Tag: first-time home buyers
Mortgage loan interest rates are one of the key drivers in the real estate industry. In today’s economy, Freddie Mac is reporting 30-year fixed rates at historic lows over the last few weeks (or is that months?).
1.) If you’re thinking about selling, now is a great time because buyers will be able to afford more home at a lower monthly payment.
2.) If you want to sell and move up, a low interest rate will help you get more home for the monthly payment you pay.
I remember my first visit to a Baskin-Robbins Ice Cream store when I was a child. There were more flavors than I had ever seen before all at a price my parents were willing to pay! How could I decide which was best? I was used to vanilla, chocolate and strawberry, but now there was mango, peach, caramel and cream, and about 27 other flavors to choose from. What was I to do?
Today’s real estate market is kind of like that. There are so many homes and neighborhoods available at great prices. How can a person decide on what to choose? If you are in the market for a new home, how can you avoid being mesmerized by the 33 flavors of homes available to you? Before you start looking, know what you need! Answer some questions before you go. The first answer you need is to the question of what you can afford. Here are a few others to consider:
- How big of a home do we need?
- Will three bedrooms and two bathrooms work? Or do we need more?
- How many square feet of air-conditioned space do we need?
- What size lot do we need?
- Do we want a large lot?
- Are we interested in a small lot?
- How much yard work am I willing to do?
- Are we interested in a townhome or condominium?
- What schools are nearby?
Once you’ve established your needs and balanced them with your wants, your Realtor® can focus the search on that target. Your Realtor® will preview a selected group of homes before spending your time in actually visiting everything in the mix. You should be able to find your home within 5 to 10 homes that you visit.
Remember Baskin – Robbins? I got sick sampling as many flavors as I could and never bought one scoop. Avoid the stomach-ache in your search by knowing what you want before you go to market.
Can you qualify for this home?
Are you looking for a new home? Today’s real estate market can be intimidating and deciding to buy a home for the first time is one of the biggest decisions you will ever make. For most of us it will mean that we will need to apply for a mortgage. That can be a daunting task but it does not have to be if you understand what is important.
Your mortgage broker will help you through the process and will likely help you to understand that there are some guidelines that will be used to determine how much you can borrow. Generally, there are two basics guidelines that your mortgage broker will consider:
- Will you mortgage payment fall within 25-28% of your gross monthly income? That payment typically includes principal, interest, taxes and insurance (PITI).
- Additionally, your monthly expenses should not exceed 33 to 38%.
I am not a mortgage broker, so these are general guidelines based on my personal experiences. You situation is different and your mortgage broker will help you to understand the specifics in your own case.
Other factors that will decide your ability to qualify for a home loan. Your credit history, income, assets, and the home that you intend to purchase all have a bearing on the amount of loan you can get.
Can I afford this home?
Before you start looking for your first home, or your next home, you need to be able to answer the question “How Much Home Can I Afford?” Looking for a home before you know that answer can be frustrating and a waste of your time. If you will have to take out a mortgage, you need to determine how much of a loan you qualify to make.
How much money do you have for a down payment?
What is your current income?
What is your debt?
What other liabilities do you have?
What assets do you have?
A home is likely the most valuable asset you will have. It is a big decision and a very important one. Emotions are involved, but this is a business decision and part of your investment strategy. Before you make any decisions, understand what you can afford.
Work with a reputable mortgage broker to determine what size loan you qualify to obtain. Once you take this step you will be able to focus your search on homes that are within your price range. This will save time and energy looking at properties that are beyond your means.
Few of us are in the position to pay cash for our next house. Most of us will need a mortgage. When we apply with a lender we need information about the mortgage and the process of closing a loan. Here are some questions to ask your lender before you apply for your mortgage.
What is the best program for me based on my situation? Why?
How long will it take to process and close the loan?
Will I need Private Mortgage Insurance (PMI)? If so, for how long?
Are there any special underwriting guidelines that you follow?
What is the most popular loan program being offered? Why is it popular?
Who will be servicing the loan?
In six months to a year, what will make this loan look good to me?
What are your standard fees? Are there special fees that I should be aware of?
Are there any escrow requirements?
During the “lock-in” period, what happens if rates go down?
What do you need from me to get the loan approved?
Who will be my contact person during the application process?
You can probably think of many more things you need to know before you apply. Your mortgage consultant should be able to answer your questions and offer you all the information you need to make an educated decision.
When I look at our real estate inventory and the numbers of days most are on the market, the answer may be that it is not! Generally speaking, there are a number of factors to consider when selling your home. One of the most critical is the listing price.
Many people set the list price of their home based on their ‘needs’ rather than what the market is saying about the value. Well meaning, but misinformed parties may offer advice that is based on incorrect assumptions. The home owner may allow their own positive emotions about the home to influence what they think the house is worth. Some home owners think they need to allow a negotiating cushion in their listing price. What is the result of any of these pricing strategies? A listing price that is above the current market value!
Houses that are priced at or below the current market value draw buyers and sell quickly, even in a buyers market. Well priced homes will sell in a shorter time and at a higher sales price.
It seems that every day we read conflicting information about what the real estate market is doing. One day sales are down and the next day they are up. One report tells you that prices are falling and the next report tells you that they have stabilized. It makes you wonder if there is ever a good time to jump into real estate. You are waiting for the perfect conditions when prices are at there lowest and interest rates are low.
If you have already calculated what you can afford in monthly payments, it doesn’t really matter if prices fall are if interest rates rise. What matters is what the combination of price and interest produces as a monthly payment. If price fall and interest rates rise, has waiting for the lowest price reduced your monthly payment?
The median price of homes in Mt. Pleasant, SC has been moving in the range of $214,000 to $229,000 in the last few years. Let’s pick $218,900 as a median price for a 4 bedroom, 2.5 baths home. Mortgage interest rates have been around 5% recently for a 30 year fixed rate mortgage. If you put down 20% your monthly principle and interest payment would be $940. What happens if the price decreases by 5% but interest rates go to 5.5%? Or if the price decreases by 10% but interest goes to 6%?
Price Down 5% Down 10%
Interest Rate 5.5% 6%
Monthly P/I $945 $945
While the price of the home decreased, your monthly payment changed by less than $5.00!
There are great homes available for you and your family. Interest rates will rise. Why are you waiting? Call me for more information.
Robert Freedman of Realtor Magazine recently sat down with Linda Goold, The National Association of Realtors’ director of tax policy, and Samuel Whitfield, an NAR legislative representative to discuss the possibility of an extension. The tax credit has been, in Freedman’s words, “the economic recovery’s workhorse.” To date, over 1.4 million households have used the credit. Goold and Whitfield both point out that there is bi-partisan support for extending the credit, but the current Dec 1 deadline is quickly approaching. To watch Freedman, Goold, and Whitfield further discuss of this issue, click HERE.
I originally posted this on my blog, but I wanted to give readers of The Charleston Coast the benefit of this chart as well.
For those of you attempting to purchase your first home and for those of us trying to help you with that, here is a breakdown of the modifications to the First-Time Homebuyer Tax Credit plan.
If I can help you, your friends or family with this, please give me a call or shoot me an email at Betty@BettyPoore.com.