Buyers

How to Spot the Top Problems Home Sellers Try to Hide

Whether you’re a seasoned house hunter or a first-time buyer, the process of purchasing a home has plenty of pitfalls. And while you may assume that sellers are being upfront, it’s not uncommon for them to gloss over some of their home’s shortcomings.

“All homeowners sign a disclosure document about their property so buyers know what they’re getting into; however, it can be very tempting for some to tell white lies or conveniently forget facts,” says Wendy Flynn, owner of Wendy Flynn Realty in College Station, TX. “In fact, a very large number of real estate lawsuits stem from owners misrepresenting their property.”

So, just to be on the safe side, here are some common cover-ups and how you can crack them.

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Water damage

Water stains aren’t just ugly; they’re also signs of leaks and a breeding ground for mold. And they’re fairly easy for homeowners to hide with strategic decoration or staging, according to Frank Baldassarre, owner of Ace Home Inspections on Staten Island, NY.

“Many sellers try to conceal water intrusion in the basement, for example, with a pile of cardboard boxes or suitcases,” he says. You could always ask the homeowner to move the furniture a few inches and shine a pocket flashlight around. If the home has obvious red flags (an odd odor or visible wall cracks), it’s not unreasonable to request removing a large picture frame to take a peek at what’s behind it.

Another popular tactic for concealing water damage: a coat of fresh paint.

“Always ask the homeowner when they last painted,” says Baldassarre. “If it was a year ago, they’re probably not trying to hide water stains.”

A contaminated backyard

If you’re looking at an older home—specifically, if it was built before 1975—odds are it used to run on oil. Back then, homeowners typically had large oil tanks installed in the basement or underground in the backyard to conserve space and maintain the home’s aesthetic.

“The problem is that oil can contaminate soil, and because it’s incredibly costly to remove, some people try to hide evidence of the tank,” says Baldassarre. “Recently, I arrived to a home inspection early and caught the homeowner sawing off the top of the fill pipe.”

So while walking through a home’s backyard, look for a small fill pipe sticking up from the ground (sometimes covered by patches of grass), a dead giveaway that an oil tank is on the premises. Or double-check by asking the seller if the home was heated with oil in the past.

A shaky foundation

If the paint job in a home looks a little uneven around the door frames or windows, take a closer to look to see if it’s concealing any jagged cracks in the wall, advises Flynn. Those zigzags can signify foundation problems, a costly and potentially dangerous situation for potential buyers.

A weak foundation can prevent cabinets and doors from closing, cause supporting beams to snap from stress, or even result in a poor home appraisal, which can affect your loan and the home’s resale value.

Another clue that the house has a weak foundation: “if you feel as though you’re suddenly walking up or down—even slightly—as you move through the home,” says Flynn.

Problem neighbors

Barking dogs, rocker teens, and blaring horns are all factors that can turn off potential buyers. That’s why some owners try to downplay these situations with well-timed open houses and neighborly negotiations.

“Homeowners have an obligation to disclose what are called ‘neighborhood nuisances,’ but if they don’t, buyers have to rely on their word,” says Carrie Benuska, a real estate professional at John Aaroe Group in Pasadena, CA. “I know people who have asked their neighbors to keep noisy dogs inside during showings or only open their homes during strategic times of the day.”

Even well-intentioned owners may not be candid if they’ve become accustomed to their environment. One workaround, suggests Benuska, is for buyers to take a stroll around the neighborhood at different times of the day to get a more authentic feel for the area. And don’t hesitate to make small talk with the locals, who can offer a more objective view of their surroundings.

Weird temperature changes

Anyone who’s lived in a home with a freezing bathroom or unusually warm bedroom knows that a temperature imbalance can result in avoiding a room altogether. That’s why tapping into your senses is key when viewing your potential new home.

“If you walk into a room and there’s a subtle shift in the atmosphere—maybe the air feels dry or damp—ask the owner what the room feels like throughout the seasons,” says Benuska. “The culprit is usually poor insulation, sometimes as a result of the owner adding a second room or floor to the home.”

Oftentimes, an owner isn’t trying to outright conceal extension work. However, if the construction was done without a permit—“more common than you’d imagine,” says Benuska—you aren’t required to pay for the extra square footage.

By Elise Sole

For the original article visit Realtor.com

Expert Quotes on the 2024 Housing Market Forecast

If you’re thinking about buying or selling a home soon, you probably want to know what you can expect from the housing market in 2024. In 2023, higher mortgage rates, confusion over home price headlines, and a lack of homes for sale created some challenges for buyers and sellers looking to make a move. But what’s on the horizon for the new year?

The good news is, many experts are optimistic we’ve turned a corner and are headed in a positive direction.

Mortgage Rates Expected To Ease

Recently, mortgage rates have started to come back down. This has offered hope to buyers dealing with affordability challenges. Mark Fleming, Chief Economist at First American, explains how they may continue to drop:

Mortgage rates have already retreated from recent peaks near 8 percent and may fall further . . .

Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), says:

“For home buyers who are taking on a mortgage to purchase a home and have been wary of the autumn rise in mortgage rates, the market is turning more favorable, and there should be optimism entering 2024 for a better market.”

The Supply of Homes for Sale May Grow

As rates ease, activity in the housing market should pick up because more buyers and sellers who had been holding off will jump back into action. If more sellers list, the supply of homes for sale will grow – a trend we’ve already started to see this year. Lisa Sturtevant, Chief Economist at Bright MLS, says:

Supply will loosen up in 2024. Even homeowners who have been characterized as being ‘locked in’ to low rates will increasingly find that changing family and financial circumstances will lead to more moves and more new listings over the course of the year, particularly as rates move closer to 6.5%.”

