Category: Real Estate

Should I Keep Saving for a Home or Buy Now? | Credit.com

Saving up to buy a home is no easy feat.

One of the key components of being able to successfully buy a home is having enough cash for a down payment plus closing costs. Generally, you’ll need at least $20,000 to buy a home. The old 20% down rule does mean a low payment, but may or may not make sense for your specific financial situation.  As you continue to save, your ability to buy a home could be compromised if you are in an area such as Sonoma County, California, or other pockets of the country where prices continue to rise.

Can you get in now? Does it make sense? If you have enough money to also meet your other financial obligations, buying a home with a long-term, fixed-rate mortgage is generally a safe bet.

On the other side, if you’re in a competitive market, buying a home now may mean taking on a payment slightly higher than might be financially optimal. It may mean a higher payment until you can pay off some debt, you come into some cash, a life event happens or your income is set to rise. If you know one of these things will happen, taking on those higher mortgage payments could make sense. If not, it may be best to wait.

Here are some other factors to consider when deciding when to buy.

1. Rising Interest Rates

If rates go up, even a little, your payments likely will as well. Every .375 rate increase generally means you pay $75 more per month on every $100,000 borrowed. In other words, the more home you are trying to buy, the more exposure you have to payment volatility based on changing rates. This, of course, ties directly into how much payment you’re looking to handle on a monthly basis.

2. Rising Home Prices or a Higher-Priced Home

Homes typically move at a faster pace in terms of volume, activity and appreciation than your ability to save. If you are saving 8% of your gross income, but homes are appreciating at 10%, for example, you are going backwards. It means your down payment will be worth less as the home may inevitably cost more in the future, depending on your market. If you were to buy a home today for $550,000 or wait a year and that $550K home is a now a $600K, you would’ve missed an opportunity.

If you are looking to buy a home, and you can afford the mortgage payment, generally speaking it might make sense to do so knowing that you would be on a fixed-rate,amortizing principal-and-interest mortgage – nothing exotic – while continuing to build equity in your home. This way you have two factors at work in your favor: the equity built up by virtue of making your payment each month, and your home’s increase in value.

Case in point: if you buy that house at $550,000 today and that house becomes $600,000 in 12 months, you can refinance for payment reduction, making the home more affordable.

 

3. Your Credit Score

While you don’t need a perfect credit score to get a mortgage, people with scores below a 620 can have a tougher time securing financing. If your score is subpar, it’s a good idea to try and clean up your credit before you look to buy a home. You can pull your credit reports for free each year from AnnualCreditReport.com, then hunt for and dispute errors and discrepancies.

Working hard to improve your score may also help you nab a better interest rate, so the state of your credit score is worth considering before you buy a home. You can monitor your progress by viewing two of your credit scores for free each month on Credit.com.

Few Lenders Plan to Loosen Standards | Realtor Magazine

Those hoping credit standards will continue to ease may be out of luck. About 90 percent of lenders surveyed recently say they have no plans to relax their credit standards for at least the next three months, according to Fannie Mae’s second quarter 2016 Mortgage Lender Sentiment Survey, which polls senior executives at lending institutions.  

In fact, lenders surveyed show that their expectations to ease standards in the near future have lessened since a year ago. 

“The trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90 percent, reported plans to keep their credit standards about the same,” says Doug Duncan, Fannie Mae’s chief economist. “The survey was conducted before the recent May jobs report, and the weaker reported job gains might potentially temper this optimism.”

What’s more, key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook, Duncan says. 

“The outlook for [mortgage application] purchase demand growth over the next three months returned to levels similar to last year, while the outlook for refinance demand and profit margin improved moderately versus last year’s levels,” Duncan says. 

Do I REALLY Need an Inspection?

That question is a common one among Buyers come offer time. Though we can’t tell you what to do, we must say that it’s never a bad idea to get your potential home inspected. There are a number of reasons why getting an inspection is a smart idea.

The most important reason for getting an inspection: It tells you what simply walking through the house cannot tell you. If there are any problems – minor and/or severe – the inspection will give you advance warning of them. Who wants to move into their new home only to find out later about the foundation problems, the water damage, or the mold they never saw?

The information the inspection gives you is of great benefit. With this information, you can do one of 3 things:

• Use it for Bargaining – Once you have a list of the needed repairs, you can use this to negotiate to a lower sale price. This will compensate to cover the cost of the repairs.  It will be hard for the Seller to sell for their original asking price if there are especially severe problems.

