Every year, Gallupsurveys Americans to determine their choice for the best long-term investment. Respondents are given a choice between real estate, stocks, gold, and savings accounts.
For the sixth year in a row, real estate has come out on top as the best long-term investment! That has not always been the case. Gallup explains:
“Between 2008 and 2010, covering most of the Great Recession period that saw plummeting home and stock values, Americans were as likely to name savings accounts or CDs as the best long-term investment as they were to name stocks or real estate.”
This year’s results showed that 35% of Americans chose real estate, followed by stocks at 27%. The full results are shown in the chart below.
Now that the real estate market has recovered, so has the belief of the American people in the stability of housing as a long-term investment.
Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20% on conventional financing, you can never have too much information about Private Mortgage Insurance (PMI).
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
Believe it or not there are options on conventional loans with less that 20% down where a homebuyer can look at alternative options on mortgage insurance such as lender paid or upfront vs monthly. FHA, VA & USDA are a different type of loan that also will have a similar type of mortgage insurance however the rules are a little different.
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions & loan options to help you make the best decision for you and your family.
In every area of the country, homes that are priced at the top 25% of the price range for that area are considered to be Premium Homes. In today’s real estate market there are deals to be had at the higher end! This is great news for homeowners who want to upgrade from their current house and move-up to a premium home.
Much of the demand for housing over the past couple years has come from first-time buyers looking for their starter home, which means that many of the more expensive homes that have been listed for sale have not seen as much interest.
This mismatch in demand and inventory has created a Buyer’s Market in the luxury and premium home markets according to the ILHM’s latest Luxury Report. For the purpose of the report, a luxury home is defined as one that costs $1 million or more.
“A Buyer’s Market indicates that buyers have greater control over the price point. This market type is demonstrated by a substantial number of homes on the market and few sales, suggesting demand for residential properties is slow for that market and/or price point.”
The authors of the report were quick to point out that the current conditions at the higher end of the market are no cause for concern,
“While luxury homes may take longer to sell than in previous years, the slower pace, increased inventory levels and larger differences between list and sold prices, represent a normalization of the market, not a downturn.”
Luxury can mean different things to different people. It could mean a secluded home with a ton of property for privacy to one person, or a penthouse in the center of it all for someone else. Knowing what characteristics you are looking for in a premium home and what luxury means to you will help your agent find your dream home.
If you are debating upgrading your current house to a premium or luxury home, now is the time!
Interest rates for a 30-year fixed rate mortgage have been on the decline since November, now reaching lows last seen in January 2018. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates came in at 3.82% last week!
This is great news for anyone who is planning on buying a home this Summer!
To put the low rates in perspective, the average for 2018 was 4.6%! The chart below shows the recent drop, and also shows where the experts at Freddie Mac believe rates will be by the end of 2019.
If you plan on buying a home this year, let’s get together to start your home search to ensure you can lock in these historically low rates today!
The US-China trade war has caused global interest rates to drop as investors divert capital away from the stock market and into the bond market. The 25% tariff recently placed on Chinese imports into the US means that these products could potentially cost 25% more than what they cost last year, driving up consumer prices on those goods and services. It remains to be seen whether companies will pass on the higher costs to their customers, or whether they’ll absorb the cost increases themselves. Either way, corporations are likely to earn less profit, which is the main reason why stock prices have tumbled recently.
In the meantime, bonds have benefited as investors have shifted their funds into the safety of the bond market to ride out the storm. This has caused interest rates on government bonds as well as mortgages to go down. In fact, mortgage rates are at their best levels of the year. But how long will this last?
Generally, tariffs and trade wars are bad for both stocks and bonds. That’s because tariffs carry with them the risk of higher inflation. Whenever there is inflation (higher prices), interest rates also go up. That’s because inflation erodes the purchasing power of the interest that’s being paid to the one lending the money. For example, if you pay 5% interest to a lender who lends you $100,000, that lender is earning $5,000 each year. But if that $5,000 has less purchasing power due to inflation, the lender may ask you to pay 6% instead.
That’s the long-term risk with tariffs and trade wars. Although interest rates are very low right now, market conditions could change at any time. If you’re thinking of buying a new house or refinancing your mortgage, you may want to get moving on it now, because the longer you wait, the bigger the risk you’re taking that interest rates could go higher. Do not wait!
Contact me for more info or evaluate your options!
In today’s real estate market, with more houses coming to market every day and eager buyers searching for their dream home, setting the right price for your house is one of the most important things you can do.
