you can pay and what you can buy:
- Your loan amount is based on your income, debt, and interest rate.
- Your interest rate is determined based on your credit rating—which is based on your history of paying your debts, as well as the amount of overall debt you carry.
- The interest rate you are given may mean a $20,000 to $40,000 difference in the price of home you can buy.
So, although you feel comfortable paying, say $1,500/mo, the mortgage lender might say that based on your income, debt, and credit score, you really are more comfortable paying $1,400/mo.
And that means, instead of getting a mortgage for $239,000, you can only get a mortgage of $219,000.
So work with your mortgage professional, and go through the entire loan application process. Fill out the loan application. Provide the documentation. Yes, it’s arduous. But it’s the only way to get accurate figures, and get the coveted “pre-approval letter” that you need when buying a home.
Why do you really want to own a home?
Here are your choices: 1. Financial reasons. 2. Pride and roots reasons. Of course, it’s both for most people. As a first time buyer, you’re aware that ownership has financial benefits. And you also want to live in a place you love and put down roots.
Unfortunately, for many home buyers, the price of a home in their desired location is too high for them. That means that first time buyers need to focus on the first choice: buying for financial reasons.
Look at lower cost alternatives that allow you to build equity and eventually buy up into the area you want to put down roots. Here are a few ideas for first time buyers to make their first home a smart investment:
- Buy a much smaller home or condominium near the
area you want to live.
- Buy a fixer-upper near where you want to live.
- Buy a home in an area you don’t want to live. After a few years, decide to either keep it, and put a renter in it, perhaps using the equity to buy another home, or sell it and use the cash to move up.
Each choice has its own costs and benefits. With each choice, the goal is to increase equity so that you can sell and have a larger cash down payment on a home in your preferred location. Create a long-range plan. Then work towards that goal by increasing savings, building equity, and improving your income. And always, always work on reducing debt.
Is your rent low enough?
If you’re paying $1,000/mo in a $3,500/mo area, and you have a good landlord, maybe you’re better off investing in other things instead of buying a home. Or perhaps buying an investment home in a cheaper area. It is OK to not own the home you live in, if it makes financial and emotional sense not to.
But be smart about it. Do the analysis. There are many factors involved in home ownership that may benefit you, such as rising values, interest rate deductions, and the potential to control an asset.
Using a Mortgage Calculator
Mortgage calculators should be used as guidelines only, as just another data point. Once you’re really serious about buying, the only truly accurate way to know what you can afford and what your payments will be is to go through a full pre-approval process with a mortgage professional.
But until then, mortgage calculators can be a useful tool to help you see how adjustments in down payment, interest rate, and income can affect purchase power. Just be dead sure that the estimate you get is includes Principle, Interest, Taxes, Insurance, and Extras charged on the loan, such as Private Mortgage Insurance. If you leave out any of these costs, you will be surprised when your mortgage professional shows you a figure lower than you thought.
Calculators come in several varieties. Here are four calculator suggestions you can look up on Google. Use a calculator designed for your country.
1. House Price, Based on Payment
2. Payment, Based on House Price
3. Payment, Based on Income
4. Rent vs. Buy
As a first time buyer, you are swept up in the excitement of buying—the dream of owning. You look at homes online and imagine putting in your own garden, painting the baby’s room, and decorating the way you want.
But you are smart. You know you’re making a financial decision, not simply an emotional one. You know the factors that go into deciding when to stop renting and buy a first home are complex.
There are no simple answers. But we’d like to leave you with this final word:
Don’t let fear of buying stop you from buying a home. There are plenty of professionals out there who can guide you through this decision and help you make a sound financial choice. If not me, then find a real estate consultant you trust to sit down with you and discuss the ideas presented in this report. Work with a mortgage professional to get accurate figures.
We want you to know that I’m always available to you—or your friends and family—for a home buying consultation. And we want you to know that we’ll spend whatever time you need to answer your questions so you can make the right decision in your own time.
Call to arrange a consultation appointment – Simply call 904-515-2479 OR email Team@HanleyHomeTeam.com Thank you! Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside
NAR: Pending Home Sales Soar 44.3% in May
WASHINGTON – Pending home sales mounted a record comeback in May, seeing encouraging contract activity after two previous months of declines brought on by the coronavirus pandemic, according to the National Association of Realtors® (NAR). Every major region recorded an increase in month-over-month pending home sales transactions – and the South also experienced a year-over-year increase in pending transactions.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 44.3% to 99.6 in May, chronicling the highest month-over-month gain in the index since NAR started the series in January 2001.
While the increase broke records, however, year-over-year, contract signings fell a slight 5.1%. An index of 100 is equal to the level of contract activity in 2001.
“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” says Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
“More listings are continuously appearing as the economy reopens, helping with inventory choices,” Yun says. “Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
According to data from realtor.com, active listings were up by more than 10% in May compared to April in several metro areas.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown,” Yun says.
NAR now expects existing-home sales to reach 4.93 million units in 2020 and new home sales to hit 690,000.
“All figures light up in 2021 with positive GDP, employment, housing starts and home sales.” Yun says that in 2021, sales are forecast to rise to 5.35 million units for existing homes and 800,000 for new homes.
The month of May saw each of the four regional indices rise on a month-over-month basis after all were down in April 2020. The Northeast PHSI grew 44.4% to 61.5 in May, although it was still down 33.2% year-to-year. In the Midwest, the index rose 37.2% to 98.8, down 1.4% from May 2019.
Pending home sales in the South increased 43.3% to an index of 125.5 in May – a 1.9% increase year-to-year. The index in the West jumped 56.2% in May to 89.2, down 2.5% from a year ago.
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