To have a good inspection, make sure you hire the right inspector!  He should be licensed and certified by a reputable inspection agency, like the American Society of Home Inspectors. It’s a good idea to interview your potential inspector.  If you’re unsure of what to ask him, the U.S. Department of Housing and Urban Development offers a list of “Ten Important Questions to Ask Your Home Inspector” on their website (www.hud.gov/offices/hsg/sfh/insp/inspfaq.cfm):

1. What does your inspection cover?

Just imagine the stress and expense you can potentially avoid by having an inspection done!  Home Inspections not only provide you with the problems, but they also tell you what needs to be done to solve the problem. Some may even give you an estimated cost to repair.

 So what do you think – is it worth it?

Down Payment Aid Programs Save Buyers $17k | Realtor Magazine

Down payment assistance programs can help home buyers save big over the lifespan of a loan. On average, qualifying home buyers can save $17,766 over the life of the loan, according to a new report of 513 counties nationwide released by RealtyTrac and Down Payment Resource.  

Read more: Banks Rush to Offer 3% Down Payment Loans

The total savings breaks down to an average of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home, according to the report. 

“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” says Daren Blomquist, senior vice president at RealtyTrac. “Even just a 3 percent down payment requires 14 percent of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3 percent down payment requires more than one-fifth of annual wages. 

The study shows that the following markets are where buyers who use down payment assistance programs have the biggest total dollar savings compared to buyers not using down payment assistance: Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).

“Home ownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the home owner’s saving and wealth-building capability,” says Rob Chrane, CEO at Down Payment Resource. “In fact, these programs are now the last frontier in the fight to preserve home ownership affordability. Rates are never going to be substantially lower, and home prices continue to trend higher.”

3 Tips for Homebuyers in a Fast-Paced Real Estate Market | U.S. News & World Report

Real estate markets across the U.S. are fast-paced right now. Homes are selling within hours, rather days. Homebuyers are struggling to find the right house before someone else has put it under contract. The pressure to beat out other homebuyers is intense.

Homebuying is already an emotional experience without the pressures of the market. Adding on the market’s intensity is enough to make anyone go insane. If you’re experiencing this problem as a homebuyer in your local market, here are three tips to help break through the competition and beat the other competing buyers to your next home purchase.

Set up instant property alerts. Many real estate websites allow users to save their search criteria and alerts emailed or text to them within minutes of homes coming on the market. This is the best way to stay ahead of competing buyers. When homes are selling within hours, every minute counts. It’s nearly impossible to find the best house in a hot market without having instant notifications.

The process is typically very simple. Find the best real estate website in your area to setup email alerts and then watch your phone for the alerts to come through. Many times, the best sites for this feature are local Realtors’ websites. A quick Google search is the easiest way to find these sites, and see which have homes that best meet your criteria.

Pro tip: Not all websites have a direct feed to their local multiple listing service. In order to get the best results from the site supplying you with property updates, make sure you choose one connected to the MLS and updates within minutes. Some websites update daily, meaning you won’t receive updates until the next day. In markets where homes are selling within hours, these late updates will not help much.

Hire an agent who moves fast. Not all real estate agents are created equal, and some work with more sellers than buyers. Other may work part time, or are not very tech savvy. There are many different kinds of agents, so you need to be smart about who you choose to help you find your home.

Find an aggressive agent who can meet you in a timely manner. You stand the best chance of this by working with one who works with mostly homebuyers. Buyer’s agents are very in-tune with the current struggles that fast-paced markets present. They understand how time is of the essence when shopping for a home in a hot market.

By choosing an agent who moves fast and simplifies the process, you can beat other buyers to the punch and get the home you’re interested in under contract. The internet and technology have changed the real estate industry dramatically over the past few years. While some professionals have adapted well, others are still trying to catch up – choose wisely.

Be prepared to make an aggressive offer. When a real estate market is hot, there’s no time for being picky. If you’ve looked at multiple homes and have been beat out by other buyers on several occasions, you may be asking for too much in your offer.

Listing agents are very busy right now. When they receive multiple offers – sometimes 20 or more at time – they have to sift through all of those contracts to determine which ones are the best for their sellers. Some buyers are willing to offer tens of thousands of dollars above the listing price of the home. If you want to compete, you have to keep up or give up on buying a home this year.