According to CoreLogic’s latest Home Price Index, home values have risen at over 6% a year over the past two years, but have started to slow to 4.4% over the last 12 months. By this time next year, CoreLogic predicts that home values will be 4.6% higher.
With prices slowing from their previous pace, homeowners must realize that pricing their homes a little OVER market value to leave room for negotiation will actually dramatically decrease the number of buyers who will see their listing! (see the chart below)Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price their house so that demand for the home is maximized. By doing so, the seller will not be negotiating with a buyer over the price, but will instead have multiple buyers competing with each other over the house.
The key to selling your house in 2019 is making sure your house is Priced To Sell Immediately (PTSI)! That way, your home will be seen by the most buyers and will sell at a great price before more competition comes to market!
If you are debating listing your house for sale, let’s get together to discuss how to price your home appropriately for our area and maximize your exposure this Spring Market!
If your plan for 2019 includes selling your home, you will want to pay attention to where experts believe home values are headed. According to the latest Home Price Index from CoreLogic, home prices increased by 4.7% over the course of 2018.
The map below shows the results of the latest index by state.
Real estate is local. Each state appreciates at different levels. The majority of the country saw at least a 2.0% gain in home values, while some residents in North Dakota and Louisiana may have felt prices slow slightly.
This effect will be short lived. In the same report, CoreLogic forecasts that every state in the Union will experience at least 2.0% appreciation, with the majority of the country gaining at least 4.0%! The prediction for the country comes in at 4.6%. For a median-priced home, that translates to over $14,000 in additional equity next year! (The map below shows the forecast by state.)
So, how does this help you list your home for the best price?
Armed with the knowledge of how much experts believe your house will appreciate this year, you will be able to set an appropriate price for your listing from the start. If homes like yours are appreciating at 4.0%, you won’t want to list your home for more than that amount!
One of the biggest mistakes homeowners make is pricing their homes too high and reducing the price later when they do not get any offers. This can lead buyers to believe that there may be something wrong with the home, when in fact the price was just too high for the market.
Pricing your home right from the start is one of the most challenging parts of selling your home. Once you decide to list your house, let’s get together to discuss where home values are headed in your area!
Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job! We must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
Now that being said – if you get an opportunity to obtain another job to improve your financial situation – do not over look this and give us a call to discuss before passing on this. not everything is always clear cut and we understand this.
2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with us. Normal payroll and other sorts of income that are typical are not what we are discussing here.
3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans and more difficult to get approved… and sometimes qualified borrowers no longer qualify.
4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated – YES a cosigner is equally obligated to pay as the main borrower – no difference. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you. Also understand that in some cases if a history of payment from another party can be documented for an extended period of time – there may be some flexibility.
5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to us.
6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.
So you made an offer, it was accepted, and now your next task is to have the home inspected prior to closing. Oftentimes, agents make your offer contingent on a clean home inspection.
This contingency allows you to renegotiate the price you paid for the home, ask the sellers to cover repairs, or even, in some cases, walk away. Your agent can advise you on the best course of action once the report is filed.
How to Choose an Inspector
Your agent will most likely have a short list of inspectors that they have worked with in the past that they can recommend to you. HGTVrecommends that you consider the following 5 areas when choosing the right home inspector for you:
Qualifications – find out what’s included in your inspection and if the age or location of your home may warrant specific certifications or specialties.
Sample Reports – ask for a sample inspection report so you can review how thoroughly they will be inspecting your dream home. The more detailed the report, the better in most cases.
References – do your homework – ask for phone numbers and names of past clients who you can call to ask about their experiences.
Memberships – Not all inspectors belong to a national or state association of home inspectors, and membership in one of these groups should not be the only way to evaluate your choice. Membership in one of these organizations often means that continued training and education are provided.
Errors & Omission Insurance – Find out what the liability of the inspector or inspection company is once the inspection is over. The inspector is only human after all, and it is possible that they might miss something they should have seen.
Ask your inspector if it’s okay for you to tag along during the inspection, that way they can point out anything that should be addressed or fixed.
Don’t be surprised to see your inspector climbing on the roof or crawling around in the attic and on the floors. The job of the inspector is to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating & air conditioning systems, ventilation, windows, the fireplace and chimney, the foundation, and so much more!
They say ‘ignorance is bliss,’ but not when investing your hard-earned money into a home of your own. Work with a professional who you can trust to give you the most information possible about your new home so that you can make the most educated decision about your purchase.