Inside Real Estate

April 7, 2015April 5, 2015

Five Ways to Find Your Down Payment

What’s the hardest part of the process for anyone preparing to buy a home? According to many in the real estate industry, it’s saving up a down payment. In fact, the National Association of Realtors and RealtyTrac have reported that at the rate Americans generally save, first-time homebuyers have to spend an average of 12.5 years amassing their 20 percent upfront investment. While you can buy a home with less—such as 3.5 percent down through the FHA, for example—you’ll pay a penalty in private mortgage insurance and, often, higher interest rates.

Fortunately, there are ways to save up faster and even find alternative sources of cash. Give these a try and 20 percent down may no longer seem like that large of an obstacle.

1. Find a Down Payment Assistance Program

According to RealtyTrac, 87 percent of U.S. homes qualify for down payment help, and there are more than 2,290 down payment assistance programs across the nation. You can start your search at Down Payment Resource, a website that connects homebuyers with down payment assistance opportunities. Use their online program finder to explore your eligibility. You can also check out your state’s housing authority website for a list of programs and participating lenders. Not all lenders participate in down payment assistance programs.

2. Make Saving for a Down Payment Automatic

Instead of waiting until the end of the month to see what you have left over to save for a down payment, schedule automated contributions to your designated savings account. It’s a lot easier—and less painful—to save when you budget accordingly and pull contributions from your checking account weekly, bimonthly or monthly. You can schedule transfers through your bank or ask your employer about your direct deposit options. Some give you the ability to divide and deposit your paychecks into multiple accounts.

3. Stash Extra Cash

Did you just win $50 on a lottery scratch ticket? Put it in your down payment savings account. Did your employer give you a 5 percent raise this year? Schedule an additional 5 percent of each paycheck for transfer into your down payment savings account. You get the idea; any extra cash that comes your way—from tax refunds and work bonuses to yard sale profits and inheritances—goes into your down payment savings account before you’re tempted to spend it on anything else.

4. Ask Your Family for Help

Most lenders will allow you to use cash gifts from family to cover at least a portion of your down payment. As of 2014, conventional mortgages generally allow you to use gift funds for your entire down payment as long as you’re putting down 20 percent or more of the purchase price. If you’re putting down less than 20 percent, part of the money can be from gifts, but part must come from your own earnings as well. The exact contribution limits vary by loan type. FHA and VA loans allow for gift assistance on the entire down payment provided your credit score is 620 or above.

5. Talk to Your Employer

Some employers offer mortgage assistance programs to their workers. Talk to your human resources department about the options—from down payment assistance to low-interest mortgages—that may be available to you. If you’re in the market for a new job, you might even be able to request down payment assistance as a signing or relocation bonus.

Anything worth doing is worth doing right, and for many, that means buying a home with 20 percent down. Whatever your real estate plans, please don’t hesitate to give us a call for further insight. We look forward to assisting you soon.

March 23, 2015March 16, 2015

How to Find the Best Real Estate Agent

Whether someone is selling his or her current home or scouring the market for a new one, finding a good agent is the key.

A great agent makes the process of selling or owning a home a smoother process. An agent is not just someone who knows the ins and outs of the housing market. They serve as guides faster and easier home buying or home selling transactions. They also work hard to be sure you’re happy.

But with so many agents in a local market, how does one find someone who can be trusted to do a great job of helping sell or acquire a new home?

Here are four tips to help in the search.

1. Identify specific buying and selling requirements.

Determine if what’s needed is a buyer’s agent or a seller’s agent. There’s a difference between the two. Depending on whether the aim is selling a home or buying one, one agent is better for a specific purpose than the other.

Ask for a buyer’s agent if the aim is to buy a home. Conversely, ask for a seller’s agent if the aim is to sell. This ensures that the agent will work according to what’s best for the hirer’s interests.

Note also that there are differences between real estate agent, real estate realtor, and real estate broker. It’s important to know the differences in jargon while transacting in the market.

A real estate agent possesses a real estate license from the state where he or she works. Meanwhile, a Realtor is associated with the National Association of Realtors® and therefore has the business rights to use the REALTOR name and logo. Last but not least is the real estate broker, who possesses the most training in the field, especially with regards to real estate law and ethics. A broker also possesses the license to arrange buying and selling transactions of properties.

