What to Expect From Your Home Inspection

So you made an offer, it was accepted, and now your next task is to have the home inspected prior to closing. More often than not, your agent may have made your offer contingent on a clean home inspection.

This contingency allows you to renegotiate the price paid for the home, ask the sellers to cover repairs, or even, in some cases, walk away. Your agent can advise you on the best course of action once the report is filed.

How to Choose an Inspector

Your agent will most likely have a short list of inspectors that they have worked with in the past that they can recommend to you. Realtor.com suggests that you consider the following 5 areas when choosing the right home inspector for you:

1. Qualifications – find out what’s included in your inspection & if the age or location of your home may warrant specific certifications or specialties.
2. Sample Reports – ask for a sample inspection report so you can review how thoroughly they will be inspecting your dream home. The more detailed the report, the better in most cases.
3. References – do your homework – ask for phone numbers and names of past clients that you can call to ask about their experience.
4. Memberships – Not all inspectors belong to a national or state association of home inspectors, and membership in one of these groups should not be the only way to evaluate your choice. Membership in one of these organizations often means that there is continued training and education provided.
5. Errors & Omission Insurance – Find out what the liability of the inspector or inspection company is once the inspection is over. The inspector is only human after all, and it is possible that they might miss something they should have seen.

Ask your inspector if it’s ok for you to tag along during the inspection, that way they can point out anything that should be addressed or fixed.

Don’t be surprised to see your inspector climbing on the roof, crawling around in the attic, and on the floors. The job of the inspector is to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating & air conditioning systems, ventilation, windows, the fireplace & chimney, the foundation and so much more!

Bottom Line

They say ‘ignorance is bliss,’ but not when investing your hard-earned money in a home of your own. Work with a professional you can trust to give you the most information possible about your new home so that you can make the most educated decision about your purchase.

2 Myths That May Be Holding Back Buyers

Fannie Mae’s article, “What Consumers (Don’t) Know About Mortgage Qualification Criteria,” revealed that “only 5 to 16 percent of respondents know the correct ranges for key mortgage qualification criteria.”

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

 

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.7% of approved mortgages had a credit score of 600-749.

 

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

Sales at Highest Pace in 10 Years!

Highlights:

• 5.45 million existing homes were sold in 2016! This is the highest mark set since 2006.
• Inventory of existing homes for sale dropped to a 3.6-month supply, the lowest level since NAR began tracking in 1999.
• The median price of homes sold in December was $232,200. This is the 58^th consecutive month of year-over-year price gains.

Buying a Home is More Affordable Than Renting in 66% of US Counties

According to ATTOM Data Solutions’ 2017 Rental Affordability Report, buying a home is more affordable than renting in 354 of the 540 U.S. counties they analyzed.

The report found that “making monthly house payments on a median-priced home — including mortgage, property taxes and insurance — is more affordable than the fair market rent on a three-bedroom property in 354 of the 540 counties analyzed in the report (66 percent).”

For the report, ATTOM Data Solutions compared recently released fair market rent data from the Department of Housing and Urban Development with reported income amounts from the Department of Labor and Statistics to determine the percentage of income that a family would have to spend on their monthly housing cost (rent or mortgage payments).

Rents have been surging faster than home prices in about 37% of the markets measured. Daren Blomquist, Senior Vice President of ATTOM Data Solutions warns that rising interest rates could be the tipping point of affordability:

“While buying continues to be more affordable than renting in the majority of U.S. markets, that equation could change quickly if mortgage rates keep rising in 2017. In that scenario, renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year.”

Bottom Line

Rents will continue to rise and mortgage interest rates are still at historic lows. Before you sign or renew your next lease, meet with a local professional who can help you determine if you are able to buy a home of your own and lock in your monthly housing expense.

How Low Interest Rates Increase Your Purchasing Power

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.09%, which is still very low in comparison to recent history!

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments at or about $1,100 a month.

How Low Interest Rates Increase Your Purchasing Power | Keeping Current Matters

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5%, (in this example, $6,250). Experts predict that mortgage rates will be closer to 5% by this time next year.