Home Price Growth Should Moderate

And mortgage rates pulling back isn’t the only positive sign for affordability. Home price growth is expected to moderate too, as inventory improves but is still low overall. As the Home Price Expectation Survey (HPES) from Fannie Mae, a survey of over 100 economists, investment strategists, and housing market analysts, says:

“On average, the panel anticipates home price growth to clock in at 5.9% in 2023, to be followed by slower growth in 2024 and 2025 of 2.4 percent and 2.7 percent, respectively.” 

To wrap it up, experts project 2024 will be a better year for the housing market. So, if you’re thinking about making a move next year, know that early signs show we’re turning a corner. As Mike Simonsen, President and Founder of Altos Research, puts it:

“We’re going into 2024 with slight home-price gains, somewhat easing inventory constraints, slightly increasing transaction volume . . . All in all, things are looking up for the U.S. housing market in 2024.”

Bottom Line

Experts are optimistic about what 2024 holds for the housing market. If you’re looking to buy or sell a home in the new year, the best way to ensure you’re up to date on the latest forecasts is to partner with a trusted real estate agent. 

For the original article, visit Keeping Current Matters.

ON THE HOUSE: 10 WAYS TO SAVE MONEY ON BUYING A HOME TODAY

How can first-time homebuyers save money when mortgage rates are at 20-year highs and home prices are rising again?

There’s no doubt that buying a home today is expensive. Mortgage rates are above 7%, home prices have begun climbing again, and bidding wars are back.

But for first-time buyers who are determined to become homeowners, there are a few ways to cut costs and lower mortgage payments. Some require a bit of creative thinking; others may take some perseverance.

Below are 10 tips to save money when purchasing a home in today’s crazily expensive market.

1. Improve your credit score and pay down old debt

Paying off old debt might not seem like a way to save money, but hear me out. Lenders are less worried about borrowers defaulting on their loans if they have a proven track record of paying off their debt on time.

So borrowers with higher credit scores can usually snag lower mortgage rates and fewer fees on their loans.

This is where the savings can add up. Upfront fees on a loan can total thousands of dollars at closing—and higher mortgage rates have the potential to add tens of thousands of dollars over the life of a 30-year loan.

Plus, those with less debt can often qualify for larger loans.

2. Shop around for a mortgage

Make lenders compete for your business. Many buyers think they’re stuck with the lender that wrote them their loan pre-approval letter. Or they believe all lenders charge the same amount. That’s simply not true.

You can save tens of thousands of dollars over the life of your loan by making lenders compete over your business. With fewer borrowers seeking loans due to the higher mortgage rates, lenders may be more amenable to giving you a break.

And if you get a better offer from one lender but would prefer to use another, you can always see if your mortgage company of choice will match the better offer. This is how I snagged a lower mortgage rate, without buying points, and had fees waived when I bought a home two years ago.

3. Consider a FHA loan

Federal Housing Administration loans have long been popular with first-time buyers who can’t make large down payments. Borrowers can put down as little as 3.5% of the purchase price of their home with these loans. Plus, they can often get lower mortgage rates than those making a 20% down payment with a conventional loan.

However, there are a few downsides to this loan. Borrowers typically have to pay private mortgage insurance on their loans every month until they reach 20% equity in their home.

In addition, homes purchased with these loans must go through a thorough inspection and may require the seller to make repairs before the loan is approved. There are also limits on how much buyers can borrow. Plus, borrowers typically must have at least a 580 credit score to qualify for putting just 3.5% down.

4. Snag a VA or USDA loan

You can buy a home with 0% down—if you can qualify for one of these loans.

Activity-duty military personnel, veterans, their spouses, and those purchasing homes in rural areas can often qualify for a Veterans Affairs or U.S. Department of Agriculture mortgage where buyers don’t have to put anything down.

Bonus: These loans often come with lower mortgage rates, and VA loans typically don’t require private mortgage insurance.

5. Choose a 15-year mortgage

Choosing a 15-year mortgage can save you quite a bit of money over the long term, but buyers should anticipate higher monthly payments over the short term.

Mortgage rates are generally much lower on these loans than for a 30-year fixed-rate mortgage. You also pay the home off in half of the time. But since you’re paying it off earlier, your monthly payments can be much larger.

6. Buy mortgage points

Purchasing mortgage points from your lender can cost you more upfront when you take out a loan. But it can lower your mortgage payments permanently, saving you quite a bit of money each month.

Typically, points are sold in 0.25% increments. They generally cost about 1% of the full amount of the mortgage. So to bring your mortgage rate down by a quarter of a percentage, you would pay $4,500 on a $450,000 loan.

Make sure you plan on staying in your home for a while before purchasing points. It might not make much financial sense if you plan to sell in just a few years.

7. Shop for new construction

Look beyond the sticker price when considering buying new construction. Even if the purchase price is higher than a similarly sized home on the resale market, buyers might wind up with lower monthly mortgage payments than if they had purchased an older residence.

Many builders are buying mortgage rates down either permanently or through temporary 3-2-1 or 2-1 buy-downs. The larger, national builders often have lending arms that make it easier to provide those mortgage savings to buyers. Even smaller builders might offer similar incentives to attract buyers.

In addition, new construction isn’t as costly as many buyers believe. Many of the larger builders today are striving to put up smaller, more affordable homes. That’s helped to narrow the gap in prices.

In July, there was only a $30,000 difference between the median price of a typical new home, at $436,700, and an existing one, at $406,700, according to government and National Association of Realtors® data.

8. Seek out down payment assistance programs

This is one of my favorite tips because everyone loves free money! There are more than 2,000 down payment assistance programs available across the country for all first-time and even repeat buyers who qualify.

