Home BuyingTips and Advice May 28, 2024

Should I buy a house now, or wait?

Should I buy a house now, or wait?

David McMillin

 

 

Buy now, or wait? That’s the question prospective homeowners have been struggling to answer in today’s housing market. Home prices have been skyrocketing recently, and the Federal Reserve’s work to tame inflation sent mortgage rates soaring, too.

The combination has led many would-be buyers to pick the “wait” side of the equation. The volume of existing home sales was down 1.9 percent from April 2023 to April 2024, according to the National Association of Realtors (NAR). And, according to the Fannie Mae Home Purchase Sentiment Index released in May 2024, 79 percent of consumers believe it’s a bad time to buy a house.

However, after being at a constant disadvantage for the past few years, things have started to look better for buyers in some respects. For example, days-on-market figures are up, giving buyers more time to make an informed decision. NAR data shows that homes typically spent 26 days on the market before selling in April, up from 22 days a year ago. And available housing inventory, while still low, is rising — up 9 percent month-over-month and a healthy 16.3 percent year-over-year, per NAR.

April’s National Housing Report from RE/MAX, one of the biggest real estate brokerages in the country, also reported a sharp uptick in new listings, up 18.2 percent from April 2023. “We’ve started the busy homebuying season on a very good note,” said RE/MAX president Amy Lessinger in the report. “This has happened without a significant drop in interest rates — suggesting that buyers and sellers may be less apt to delay their plans this year.”

So, is it a good time to buy a home? Or is it better to wait on the sidelines, in the hopes that either prices or rates see a significant drop soon? And are there still concerns about a possible recession? Here are some key considerations to help determine the way forward.

 

 

Is now a good time to buy a house?

 

Mortgage rates have backed off from the 8 percent highs hit in October, but they’re still above 7 percent. And home prices are high as well: April NAR data showed that prices have risen year-over-year for 10 consecutive months. Together, these factors might dissuade you from buying right now, and that’s understandable.

No matter which way the real estate market is leaning, though, buying now means you can start building equity immediately. It also means avoiding the potential for additional mortgage rate increases later: Rising rates can spell serious trouble for your monthly budget, and they also result in paying more in interest over the life of the loan.

“If a buyer finds a property they would like to call home, they should not delay,” says Stacey Froelich, a broker. “You cannot time the market, and a home should be a long-term investment.”

“When mortgage rates drop and more buyers come back into the market, home prices will rise,” Melissa Cohn, regional vice president of William Raveis Mortgage recently told her newsletter subscribers. “Remember, you ‘Marry the house and date the rate.’” To put it another way, buy now if you find the right place — you can always refinance later.

 

In general, if you can answer yes to these three questions, now is a good time to buy.

  1. Do you have excellent credit? Anytime you’re borrowing money, start by checking your credit score. The best deals on mortgages will be available to those with the best scores — in fact, the median credit score for mortgage borrowers in the first quarter of 2024 was a very high 770, according to the Federal Reserve Bank. If you have demonstrated that you are a low-risk borrower with a history of on-time payments, you’ll be in line for the lowest mortgage rates a lender offers.
  2. Have you saved enough for a down payment? In addition to paying your bills on time, you should be sitting on a sizable chunk of change for a down payment. The more you can pay upfront, the less you’ll have to borrow (and so the less interest you’ll have to pay). Make sure you’ll have plenty left over, too: Lenders like to see additional cash reserves that can provide a cushion if something unexpected happens.
  3. Are you planning to stay in the home for a while? Beyond the purchase price, buying a home comes with closing costs that can run thousands more. So, to justify those one-time transaction costs, it’s wise to be reasonably certain that you won’t move again anytime soon — or that you’ll be financially stable enough to hold on to the property and rent it out. Selling a home very soon after buying can have serious tax implications.

 

 

Should I buy a house now or wait?

 

Ultimately, the decision of when to buy a home is up to you. Life goes on, whether the timing is perfect or not. If you’re anxious to become a homeowner, you’ve met the criteria above and you’re financially stable, go ahead and start house-hunting.

