Tag Archives: equity

3 Tips for Homebuying Success in Today’s Real Estate Market

3 Tips for Homebuying Success in Today's Real Estate Market

In today’s highly competitive real estate market, where home inventory levels are not keeping up with the constant stream of buyer demand, there are steps you can take to ensure you are most prepared for success when buying a home.

The 3 tips we are going to expand on today come from a recent blog by Trulia entitled, The Skinny on Skinny Inventory. 

1. Be Prepared

“Homebuyers should talk with a lender, real estate agent, and a home inspector BEFORE finding a home to make an offer on.”

Being intentional, pre-approved, and prepared will set you up for the accelerated time tables that come with a highly competitive market. If you are the most prepared buyer interested in a home, if you have already secured financial approval, and if you are ready to move fast, your bid will be that much more attractive to a seller.

2. Think Strategically

“Starter homebuyers don’t have a home to sell and can be flexible on closing dates compared to homebuyers who are also trying to sell at the same time.”

If you are one of the many first-time buyers looking for your dream home, know that being strategic and flexible about closing dates can also help your offer stand out from the rest. But don’t fret if you are a homeowner who will also have to sell your own house first – be upfront about your timeline with your agent and with any offers you make.

3. Seek Out the Ugly Ducklings

“Buyers might consider looking for homes that have been on the market for a while and investigate why. The reasons may be a deal-killer but all it takes is one ugly duckling to turn into a swan.”

Finding a fixer-upper or a home that needs a little love might be your best way to guarantee that you are able to find a home in the neighborhood that you want. The worst house on the best block will go for a steal and offer instant equity once you fix it up!

Bottom Line

In today’s market, full of bidding wars and tough competition, finding ways to stand out from the rest by getting creative will improve your chances of having a home to call your own.

The 5 Greatest Benefits of Homeownership

5 Reasons to Own Your Own HomeRecently, Freddie Mac reported on the benefits of homeownership. According to their report, here are the five benefits that “should be at the top of everyone’s list.”

  1. Homeownership can help you build equity over time.
  2. Your monthly payments will remain stable. The landlord can’t raise your rent!
  3. You may have some tax benefits.
  4. You can take pride in ownership of your home.
  5. Homeownership improves your community.

Let’s expand on each of Freddie Mac’s points:

1.  Equity: Homeownership can help you build equity over time.

Every three years, the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a Forbes article, the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun reported that now the net worth gap is 45 times greater.

2.  Financial Stability: Your monthly payments will remain stable.

When you purchase a home with a fixed rate mortgage, the majority of the payment (principle and interest) remain constant. On the other hand, rents continue to skyrocket. Your housing expense is much more stable if you own instead of rent.

3.  Tax Savings: You may have some tax benefits.

According to the Tax Policy Center’s Briefing Book -“A citizen’s guide to the fascinating (though often complex) elements of the federal Tax System” – there are several tax advantages to homeownership.

Here are four items from the Briefing Book:

  • Mortgage Interest Deduction
  • Property Tax Deduction
  • Imputed Rent
  • Profits from Home Sale

4.  Pride: You can take pride in ownership.

Most surveys show that a major factor in purchasing a home is the freedom you have to design the home the way you want. From paint colors to yard accessories, you don’t need a landlord’s permission to make the house feel like a home.

5.  Community: Homeownership improves your community.

The National Association of Realtors recently released a study titled ‘Social Benefits of Homeownership and Stable Housing.’ The study explained:

“Homeownership does create social capital and provide residents with a platform from which to connect and interact with neighbors…Owning a home means owning part of a neighborhood, and a homeowner’s feelings of commitment to the home can arouse feelings of commitment to the neighborhood, which, in turn, can produce interactions with neighbors.”

Bottom Line

There are many benefits to homeownership. That is why it is still a critical piece of the American Dream.

Real Estate Lingo for Homebuyers: Part 1

Freddie Mac Real Estate GlossaryBuying a home can be a daunting and complex process, but it doesn’t have to be. With the right Realtor, you can feel confident that you are being well represented and that she has your back. It can also help to understand real estate lingo. Here is part one of a Freddie Mac real estate glossary you can use to educate yourself on the home buying process.

Amortization: Paying off a loan over the period of time and at the interest rate specified in a loan document. The amortization of a loan includes the payment of interest and a part of the amount borrowed in each mortgage payment.

Amortization Schedule: Provided by mortgage lenders, the schedule shows how over the term of your mortgage the principal portion of the mortgage payment increases and the interest portion of the mortgage payment decreases.

Annual Percentage Rate (APR): How much a loan costs annually. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay.

Application Fee: The fee that a mortgage lender charges to apply for a mortgage to cover processing costs.

Appraisal: A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties.

Appreciation: An increase in the market value of a home due to changing market conditions and/or home improvements. [Because we are in a seller’s market, homes are appreciating faster than they would in a normal market. See our May 30, 2017 post for more info.]

Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability (job history and security), your assets and savings, and the amount of your income each month that is left over after you’ve paid for your housing costs, debts and other obligations.

Closing Costs: The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.

Commitment Letter: A letter from your lender stating the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.

Contingency: A plan for something that may occur but is not likely. For example, your offer may be contingent on the home passing a home inspection. It the home does not pass inspection, you’re protected.

Counter-offer: An offer made in response to a previous offer. For example, after the buyer presents their first offer, the seller may make a counter-offer with a slightly higher sale price.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, car payments and other installment debts, and payments on revolving or open-ended accounts such as credit cards.

Depreciation: A decline in the value of a house due to changing market conditions or lack of upkeep on a home.

Earnest Money Deposit: The deposit to show that you’re committed to buying the home. The deposit will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not fulfilled.

Equity: The value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Home Inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Index: The published index of interest rates used to calculate the interest rate for an ARM. The index is usually an average of the interest rates on a particular type of security such as the LIBOR.

Liabilities: Your debts and other financial obligations.

Loan modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.

Loan Origination Fees: Fees paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.

Click here to read Real Estate Lingo for Homebuyers, Part 2.

[Source: Freddie Mac}

 

Home Ownership Builds Equity and Stability

The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:

  1. They want the opportunity to build equity.
  2. They want a stable and safe environment.

Building Equity

In a recent article by The Mortgage Reports, they report that “buying and owning a home is the essence of ‘The American Dream.’ Each month, your housing payments go toward owning your home instead of renting it; building your personal wealth and assets instead of someone else’s.

History has shown that homeownership is a clear path to wealth-building, with homeowners boasting a net worth [that is] multiples higher than the net worth of renters.”  

Family Stability 

Does owning your home really create a more stable environment for your family?

survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:

  • 68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%.
  • 53% of property managers said that they were more likely to bring in a new tenant at a higher rate than to negotiate and renew a lease with a current tenant they already know.

We can see from these survey results that renting will provide anything but a stable environment in the near future.

Bottom Line

Homeowners enjoy a more stable environment, and at the same time are given the opportunity to build their family’s net worth.