Blog

Why Getting Pre-Approved Should Be Your First Step

20170418-Share-STM

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the My Home section of their website:

It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding your credit, debt, work history, down payment and residential history. 

Freddie Mac describes the 4 “C'”s that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

The Cost of NOT Owning Your Home

20171127-Share-STM

 

Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

Zillow recently reported that:

In reality, buying or renting a home is an intensely personal decision, with emotional and even financial considerations that go beyond whether to invest in this one (admittedly large) asset. Looking strictly at housing market numbers, there is a concrete point at which buying a home makes more financial sense than renting it.

What proof exists that owning is financially better than renting?

1. We recently highlighted the top 5 financial benefits of homeownership:

  • Homeownership is a form of forced savings.
  • Homeownership provides tax savings.
  • Homeownership allows you to lock in your monthly housing cost.
  • Buying a home is cheaper than renting.
  • No other investment lets you live inside of it.

2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.

3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2017 could build more than $48,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment along with a profit margin!!

Bottom Line

Owning a home has always been, and will always be, better from a financial standpoint than renting.

Top 4 Home Renovations for Maximum ROI

20171117-Renovations-STM-1046x1354

Some Highlights:

  • Whether you are selling your home, just purchased your first home, or are a homeowner planning to stay put for a while, there is value in knowing which home improvement projects will net you the most Return On Investment (ROI).
  • While big projects like adding a bathroom or a complete remodel of a kitchen are popular ways to increase a home’s value, something as simple as updating landscaping and curb appeal can have a quick impact on a home’s value.

Veterans Affairs Loans by the Numbers

Want more? Click HERE to get all the details about the Veterans Affairs Loans by the Numbers

**Uniform is not a copyright issue

Some Highlights:

  • Since the creation of the VA Home Loans Program, 22 million veterans have been able to achieve the American Dream of homeownership.
  • So far in 2017, $188 billion has been loaned to veterans and their families through the program.
  • VA Purchase Loans are on the rise in 46 out of 50 states and Washington, DC.

5 Reasons Homeownership Makes ‘Cents’

20171002-Share-STM

The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

  1. Homeownership is a form of forced savings  Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
  2. Homeownership provides tax savings  One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
  3. Homeownership allows you to lock in your monthly housing cost  When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
  4. Buying a home is cheaper than renting  According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
  5. No other investment lets you live inside of it  You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, let’s get together to help you better understand all your options.

 

Thinking About Buying? Know Your Credit Score

Knowing your credit score or getting a recent copy of your credit report is one of the first steps that you can take toward knowing how ready you are to start the home buying process.

Make sure all the information listed on your report is accurate and work to correct any mistakes. The higher your credit score, the more likely you will be to receive a better interest rate for your mortgage, which will translate into more home for your money

Many potential buyers believe that they need a 750 FICO® Score or higher to be able to purchase a home. The truth is that according to Ellie Mae’s Origination Report, over 53% of loans were approved with a FICO® score under 750 last month!

Here are some tips for improving your credit score:

  • Make payments, including rent, credit cards, and car loans, on time.
  • Keep your spending to no more than 30% of your limit on credit cards.
  • Pay down high-balance credit cards to lower balances, and consider balance transfers to free up credit.
  • Check for errors on your credit report and work toward fixing them.
  • Shop for mortgage rates within a 30-day period — too many spread-out inquiries can lower your score.
  • Work with a credit counselor or a lender to improve your score.

Once you know your score, your next step will be finding a lender and getting pre-approved for a mortgage. Doing this will ensure that you know your budget before you start looking for your dream home.

Don’t Let Fear Stop You from Applying for a Mortgage

20171030-Share-STM

 

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:

  1. Find out your current credit history & score â€“ even if you don’t have perfect credit, you may already qualify for a loan. The average FICO® Score of all closed loans in September was 724, according to Ellie Mae.
  2. Start gathering all your documentation “ income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
  3. Contact a professional your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
  4. Consult with your lender he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
  5. Talk to your lender about pre-approval a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

Renting or Buying…Either Way, You’re Paying Someone’s Mortgage

20171030-Share-STM1

There are some people who have not purchased homes yet because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained in their article,  12 Practical Steps to Getting Rich,

While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.

Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years  unlike rents which will continue to rise over the next three decades.