If you’re holding out for lower mortgage rates, a bit of patience might be in order. They have been volatile lately, topping 8 percent in October 2023 before falling back below 7 percent, and now above 7 percent again. That’s more than a full percentage point swing in just a few months.

 

 

Next steps

 

Trying to buy a house right now might feel overwhelming, but waiting too long can present challenges as well. Review your finances in detail, and think about how much you’re able to pay upfront as a down payment. Be sure to take the pulse of the town in which you’re hoping to live. Then, talk with an experienced local real estate agent to figure out whether you should buy now or wait until the market is a bit more friendly to your bank account.

Home BuyingTips and Advice April 23, 2024

Do I Really Need a 20 Percent Down Payment for a House?

Do I Really Need a 20 Percent Down Payment for a House?

Eric J. Martin

 

 

Eager to purchase a home? You’ll likely need to save up for a down payment. This represents the initial portion of a home’s purchase price, and you pay it upfront, so it’s not part of the amount financed through your mortgage loan.

That begs the question, how much of a down payment do you actually need? Conventional wisdom says that 20 percent of the home’s price is standard. This is daunting for many people, and with good reason: On a $350,000 home, 20 percent is $70,000 — a huge sum to have to pay all at once.

But don’t let that number keep you from your homeownership dreams. The truth is, it’s possible to buy a house with a much lower down payment, or even none at all if you qualify. Read on to learn more.

 

 

 

Do You Have To Put 20 Percent Down on a House?

 

The down payment you make on a home represents a percentage of its purchase price, so the amount you need depends largely on the price of the home you’re buying. The more expensive the home, the more money you’ll need for a down payment.

But a lot also depends on the type of mortgage you choose. A 20 percent down payment may be traditional, but it’s not mandatory — in fact, according to 2023 data from the National Association of Realtors, the median down payment for U.S. homebuyers was 14 percent of the purchase price, not 20. Conventional loans can require as little as 3 percent down for qualified borrowers, while FHA loans can be had for as low as 3.5 percent if you meet the credit requirements.

Regardless of price or loan type, though, keep in mind that the more money you put down upfront, the less you will have to borrow. Borrowing less equates to lower monthly payments, and less interest paid over the life of the loan. So no matter what your loan requires as a minimum, it’s in your best interest to make as large of a down payment as you can afford.

 

Minimum Down Payment Requirements

 

Most of these minimums require you to meet some level of eligibility standards in order to qualify. For example, FHA loans at 3.5 percent are only available to those with credit scores of 580 or above. VA loan borrowers must meet requirements set forth by the Department of Veterans Affairs. And for a USDA loan, you must buy a rural property that meets specific criteria.

 

 

Private Mortgage Insurance

 

Private mortgage insurance, often abbreviated as PMI, is another reason to opt for a 20 percent down payment if at all possible. If more than 80 percent of a property’s cost is being financed, most conventional lenders will charge this additional fee every month as a safeguard against default. In other words, if you put down less than 20 percent, it will add a bit more to your monthly payments in the form of PMI. The exact amount depends on how much you did put down and what your interest rate is.

Fortunately, PMI will not usually extend for the entire life of a conventional loan. Once you’ve accumulated 20 percent equity in your home, either through gradually paying down your balance or due to an increase in home values, it can be removed. (If this does not happen automatically, contact your lender to discuss it.)

Note that FHA loans have their own slightly different version of mortgage insurance, which entails an initial payment and ongoing annual mortgage insurance premiums.

 

 

 

Down Payment Assistance

 

If you’re finding it challenging to save up enough cash for a down payment, help is available. The federal government, and most state and local governments too, offer various down payment assistance programs designed to help people achieve homeownership. If you qualify, these can help you cover down payment and/or closing costs, typically in the form of grants and low-interest, deferred-payment or forgivable loans. Eligibility requirements and availability vary from one program to the next. Here are some good places to start looking:

  • At the federal level: The U.S. Department of Housing and Urban Development’s website lists local homebuying programs by state.
  • At the state level: Many states’ Housing Finance Agencies provide homebuying aid and education.
  • At the local level: Plenty of cities and counties offer down payment assistance programs, too, especially for first-time purchasers. Check your municipality’s website for details, or try searching at Down Payment Resource.