These programs provide assistance to buyers based on their annual incomes, professions, military service, racial backgrounds, disabilities, and where they are looking for homes, among other qualifications.

(Buyers can see what they might be eligible for here.)

9. Look at the homes that no one wants

Most buyers want a cute, turnkey home with a nicely landscaped yard. But they might be missing the potential of an attractively priced fixer-upper or a home that’s been sitting on the market for a while with a discounted price tag.

Homes become stigmatized in the minds of some buyers if they’re on the market for long periods or if deals fall through. But that might not be the fault of the seller or indicate something wrong with the property. It might be the buyer who was under contract couldn’t secure financing or changed their plans.

Other homes may not seem attractive in photos or in person, but they might just need a coat of paint and some minor cosmetic work to clean up nicely. And with all that money you’re saving on the purchase price, you might be able to turn these properties into some really special homes.

Just be sure to hire a home inspector and have a chat with a remodeler before you put in an offer so you understand the scale of the work that’s needed and how much it’s going to cost you.

10. Negotiate with sellers

Even in today’s competitive market, buyers can attempt to negotiate with sellers. Nothing ventured, nothing gained.

Now, this probably won’t work for well-priced homes oozing curb appeal in the most desirable neighborhoods. But sellers of homes that have been sitting on the market for a while, homes that need some work, or homes in less desirable locations mightº be willing to make a deal.

Some common things today’s buyers are asking for are for sellers to contribute to their closing costs, make pricey repairs, and temporarily buy down their mortgage rates for the first two or three years of their mortgage.

 

For this and related articles, please visit Realtor.com

The Perfect Home Could Be the One You Perfect After Buying

There’s no denying mortgage rates and home prices are higher now than they were last year and that’s impacting what you can afford. At the same time, there are still fewer homes available for sale than the norm. These are two of the biggest hurdles buyers are facing today. But there are ways to overcome these things and still make your dream of homeownership a reality.

As you set out to make a purchase this season, you’ll want to be strategic. This includes taking a close look at your wish list and considering what features you really need in your next home versus which ones are nice-to-have. This will help you avoid overextending your budget or limiting your pool of options too much because you’re searching for that perfect home.

Danielle Hale, Chief Economist at Realtor.com, explains:

“The key to making a good decision in this challenging housing market is to be laser focused on what you need now and in the years ahead, . . . Another key point is to avoid stretching your budget, as tempting as it may be . . .”

To help identify what you truly need, make a list of all the features you’ll want to see. From there, work to break those features into categories. Here’s a great way to organize your list:

  • Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle (examples: distance from work or loved ones, number of bedrooms/bathrooms, etc.).

  • Nice-To-Haves – These are features you’d love to have but can live without. Nice-to-haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of these, it’s a contender (examples: a second home office, a garage, etc.).

  • Dream State – This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner (examples: a pool, multiple walk-in closets, etc.).

If you’re only willing to tour homes that have all of your dream features, you may be cutting down your options too much and making it harder on yourself (and your budget) than necessary.

While you’d love to have granite countertops or a pool in the backyard, those are both things you could potentially add after you move. Instead, it may be best to focus on finding the things that you can’t change (like location or a certain number of rooms). Then, you can upgrade or add some of the other features or finishes you want later on.

Sometimes the perfect home is the one you perfect after buying it.

Once you’ve categorized your list in a way that works for you, discuss your top priorities with your real estate agent. They’ll be able to help you refine the list further, coach you through the best way to stick to it, and find a home in your area that meets your top needs.

Bottom Line

With the current affordability challenges and limited housing supply, you’ll want to be strategic so you can find a home that meets your needs while staying within your budget. Connect with a real estate agent who can help make that possible.

To see the original article, visit Keeping Current Matters

10 THINGS MOST HOMEBUYERS GET WRONG ABOUT GETTING A MORTGAGE TODAY

While buying a home has always been a challenging milestone, today’s high interest rates have made this dream even harder to achieve.

Over the past two years, interest rates on home loans have nearly doubled from the 3% range to around 7% today. This tacks many hundreds extra onto the monthly expense of housing, stretching some homebuyers’ budgets to the breaking point. And while there are ways to lower those costs, navigating the home loan process is extremely complicated—particularly for first-time homebuyers.

“It’s very important for first-timers to do research and understand all their options before they start looking for a home,” says Cara Ameer, a real estate agent with Coldwell Banker who is licensed in California and Florida. “Doing your due diligence can help you avoid some of the most common rookie mistakes, so you come out not only with the home of your dreams, but also a mortgage you can afford.”

Here are some common blunders homebuyers make when attempting to secure a mortgage.

1. Focusing too much on the interest rate

Probably the most common mistake homebuyers make is simply assuming that the lower the interest rate, the better the deal. But what they might not realize is that to get an ultralow rate, there are often hidden fees—and those fees could mean they ultimately end up paying more.

“Many lenders, especially in more recent years, have started to charge hidden points in an effort to advertise a much lower mortgage rate to potential applicants,” warns Jason Gelios, author of “Think Like a Realtor” and a real estate agent with Community Choice Realty in South East Michigan.

“It’s great to have the most attractive rate, but if the lender has you paying junk fees to obtain that rate, it might not make sense,” he adds.

Mortgage points are a fee that lenders can charge to applicants to lower their interest rate through the life of the loan. This process is also known as “buying down the rate,” and the fee is paid to the lender as its own fee.

In other words, “buying down the rate” or “buying points” are just a fancy way of saying you’re paying more fees upfront to get a lower interest rate.

As a result, it’s important for mortgage seekers to ask for an estimate of all fees included in their mortgage offer, and not just the interest rate.