2. Ask from referrals from friends and acquaintances.

This is the time to utilize that extensive network of friends and acquaintances, be they from the offline or online world of social networking.

Since trust is an important part of the buying and selling experience, getting a well-trusted and reputable agent serves one’s best interests. This is especially useful if planning to live in a new city or town.

Get in touch with friends and acquaintances and ask them about their experiences with agents. Since they are friends, they will give an honest rundown of their experiences.

3. Do some legwork – Personally watch agents in action.

The adage that goes “Seeing is believing” holds true in this case. Seeing and watching agents while they are on the job gives a firm idea on what the market entails and what kind of steps the purchasing process has.

It is best to take a drive along areas where open houses are being held. Mingle for a little while, observe, and interact with agents, as well as buyers or sellers alike. Get a feel of the market and what a potential agent’s work style is.

4. Go ahead and ask potential agent some questions.

This is the time when it pays to be proactive in asking the questions one has always wanted to ask an agent.

Once your choices have been narrowed down to two or three potential agents, arrange informal interviews with them. Get to know them better and determine which one among them is the best.

Determining the best fit carefully ensures that the agent is compatible with the hirer’s needs and interests. Making sure that the hirer is comfortable with the agent’s work practice and style is also important.

Some possible areas of concern are the length of time they’ve been working in the market, the number of home sales they transact successfully in a year, whether they’re representing the hirer or the seller, and whether they’re willing to provide references.

If ready to buy or sell a home, these simple tips will help you find a real estate agent that is the right fit for you and your needs.

March 5, 2015March 3, 2015

Want to Survive as a Landlord? Five Must-Dos

According to RealtyTrac, a housing data and analytics company, U.S. homeownership rates are still at their lowest level in 20 years. Combine this fact with relatively low home prices in many parts of the nation, and investors will find numerous opportunities to profit while buying and renting single-family properties. You might even be thinking about joining them and becoming a landlord yourself. However, consider these must-dos before you make the leap.

1. Research your rental rate carefully.

Unless you bought the property with cash, you probably have a mortgage payment. However, you shouldn’t just set the rent at that amount. You’ll need to factor in homeowners association fees, property taxes and the cost of upkeep as well. Then take a look at what similar properties are renting for in your area. If you want to find a tenant, your asking rent must be comparable.

2. Write a comprehensive lease.

Constructing a good lease takes time, so put one together before you start advertising for tenants. While you can find hundreds of templates online, you’ll need to make sure that your final document complies with the laws in your city, county and state. Details required within the lease include the term, security and pet deposit, due date for rent, penalties for late payment, pet and visitor policies, routine upkeep and maintenance responsibilities, rules of behavior, rental renewal and property damage terms, inspection and showing policies, and actions that can lead to eviction.

3. Thoroughly evaluate rental applicants.

There are many ways to find potential tenants, from on-site “For Rent” signs to free Craigslist ads and paid listings on real estate rental websites. While you may want to get someone into the property quickly—you can’t start making money until someone is paying rent, after all—don’t cut corners when evaluating your applicants. You should require everyone to fill out a rental application that includes his or her current employer, monthly/annual income, and previous landlords and references.

You’ll need written permission to run a background check including criminal history and credit report. Many pros suggest using a vendor for this portion of the screening process, and you’ll find many—at various prices—online. You can verify employment and speak with previous landlords on your own or outsource that as well.

4. Take care of insurance.

Talk to your insurance agent about rental property insurance. In addition to covering the structure itself, rental property insurance policies cover personal liability and medical expenses as well as loss of rental income in the event of a property-damaging event. If you plan to leave personal belongs in the property (say, you’re renting it out furnished or storing things in the basement), you’ll need additional coverage.

You should encourage your tenants to purchase renters insurance of their own as well. Your insurance policies do not cover their belongings, and renters are less likely to file lawsuits against landlords in the event of break-ins, fires and other disasters if they have their own insurance to fall back on.

5. Determine how you will handle property management.

Prepping a property for rental, screening tenants, collecting rent and dealing with lease violations can be frustrating and time consuming. If you’re not comfortable tackling these tasks yourself, you might want to consider hiring a management company. You’ll have to pay fees for their service (such as one month’s rent for filling the vacancy and a percentage of the monthly rent for ongoing management), but your time just might be worth it.