 

 

20 Percent vs. Smaller Down Payment

 

If you put down at least 20 percent on your home purchase, you’ll see several benefits:

  • Saving money: “With a larger down payment, your monthly mortgage payment will be lower, and you may qualify for better rates or terms,” says Diane Hughes, executive vice president and director of mortgage lending at UMB Bank in Kansas City, Missouri.
  • Financial stability: A larger down payment makes lenders see you more favorably and demonstrates financial stability, which can improve the chances of loan approval. It also gives you more stability once you own the home: “When you put more money down, you have more cushion to withstand market fluctuations and their impact on the value of your home,” says Ashley Moore, community lending manager for JPMorgan Chase in Houston.
  • No PMI: A 20 percent down payment means you won’t have to pay for private mortgage insurance.

While a smaller down payment saves you money upfront, it has serious long-term drawbacks:

  • A bigger loan: Putting down less upfront means borrowing more to make the purchase, which makes for higher monthly payments and more interest paid over time.
  • Higher costs: Your mortgage interest rate and loan costs could be higher if you put down less upfront. “It can increase the cost to the borrower when you put less than 20 percent down, as many loans are priced based on factors relating to risk,” says Scott Griffin, founder of Scott Griffin Financial in Los Angeles.
  • PMI: You will likely be required to pay for PMI, which adds to your monthly payments.

 

 

 

Is It Ever Smart To Put Down Less Than 20 Percent?

 

For most homebuyers, a down payment of less than 20 percent will generally cost more money in the long run. But if saving up that kind of money will keep you from ever owning a home, it’s worth considering.

“Putting down less than 20 percent on your home may be a good idea if you have a good household income but haven’t had time to save up for a down payment,” Moore says. “It can also be a good idea if a large down payment will almost completely deplete your savings, or if it is the only thing preventing you from buying a home.”

Home BuyingReal Estate InvestmentTips and Advice March 19, 2024

Are Your Homebuying Tactics Out of Date? The New Rules for Buying a Home in 2024

Are Your Homebuying Tactics Out of Date?

The New Rules for Buying a Home in 2024

Jillian Pretzel

 

 

For most of 2023, homebuyers faced a daunting real estate market marked by dizzyingly high mortgage rates. Combined with steep home prices and a severe shortage of homes for sale, it’s no wonder many struggled or gave up their home search entirely.

But with this new year comes new hope: Could homebuyers get a break?

If you’re gearing up to buy a house soon, it’s time to forget the horror stories of last year and reset your expectations. Below are the old rules that no longer apply to the current real estate market—plus the new ones that will take their place this year.

 

 

1. Old rule: Mortgage rates are so high, buying a house might not make sense
New rule: Rates are ebbing, so they shouldn’t stop buyers

 

In late 2023, mortgage interest rates hit highs around 8%, but they started falling to the mid-6% range by mid-December. While rates are anticipated to creep up due to recent higher-than-expected inflation reports, most real estate experts say they won’t approach the highs seen last year.

The Realtor.com® forecast for 2024 projects that mortgage rates will end the year in the mid-6% range. That’s not all that low, but it’s low enough to make a difference to homebuyers.

“Homes are going to fly off the market again, as there is pent-up demand while buyers hibernated during the skyrocketing mortgage rates,” says Elizabeth Sugar Boese, a real estate agent in Boulder, CO. “Now that rates have come down, buyers are coming back and [are] eager to buy.”

Max Carr, a real estate agent in California’s Orange County, notes that some potential buyers might still be holding out. They’re hoping rates will drop even further—perhaps back to COVID-19 pandemic levels in the mid-2% range.

However, waiting to buy is likely unwise, he says. Today’s buyers need to get comfortable with the “new normal” interest rates.

“While rates may improve slightly, anyone waiting for rates in the 2% range again is liable to miss the boat entirely,” he says, “and miss out on a large amount of equity in the process.”

 

 

2. Old rule: Buyers won’t face much competition
New rule: Competition for homes will be fierce

 

In 2023, home shoppers who were willing to get out there despite high rates were rewarded with less competition in the marketplace. This won’t be the case going into 2024, warns Carr.