A good local real estate agent will know the best way to structure a contract to make it as appealing as possible to the home sellers in your market. The more appealing your offer, the better chance it stands of being accepted. If you work with your agent to form your offer strategy before you fall in love with a home, the process will go much smoother. Emotions tend to trigger impulse decisions, which can cause deals to fall apart later on. Learn your market, develop a strategy, and stick to it.

Final thoughts. Buying a house in a fast paced market can be very stressful, but it doesn’t have to be. If you know what to expect going into it and you utilize tools and tricks to navigate your market, you can bypass much unnecessary stress. Leverage the professionals around you and be ready to move fast once you find the best home for you.

Three Tips for First-Time Home Buyers

Buying  a home in today’s economy is no easy task. Even if you have enough money to buy your first property there are a number of pitfalls that you need to know about. A lot of first time buyers end up wasting all their hard earned money on a piece of property that is completely worthless. If you want to avoid this then it is extremely important that you educate yourself about the housing market and try to make an educated decision. In this article we have listed a few things that you must do before spending any money. If you follow the tips and guidelines given here, you should be able to buy the house of your dreams without running into any serious problems.

The very first thing that one must do is inspect the property for possible physical defects, such as cracks, leaks or malfunctioning utilities. It is also a good idea to hire a professional contractor to examine the house. A professional is able to detect hidden problems that an inexperienced eye can’t see. You need to remember that the seller will do everything to sell his or her property. Before showing you the property the owner might have hired somebody to conceal the damages. It is up to you to decide whether the property is actually in a good state or not. It is always a bad idea to invest in a piece of real estate just by looking at it’s exterior. Unless you have an unlimited amount of money to spend, you must take a look at each and every element, no matter how insignificant it seems.

In addition to the property itself you should also look at the neighborhood. This is something that many people fail to consider when purchasing  a house. The neighborhood will not only effect the lives of the people living in the property but it will also determine the price in case you ever want to resell. Similarly you should think about the proximity of the house to schools and hospitals. You can do research on the internet to find out about the location of the property. Websites like Google Maps can help you take a look at the location of the house without actually visiting it. Once you are sure that the neighborhood is good enough for your family, you can proceed to the next step.

Once you have examined the property as well as the neighborhood it is in, you should start finding the right lender. There are countless financial institutions out there and selecting the right one can be quite difficult. Interest rate is the most important thing to consider when choosing a lender but it is not the only one. Reliability and customer support are also extremely important.

Sorting Out the Housing During a Divorce | Realtor Magazine

In a divorce, real estate matters can get complicated quickly. There are several options that couples may consider when deciding on what to do with their home, such as selling and splitting the profit, buying out the other spouse, or having a delayed buyout.

Selling the home together and then splitting the profit may be the least complicated of the scenarios, according to a recent article at realtor.com®. “A lot of financial advisers and attorneys recommend that clients just sell the home,” says attorney Brette Sember, author of “The Complete Divorce Guide.” “It can often be the simplest way to solve all the problems. Everyone gets their share, and there is no lingering joint debt to resolve.” Also, if selling the home for a profit, the money may then come in handy in paying off the legal expenses from the divorce.

For others, some exes may opt to buy out the other spouse and stay in the home. They may have an emotional attachment to the home or choose that option for the sake of what they believe is best for the children. But sometimes the spouse needs to work through what is really financially feasible for their new situation.

For example, Natalya Price, a real estate professional with Coldwell Banker Residential Brokerage in New Jersey, says she had a client who wanted to remain in her five-bedroom home, but in two years her children would be leaving for college. “I asked her, ‘Do you really need this big house with all these rooms? Would it be smarter for you to sell your home and rent an apartment or a condo within the same community?’”

In buyout situations, the parties need to tread cautiously too and be sure to get an appraisal.

“With a buyout, you have to be very careful,” Price cautions. “Because there’s no actual sale involved, the figures can be very subjective. Think about how many homes are listed and don’t sell at that number. Until there’s a buyer willing to pay actual money, it’s just a number and you’re banking your future on that.”

Some divorcees opt for a delayed buyout, such as if one spouse wants to stay in the home and aren’t in the position to buy another home at the moment. The spouse would then continue to make monthly mortgage payments until he or she can afford to buy out the other.