Whether you think becoming a landlord is the right choice for you or have decided you’d prefer to sell your home outright, we’re here to help. Give us a call or send us an email any time to discuss your situation.

February 17, 2015February 8, 2015

When Buying or Refinancing, Consider More than Interest Rates

When people think about buying a home or refinancing their current mortgage, interest rates are often top of mind. After all, the news has been full of speculation—for more than two years—on when the Federal Reserve Bank would taper its bond buying (which it has done) and raise its prime rate (which is still a question that remains to be answered). However, while a percentage point—or even fraction of one—will make a difference in the amount of interest you’ll pay on home loan, it isn’t the only factor you need to consider.

Determine how long you’ll stay in the home.

Every mortgage comes at a price (all those fees and closing costs) and you need to live in the home long enough to recoup what you’ve spent to secure the loan. While costs vary based on situation and locality, experts advise it generally takes four to seven years to break even. If you’re not going to stick around that long, renting (or maintaining your current mortgage) could be the better option.

Evaluate your job security.

Is there any chance your employer might downsize you, cut your hours, or ask you to move across the country for a new position? If so, it’s probably not the right time to buy. However, if you can refinance and lower your monthly payments (and are confident you can find a new job quickly and in the same area), it still may make sense to do so. Your mortgage advisor is the best one to help you evaluate the situation.

Take stock of your down payment.

While there are now loans available with down payments as low as 3 percent, putting less than 20 percent down will result in private mortgage insurance. This will increase your monthly mortgage payment and may even lead to a higher interest rate. Can you weather that financial burden? Would it be better to buy once you’ve amassed a larger down payment, or refinance once your home equity is at 20 percent? Again, your mortgage advisor can provide insight.

Closely examine your finances.

You can bet any mortgage lender is going to go through your financial affairs with a fine-toothed comb before giving you a new loan. Do this on your own ahead of time, and you’ll be better prepared to address whatever he or she might find. Things you’ll want to consider include your credit score, income, savings and debts.

Learn about the local market.

Housing affordability varies by city. In some, buying a home is decidedly cheaper than renting. In others, the opposite is true. You’ll also find cost variations among similar homes in different neighborhoods. The more you learn about the area and factors driving those costs, the better decision you can make on where (and where not) to buy. Most real estate agents will be happy to help you find this information.

February 3, 2015February 1, 2015

The Biggest Housing Market Threats of 2015

Many experts predict a continuing housing recovery in 2015, despite stagnant builder confidence and slowing price gains. While this year could still be a great time for you to buy a new home or invest in real estate, a look at the big picture never hurts. Consider these potential events cited by CNNMoney as today’s biggest threats to the housing market.

Institutional Investors May Sell Off Properties

Institutional investors—organizations that pool and invest large sums of money—have purchased hundreds of thousands of properties as rentals. However, now that home price increases are slowing, it is possible that they will begin cashing out their gains. There are some indications that this is already beginning to happen. According to the National Association of Realtors, the number of institutional investors dropped to a four-year low in the third quarter of 2014.

Foreign Buyers May Lose Interest in U.S. Properties

As the dollar has grown stronger, investing in U.S. housing has become more expensive for foreign buyers. According to the National Association of Realtors, real estate purchases by European and Russian buyers have already started to lag. In addition, according to the California Association of Realtors, the number of sales to foreign buyers within the state has fallen 25 percent.

American Incomes Are Not Increasing Fast Enough

The unemployment rate has continued to fall, dropping to 5.6 percent in December according to the Bureau of Labor Statistics. However, wages are not increasing fast enough to keep pace with market prices. The Society for Human Resource Management, the nation’s largest group of human resource professionals, has forecast a base salary increase of 3 percent for U.S. workers in 2015. This disappointing figure may make purchasing a home less affordable for buyers—particularly in higher priced areas.

Some Lenders Are Still Reluctant to Lend

While both Fannie Mae and Freddie Mac recently eased the lending standards on the mortgages they buy, reducing the required minimum down payment to 3 percent, some experts believe other lenders are still taking it too hard on potential buyers. Evidence of this includes demands for near perfect credit and large down payments. This can increase borrowing challenges for a variety of buyers including those with short-lived credit histories, former homeowners who had to short sale a previous property, or anyone with a heavy student loan debt load.