If rates continue to drop, as anticipated, competition “may get fiercer, quickly,” he warns.

Already, he’s noticed homes in his area selling faster.

“The average home in Irvine, CA, for instance, only sits on the market for 37 days, which is notably lower than the county’s average of 53 days,” he says. “That number seems to be getting lower, as buyers are shaking off their holiday hibernation and jumping back into the market.”

 

 

3. Old rule: Sellers won’t bend much to buyer demands
New rule: Some sellers will make concessions

 

With so few homes on the market, we’re technically still in a seller’s market. In past years, this meant that sellers didn’t need to negotiate much with buyers. But with more new listings entering the market in 2024, it isn’t as favorable for sellers now. This means there’s going to be some wiggle room for buyers.

Cindy Allen, a real estate agent in the Dallas and Fort Worth, TX, area, has recently seen sellers offering a variety of concessions that can help bring buyers to the closing table.

“They’re much more inclined to pay some buyer closing costs, negotiate fees, or perhaps pay points for a buyer’s lower interest rate,” she explains.

 

 

4. Old rule: Buyers must make their best and highest offer to get attention from sellers
New rule: Any reasonable offer could do the trick

 

Since the number of homes on the market has been so constrained, many sellers got used to the idea of receiving multiple offers, often above the asking price. Desperate buyers were often forced to play along.

Those days are more or less gone now in all but the most competitive markets. With more fresh listings, Allen says, buyers should “still aim to make a reasonable offer. Even if there are multiple bids, there are other homes available to choose from.”

She recalls one of her recent listings, which was sold the first weekend on the market. She says she was surprised when the buyer “came roaring in with an offer above the asking price,” noting that such an aggressive offer wasn’t necessary.

“Don’t get me wrong, I am happy for the seller,” she says. “But the sellers were prepared to accept an offer 3% or 4% off the asking price. The other agent said the buyer had friends who recently bought and told him he needed to offer over asking to have a chance at a property. I think those friends must have bought a while back.”

 

 

5. Old rule: If you like a house, submit an official offer ASAP
New rule: Make a ‘soft offer’ to see what kind of deal you can get

 

Back in the pandemic market, things moved quickly. Buyers had to get their offers in pronto if they wanted to stand a chance. This desperate pace has since slowed somewhat.

Jonathan Spears, a real estate agent based in Florida and the founder of Spears Group, says that buyers have some time to come up with a bid that feels comfortable.

A “soft offer” can be a good place to start, he explains. The buyer’s agent can go to a seller’s agent and float an offer below the asking price to see what the seller might say.

“You’re not in writing, you’re not committing to the offer price, but you’re now able to test the waters before you get [it] on paper,” Spears says. “It opens up conversation, and then the real estate professional is able to gather more information that can potentially help the buyer get a great deal. Where, before, in a tight market where a property doesn’t last very long, a seller’s willingness to negotiate is relatively low.”

 

 

6. Old rule: Buy to flip and make quick money
New rule: Long-term investments make the most sense

 

In recent years, plenty of real estate investors made a fortune flipping properties. They would buy a home cheap, fix it up, and sell it for a big profit. But times are tough for flippers today. In most markets, there’s often little to no room to turn a profit.

As a result, a buy-and-hold philosophy might be a better bet for 2024, and beyond.

“If you’re going to buy, you [rarely] lose on real estate when you focus on it being a long-term investment,” says Spears. Today’s buyers would do well to buy a home they can stay in for at least five years.

“It shouldn’t be something that’s like, ‘I’m only gonna own this for six months, and I’m going to try to turn around and speculate,’” he cautions.

Home BuyingTips and Advice March 4, 2024

5 Top Homebuying Mistakes Millennials Make and How To Avoid Them

5 Top Homebuying Mistakes Millennials Make

and How To Avoid Them

Yaёl Bizouati-Kennedy

 

 

It’s a rough housing market for first-time homebuyers. Between soaring mortgage rates, low inventory — partly due to the “lock in effect” of owners not wanting to let go of the homes they bought with lower rates — and high prices, many of them are left on the sidelines.