“It can lead to a lot of potential issues if people aren’t careful,” says Nicholas Kensington, a real estate professional with The Matheson Team in Scottsdale, Ariz. “Since this arrangement can last years, there can be plenty of fights about how the house is being cared for.”

Also, “the biggest issue is your name remaining on the mortgage,” Sember adds. “If your ex doesn’t keep up the payments, you’re liable. It could ruin your credit rating if payments start to be missed or if the home is foreclosed on.” Plus, it might affect your ability to buy another home.

Rent vs. Buy? This Index Says Definitely ‘Buy’ | Realtor Magazine

A nationwide buy versus rent index is moving deeper into the “buy” territory, indicating that housing markets across the country are strong. This study by Florida Atlantic University and Florida International University also shows that home prices rose 5.4 percent in the first quarter.

“This appears to be driven by a steady but strengthening job market, rising rents relative to rising ownership costs and recent slower growth in traditional financial portfolios consisting of stocks and bonds,” says Ken Johnson, a real estate economist and one of the index’s authors. 

The index looked at the relationship between buying a property and building wealth through a buildup of equity versus renting a comparable property and investing in a portfolio of stocks and bonds, and concluded that “In terms of wealth creation, the U.S. housing market, when considered as a whole, has swung marginally more in favor of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds.”

The index also revealed that 16 of the 23 metro markets examined moved in the “buy” territory direction.

The metro areas remaining solidly in the “buy” territory include Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia, and St. Louis.

“These cities should have room for price growth without much worry of overheating,” says Eli Beracha, co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. “This is especially true for Chicago, Cincinnati, Cleveland and Detroit.”

On the other hand, index authors say cities like Honolulu, Kansas City, Los Angeles, Miami, Pittsburgh, Portland, San Diego, San Francisco, and Seattle are near an “indifference point” between buying versus renting.  In nearly all of these metro markets, the index score for the quarter moved in the direction of ownership.

“This movement suggests that most consumers in these markets appear to have learned from the real estate crash and now understand that residential property prices can get too high,” Beracha says. “This is a good sign for future housing price stability in these markets.”

Houston, meanwhile, is deep in the “rent” territory. Also, two other housing markets – Dallas and Denver – moved deeper into the “rent” territory, but at a slower rate than previous quarters, the authors note.

“Strong economic support within these two markets should make for a soft landing in terms of slowing property price growth, increased marketing time for properties and lower probabilities that sellers will actually transact and close during a given marketing effort of their property,” Johnson says.

Another Reason for Tight Inventories | Realtor Magazine

Borrowers behind on their mortgage payments are twice as likely to list their properties for sale compared to borrowers who are current on their payments, according to new data from Black Knight Financial Services.

But with fewer people behind on their mortgage, inventories across the country are tightening. The non-current inventory of properties is down 500,000 from a year earlier (and down from 3 million in March 2012). As such, the number of non-current mortgaged properties listed for sale has dropped from 7.7 percent in 2012 to 3.4 percent today.

The decline in delinquent properties is one reason behind the overall decline in mortgaged properties for sale, Black Knight notes. However, the status of a mortgage payment is not the only reason for tight inventories of homes for sale.

“People with adjustable-rate mortgages are more likely to list their homes than those with fixed rates, which is hardly surprising given that buyers often choose ARMs when they plan to stay in their homes for less time,” says Ben Graboske, senior vice president of Black Knight Data & Analytics. “Interestingly, borrowers with low fixed interest rates – 4.25 percent or below – are less likely to put their homes on the market than those with higher rates. This is something to keep an eye on if and when interest rates begin to rise. Should the trend hold true, rising interest rates could put an even greater strain on an already tight housing inventory.”

San Jose housing prices: County’s median hits $1 million for first time – San Jose Mercury News

With high demand and a tight market, Bay Area housing prices continue to soar, setting record highs in April in Santa Clara and Alameda counties.

 

 

The median price of a single-family home in Santa Clara County hit seven figures for the first time last month: $1 million on the button. Prices grew even dizzier in San Mateo County, where the $1.2 million average matched the previous record, set in May 2015.

 

 

The East Bay also saw a run-up in prices, with the median Alameda County home reaching $750,000, up more than 10 percent from the previous month. Tugged upward by prices in Walnut Creek and other high-end areas, the median Contra Costa County price grew to $525,000, its steepest in seven years, according to new housing figures released Wednesday.