2. Assuming you need a 20% down payment

“There’s a common but detrimental misconception that’s causing some potential first-time owners to delay starting the homebuying process, and that is the belief that it still takes 20% down to buy,” says Cindy Allen, veteran real estate agent and founder of DFWMoves in Southlake, TX.

In reality, according to a new study from Self Financial, the average down payment needed in the U.S. for first-time buyers is $12,274 (around 6%), in addition to $1,983 in closing costs.

“Fannie Mae has had a 3% down, first-time homebuyer mortgage for years now, which competes with FHA’s 3.5% down,” says Yifan Zhang, CEO of the host-to-own homebuying program Loftium. “The only difference is that home prices have risen so much recently that these programs are probably more popular now.”

However, keep in mind that you will have to pay private mortgage insurance if you put less than 20% down, which increases your monthly payments.

3. Assuming you can get a loan instantly

Many borrowers assume that in today’s instant-gratification culture, they can get a mortgage in days or even minutes. Not so.

“Even the mortgage lenders with splashy apps and websites still may need a phone call, manual document collection, or other time-consuming steps,” says Zhang.

In fact, many home tours might be off-limits until you’ve been vetted by a lender.

“Buyers may not be able to even see a home without providing a copy of their pre-approval letter just to schedule an appointment,” says Ameer. “Many listing agents are requiring that, no matter the price range. This is no longer just for high-end properties.”

4. Thinking pre-qualification means you’re approved for the loan

While getting pre-qualified for a loan is a good first step, it does not mean you’re guaranteed the money. Pre-approval is better because it means lenders have reviewed your finances.

In the past, pre-approval was typically enough to pass muster. In today’s ultracompetitive market, however, you might want to get fully approved from the get-go before you make an offer.

“Full approval means the buyer has been underwritten prior to making an offer—they have submitted all of their required documents, the lender has reviewed it and been able to vet them to basically say they are solid and just need to get an accepted offer on a property for the loan to go through,” says Ameer.

Being fully approved also allows buyers to close the deal in a much shorter time—two to three weeks in most cases.

This can give buyers the edge, as Ameer points out, “given today’s tight market with low inventory. Listing agents are going to recommend their seller ask for shorter time periods for loan approval.”

5. Not considering first-time homebuyer programs

Newbies who feel overwhelmed by the financial barriers to homeownership might be pleasantly surprised to learn that there are first-time homebuyer programs to help them get over the hump.

“You can find programs that offer help with closing costs and down payments, lower interest rates, and even tax credits to free up some of your savings,” says Allen. “And if you’re a first responder or educator, active-duty military or veteran, there are often special programs available for you, too.”

For example, Allen says just this past January she was involved in a $352,000 transaction where the buyers were granted over $6,000 toward closing costs and escrow through a first-time buyer program. They were then able to use the $6,000 they saved as additional down payment funds.

6. Failing to check your credit score

You really need to check your credit score prior to talking to mortgage lenders because ultimately, this number—which represents how well you’ve paid off past debts—will affect the interest rate you’re offered.

“Not tackling easy options for improving your credit score before taking out a mortgage is a big mistake for first-time homebuyers,” says Zhang. “Today, there are tons of credit improvement tools you can use to quickly and easily tackle your credit. Even just paying off a credit card can bump you into a higher credit category and save you hundreds each month on your mortgage.”

At the very least, make sure you know what your score is by checking it with CreditKarma.com or one of the top three ratings bureaus: TransUnion, Experian, and Equifax.

7. Picking the wrong type of loan

Are you better off going with an FHAVA, or USDA loan or some other type entirely? Don’t know what these acronyms mean? There are many types of mortgages available, each with its own pros and cons based on your own personal circumstances.

“Know your loan options because an inexperienced loan representative may not know all the available programs or may not present all the possibilities,” says attorney Bruce Ailion, a real estate agent with Re/Max Town & Country, Atlanta. “Learn about the types of loans before talking with a professional to know the right questions to ask.”

8. Underestimating fees beyond the down payment

The down payment is not the only cost you’ll have when buying a home and securing a mortgage.

“People talk about the down payment required but rarely talk about the ancillary costs required for purchasing a home like closing costs, title, appraisal, and first-year homeowners insurance upfront,” says Nicole Rueth, senior vice president and producing branch manager, The Rueth Team of Fairway Independent Mortgage Corp. “It’s a mistake not to factor these in, because they can add up to an additional $5,000 to $12,000 down.”

9. Not preparing for the possibility of a low appraisal

Before lenders front the money for a house, they will have an independent home appraiser estimate its value. Many first-time buyers don’t realize that with listing prices so high, it’s entirely possible that their appraisal will come in lower, which means the lender will loan only that much.

“Given the rapidly rising asking prices and multiple-offer scenarios going on, it is quite possible that a property may not appraise at the agreed upon contract sales price. But a bank is only going to base their loan amount off of the appraised price, not what a buyer and seller agreed to pay,” says Ameer. “Buyers may not be able to come up with the cash to cover the difference between the appraised value and the contract sales price, so only offer what you know you can cover out of pocket should that happen.”

10. Not shopping around for the right lender

Not all lenders are created equal and work the same way. That’s why you really should shop around and find someone you trust who will pick up the phone when you call.

“In today’s market, it is imperative that you work with someone reputable who is reachable by cellphone seven days a week, because various questions and scenarios will come up as you embark on your property search and you may need some guidance that is crucial to having the winning offer,” says Ameer. “These situations often happen outside of typical office hours.”

This is one reason real estate agents typically prefer to use local lenders because they are accessible and reliable.