Mortgage Rates Could Increase Sharply

The general consensus among financial experts is that The Federal Reserve Bank will increase the prime rate—the benchmark rate against which many other interest rates are calculated—sometime in 2015. However, no one really knows how soon The Fed will do so, or by how much. If rates climb high enough, housing affordability in high-priced markets could plummet.

While the U.S. housing market could face a few bumps in the road in 2015, it still makes sense to explore your options if you have been considering a new home purchase or investment. I would love to talk you through an analysis of your local market, personal financial situation and buying goals.

January 22, 2015January 21, 2015

Understanding the Escrow Process

If you’ve ever purchased a home, you’ve encountered escrow: the period between the acceptance of your offer and deposit of your earnest money and the final closing of the buyer-seller-lender transaction. The escrow period can range from weeks to months—depending on the lender’s timetable and the desires of the seller and buyer—and can be a bit confusing if you don’t understand what’s going on. While you can always ask your real estate agent to keep you informed on your escrow’s progress, the following details may also help alleviate uncertainty.

The Parties Involved

Multiple parties are involved in the escrow process and include your real estate agent, the sellers’ real estate agent, your lender, a title agent and an escrow agent.

Your real estate agent is there to guide you through the process, much as the sellers’ real estate agent will do for them.
Your lender takes your mortgage application and verifies all the important details before putting it through underwriting.
The title company makes sure the title to the property you are buying is free of liens and judgments. It also issues title insurance to protect you and your lender from any future property claims or disputes.
The escrow agent serves as a neutral third-party officer. He or she coordinates the escrow process, ensures it follows the terms of the purchase contract, and handles all of the paperwork.

Basic Escrow Timeline

While the actual timeline of any escrow may change due to a variety of factors, the basic steps involved in the process are as follows:

A realtor submits the purchase and sale agreement to the escrow agent.
The escrow agent sends instructions to the buying and selling parties, requesting more information about the transaction if necessary.
The escrow agent contacts the title agent and asks for a title search on the property.
The title agent conducts a title search and notifies the escrow agent of any issues.
If there are title issues, the escrow agent will work to clear them from the title.
The lender sends the completed loan document to the escrow agent.
The escrow agent prepares a settlement statement that reflects the costs of the transaction including loan fees, escrow fees and title fees.
The escrow agent prepares other documents the parties will need at closing.
The escrow agent coordinates a closing date.
The buyer, seller, escrow agent (and sometimes the buyer/seller real estate agents) meet to sign the closing documents.
The buyer gives the escrow agent a money order for any transaction costs that are not included in the loan amount.
The escrow agent sends copies of the signed loan documents to the lender.
The escrow agent sends the deed or deed of trust to the title agent.
The lender reviews the documents and approves them.
The escrow agent communicates this approval to the title agent.
The title agent records the documents (this is when the transaction is officially closed).
The lender wires the funds for the property purchase to the escrow agent.
The title agent sends the escrow agent a recording number indicating he/she has recorded the documents.
The escrow agent disburses the purchase funds to the appropriate parties.
The escrow agent sends a final settlement statement to the involved parties.

The escrow process is best navigated by a licensed real estate professional who works with lenders, title and escrow agents on a regular basis. Few experts would advise that a homebuyer tackle it alone. Fortunately, I’m here to help! Give me a call if you have additional escrow questions or have been thinking about buying, selling or investing in real estate.

January 14, 2015January 13, 2015

Getting a Mortgage is About to Get Easier

Since the advent of the subprime mortgage crisis in late 2007, mortgage companies, banks and government-backed mortgage guarantors have tightened their lending standards. Many potential homebuyers and refinancers without the near-perfect credit and substantial 20 percent down payment (or equivalent equity) required, have had to kiss their dreams of home ownership or lower interest rates goodbye as a result. Fortunately, all of that is about to change.

Fannie Mae and Freddie Mac are lowering their down payment requirements.

These two government sponsored enterprises buy mortgages from the banks, credit unions and other financial institutions that make them. Doing so is a sizable investment, and to minimize their risk they require that the loans they purchase “conform” to specific guidelines. In an effort to make home purchases more affordable for first time and low-income homebuyers, they recently adjusted these rules to allow for the backing of mortgages with 3 percent down payments.

