Do you have the Jack to pay for Closing Costs?

Have You Budgeted for Closing Costs? | MyKCM

Saving for a down payment is a key step in the homebuying process however, it’s not the only monies you may need to include in your budget. Another factor that’s important to plan for is the closing costs and prepaid items required to obtain a mortgage. I cant tell you how many buyers contact us wanting to buy a $200,000 home putting down 5% and thinking they only need $10,000. There is more to this and getting the right details upfront makes a big difference.

What Are Closing Costs?

According to some experts – bla bla bla,

When you close on a home, a number of fees will be collected. They typically range anywhere from 2% to 5% of the total cost of the home, and can include title insurance, Lender fees, Settlement fees, doc preparation fees, and more.”

Experts further share

You will see lots of documents in front of you prior to closing and also on closing day. By closing you will not have enough time to read all the docs. We recommend that you work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.

For closing the most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You are required to acknowledge this form no later than 3 days three days before closing since, once you (the borrower) are required to sign it. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your lender and real estate agent are great resources for getting you all the answers you need.”

Bottom Line

We are here to discuss the home buying process, to be sure your plan includes budgeting for what you need to purchase your dream home – without any surprises! We can even share a few secrets for how to do this with with less cash out of your pocket. Ask us about our Home Express Mortgage Plan.

Reasons – Pre-Approval Is the First Step in the 2020 Homebuying Journey

Three Reasons Why Pre-Approval Is the First Step in the 2020 Homebuying Journey | MyKCM

When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.

1. Gain a Competitive Advantage

Low inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.

2. Accelerate the Homebuying Process

Pre-approval can also speed up the homebuying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

3. Know What You Can Borrow and Afford

Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach. Why spend the time and money looking for a home that may be out of yoru budget. Take advantage of our Home Express Mortgage Plan

Freddie Mac sets 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.”

Freddie Mac also describes the ‘4 Cs’ that help determine the amount you’ll 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

While there are still many additional steps you’ll need to take in the homebuying process, it’s clear why pre-approval is always the best place to begin. It’s your chance to gain the competitive edge you may need if you’re serious about owning a home.

Bottom Line

Getting started with pre-approval is the best way to begin the homebuying journey. Let’s get together today to make sure you’re on the fastest path to homeownership.

The Cost of Renting vs. Buying Today

The Cost of Renting vs. Buying Today [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

You Can Save for a Down Payment Faster Than You Think!

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long it would take to save for a down payment in each state.

Using data from the United States Census Bureau and Zillow, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Ohio can save for a down payment the quickest in just under 3 years (2.44). Below is a map that was created using the data for each state:

You Can Save for a Down Payment Faster Than You Think! | MyKCM

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3%-down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes possible in a year or two in many states as shown on the map below.

You Can Save for a Down Payment Faster Than You Think! | MyKCM

Bottom Line

Whether you have just started to save for a down payment, or have been saving for years, you may be closer to your dream home than you think! Let’s discuss so I can help you evaluate your ability to buy today.

Investment Property Math: 30-yr vs. 15-yr Mortgage

Here are three things to consider when choosing between a 30-year fixed rate mortgage and a 15-year fixed rate mortgage on an investment property:

1 – Cash-Flow Considerations
A 30-year mortgage carries a lower monthly payment and therefore is more likely to result in positive monthly cash flow.  The less money you pay out each month, the more likely you are to achieve and maintain positive monthly cash flow. Positive cash-flow reduces your risk of default in case the tenant stops making their rent payments or in case the property goes vacant for a while.  For this reason, a 30-yr mortgage is generally less risky for investors vs. a 15-yr mortgage.

2 – Rate of Return Considerations
A 15-yr mortgage saves you money because you pay less interest over time.  However, is your goal to save money or make money?  If your goal is to make money and improve your rate of return on investment, a 30-yr mortgage may be a better option for you. Although you’d need to run the numbers in each case to determine which option would produce a higher rate of return, you’ll typically find in favor of a 30-yr mortgage.  That’s due to the impact of positive leverage on your investment returns.

3 – Investment Objectives
Investing in real estate is not always purely a numbers game.  For example, some investors would be happy earning less of an investment return, and experiencing less financial liquidity with a 15-yr mortgage because they value the tangible nature of owning real estate property free and clear. A 15-yr mortgage pays off in half the time, and it would result in higher cash flow and less cash-flow risk in the future when the loan is paid off (assuming you still own the property at that time).

As you can see, there’s no “one-size-fits-all” strategy when it comes to investing in real estate.  Contact me for more info or to explore your options!

No… You Do Not Need 20% Down to Buy NOW!

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO® Scores

An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.

The Mortgage Process: What You Need to Know

The Mortgage Process: What You Need to Know [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Many buyers are purchasing a home with a down payment as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.