“Local lenders have a proven track record to maintain and value not just the client but the Realtor relationships they work hard to create,” says Kim Jungles, a loan officer with Atlantic Coast Mortgage in Ashburn, VA. “Online lenders for the most part are very difficult to speak with, let alone be available to write a pre-approval letter after 5 p.m. on Friday.”

 

For this and similar articles, please visit Realtor.com

The Surprising Trend in the Number of Homes Coming onto the Market

If you’re thinking about moving, it’s important to know what’s happening in the housing market. Here’s an update on the supply of homes currently for sale. Whether you’re buying or selling, the number of homes in your area is something you should pay attention to.

In the housing market, there are regular patterns that happen every year, called seasonality. Spring is the peak homebuying season and also when the most homes are typically listed for sale (homes coming onto the market are known in the industry as new listings). In the second half of each year, the number of new listings typically decreases as the pace of sales slows down.

The graph below uses data from Realtor.com to provide a visual of this seasonality. It shows how this year (the black line) is breaking from the norm (see graph below):

Looking at this graph, three things become clear:

  • 2017-2019 (the blue and gray lines) follow the same general pattern. These years were very typical in the housing market and their lines on the graph show normal, seasonal trends.

  • Starting in 2020, the data broke from the normal trend. The big drop down in 2020 (the orange line) signals when the pandemic hit and many sellers paused their plans to move. 2021 (the green line) and 2022 (the red line) follow the normal trend a bit more, but still are abnormal in their own ways.

  • This year (the black line) is truly unique. The steep drop off in new listings that usually occurs this time of year hasn’t happened. If 2023 followed the norm, the line representing this year would look more like the dotted black line. Instead, what’s happening is the number of new listings is stabilizing. And, there are even more new listings coming to the market this year compared to the same time last year.

What Does This Mean for You?

  • For buyers, new listings stabilizing is a positive sign. It means you have a more steady stream of options coming onto the market and more choices for your next home than you would have at the same time last year. This opens up possibilities and allows you to explore a variety of homes that suit your needs.

  • For sellers, while new listings are breaking seasonal norms, inventory is still well below where it was before the pandemic. If you look again at the graph, you’ll see the black line for this year is still lower than normal, meaning inventory isn’t going up dramatically and prices aren’t heading for a crash. And with less competition from other sellers than you’d see in a more typical year, your house has a better chance to be in the spotlight and attract eager buyers.

Bottom Line

Whether you're on the hunt for your next home or thinking of selling, now might just be the perfect time to make your move. If you have questions or concerns about the availability of homes in your local area, connect with a real estate agent.

To read the original article, visit Keeping Current Matters

Down Payment Assistance Programs Can Help Pave the Way to Homeownership

If you’re looking to buy a home, your down payment doesn’t have to be a big hurdle. According to the National Association of Realtors (NAR), 38% of first-time homebuyers find saving for a down payment the most challenging step. But the reality is, you probably don’t need to put down as much as you think:

Data from NAR shows the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 15%. And it’s even lower for first-time homebuyers at 8%. But just because that’s the median, it doesn’t mean you have to put that much down. Some qualified buyers put down even less.

For example, there are loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants. But let’s focus in on another valuable resource that may be able to help with your down payment: down payment assistance programs.

First-Time and Repeat Buyers Are Often Eligible

According to Down Payment Resource, there are thousands of programs available for homebuyers – and 75% of these are down payment assistance programs.

And it’s not just first-time homebuyers that are eligible. That means no matter where you are in your homebuying journey, there could be an option available for you. As Down Payment Resource notes:

“You don’t have to be a first-time buyer. Over 39% of all [homeownership] programs are for repeat homebuyers who have owned a home in the last 3 years.”

The best place to start as you search for more information is with a trusted real estate professional. They’ll be able to share more information about what may be available, including additional programs for specific professions or communities. 

Additional Down Payment Resources That Can Help

Here are a few down payment assistance programs that are helping many of today’s buyers achieve the dream of homeownership:

  • Teacher Next Door is designed to help teachers, first responders, health providers, government employees, active-duty military personnel, and veterans reach their down payment goals.

  • Fannie Mae provides down-payment assistance to eligible first-time homebuyers living in majority-Latino communities.

  • Freddie Mac also has options designed specifically for homebuyers with modest credit scores and limited funds for a down payment.

  • The 3By30 program lays out actionable strategies to add 3 million new Black homeowners by 2030. These programs offer valuable resources for potential buyers, making it easier for them to secure down payments and realize their dream of homeownership.

  • For Native Americans, Down Payment Resource highlights 42 U.S. homebuyer assistance programs across 14 states that ease the path to homeownership by providing support with down payments and other associated costs.

Even if you don’t qualify for these types of programs, there are many other federal, state, and local options available to look into. And a real estate professional can help you find the ones that meet your needs as you explore what’s available. 

Bottom Line

Achieving the dream of having a home may be more within reach than you think, especially when you know where to find the right support. To learn more, reach out to a real estate professional who can guide you through the available resources.

To read the original article, visit Keeping Current Matters

RENTING VS. OWNING — WHAT ARE THE ADVANTAGES?

Many Americans doubt their ability to cover the costs of buying a home. But that only means exchanging monthly mortgage payments for monthly rent payments.

Renting vs. owning — what are the advantages of each? Here are some things to consider before signing your next lease.

Advantages of Renting

Renting a house or an apartment has several distinct advantages, including:

  • Fixed rent

  • No property taxes or HOA fees

  • Lower insurance costs (no homeowners insurance)

  • Your landlord is responsible for all repairs and maintenance

  • Various amenities (e.g., pools, gyms, common areas, etc.)

Furthermore, you’re usually only locked into a year-to-year contract when you rent. Unlike buying a house, you won’t be tied to your rental property any longer than you want, which can be ideal for young professionals, college students, or those who need to relocate frequently.

