Buyers

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On the House: How Early Should I Begin Searching for a Home?

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Q:How early should I begin shopping for a home if I hope to buy one this year?

There’s no hard-and-fast rule on how early to start looking for a home. But I suggest that first-time homebuyers give themselves at least six months.

Even with the rising number of more affordable homes going up for sale, it’s challenging to find a home you want in a location where you would like to live—and then beat out all of the competition for it.

Many buyers traditionally start home shopping around now as the spring housing market kicks off. Some will be lucky and have their first offer accepted, while others may be looking for years. How early you begin your search depends on your deadline to move, the number of buyers vying for homes in your area, and your price range.

It took the typical buyer 10 weeks to find a home, according to the most recent data from the National Association of Realtors®.

It might take you longer as there’s a lot of competition for move-in ready, affordable homes in a great school district. However, if you’re open to purchasing a fixer-upper, a home in a less popular location, or even a luxury home, your search might be considerably shorter. It’s really market-specific.

When my spouse and I purchased our first house, a starter home in the New York City suburbs, it took about nine months before we closed. This was in late 2021, though, during the COVID-19-juiced market. And we were holding out for that reasonably priced starter home with curb appeal.

If you’re thinking about starting your home search soon, there are a few things you should consider doing first.

1. Figure out what you can afford

The first thing first-time buyers should do is figure out how much home they can afford. There’s no point in falling in love with a home you can’t comfortably pay for. You also don’t want to get in over your head financially. (Repeat after me: I will not allow myself to be house poor.)

That’s why it’s helpful to run your numbers to help you to establish a budget. Don’t forget to factor in property taxes, home insurance, and private mortgage insurance (if you don’t put 20% down) costs as well.

Note: Property taxes can vary greatly from home to home and town to town. They can also rise steeply in some municipalities after you have work done on the property.

You can find out here how much home you can afford.

This might also be an opportune time to clean up your credit and pay down debt. Lenders typically grant larger loans to those with higher credit scores and less debt. Borrowers with pristine credit can also often score lower mortgage rates and fees on loans.

2. Get pre-approved for a mortgage

In the competitive spring market, you may need to act quickly if you see a great home. That’s why you should get a mortgage pre-approval letter early in your homebuying journey.

Most sellers aren’t going to want to take a chance on buyers who can’t prove they will be able to secure financing, especially if other offers come in. A pre-approval letter tells sellers that you’re serious—and are likely to be able to get a loan up to a specified amount.

3. Familiarize yourself with the local market

The more you know about the local market, the less time you’ll waste when you start putting in offers.

It helps to know how often homes in your price range are going up for sale and if they are located in neighborhoods where you would like to live. You’ll also want to know how quickly homes are selling in these areas, so you know if you need to make an offer on the spot or have some time to think it over.

Perhaps most importantly for first-time buyers, you should find out how much similar homes sold for at closing. Focus your research on homes in your price range in the places where you would like to live. If you want only a move-in ready home in a certain school district, look at those comps and not for fixer-uppers.

You’ll want to find out if these homes are selling for above the list price, and if so, by how much. Or maybe they’re not going for the asking price. This will help you to figure out the offers you should be making.

Try to be thorough in your research. What are the property taxes in this area? Is this area within a reasonable commute to your job? If you have children, are there other families in the neighborhood? Is the community close to parks and restaurants? You want to make sure this is a place where you’ll be happy.

4. Know your priorities

Finally, figure out what you have to have in a home—and what you can live without.

Unless you’re a multimillionaire, most first-time buyers will likely have to make some hard compromises. Knowing what you can live without or choosing a not-quite-ideal location could open up more potential homes. And if you’re looking in less competitive markets, you might be able to purchase a home faster.

For the original article by Clare Trapasso visit Realtor.com

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Is It Easier To Find a Home To Buy Now?

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One of the biggest hurdles buyers have faced over the past few years has been a lack of homes available for sale. But that’s starting to change.

The graph below uses the latest data from Realtor.com to show there are more homes on the market in 2024 than there have been in any of the past several years (2021-2023):

Does That Mean Finding a Home Is Easier?