In order for the entities to consider the mortgages conforming, these loans must require private mortgage insurance, a minimum 620 credit score, and complete income, asset and job documentation. Additionally, borrowers receiving these loans must attend homeownership counseling.

Fannie Mae started backing loans that met the loosened requirements in December. Freddie Mac will begin purchasing them from lenders in March. They will include 15-, 20- and 30-year fixed rate options with a borrowing limit of $417,000.

Lenders are already responding favorably to the changes.

In a recent article by CNN Money, an official at Fannie Mae noted that the average credit score seen on approved loan applications has dropped slightly. He is seeing lenders making mortgage loans to borrowers with lower down payments as well. And according to a survey conducted by the Federal Reserve, 14 percent of senior loan officers report that their banks began loosening lending standards in the fall.

What does this mean for you? If you’ve been dreaming about buying your first home, moving up into a bigger home, or refinancing your current mortgage, it’s unlikely there will ever be a better time to do so—even if lenders have turned you down before. Contact your real estate and mortgage professionals today to explore your options and learn more about next steps.

December 2, 2014December 1, 2014

Avoiding Homebuyer Remorse

Look up “remorse” in the dictionary and you’ll learn it means “deep and painful regret for wrongdoing; compunction.” That sounds like something no one should ever experience. Unfortunately, remorse is an all too common feeling among homebuyers. In fact, according to one recent CNN Money article, 80 percent of homebuyers report regretting at least one thing about their new home. If you don’t want to be among them, consider these ways to avoid remorse the next time you make a real estate purchase.

Don’t abandon your must-haves.

While four bedrooms might be nice (defined as a “want”), a family of three must have (or “needs”) at least two bedrooms. When shopping for a home you can look at properties that don’t have all your wants. But if you want to avoid homebuyer remorse, don’t bother with those that lack essential must-haves. There’s no sense in falling in love with something that will make you unhappy in the long run.

Stand up for your feelings.

It’s possible your spouse or partner will pressure you to purchase a property you don’t like. If it’s lacking a few of your wants but has everything you need, you might agree to compromise. However, if you are certain you will be unhappy in the new home—for whatever reason—make sure your feelings are known. You don’t want the purchase to cause resentment down the line.

Don’t act impulsively.

Have you ever bought a handbag you didn’t absolutely love just because all of your friends wanted it? Chances are that impulse buy didn’t make you happy—and an even larger impulsive purchase is even less likely to do so. One of the biggest sources of homebuyer remorse is overpaying on a property because of a bidding war. If you don’t really want the home, or can’t get it for a price within your budget, move on.

Don’t make dangerous concessions.

If your dream house has dry rot, termites or a sinking foundation, pull out of the deal or ask the seller to lower the price to account for the cost of repairs. It’s unlikely your mortgage lender will approve the loan otherwise. Even if they do, turning a blind eye to costly flaws will only reduce your love for the property later on.

Consider the big picture.

Even a “perfect” home might not be the right home for you. Sure, it might have everything you need and even most of the things you want, but if it’s too far from your office, in a crime-ridden area, a little out of your budget, or near a loud highway, it might not be the best choice. Make sure you consider the big picture—from the school system and neighbors to the distance from your favorite restaurants and movie theaters—before you make an offer.

November 17, 2014October 30, 2014

How to Beat All-Cash Homebuyers

When most people want to buy a home, they speak to a mortgage lender about financing. After all, with median existing home prices in the U.S. at $209,700 (5.6 percent higher than they were 12 months ago), it would be decidedly difficult for the majority of homebuyers to access that much cash. Some, however, are able to do so—24 percent according to data from the National Association of Realtors. Many investors are among them. In fact, 63 percent of investors purchasing residential real estate properties paid in cash in September.

While all-cash offers can make the market a bit more challenging for consumers planning to use financing, they don’t make buying a home with a mortgage impossible. In fact, there are several tactics you can use to beat the all-cash offers against which you may be competing.

Secure mortgage pre-approval before making an offer.

