Why would you consider refinancing if your mortgage is only two or three years old and the rate is not considerably higher than what is currently available on new loans? Because you may be able to eliminate the mortgage insurance and have significant monthly savings. Many homes have seen their values rise in the past few years. The current loan-to-value ratio may be low enough to no longer require mortgage insurance. In some cases, a homeowner might actually pay a little higher rate than they currently have but lower their monthly payment dramatically because the mortgage insurance isn’t required. A rough rule of thumb is that mortgage insurance is not needed on loans at or less than 80% of value. There could be programs available that would allow a higher LTV than 80%. Careful consideration should also be given to the fees required to refinance. Lenders differ in not only the rates they charge but also the fees associated with the loans and the process. If you’d like a recommendation of a trusted mortgage professional, we’d be happy to make a recommendation.
Low inventories resulting in multiple offers are contributing to what experienced agents are calling the most challenging market they’ve ever worked. While buyers with resources may find the market difficult, purchasers with minimum cash and credit are struggling to find and get into a home. First-time buyers feel the impetus to purchase because they’re renting and are concerned about being priced out of the market with rapidly appreciating prices and rising interest rates. Sellers may not feel the same urgency because they already own a home. While they might find it appealing to change homes, they may not feel a pressing motivation causing them to act. In some cases, sellers are so attached to their low interest rate mortgage that instead of selling, they’re keeping the home for a rental property. This may be a good investment for people with additional cash resources for the down payment and closing costs on the replacement property. Why now is a good time to sell:
- The economy is strong.
- The majority of home sales occur in the months of May through September.
- Many buyers find it preferable to move in the summer because their children are out of school and they can avoid the winter weather.
- Mortgage rates are still very low but are starting to rise.
- Current low inventories in most markets result in higher prices and less competition.
Contact your real estate professional to evaluate the opportunities of making a move.
Preserve the memories you’re making by taking photographs of your home now. The pictures will remind you of the role your home played with your family and life. Reminiscing is easier when scrolling through pictures to remind you of people and times. One of the least heard regrets is that we should have taken more pictures. Shots to consider:
- The front of the home from across the street
- Times when your yard and plants looked exceptional
- Holiday decorations
- Special occasions in the homes like birthdays, anniversaries, graduations, etc. Home improvements
- Major purchases for the home
- Times when the home looked the best and the worst
- Family, friends and pets in the home
- Your children’s height marks on a door frame
- The view from a favorite window
From an organizational standpoint, put the pictures in a folder with your address as the name. Even if you don’t take time to name each picture, you’ll have the file date to identify when it was taken. Since the cost of film and processing has disappeared, there is little reason not to chronicle your life in pictures.
If a seller was looking at two offers for exactly the same price on their home, there would still be things that could make one standout more than the other. If there happens to be more than two offers, things can really get sticky for a buyer. For that reason, it is good to craft the most attractive offer possible because even if you don’t have competition now, another offer could come in during negotiations and derail all your efforts to that point. Anything that can give the seller the peace of mind that one contract will close on time and as agreed will make them more comfortable in accepting one offer over another. Buyers can consider putting up larger than customary amounts of earnest money and limiting the contingencies to only the most essential items. The closing costs could be more expensive to the seller based on the type of mortgage a buyer is obtaining. One buyer may be asking the seller to pay part or all of their acquisition costs and the other buyer is paying their own costs. The borrower who has a signed, preapproval letter will appear to have a greater certainty to closing than a buyer who only says they have talked to a loan officer. Some lenders' letters are considered “gold” and others may not be worth the paper they’re written on. The seller will depend on their listing agent to advise them. In most cases, the seller will be taking all or part of the cash they receive from the sale of their home and buying another one. If they have to put a contingency clause in the contract based on their current home selling, it weakens their position. Conversely, it will strengthen a buyer’s position if they don’t have to make their offer contingent upon selling their current home. Even shortening the inspection periods and offering to close early or possible lease the home back to the seller for a short time can be valuable negotiating factors. Finally, don’t overlook the value of a personal hand-written letter that tells the seller why you want their home. An emotional connection has been known to make a difference for one set of buyers getting the home.
When the 75 year old man who had been widowed four times was asked why he was getting married again, he said “for the little bit that they eat, I wouldn’t want to be without one.” In a torrential rainfall, you wouldn’t want to be without an umbrella. It is also understandable that when purchasing or selling a home, more and more people want an agent involved. NAR’s Homebuyers and Sellers Profile states the trend in owners trying to sell their home themselves has declined over the past ten years from 14% in 2003 to only 9% in 2014. Similarly, the number of buyers purchasing directly through an owner has decreased from 2001 to 2014 from 15% to 5%. It is natural to think that a seller wants to get the highest price for their property while the buyer wants to pay the least possible. Negotiations may be the most valuable service provided by an agent because of the clear conflicts of interest such as the price, terms and condition. Other areas of contention that could affect a party without an agent:
- The real estate agent who represents the other party
- The attorney who represents only one party
- Home and pest inspectors regarding condition
- The buyer’s lender regarding terms
- The lender’s appraiser regarding value
- The title company in an effort to satisfy challenges to clear title
- Municipal authorities to mitigate code violations
Even when there are two licensed agents involved, there could be a question of representation. This is a discussion that buyers should have with a real estate professional before looking at houses.