The answer is yes, and no. As an article from Realtor.com says:

“There were nearly 15% more homes for sale in February than a year earlier . . . That alone could jolt the housing market a bit if more “For Sale” signs continue to appear. However, the nation is still suffering from a housing shortage even with all of that new inventory.”

Context is important. On the one hand, inventory is up over the past few years. That means you’ll likely have more options to choose from as you search for your next home.

But, at the same time, the graph above also shows there are still significantly fewer homes for sale than there would usually be in a more normal, pre-pandemic market. And that deficit isn’t going to be reversed overnight.

What Does This Mean for You?

You might find a few more choices now than in recent years, but you shouldn’t expect a ton of options.

To help you explore the growing list of choices you have now, team up with a local real estate agent you trust. They can really help you understand the inventory situation where you want to buy. That’s because real estate is local. An experienced agent can share some smart tips they’ve used to help other buyers in your area deal with ongoing low housing supply.

Bottom Line

If you’re thinking about buying a home, team up with a local real estate agent. That way, you’ll be up to date on everything that could affect your move, including how many homes are for sale right now.

For the original article, visit Keeping Current Matters.

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The First Step: Getting Pre-Approved for a Mortgage

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Some Highlights

For the original article visit Keeping Current Matters.

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The Truth About Down Payments

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If you’re planning to buy your first home, saving up for all the costs involved can feel daunting, especially when it comes to the down payment. That might be because you’ve heard you need to save 20% of the home’s price to put down. Well, that isn’t necessarily the case.

Unless specified by your loan type or lender, it’s typically not required to put 20% down. That means you could be closer to your homebuying dream than you realize.

As The Mortgage Reports says:

“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment.”

According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today it’s only 15%. And it’s even lower for first-time homebuyers at just 8% (see graph below):

The big takeaway? You may not need to save as much as you originally thought.

Learn About Resources That Can Help You Toward Your Goal

According to Down Payment Resource, there are also over 2,000 homebuyer assistance programs in the U.S., and many of them are intended to help with down payments.

Plus, there are loan options that can help too. For example, FHA loans offer down payments as low as 3.5%, while VA and USDA loans have no down payment requirements for qualified applicants.

With so many resources available to help with your down payment, the best way to find what you qualify for is by consulting with your loan officer or broker. They know about local grants and loan programs that may help you out.

Don’t let the misconception that you have to have 20% saved up hold you back. If you’re ready to become a homeowner, lean on the professionals to find resources that can help you make your dreams a reality. If you put your plans on hold until you’ve saved up 20%, it may actually cost you in the long run. According to U.S. Bank:

“. . . there are plenty of reasons why it might not be possible. For some, waiting to save up 20% for a down payment may “cost” too much time. While you’re saving for your down payment and paying rent, the price of your future home may go up.”

Home prices are expected to keep appreciating over the next 5 years – meaning your future home will likely go up in price the longer you wait. If you’re able to use these resources to buy now, that future price growth will help you build equity, rather than cost you more.

Bottom Line

Keep in mind that you don't always need a 20% down payment to buy a home. If you're looking to make a move this year, reach out to a trusted real estate professional to start the conversation about your homebuying goals.

For the original article visit Keeping Current Matters.

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How Changing Mortgage Rates Impact You

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Some Highlights

For the original article, visit Keeping Current Matters.

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Strategic Tips for Buying Your First Home

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Buying your first home is a big, exciting step and a major milestone that has the power to improve your life. As a first-time homebuyer, it’s a dream you can make come true, but there are some hurdles you’ll need to overcome in today’s housing market – specifically the limited supply of homes for sale and ongoing affordability challenges.

So, if you’re ready, willing, and able to buy your first home, here are three tips to help you turn your dream into a reality.

Save Money with First-Time Homebuyer Programs                                       

Paying the initial costs of homeownership, like your down payment and closing costs, can feel a bit daunting. But there are many assistance programs for first-time homebuyers that can help you get a loan with little or no money upfront. According to Bankrate:

“. . . you might qualify for a first-time homebuyer loan or assistance. First-time buyer loans typically have more flexible requirements, such as a lower down payment and credit score. Many help buyers with closing costs and the down payment through grants and low-interest loans.”

To find out more, talk to your state’s housing authority or check out websites like Down Payment Resource.