As an owner, your mortgage payment is a form of forced savings which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 3.94% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

How to Save on a Mortgage Payment Whether Buying or Selling

20171026-Share-STM

In Trulia’s recent report Rent vs. Buy: Roommate Edition, they examined the impact that renting with a roommate has in determining whether it is more expensive to rent or buy. The study explains:

Since we started keeping track in 2012, it’s been a better deal to buy than rent in America’s largest housing markets “ and for much of that time it hasn’t been close

It then goes on to ask the question:

But does the equation change for renters who share their rent with a roommate?

The report reveals:

While the standard rent vs. buy analysis reveals buying is cheaper than renting in all of the nation’s 100 largest metros, this doesn’t hold true for those choosing between renting with a roommate and buying a starter home.

It seems obvious that sharing the cost of renting your living space by taking in a roommate dramatically decreases your housing expense (which is exactly what the report concluded), but it got us thinking.

What if you purchased a home and took in that same roommate?

The savings you would gain by adding a roommate would also occur if you purchased a home. This presents an opportunity for a list of possible purchasers. Here are two examples:

  1. The first-time buyer: As the report explains, many young adults already live with a roommate. If they purchased a new home, perhaps that roommate (or someone else) would be willing to rent a room in their new house. The rent could help offset the mortgage payment.
  2. The empty-nester seller looking to move: Their home may no longer fit their current lifestyle. They may now be looking for something a little smaller with all the bedrooms on the ground level. These families may be able to open a bedroom to an older family member (parents, aunts & uncles, etc.). This would kill two birds with one stone.

A smaller, move-down home is almost impossible to find in the current housing market. If the seller-turned-buyer takes on a tenant, they could buy a more expensive home knowing that the additional monies needed to pay the mortgage would be offset with the additional monies they receive in rent. Secondly, the older couple (ex. parents) could get a housing option that probably far surpasses anything else available to them in the current market.

Bottom Line

Considering the concept of renting a portion of your house to be able to purchase the perfect home may make sense to many families. You will need to decide if it is right for you.

Highlights from Social Benefits of Homeownership and Stable Housing

20161220-Share-STM

Highlights from the full article included in the latest volume of the Journal of the Center for Real Estate Studies. 

Research has consistently shown the importance of the housing sector on the economy and the long-term social and financial benefits to individual homeowners. However, in recent years many have questioned the role of homeownership due to the housing downturn and foreclosure crisis. Thus, a related question is: do the social benefits of homeownership from the past still apply? With respect to the new conditions of the real estate market, the current report provides an updated review of the literature of the social benefits of homeownership. Furthermore, this paper examines not only the ownership of homes, but also the impact of stable housing (as opposed to transitory housing and homelessness) on social outcomes, looking specifically at some outcome measures such as:

Educational achievement

Consistent findings show that homeownership does make a significant positive impact on educational achievement. Less clear, however, is whether homeownership in itself, stable housing or favorable neighborhood characteristics are the main underlying factors contributing to better educational outcomes.

More recently, researchers found that the act of saving has some association with child outcomes and specifically the degree to which children of homeowners are less likely to drop out of school.

Civic participation

The extent of community involvement and the benefits that accrue to society are hard to measure, but several researchers have found that homeowners tend to be more involved in their communities than renters.

After the sharp decline of home prices, recent studies reevaluated the social role of homeownership and found that residential stability increases the likelihood of electoral participation but is unrelated to participation in membership groups. Interestingly, even after controlling for residential stability, homeowners remain more likely to participate in local elections, civic groups and neighborhood compared to renters.

Health benefits

Early studies of homeownership and health outcomes found that homeowners and children of homeowners are generally happier and healthier than non-owners, even after controlling for factors such as income and education levels that are also associated with positive health outcomes and positively correlated with homeownership.

More recent studies have found that the wealth building effect of homeownership and the sense of control it provides to homeowners in a stable housing market affect homeowners mental and physical health in a positive way. However, the literature is mixed in times of housing market instability. While some studies showed that homeowners fared better than renters during the recent housing crisis, other studies suggest that areas of high housing distress also had high rates of mental health and stress-related diagnoses. More research is needed on the relationship of health outcomes and homeownership.

Crime

Research on crime and home ownership shows that a lower crime rate among homeowners and people living in a stable housing environment are consistent with theories on social disorganizations. A stable neighborhood, independent of ownership structure, is also likely to reduce crime. It is easier to recognize a perpetrator of crime in a stable neighborhood with extensive social ties.

However, with respect to the housing crisis and the increased foreclosure rates, several studies readdressed the relationship between homeownership and crime examining the effects of foreclosures on neighborhood crime. Most of those studies found some evidence that additional foreclosure leads to an increase of burglary and violent rates