For millennial homebuyers, the road to homeownership can be particularly difficult — as this cohort is already dealing with several financial responsibilities, including having a family, resuming the payment of student loans or taking care of aging parents.

Yet, they make up a large part of first-time homebuyers. First-time buyers made up 26% of all home buyers, and 70% of younger millennials and 46% of older millennials were first-time home buyers in 2023, according to the National Association of Realtors (NAR).

 

 

Not Differentiating Between Wants and Needs and Wanting It All

 

Many first-time millennial buyers are guilty of wanting it all, the big, move-in ready house with a garage in a desirable neighborhood “that oozes curb appeal with interiors so pretty they could be featured on Instagram.”

“But that may not be realistic given the high prices of homes, elevated mortgage rates, and lack of homes on the market,” said Clare Trapasso, executive news editor, Realtor.com.

In turn, she said they have to be willing to compromise on square footage, location and amenities to find a home that fits into their budget.

“They should think about what they need versus just what they want,” Trapasso said.

Kurt Carlton, co-founder and president, New Western, echoed the sentiment, saying that the perfect house might not exist, but if a buyer can be flexible and prioritize essential features, this will allow them to focus on what truly matters and get it as close to perfect as possible.

 

 

Not Considering All the Costs Involved

 

While it can be easy to focus solely on the down payment amount — which can be fairly substantial — there are also many homebuying costs that millennials should not ignore, such as closing fees, HOA fees or insurance.

“These can add up and it is super important to look at the purchase holistically,” said Chelsea Werner, global real estate advisor at Sotheby’s.

Michael Micheletti, chief communications officer at Unlock Technologies, further argued that it’s also important to consider long-term costs, such as whether you will have the resources to keep up the home after you buy it.

“Some experts suggest budgeting 1% of the home’s purchase price each year for maintenance; others suggest at least 3%,” he added.

In addition, he noted that there will also be mortgage processing fees for services such as appraisals, loan processing and underwriting.

“Before you start house hunting, It’s a good idea to create a budget that incorporates all home-related expenses. Be honest and realistic with yourself, and you’ll stand a much better chance of not overextending,” he added.

 

 

Failing To Make a ‘Home’ Budget and Sticking To It

 

Additional common mistakes first-time millennial homebuyers make include failing to create a budget and sticking to it, some experts said.

“The first year of home ownership is often challenging, especially for those transitioning from renting to owning,” said Parry Ermogenous, principal broker, owner at NextHome Empire. “It’s crucial to work hard, be conservative, budget properly, and maintain good records.”

Ermogenous added that many new homeowners may underestimate expenses or encounter unexpected repairs despite a favorable home inspection. To avoid these pitfalls, it’s essential to plan ahead, anticipate potential costs and build a “rainy day” fund for unforeseen expenses, he added.

 

 

Feeling Married To a Lender

 

Just because you’ve invested time in the process doesn’t mean you need to sign on the dotted line — buying a home is one of the most important financial decisions of your life, and it’s important to, above all else, be focused on what’s best for you, said Zach Robbins, finance expert, founder, Loanfolk.

In turn, Robbins said that it’s essential for millennials to shop around and “to go deep with a few lenders,” and to not only find the best rate but build a contingency plan if, for some reason, your lead lender can’t perform.

“Comparison shopping is even built into how credit bureaus record credit profile inquiries. For up to 45 days, all mortgage inquiries only count as one inquiry on your credit report. It can be real work, but it can be worthwhile to evaluate multiple deals thoroughly,” he added.

 

 

Not Realizing That Paying Debt and Raising Credit Scores Matters

 

Millennial buyers may not realize how important it is to pay down debt and work on raising their credit scores before trying to buy a home.

As Realtor.com’s Trapasso explained, the higher a borrower’s debt is, the less they can borrow to finance a home purchase.

“Also important are credit scores,” she said. “The higher a borrower’s credit score, the more favorable a mortgage they can secure. Often these buyers will be offered lower mortgage rates and lower fees on their loans. This is because lenders see them as less risky borrowers, who are more likely to make their mortgage payments on time. “

In turn, Trapasso recommended that buyers sit down with a calculator and a list of their daily, weekly, monthly and annual expenses and figure out what sort of mortgage payment they can realistically afford.