Expand Your Options by Looking at Condos and Townhomes

Right now, there aren’t enough homes for sale for everyone who wants to buy one. That’s pushing home prices up and making affordability tight for buyers. One way to deal with that issue and find a home right now is to consider condos and townhomes. Realtor.com explains:

“For many newbies, it might just be a matter of making a shift toward something they can better afford—like a condo or townhome. These lower-cost homes have historically been a stepping stone for buyers looking for a less expensive alternative to a single-family home.”

One reason why they may be more affordable is because they’re often smaller. But they still give you the chance to get your foot in the door and achieve your goal of owning a home and building equity. And that equity can help fuel your move into a larger home later on if you decide you need something bigger in the future. Hannah Jones, Senior Economic Analyst at Realtor.com, says:

“Condos can help prospective homebuyers who perhaps have a smaller budget, but who are really determined to get a foothold in the market and start to accumulate some equity. It can be a really great entry point.”

Consider Pooling Your Resources To Buy a Multi-Generational Home

Another way to break into the market is by purchasing a home with friends or loved ones. That way you can split the cost of things like the mortgage and bills, to make it easier to afford a home. According to Money.com:

“Buying a home with another person has some obvious advantages in the mortgage department. With two incomes in the mix, buyers can likely qualify for a larger mortgage — a big help in today’s high-cost market.”

Bottom Line

By exploring first-time homebuyer assistance, condos, townhomes, and multi-generational living, it can be easier to find and buy your first home. When you’re ready, connect with a local real estate agent.

For the original article, visit Keeping Current Matters

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Economist: ‘Timing’ the Market May Not Work for Buyers

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Mortgage rates edged up this week, prompting a pause among some would-be house hunters. But here’s why they may not want to wait.

Home shoppers are sensitive to mortgage rates, which was made clear this week with an increase in the average for the 30-year fixed-rate mortgage. The rate rose to 6.77%, and mortgage applications for home purchases fell 3%, according to the Mortgage Bankers Association.

© David Gyung - iStock/Getty Images Plus

Every notch up and down in rates can impact home buyers’ purchasing power, but borrowing costs have largely stabilized. “While mortgage interest rates edged up weekly, the overall trajectory from fall 2023 is down and is now a full percentage point below the recent high” when rates neared 8%, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. “While mortgage interest rates may come down to the low 6% range in the middle to later part of the year, buyers must weigh what makes the most sense for them. Timing the real estate market based purely on mortgage interest rates—especially marginal changes—rarely works when new babies, marriages and jobs are the real decision-makers.”

Buyers may not save much by waiting, either. Home buyers purchasing the typical home at $400,000, with a 20% down payment, would likely have a monthly mortgage payment of about $2,080 at this week’s rate average, Lautz says. Last week, when rates averaged 6.64%, home buyers could have paid about $70 less per month—but that was based on a median home price of $391,700.

Home prices are rising quickly. The median price of an existing home surged to an all-time high in December, according to NAR, and prices are expected to continue to climb. The annual median home price is predicted to increase by 1.4% this year, and by another 2.6% in 2025, to $405,200, NAR’s forecast shows. Plus, housing inventory remains at historical lows and remain a major obstacle for would-be home buyers. That will keep pressure on home prices, economists say.

Freddie Mac reports the following national averages for mortgage rates for the week ending Feb. 15:

  • 30-year fixed-rate mortgages: averaged 6.77%, rising from last week’s 6.64% average. Last year at this time, 30-year rate averaged 6.32%.

  • 15-year fixed-rate mortgages: averaged 6.12%, up from last week’s 5.90% average. A year ago, 15-year rates averaged 5.51%.

For the original article by Melissa Dittmann Tracey visit National Association of Realtors

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Why So Many People Fall in Love with Homeownership

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Chances are at some point in your life you’ve heard the phrase, home is where the heart is. There’s a reason that’s said so often. Becoming a homeowner is emotional.

So, if you’re trying to decide if you want to keep on renting or if you’re ready to buy a home this year, here’s why it’s so easy to fall in love with homeownership.