Advantages of Owning a Home

Young adults especially find themselves torn between renting vs. owning — what are the advantages of buying a home? There are a few, such as:

  • Homeowners build equity with each mortgage payment

  • Mortgage payments are often cheaper than renting

  • Freedom to modify the property as you see fit

  • More room for you and your family

  • No need to share living spaces or walls with neighbors

  • Available tax deductions

For many Americans, owning vs. renting can be a better option for building equity meaning the value you invest in a property. Otherwise, your rental monthly payments merely go to support your landlord, which isn’t the best long-term outlook.

Financial Considerations for Renting vs. Owning a Home

Chances are that your decision about whether to rent or buy has to do with finances and the current housing market. Here’s how to think through the different costs associated with owning vs. renting.

Upfront Costs

Buying a home comes with greater initial costs. Even if you don’t make a traditional 20% down payment, you’ll still be responsible for closing costs and administrative fees that can make the process costly.

By comparison, renters usually only have to put down a security deposit equal to one month’s rent, and this payment is fully refundable as long as you don’t damage the property.

Ongoing Costs

Some ongoing costs will be lower when you rent. For instance, many landlords perform maintenance and landscaping on the rental property. Likewise, renters don’t have to worry about real estate taxes, homeowners insurance, or other costs associated with owning a home.

On the other hand, rental payments can often be steep and unpredictable. In some cases, mortgage payments can actually be lower than what you would pay for monthly rent. And with fixed-rate mortgages, you won’t experience any surprise price hikes over the course of your loan.

If you’re thinking about buying a house, an online mortgage calculator can help you figure out how much you can expect to pay every month compared to renting.

Potential Savings

When you’re young, renting may give you time to build your credit and savings account. In that respect, it can provide a path toward financial stability — assuming you can secure a rent payment that’s lower than a mortgage.

On the flip side, homeowners can generally deduct property taxes and home offices in some states, and these tax benefits don’t always apply the same way to renters.

Lifestyle Factors for Renting vs. Owning

Your finances may be your primary consideration, but it’s also important to think about your current living situation.

Generally speaking, it isn’t a good idea to purchase a house if you’re planning on moving within the next five years. If your job is unstable or you’re finishing your education, renting can give you more flexibility than buying.

Others, however, may crave the stability that comes with homeownership. If you start a family, you may need more living space, a yard, or access to local amenities such as schools and playgrounds.

Impact on Long-Term Financial Goals

Your long-term financial decisions and goals should also influence your choice to rent vs. own. Homeownership allows you to build equity in your home. Once you’ve paid off your mortgage, you’ll own your property outright, and the value of your home will stay with you.

The same cannot be said for those who are renters. Renting may be a short-term necessity, but it won’t help you reach your long-term goals.

Loan Products for First-Time Homebuyers

Some renters stay put because they’re wary of high home prices, while others assume you can only buy a home after saving a full 20% for a down payment. The reality, however, is that there are many loan products that can make owning vs. renting an easy decision.

FHA Loans

FHA loans backed by the Federal Housing Administration are designed for homeowners with substandard credit. As long as your credit is 500 or above, you can obtain a home loan with only 10% down. And if your credit score is 580 or above, you only need 3.5% down, putting homeownership within easier reach.

VA Loans

If you or your spouse are a current or former member of the U.S. Military, you can get a loan backed by the U.S. Department of Veterans Affairs. These loans don’t require any money down and are available even to those with below-average credit.

Understand the benefits and qualifications for a VA loan.

USDA Loans

Loans backed by the U.S. Department of Agriculture are another zero-down payment option aimed at buyers who purchase a home in a qualifying rural or suburban area.

If you think a USDA loan may apply to you, learn more.

Conventional Loans

Conventional loans offer the lowest interest rates for buyers with solid credit. And even these loan programs only require a 3% down payment, making it even easier to become a proud homeowner.

Understand the pros and cons of conventional loans here.

Find the Home of Your Dreams

Don’t let fear of home prices keep you locked into your decisions to rent forever. Act now by talking to a local loan officer. We can help you secure loan options that fit your lifestyle and budget.

 

For this and similar articles, please visit CrossCountry Mortgage

AM I READY TO BUY A HOUSE?

“When am I ready to buy a house?”

It’s an important question to ask yourself, since the homebuying process is often as challenging as it is rewarding. While there’s no one right answer, there are ways you can determine when you’re ready to buy a house.

Here are some factors to consider, as well as some resources that can help you make a decision regarding the right time to buy.

Homebuying Checklist

Buying a home is a major life decision. Before you start looking, use the following checklist to assess your readiness.

Low Debt

When you apply for a mortgage, your lender will conduct a thorough analysis of your finances, including your debt-to-income ratio, which measures the ratio between your monthly income and outstanding debt.

Lenders prefer borrowers to have a debt-to-income ratio of no more than 43%, which means your total debts don’t exceed 43% of your gross monthly income.

For example, if you earn $5,000 per month and your monthly bills total $1,800, you have a debt-to-income ratio of 36% ($1,800/$5,000). But if your bills total $2,500, your ratio jumps to 50%.

Before buying a home, it can be helpful to pay off your credit card debt or auto loan or refinance your student loans to minimize your monthly debts.

What is Your Debt-to-Income Ratio?

Calculate an estimate of your debt-to-income ratio.

GET STARTED

Down Payment

When it comes to homebuying, a good rule of thumb is to have 20% saved for a down payment.

This isn’t a hard and fast rule, as many home loan programs allow you to buy a home with as little as 3% to no money down, but without a 20% down payment, you might have to pay private mortgage insurance (PMI), which could increase your monthly mortgage payments.