Act now to get the most house for your hard-earned money.

Have You Saved Enough for Closing Costs?

Have You Saved Enough for Closing Costs? | Keeping Current Matters
There are many potential homebuyers, and even sellers, who believe that they need at least a 20% down payment in order to buy a home or move on to their next home. Time after time, we have dispelled this myth by showing that many loan programs allow you to put down as little as 3% (or 0% with a VA loan).

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

We’ve recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

Government recording costs
Appraisal fees
Credit report fees
Lender origination fees
Title services (insurance, search fees)
Tax service fees
Survey fees
Attorney fees
Underwriting fees
Is there any way to avoid paying closing costs?
Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees to get the deal finalized, which is known in the industry as ‘seller’s concession.’

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.

Tips for Preparing Your House For Sale

Highlights:

• When listing your house for sale your top goal will be to get the home sold for the best price possible!
• There are many small projects that you can do to ensure this happens!
• Your real estate agent will have a list of specific suggestions for getting your house ready for market and is a great resource for finding local contractors who can help!

Will Housing Affordability Be a Challenge in 2017?

Some industry experts are saying that the housing market may be heading for a slowdown in 2017 based on rising home prices and a jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize during that time the housing crisis left the market with an overabundance of housing inventory with as many as one out of three listings being a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008:

 

We can see that, even though prices have increased, mortgage rates are still lower than historical averages and have put the index in a better position than every year for the nineteen years before the crash.

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

What Would a Millennial Baby Boom Mean for Housing?

Recently released data from the National Center for Health Statistics revealed that 1.3 million Millennial women gave birth for the first time in 2015. There are now over 16 million women in this generation who have become mothers.

“All told, Millennial women (those born between 1981 to 1997) accounted for about eight in ten (82%) of U.S. births in 2015.”

The data also shows that this generation has waited until later in life to become parents as only 42% of Millennial women were moms in 2014, compared to 49% of Generation X at the same age. A Pew Research Center article discussing the data, points to social influences that may have contributed to the delay:

“The rising age at first birth is hardly limited to the Millennial generation. It has been a trend since at least 1970. Many factors may contribute, including a shift away from marriage, increasing educational attainment and the movement of women into the labor force.”

Do Millennials Want to Be Parents?

“While Millennials may be delaying parenthood, it’s not for a lack of interest in eventually becoming moms and dads. Members of this generation rated being a good parent as a top priority in a 2010 Pew Research Center survey.  

Some 52% said it was one of the most important goals in their lives, well ahead of having a successful marriage, which 30% said was one of their most important lifetime goals.”

So, What Does This Mean for the Housing Market?

As Jonathan Smoke, Chief Economist for realtor.com explained: “At any given time in our history, demographics would explain 60-80% of what’s happening [in the market], and we are in a period of time where Millennials make up a largest demographic group.” 

As more and more Millennial families are formed, this generation will shift their focus to providing the best home for their children to grow up in, the best school districts, and often to the stability that owning a home of their own provides.

Two-thirds of Millennials have not yet reached the average first-time home buying age of 32, as reported by the National Association of Realtor. The homeownership rate amongst Millennials has nowhere to go but up!

Bottom Line

Millennials as a generation have delayed traditional social norms until later in their lives. Whether getting married, having children or buying a home, the desire to provide for their family is still there, even if it takes a little while longer than it did for previous generations.

5 Myths About Real Estate Reality TV Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there… watching entire seasons of “Love it or List it,” “Fixer Upper,” “House Hunters,” “Property Brothers,” and so many more, just in one sitting.

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and make a decision to purchase one of them.

Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors the average homebuyer tours 10 homes as a part of their search. 

Myth #2: The houses the buyers are touring are still for sale.

Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.

Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the Open House.

Truth: Of course this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but are only a PIECE of the overall marketing of your home. Just realize that many homes are sold during regular listing appointments as well.

Myth #5: Homeowners make a decision about selling their home after a 5-minute conversation.

Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!