“There should be enough left over each month to give them a cushion in case something unexpectedly expensive crops up,” she added, noting that they should also do their best to hold onto some of their savings after purchasing a home.

Home BuyingTips and Advice January 24, 2024

Homebuying Guide: 5 Expert Tips for Buying a Home This Winter

Homebuying Guide: 5 Expert Tips

for Buying a Home This Winter

Leslie Cook

 

 

 

The real estate market in the final month of 2023 and into 2024 will be very different from other years.

 

The fall/winter months are when we typically see a slowdown in homebuying activity. The school year is in full gear, the weather turns cooler, and fewer people are out searching for homes. Home prices tend to slide as well, as buyer demand cools, making the months before and after the new year a good time to find a deal.

 

But this year is very unusual. If the pandemic housing market was red hot, the post-pandemic market is now ice cold. Both buyers and sellers are staying on the sidelines as mortgage rates remain above 7% and home prices hover near record highs. As a result, home sales are at their slowest pace since 2008 and many buyers who signed purchase contracts in the last few months are backing out of their deals at the last minute.

 

Still, life goes on, and many buyers don’t have the luxury of waiting for the “perfect time to buy,” says Amit Arora, adding that the “best time to buy is your time.”

 

 

 

 

How to buy a house in today’s market

Today’s housing market is challenging for homebuyers, who can use any help they can get to navigate some rough seas. These tips can help smooth the journey, especially for those in the market for their first home.

 

 

 

 

1. Narrow down what to look for in a home

In a market where there aren’t many options to choose from, you have to be flexible when it comes to your home search. You may have to compromise on some of the features you’d like, as well as the location.

Buyers have to be “very clear about their needs versus wants,” says Bianca D’Alessio, a real estate broker with Nest Seekers International. For example, if having a third bedroom is more important than having a yard, then you focus on homes that have three bedrooms.

Make a list of the must-haves you’re not willing to compromise on and a second list with those “wants” you could live without. That way, you can quickly act when you come across a home that fulfills your first list, and if it so happens to check some boxes on your second list, consider it a bonus. But if you wait for a home that covers all your needs and wants, you may be waiting a long time.

 

 

 

 

2. Research different housing markets

You need to set the right expectations for your home search. Research different neighborhoods, find out how much buyer interest there is, and see how much for-sale inventory is currently available. Online listing sites are a good source for this information, but your best bet will be working with a good real estate agent (more on this below). The goal is to get a good idea of how competitive the market is and whether home prices are rising or falling.

Shop around. It’s important not to limit yourself to a specific neighborhood. Consider other areas that you may not have been initially on your radar. You may find the right home in a less competitive market that you might have otherwise skipped.

You should also be flexible regarding the style of home you’re looking for. Even if you’re in the market for a ranch-style home, it doesn’t hurt to look at other designs. You may find that a duplex has all the features you “need” plus some you “want.”

 

 

 

 

3. Pick the right real estate agent

If you’ve already bought and sold a few homes, you probably feel comfortable navigating the housing market on your own. You know what to look for and can avoid some common beginner missteps.

But especially if you’re a first-time homebuyer, working with an agent familiar with the markets that interest you can give you a leg up. A good real estate agent can give you insights into how competitive a market is and the price range of available homes for sale.

More importantly, real estate agents can help identify off-market homes that won’t appear on listing sites. In some cases, these could be “pocket listings” or homes for sale but not widely advertised. In other cases, says D’Alessio, agents could know about homeowners who are interested in selling but don’t “want to go through the process” of prepping and listing the property.

 

 

 

 

4. Calculate how much house you can afford

Mortgage rates are at 21-year highs, so it’s more important than ever to look beyond just home prices and consider the overall cost of the purchase.

A mortgage calculator estimates how much your monthly payments will be considering different loan amounts, down payments and mortgage rate scenarios. This is how you can figure out how much house you can afford. Make sure to do the math with higher and lower rates to see how your monthly payment would change. For example, a $450,000 loan at 7.22%, Freddie Mac’s current average rate for a 30-year fixed-rate loan, would have a $3,060 monthly payment (without taxes or insurance). If the rate goes up to 7.50%, that payment goes up to $3,146.