Furthermore, the more money you put down, the less you’ll have to borrow. A smaller loan amount will translate into a lower monthly mortgage payment, saving you money each month.

Saving for a down payment before you start shopping for a home can increase the amount of home you can afford. Make sure you have enough savings to cover closing costs and your first mortgage payment.

Credit Score

How’s your credit score? In today’s environment, a borrower can acquire a loan even with a less than ideal credit score. For a conventional mortgage, most lenders will require you to have a credit score of at least 620 to qualify. For an FHA loan, a credit score could be between 500-580 depending on your available down payment.

That’s why it helps to boost your credit as much as possible before applying for a mortgage. Even an increase of 40 points or more can save you thousands of dollars over the course of your loan.

Monthly Payment and Home Maintenance

How will your mortgage fit into your broader budget?

When you buy a home, you’ll need enough to cover your monthly mortgage payments and property taxes, along with other costs. Homeowners insurance, for example, costs an average of $100 per month. And if you purchased your home with a down payment of less than 20%, you may be responsible for monthly PMI payments.

Added to these regular expenses are the costs of home maintenance. A broken air conditioning unit, for instance, could easily cost you over $5,000. It’s important to have an emergency fund that can cover roughly three to six months’ worth of your usual expenses to cover unforeseen costs.

Area of Ownership

Where do you see yourself in five years? It’s important to buy in an area that a borrower is comfortable in. Does the city have a good school district? Is there nightlife? How is the commute? Is it close to family and friends? All are important areas in deciding where to live.

Rent vs. Buy

Why buy when you can rent? Renting has its advantages, especially since your landlord will be responsible for covering property maintenance and repair. Renting may also be necessary until you’re officially ready to buy a home.

Despite the flexibility of renting, buying is often the better option, at least if you plan on staying in the area for five to seven years. A house is an investment — by buying a home, you’re keeping your financial future secure.

For example, if your rent and potential mortgage are the same amount of money, your mortgage payment would help reduce mortgage principal and build up equity in your home. With a rent payment, that payment just goes to the landlord and does not allow you to build value.

Is It Better to Rent or Buy?

Use CrossCountry Mortgage’s rent vs. buy calculator to explore your options and decide whether renting or buying is the better choice.

GET STARTED

How Much Can You Afford?

Preparing to buy a house also means setting a budget. How much house can you afford?

As a rule, you’ll want to look for a home price three to five times your household income. However, your exact budget will depend on your existing debts and how much money you can put toward a down payment.

Determine Your Budget

If you need help pinpointing your budget, our “how much can I borrow” mortgage calculator can help you determine your optimal purchasing budget.

GET STARTED

First-Time Homebuyer Programs

Does the answer to the question “am I ready to buy a house” change if you have poor credit or limited savings? Not necessarily.

Many programs exist to help first-time buyers  purchase the home of their dreams. Here are a few options you might consider.

Conventional Loans

Don’t discount traditional loan options just because you’re a first-time buyer.

conventional loan is often preferable since it offers the lowest interest rates and other favorable loan terms. And while it’s customary to make a 20% down payment, some lenders allow first-time buyers to receive a loan with as little as 3% down.

Keep in mind, however, that conventional loans usually require a credit score of 620 or better. Some lenders can work with you if your score is slightly lower, though this can mean higher interest rates. If your credit is low, you might consider one of the other options on this list.

USDA Loans

If you don’t have money for a down payment, you might consider a loan backed by the U.S. Department of Agriculture. USDA loans allow you to purchase a qualifying home with no money down, nor will you be responsible for PMI payments.

To qualify, the homes you look at must be located in designated rural or suburban areas, and you’ll typically need a credit score of 640 or higher.

VA Loans

Active-Duty Military Members, Veterans, and spouses of both groups are all eligible for VA loans.

Backed by the Department of Veterans Affairs, VA loans allow you to purchase a home with no money down and no PMI requirement. Individual lenders may have specific credit score requirements, but you can often get a VA loan with a score as low as 580.

FHA Loans

Can you buy a home with poor credit? You can if you receive a loan backed by the Federal Housing Administration. FHA loans are available to anyone with a credit score of 500 or above, though you’ll need to put 10% down. But if your score is 580 or above, you’ll only need to put 3.5% down.

Bottom Line: Am I Ready to Buy a House?

Buying a house is a momentous decision, both personally and financially. Our CCM loan officers are trained to run through all of the home buying scenarios to make sure that you are comfortable with your first home.

 

For this and similar articles, please visit CrossCountry Mortgage

HOME EQUITY LOAN VS. HELOC: WHAT IS THE DIFFERENCE AND WHICH ONE TO APPLY FOR?

Home equity borrowing is exploding across the country, thanks to the current housing market. But with multiple options to choose from, you might find yourself wondering what the difference is and which one to apply for — HELOC (Home Equity Line of Credit) or home equity loan.

These two programs are similar, and both offer a way to convert the equity in your home into cash that can be used for home improvements, consolidating debt, and more.

But to choose, you’ll need to understand the difference between a home equity loan and home equity lines of credit (HELOCs). This guide will cover these differences and help you choose the loan program that’s right for your financial situation.

How to Calculate Home Equity

For starters, you need to understand how to calculate your home equity. The simplest way is to subtract the amount you owe toward your home from its most recent appraised value:

Home Equity = (Appraised Value) – (Amount Owed)

Remember, the amount you owe includes your primary mortgage as well as any other home equity loans or unpaid balances of other types of financing.

For example, if your home is currently valued at $300,000, and you have $120,000 remaining on your mortgage, then you have $180,000 worth of home equity.

Remember that you calculate your home equity based on how much you still owe, not how much of your mortgage you’ve paid — your monthly payments have included interest.