While you may want to obtain mortgage pre-qualification before you even begin looking for new home, you’ll need more than that—a full pre-approval—when making an offer against other homebuyers. While pre-qualification requires nothing more than stating your income, assets and debts so your mortgage lender can estimate the amount for which you should qualify, a pre-approval involves a complete mortgage application, financial documentation and credit check. Once it’s complete, you will have a better idea of the interest rate you’ll receive and—even better—you’ll receive a written conditional offer for an exact loan amount. This makes you much more attractive to home sellers.

Waive or shorten the mortgage contingency.

Most offers include a contingency wherein the seller will refund your earnest money if you are unable to secure financing within a set period. While waiving this contingency can be risky if you’re not absolutely certain you’ll qualify for a loan—you’ll lose your deposit—it can make you more attractive to home sellers who stand to benefit. If you’re uncomfortable waiving the contingency altogether, offering a shorter contingency—say, seven rather than 30 days—is also an option.

Make a bigger down payment and finance less of the purchase price.

Some home sellers see a larger down payment as an indication that you are serious about purchasing their property. Additionally, the larger your down payment, the more likely you are to secure a mortgage (and you’ll get better terms as well). This can make your offer more attractive.

Make the seller’s needs a priority.

Perhaps you’d like to close and move in by the first of the month, but the seller’s new home won’t be ready until mid-month. Maybe the seller wants to take her window coverings (or other items that are usually included in the home sale) with her when she leaves. The more flexible you can be to meet the seller’s needs, the more attractive your offer on the home.

Appeal to the seller’s emotions.

Ask any real estate agent if emotions should be involved in the home selling process and they’ll say, “No.” However, it’s exceedingly difficult for homeowners to ignore the emotional attachment they have to their property when it’s time to move on—especially if they’ve lived there for decades. For this reason, it can be helpful to include a personal letter with your offer. Write about how much you love the home, complement them for taking such wonderful care of it, and explain why it is perfect for your family. Note: don’t elaborate on upgrades or changes you plan to make to the property.

Many sellers like all-cash offers, especially in a market where mortgages are more difficult to secure. But this does not mean you won’t be able to buy with a loan—especially if you employ one or more of the tactics outlined here. Contact your mortgage lender or real estate agent today if you’re ready to get started.

November 3, 2014October 30, 2014

Most Common Loan Options for First Time Homebuyers

According to the National Association of Home Builders, first time homebuyers account for 27 percent of existing home sales and 16 percent of new home sales. While their market share has declined over the past few years, first timers are still contributing to the housing recovery. As the economy continues to improve, jobs become more plentiful, and wages go up, experts predict they’ll do so in even greater numbers. You—or if you’re already a homeowner, someone you know—can be among them. And, if so, you’ll likely purchase the home with one of the following loans.

A Fixed-Rate Mortgage

The simplest financing option, a fixed-rate mortgage involves a specific interest rate and monthly payment that will remain the same over the life of the loan or loan term. Fixed-rate mortgages are generally available in 15-, 20- and 30-year terms. The longer the term, the smaller the monthly payment will be. The shorter the term, the lower your interest rate (usually) will be. Fixed-rate mortgages are quite affordable in low interest rate environments such as the one we enjoy today.

An Adjustable-Rate Mortgage

More complex and less predictable than its fixed-rate counterpart, an adjustable-rate mortgage involves an interest rate and monthly payment that changes (usually many times) over the loan term. You’ll typically see adjustable-rate mortgages that begin to change—or adjust—two, three, five or seven years after closing. For example, a 5/1 ARM has a fixed interest rate for five years and then adjusts once every year after for the remaining term of the mortgage. Adjustable-rate loans generally carry lower interest rates than fixed-rate mortgages. In a high interest rate environment, they can be an attractive option.

An FHA or VA Mortgage

Fixed-rate and adjustable-rate mortgages are “conventional” if they require a down payment of 20 percent and you meet certain financial criteria (specific debt-to-income ratio, credit score, etc.) to qualify. For first time (or even repeat) homebuyers who do not have the cash to make such a sizable down payment, an FHA (Federal Housing Administration) or VA (Department of Veterans Affairs) loan may be an option. These loans require much smaller down payments and—in many cases—the financial criteria needed to qualify may be more lenient as well.

Whether you want to buy your first home with a conventional fixed-rate or adjustable-rate mortgage, or take advantage of the FHA or VA loan program, contact your real estate or mortgage professional today to learn more about your options and the financing process.