Archive for the ‘Homeownership’ Category

So You Want to Buy your First Home. Do You Know……?

Your Credit Score: Before you get started, contact a mortgage lender and ask them to run your credit report so you know your credit score. They will also be able to tell you if there are any issues on your credit report. If there are, this will be the time to address them. But, do NOT run your credit report yourself through a free online credit report company. These credit reports are not the same ones as the mortgage lenders use and your scores will not be accurate.

Homebuyer

How Much You Have for a Downpayment & Closing Costs: The more money you put down on a house, the lower your mortgage payment will be. If you are able to put down at least 20%, you will avoid private mortgage insurance or PMI. You should also budget another 3-6% of the purchase price for closing costs. However, houses can be purchased now with as little as a 3.5% downpayment. You may also be able to finance the closing costs in the mortgage by obtaining a seller’s concession of 3-6% of the purchase price.

What Amount You Can Borrow on a Mortgage: You will need to compile copies of your income documents such as paystubs, W2 statements and federal tax returns so your mortgage lender can review them. Your mortgage lender can then let you know how much you can borrow to buy a house. Generally, you can spend from 33-45% of your gross monthly income on your mortgage payment. You can also spend 38-55% of your gross monthly income on the total debt payments which includes your mortgage payment and all other monthly debt payments (e.g. car, credit card, student loans).

Where You Want to Live: Use online tools to explore various towns you may want to consider. There is information about school ratings, commute times, amenities, etc. that can easily be found on various websites. Once you have decided on a few towns, visit the towns and drive around. You cannot get a feel for a place until you have seen it in person.

A Good Real Estate Agent: Once you have completed the above steps, you will want to speak with a real estate agent to assist you with the process. An agent will be able to help you decide which features you want and don’t want in a home and then match these with available properties. They will also have market expertise and local knowledge. Once you find a home, a real estate agent will help you negotiate the price and assist throughout the home-buying process. But, before hiring an agent, get referrals from people you trust as well as professionals in related fields. Then, read the agent profiles and reviews online to see the experiences others have had with that agent. You should also interview several agents on the phone or in-person before hiring one.

With the information above, you will be on your way to buying your dream home!

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If it’s spring, it must be the housebuying season, right?

I know that the calendar says it is spring.  I also know that Easter and Passover are coming weekend. Though, like many others, I just don’t know where the spring weather is!  For those of us in the residential housing game, which each year feels more and more like a Game of Thrones, the spring weather is very important. For sellers and buyers alike, there is a big psychological boost when warm weather finally arrives.  Like the Israelites roaming the desert, the homebuyers are looking for a sign from above that it is time to enter the Promised Land (of homeownership)!

Photo via mypreferredlender.net

I am hoping that we finally get some warm weather next week.  And, while knowing that “hope” is not an effective business strategy, I am still predicting a very strong housing market.   Though the “so called” experts only expect housing prices to rise about 3% over last year’s prices, I think that the increase will be significantly larger. I am expecting the increase to be more like 5%-8% possibly higher.  As for the number of previously owned home sales which decreased to 4.93M nationwide in 2014 from 5.09M in 2013, I see a reversal of this for 2015.  I believe that nationwide we will be slightly above the 5.09M number.

First of all, interest rates have continued to remain low despite the dire predictions for this year. Since rates have actually decreased, not increased since January 1st, home affordability has improved since 2014. With the higher employment numbers so far this year, more people are in a position to buy a home now than they were last year.

In addition, the banks are finally easing up on their credit requirements. In January, the Federal Housing Administration (i.e. FHA) dropped their mortgage insurance rates from 1.35% to .85%. Here is a link to a 2 minute video about this reduction and it’s effect — Changes to FHA Mortgage Insurance Premiums January 2015.  With FHA loans allowing credit scores down to 580, low downpayments (including gifts and up to a 6% seller’s concession); and debt-to-income ratios as high as 55% of gross income (with income from non-occupying co-borrowers included), these loans will enable a lot of people to buy homes.

Other new first time home buyer programs were implemented by Fannie/Freddie which now allow for a 3% downpayment with credit scores as low as 620.  This will allow home buyers with less than $10k down to buy a $300,000 house or apartment!   For more information and for each of their specific program requirements (since they vary slightly), you can view this short You Tube video. — Fannie Mae and Freddie Mac 3% Downpayment for Conforming Loans.

There is also pent up demand for housing. The leading edge of the Millennials, who are now in their early 30s, are being “forced” by demographics, income and family size to purchase homes.  Though they prefer to stay flexible by renting and live in/near cities, like those of us who came before them, there comes a time when practicality and affordability (i.e. realization that you are no longer so young), trumps desire.  For many of the older Millenials, that time is now!

On the other end of the demographics are the folks who are retired or semi-retired and looking to unload the family home that they no longer need. For these people, who held out for higher prices after the housing collapse, housing prices, though not back to 2006 levels, have returned enough for them to consider selling.  The irony is that it is the clash of these two very similar generations, the formerly largest and most selfish generation of Baby Boomers with the (unbelievably) even larger and more selfish Millennials, will together bring back the housing market beginning this year. Their “partnership” will also allow the improvement to continue for the next several years, and probably accelerate as well.

So, there you have it. IMHO, there will be a very strong purchase market this year. But, if this does not occur, I will be back in the fall to tell you why. Since, like the rest of the “so called” experts, if I am wrong, it won’t be my fault. Rather it will be caused by something happening that was unexpected (at least to me)!

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Happy Easter and Happy Passover to those who celebrate each.

Dan