How to Qualify for a HELOC or Home Equity Loan

Home equity lines of credit and home equity loans both have similar eligibility requirements. Typically, you’ll need the following to qualify for this type of financing:

  • At least 20% equity in your home but this does vary by lender

  • Good credit, with a credit score on average over 620

  • Reliable income for over two years

Some lenders may approve high-risk borrowers, but the best loan terms will go to borrowers who meet the above criteria.

What Is a Home Equity Line of Credit (HELOC)?

home equity line of credit (HELOC) is a type of credit that lets you borrow money up to a predetermined credit limit. This credit limit is based on how much equity you currently have in your home.

HELOCs have two phases: a draw period, during which you can borrow money, and a repayment period, during which you’ll pay back both the principal and interest. The draw period can last 5 to 10 years, while the repayment period can last 10 to 20 years.

Since a HELOC is a credit line, borrowers have no real limit on how much money they can borrow. You can take out money (again, up to your limit), then make monthly payments, then take out money again.

Home equity lines of credit function just like the credit cards in your wallet — you can keep using them during your draw period so long as you pay your balance.

Some lenders even let you make interest-only payments during the draw periods, which means you won’t have to worry about the principal until the repayment period arrives. This setup can lead to a larger monthly payment in the long run but can be great for tapping into money quickly.

Pros of a Home Equity Line of Credit

A HELOC offers advantages that include:

  • High flexibility in terms of the amount you borrow

  • Variable interest rates could cause your rates to drop if your credit improves

  • You pay interest only on the amount you draw, not the total loan amount

These loan types are ideal for those who don’t know how much money they need, such as when you’re making improvements to your home and don’t have a clear final budget.

Cons of a Home Equity Line of Credit

However, there are some disadvantages to a HELOC, including:

  • Variable interest rates could raise your rates unexpectedly

  • You can overspend during the draw period, leaving you with considerable debt

  • Your home is collateral, meaning you could lose it if you don’t pay your loan

HELOCs can be dangerous for the undisciplined. Since the draw period can be as high as ten years, that can be plenty of time to dig yourself into a financial hole if you’re not careful. Still, HELOCs can be helpful for homeowners who manage their finances responsibly.

What Is a Home Equity Loan?

home equity loan is a loan you receive based on the equity that you have in your home. Many lenders use the terms “home equity loan” and “second mortgage” interchangeably.

These loans offer fixed interest rates as well as a fixed monthly payment schedule, making them more predictable than home equity lines of credit (HELOCs). Similar to personal loans, home equity loans are given in an upfront lump sum, which means that borrowers will need to know how much they need before applying for the loan.

The loan amount depends on how much equity you’ve built into the home, as well as your credit score and financial history. Qualified borrowers can often get a loan as high as 80% to 90% of the home’s appraised value. The loan terms can vary by loan amount and the lender, ranging anywhere from five to 30 years.

Depending on your lender, you may have to pay some origination fees of roughly 5%, but these costs tend to be relatively minor compared to the value of the loan itself.

Pros of a Home Equity Loan

The advantages of a home equity loan include:

  • Fixed loan amount

  • Fixed monthly payment schedule

  • Lower interest rate compared to other refinancing options

Borrowers can appreciate the predictability offered by a home equity loan, which prevents you from overspending like you might when using a HELOC.

Cons of a Home Equity Loan

There are some disadvantages of a home equity loan, including:

  • Lower flexibility if your financing needs change

  • Need to refinance your home to receive a lower interest rate

  • Your home is collateral, meaning you could lose it if you don’t pay your loan

With greater predictability comes less flexibility, which can lock you in if you discover your financial needs are greater than you initially thought.

Differences Between HELOC and Home Equity Loan

What is the real difference between HELOC and home equity loans? While both can be used for a variety of financing needs, the real difference comes in how the funds of each loan type are received.

Additionally, the interest you pay for each loan type can be deducted from your income taxes if you use your loan to make significant improvements to your home.

A HELOC offers flexible funding just like any line of credit, while a home equity loan offers the stability and predictability of a one-lump sum. The second major difference is that a home equity loan offers fixed interest payments, while a HELOC can offer variable interest.

When comparing a HELOC vs. home equity loan, the main difference is found in the level of predictability. A home equity loan offers far more predictability and stability compared to a HELOC, though a HELOC is ideal for those who need flexible financing options.

Which Option Should I Apply for?

So should you choose a HELOC or home equity loan? Both are solid options, though there may be specific times when one of these options surpasses the other.

When to Consider a Home Equity Line of Credit (HELOC)

You might consider a HELOC when:

  • You don’t have a final idea of how much financing you’ll need

  • You want flexible loan amounts

  • You need to withdraw money over an extended period of time

For all of these reasons, a home equity line of credit might be the better choice when undergoing a home remodeling project that you intend to complete over time. Since the cost of materials tends to vary, having access to a revolving line of credit can give you the flexibility you need.

Just be careful about how much you draw during your draw period — otherwise, you could find yourself amassing debt. Similarly, keep an eye on your variable interest rates, which can benefit you when they drop but become costly when they rise.

When to Consider a Home Equity Loan

You might consider a home equity loan when:

  • You have a specific budget for how much you intend to spend

  • You need a lump sum of quick cash

  • You want a clear, fixed repayment schedule

A home equity loan might be great for those who need quick cash for things like debt consolidation or for paying contractors who offer a clear quote on a remodeling project. You’ll also appreciate the repayment schedule and fixed interest rate. But if interest rates do drop during your loan term, you’ll need to refinance to lock in a preferable rate.

 

Please visit CrossCountry Mortgage for the full article and for more information.