Imagine that after checking www.SSA.gov to see what you can expect when you retire and estimated what your minimum required distributions from your retirement accounts will be, you’ve discovered that you’re not going to have enough retirement income to cover your living expenses. Ideally, it would be perfect if the extra money you need would just come to your mailbox each month with the same certainty as your social security or retirement income. Rental homes are a popular choice for passive income because they are an investment that most people understand based on their experience owning a home. They’re easy to manage and the rents should keep pace with inflation. Mortgage loans for investors are available to investors with good credit and at least 20% down payments. While 30 year terms are the most common, some investors wanting to have the home paid for by retirement may choose a 15 or 20 year term. A tried and true strategy is to choose average or slightly below average priced homes in predominantly owner-occupied neighborhoods. This will appeal to more prospective tenants wanting to live in good communities and should provide a higher level of revenue. When an owner has a good property with a good tenant, the income is as predictable and convenient as going to the mailbox each month. To learn more about rental homes, contact your real estate professional.
Consumers are more easily living the American Dream of owning a home because of the incredibly low mortgage rates. Today, most buyers can get a much lower rate than their parents or grandparents got on their first home. In a recent housing survey, FNMA released information about consumers' thoughts on the current market. Almost two-thirds would rather buy than rent and believe that now is a good time to buy. Half of the respondents expect rent and home prices will go up. Top Ten reasons to move the dream to reality:
- It’s cheaper than renting in most cases
- Avoid rental increases in the future
- Equity build-up with amortization of each payment going to principal
- A home is a forced savings account
- Appreciation increases your equity and your overall investment
- Mortgage interest and property tax deductions
- Home equity interest deduction
- A place you can call your own
- A place to share with friends and family
- Capital gains exclusion on profit
Buyers need the confidence that they can afford a home and proof for the sellers when they’re ready to submit a contract. If a buyer has steady reliable income, a good record of paying their bills, money saved for a down payment and are prepared to pay the mortgage each month, the next step is to get pre-approved by a trusted mortgage professional. Take a look at the Rent vs. Own to see what the real cost of owning a home for your price range.
The word describes the process of accounting that will repay a loan over time. Residential buyers will most commonly be required to have an amortized mortgage. When amortizing a fixed rate mortgage, the payment remains constant for the entire term but the allocation of what goes to principal and interest changes with each payment that is made. Since an amount of each payment retires the principal, the interest due on the next payment is calculated on the unpaid balance after the previous payment was made. This means that an increasing amount is applied to principal on each payment while the amount owed in interest decreases. If normal payments are made each time, on time, the loan will be completed paid off at the end of the term. You can see in the example of a mortgage of $200,000 at 3.25% for 30 years that it has a fixed principal and interest payment of $870.41. There is $541.67 due in interest with the first payment and the remainder is applied to principal leaving an unpaid balance of $199,671.25. Since the interest due in the second payment is based on a lower principal, a little more is applied to principal. If you’d like to have an amortization schedule for a mortgage, click here and enter the information about the loan.
Paying more for your house payment does not make your home more valuable. It does mean that the mortgage rate may be higher than it has to be. Even though fixed rates may never again be as low as they are currently, an adjustable rate mortgage may provide the lowest cost of ownership depending on how long a borrower plans to own a home. There are different types of ARMs but the one in this example is a 30 year mortgage with the rate fixed for five years and can adjust every one year after that based on independent indexes. Another feature of a FHA ARM is the maximum rate change in one period is 1% and the maximum lifetime cap is 5% over the initial rate. In the example below, the payment on the adjustable is $153.48 lower for the first five years or 60 payments. Another interesting thing is that lower interest rate loans amortize faster than higher interest rate loans. In this example, the ARM has a lower unpaid balance at the end of the first five years by $4,239. The total savings on the ARM at the end of the first period is $13,477. If a borrower felt confident they would sell the home prior to the breakeven point of 8.5 years, the ARM would produce a lower cost of housing even if the mortgage rate escalated the maximum at each adjustment period. To help determine whether you pay more or less, consult with a trusted mortgage professional and your real estate agent to learn the advantages and disadvantages of different programs. To try your own comparison, check today’s rates at the Freddie Mac Mortgage Rate Survey and plug your numbers into an Equity Accelerator
Many times, young adults feel “bullet-proof” and don’t consider the urgency to get involved or spend the money to take care of certain legal aspects of their lives because they think they’re going to live forever. Since no one is guaranteed longevity of life, if you want to be in control of who gets what and who is in charge now based on an untimely incapacitation or death, it is important to investigate these basic legal documents. Will – This is a legal instrument that specifies your desires to care for your minor children and to distribute your personal property after you die and who will manage the process. Anyone who has property and minor children needs a will. Living Will – This legal instrument specifies your intentions regarding end of life decisions or to designate an individual to make those decisions on your behalf. Many times, a person who had been diagnosed with a terminal condition or who is facing a serious surgery or hospitalization might feel a sense of urgency to have this document. Power of attorney – This document allows you to appoint someone you trust, not necessarily an attorney, to handle important legal and financial matters for you if you are unable to make decisions for yourself. The time limit can be for a specified period of time or indefinitely. Trust – This arrangement involves an entity called a Trustee who takes control and manages property for someone else’s benefit called a beneficiary. When property is placed in a trust, the trust becomes the owner of the property. There are different types of trusts and a qualified advisor can explain and recommend which type would be best suited for your situation. HIPPA Release Form – The Health Insurance Portability and Accountability Act, known as HIPPA, was created by Congress to protect the privacy of a person’s health information. Health care providers are prohibited from discussing any aspect of your medical information with anyone who is not directly involved in your care. To allow friends or family who do not have legal responsibility for you to have access to this information, this release form is necessary. Most of the issues affecting these types of documents are determined by state law. Since they are legal documents, it is recommended that you seek sound financial and legal advice.