Customizing to Your Heart’s Desire

Your house should be a space that’s uniquely you. And, if you’re a renter, that can be hard to achieve. When you rent, the paint colors are usually the standard shade of white, you don’t have much control over the upgrades, and you’ve got to be careful how many holes you put in the walls. But when you’re a homeowner, you have a lot more freedom. As the National Association of Realtors (NAR) says:

“The home is yours. You can decorate any way you want and choose the types of upgrades and new amenities that appeal to your lifestyle.”

Whether you want to paint the walls a cheery bright color or go for a dark moody tone, you can match your interior to your vibe. Imagine how it would feel to come home at the end of the day and walk into a space that feels like you.

Greater Stability for the Ones You Love Most

One of the hardest things about renting is the uncertainty of what happens at the end of your lease. Does your payment go up so much that you have to move? What if your landlord decides to sell the property? It’s like you’re always waiting for the other shoe to drop. Jeff Ostrowski, a business journalist covering real estate and the economy, explains how homeownership can give you more peace of mind in a Money Geek article:

“Homeownership means you are the boss and have the biggest say in your lifestyle and family decisions. Suppose your kids are in public school and you don’t want to risk having them change schools because your landlord doesn’t renew your lease. Owning a home would remove much of the risk of having to move.”

A Feeling of Belonging

You may also find you feel much more at home in the community once you own a house. That’s because, when you buy a home, you’re staking a claim and saying, I’m a part of this community. You’ll have neighbors, block parties, and more. And that’ll give you the feeling of being a part of something bigger. As the International Housing Association explains:

“. . . homeowning households are more socially involved in community affairs than their renting counterparts. This is due to both the fact that homeowners expect to remain in the community for a longer period of time and that homeowners have an ownership stake in the neighborhood.”

The Emotional High of Achieving Your Dream

Becoming a homeowner is a journey – and it may have been a long road to get to the point where you’re ready to take the plunge. If you’re seriously considering leaving behind your rental and making this commitment, you should know the emotions that come with this owning a home are powerful. You’ll be able to walk up to your front door every day and have that sense of accomplishment welcome you home. 

Bottom Line

A home is a place that reflects who you are, a safe space for the ones you love the most, and a reflection of all you’ve accomplished. Connect with a local real estate professional if you’re ready to break up with your rental and buy a home.

For the original article, visit Keeping Current Matters.

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What’s Really Happening with Mortgage Rates?

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Are you feeling a bit unsure about what’s really happening with mortgage rates? That might be because you’ve heard someone say they’re coming down. But then you read somewhere else that they’re up again. And that may leave you scratching your head and wondering what’s true.

The simplest answer is: that what you read or hear will vary based on the time frame they’re looking at. Here’s some information that can help clear up the confusion.

Mortgage Rates Are Volatile by Nature

Mortgage rates don’t move in a straight line. There are too many factors at play for that to happen. Instead, rates bounce around because they’re impacted by things like economic conditions, decisions from the Federal Reserve, and so much more. That means they might be up one day and down the next depending on what’s going on in the economy and the world as a whole.

Take a look at the graph below. It uses data from Mortgage News Daily to show the ebbs and flows in the 30-year fixed mortgage rate since last October:

 

If you look at the graph, you’ll see a lot of peaks and valleys – some bigger than others. And when you use data like this to explain what’s happening, the story can be different based on which two points in the graph you’re comparing.

For example, if you’re only looking at the beginning of this month through now, you may think mortgage rates are on the way back up. But, if you look at the latest data point and compare it to the peak in October, rates have trended down. So, what’s the right way to look at it?

The Big Picture

Mortgage rates are always going to bounce around. It’s just how they work. So, you shouldn’t focus too much on the small, daily changes. Instead, to really understand the overall trend, zoom out and look at the big picture.

When you look at the highest point (October) compared to where rates are now, you can see they’ve come down compared to last year. And if you’re looking to buy a home, this is big news. Don’t let the little blips distract you. The experts agree, overall, that the larger downward trend could continue this year. 

Bottom Line

Connect with a professional if you have any questions about what you’re reading or hearing about the housing market.

For the original article, visit Keeping Current Matters.