April 2016: Paul and Ruby Callary speak with their realtor Mark Wong before an open house at their home of 27 years in San Jose, Calif. (Karl Mondon/Bay Area News Group))

 

 

“We just don’t have a market under $700,000 in Walnut Creek,” said Alain Pinel agent Margaret Garber-Teeter. “And even at $700,000, you’re going to be in second-tier schools. So there’s still an affordability problem for young families, unless their parents help them, and a lot of young families get help.”

 

 

Overall, the Bay Area’s nine counties saw the median single-family home price rise to $725,000, just shy of the $738,500 peak of July 2007.

 

 

“It’s the same story: The housing supply isn’t keeping up with the demand,” said Andrew LePage, research analyst for real estate information service CoreLogic, which released the latest numbers. “Mortgage rates remain low. The region’s generating jobs. But you still have relatively low inventory, at least in the mid- and lower-priced markets, where most people are shopping.”

The numbers reflect a crisis that is squeezing low-income earners and the middle class. According to a recent poll by the Bay Area Council, more than a third of the population, fed up with housing costs and endless commutes, are considering moving away.

 

 

While regional prices rose last month, the volume of sales fell from a year earlier: by 9.5 percent in Santa Clara County, 18.3 percent in San Mateo County, 13.1 percent in Alameda County, 5.1 percent in Contra Costa County and 9.5 percent for the nine-county region. It was the second consecutive month of year-over-year declines for the Bay Area.

Recognizing that there aren’t enough houses to satisfy all the potential buyers, computer engineer Eugene Jong sensed a seller’s market and worked it to his advantage.

Two years ago, he and his wife, Linda, also an engineer, moved from their San Jose townhouse to a single-family home in Los Gatos.

He watched as San Jose prices kept rising. Then in April, he pulled the trigger, listing the 1,250-square-foot townhouse for $599,950: “The open house was a month ago. The first day, 100 people came. The second day, about 50 more came. I had some numbers in mind in terms of the selling price — what would be average and what would make me feel really happy. And it ended up that the price was way above the price where I felt really happy.”

The townhouse drew 15 offers over the asking price and sold in seven days for $665,000.

Alain Pinel agent Mark Wong, who negotiated the sale, said it was a matter of good timing: If Jong had delayed and listed his townhouse in May, his fortunes might now be up in the air — at least in part because the amount of inventory is “creeping up” and softening competition.

“The market is shifting right now,” Wong said. “The market is really mixed. Some people are getting multiple offers, some are getting no buyers. Just in one month, the market has changed a lot.”

High prices “are the new normal,” said Julie Ray, a Coldwell Banker agent in Redwood City, “and fabulous houses with curb appeal” still get grabbed up. But “buyers are getting more picky. The inventory has come up to a level where people say, ‘You know what? This one I’m not going to bid on, because it’s not what I want.’ ”

In Contra Costa County, Garber-Teeter agreed that May has brought “a leveling” to the market. In more affordable areas — she mentioned northern Concord, near Pittsburg — inventory has opened up to the point that “the market is softening, homes are sitting.”

Even in desirable Lafayette, Moraga, Orinda and Walnut Creek, she said, “We do have a little more inventory, but then you have to weed through that and find the few that are ready to go.”

Expecting stiff competition in April, Garber-Teeter helped clients Tom and Heather Young “get all their ducks in a row” in order to sell their Walnut Creek house and buy a new one in Orinda.

They had purchased the Walnut Creek home, a fixer-upper, for $475,000 in 2009, and spent $225,000 on improvements. Last month, they listed it at $985,000, held open houses on two consecutive weekends, then took offers on the Tuesday after: “We had multiple offers and a buyer that night,” said Tom Young, who runs an online advertising company and works at home.

The selling price: $1,070,000.

Last month, they also bought their new place in Orinda: four bedrooms, four baths and 3,700 square feet on a hillside with 100-year-old oak trees and “tons of wildlife.”

It listed at $1,350,000. Their bid — for $1,475,000 — was one of five. The seller went with a higher offer, but the deal fell out of escrow. The seller then approached a second buyer, who dropped out, leaving the Youngs as main contenders. They had lined up those ducks, showing liquid funds and pitching the seller with a persuasive letter and a photo of their 6-month-old baby.

Now in his new home, Tom Young called last month “the most stressful period of my life, not because anything terrible happened, but because there were an overwhelming number of scenarios to think through and my brain got pretty busy. Now I’m waking up in a brand new place.”