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ICE Mortgage Monitor: Positive Signs in Housing, Mortgage Markets Ahead of Spring Homebuying Season

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Affordability has improved along with rates in recent months, with the share of income required to purchase the median home falling nearly 5 percentage points from October’s 28-year high

  • The national inventory deficit also improved for the 7th consecutive month which, along with improved affordability, points to a better housing market environment in coming months

  • The ICE Home Price Index for December reported an annual growth rate of +5.6%, up from +5.1% in November, which at first glance suggests an accelerating housing market

  • That acceleration, however, is a residual effect of last spring and summer’s strong run of growth, with more recent data suggesting that growth rate will begin to cool in coming months

  • Lower interest rates have also begun to increase refinance incentive, albeit slowly, with more potential on the horizon, particularly among the 4.3M mortgages originated in 2023

  • Of the 2023 vintage, 46% (2M) would be able to cut their first lien rate by 75 bps if 30-year rates fall to a projected 6% by year’s end, with 33% able to save a full percentage point or more

  • Mortgage holders gained $1.6T in equity in 2023 to reach an aggregate $16T, the highest year-end total on record, two thirds of which is held by borrowers with credit scores of 760 or higher

  • The average mortgage holder now has $299K in equity, $193K of which is “tappable” and could be withdrawn while still maintaining a healthy 20% equity stake

ATLANTA and NEW YORK, February 5, 2023 – Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, released its February 2024 ICE Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. Mortgage rates were at 6.71% as of January 24 according to the ICE US Conforming 30-year Fixed Mortgage Rate Lock Index – more than a full percentage point below their October 2023 high. As ICE Vice President of Enterprise Research Strategy Andy Walden explains, this and other recent market trends have produced positive, yet measured, signs for the 2024 housing market.

“Prospective homebuyers may feel an all-too-familiar sense of dread upon hearing that prices – already at record highs – rose another 5.6% in 2023 according to our ICE Home Price Index,” Walden said. “As always, the truth of the situation is more nuanced than one simple, backward-looking metric might suggest, and the data holds some encouraging signals for these folks. In recent months, we’ve seen improvement in rates, affordability, and for sale inventory, with monthly home price growth moderating on a seasonally adjusted basis. While we are still out of sync with historical norms on multiple fronts, each of those metrics have at least been moving in the right direction.”

Research in this month’s report shows today’s market remains interest-rate-driven. The recent rebound in affordability has increased purchase mortgage demand, comparable to levels seen last summer when interest rates were in a similar range. Purchase demand continues to trend very consistently with 30-year-rate changes and their downstream impact on affordability. As Walden explains, the refinance market  has also seen some modest improvement, with the potential for more growth throughout the year.

“While the mortgage market remains overwhelmingly purchase-centric, refinance incentive is rising, albeit slowly, alongside easing interest rates,” Walden continued. “Since interest rates peaked back in October, we’ve seen a threefold increase in the number of mortgage holders who could reduce their first lien rate by at least 75 bps with a rate/term refi. And while that population stands at roughly 1.7 million – up from 520K last fall – it is still a historically small number. Should rates fall to 6% by year’s end as current forecasts suggest, the number of borrowers with refinance incentive would rise, particularly among 2023 vintage originations.

“Under that scenario – a potential needle mover for the refinance market – some 46% of 2023-vintage borrowers would be ‘in the money,’ with nearly a third able to cut a full percentage point off their current rates. As more legacy mortgages regain rate incentive as well, the overall ‘in the money’ population would more than double to 3.8 million by the end of the year, with nearly 60% of that growth coming from loans originated in 2023. Originators would do well to identify and engage with these potential customers now. Of course, what’s good news for mortgage originators simultaneously heightens prepayment risk in the capital markets. Getting a granular, daily view of prepay activity will become essential this year as investors navigate an extremely rate-sensitive and volatile market.”

The month’s data also shows that aggregate American mortgage holder equity ended 2023 at $16T – gaining 11% ($1.6T) over the year to reach the highest year-end total on record. The average mortgage holder now has $299K in equity, up from $274K at the end of 2022. Such historically high equity levels create the conditions for an upswing in equity lending when interest rates ease enough to make withdrawals more attractive to homeowners. Two thirds of all equity is held by borrowers with credit scores of 760 or higher, offering lenders a likewise appealing, lower-risk cohort to whom they can offer equity-based products.

Much more information on these and other topics can be found in this month’s Mortgage Monitor. Article found on Black Knight.