Mortgage rates are expected to ease eventually, so you may be able to refinance in the future at a lower rate and save money. But no one knows when rates will decrease or by how much, so it’s important “not to depend on refinancing for affordability,” says Hannah Jones, senior economic research analyst at Realtor.com, adding that “buyers should not take on a loan today that they cannot afford comfortably in their current [financial] situation.”

 

 

 

 

5. Be creative with your home search and mortgage financing

In a tough market, you sometimes have to think outside the box. Both Arora and D’Alessio recommend being flexible throughout the homebuying process and considering options you may not initially believe will work.

For example, shopping around among different mortgage lenders, such as banks, credit unions and online lenders, can lead to significant savings on monthly payments. Many lenders also offer rate buydown options and lender credits to help offset today’s high rates and bring a home purchase within reach.

Being creative also means looking at homes you might skip. Don’t overlook homes that have been on the market for a while. Many people assume that a home that hasn’t sold quickly must have something wrong with it. That’s not always the case. Sometimes, notes Arora, the home may have been overpriced, and the owners may now have more incentive to sell at a more reasonable price or with significant concessions.

Home BuyingReal Estate NewsTips and Advice December 21, 2023

How Far Home Prices and Mortgage Rates Could Drop in 2024

How Far Home Prices and Mortgage Rates

Could Drop in 2024

 

 

 

 

The new year could finally bring good tidings for homebuyers — or at least the beginning of improved housing affordability.

 

Historically high mortgage rates and housing prices that stymied homebuyers this year are expected to ebb a bit in 2024, according to real estate brokerage Realtor.com’s new housing market forecast. While home shoppers shouldn’t expect major relief from today’s crushing homeownership costs, small gains in affordability are expected to help some buyers get a foot in the door.

 

 

 

 

What will the housing market look like in 2024?

 

This year was another rough one for homebuyers thanks to stubbornly high prices and rising interest rates, which kept many current homeowners locked into their current mortgages. Soaring home insurance costs throughout 2023 also worsened the outlook for buyers, many of whom were forced to hold back on making a purchase or back out of deals.

 

Now that inflation is easing, mortgage rates are expected to make a slow decline throughout 2024. But the wheels of progress turn slowly: Realtor.com experts are forecasting that rates will be 6.8% on average for 2024 and 6.5% by the year’s end. (For comparison, the average mortgage rate between 2013 and 2019 was about 4%, and they reached a high of 7.79% earlier this year.)

 

As for home prices, Realtor.com expects the typical monthly purchase cost for the median priced home listing to drop slightly from this year’s $2,240 to $2,200, amounting to about 35% of the average U.S. household income. Demand will probably remain low, and inventory will still be limited as would-be sellers hold back.

 

“Moves of necessity — for job changes, family situation changes, and downsizing to a more affordable market — are likely to drive home sales in 2024.” Danielle Hale, Realtor.com’s chief economist, said in the report.

 

On the whole, while Realtor.com expects record-high unaffordability to wane, Americans shouldn’t anticipate a return to pre-inflation, pre-pandemic norms in 2024. And if inflation ticks back up, home sales could suffer even more, upending any prospective market stabilization.

 

 

What can help homebuyers in 2024?

 

Though affordability will still be a challenge for the foreseeable future, free tools like a mortgage payment calculator can help prospective buyers figure out the best options for their needs in terms of loans, down payment and home price. Exploring different loan products with mortgage lenders may also help buyers find lower rates or less stringent loan requirements.

 

Although the average down payment reached a record high of $30,000 this year, there are an estimated 2,000-plus down payment assistance (or DPA) programs available throughout the country. DPA programs can be especially beneficial for first-time buyers and are typically designed to meet the needs of local homebuyers.

 

Homebuyers can start by researching DPAs in their desired state, county and city and reaching out to providers about their qualification requirements. Working with a housing counselor, which every lender has available, can help buyers explore the programs that best suit them.

Home BuyingTips and Advice November 29, 2023

How Long Does It Take to Close a Mortgage? Timeline to Close

How Long Does It Take to Close a Mortgage?

Timeline to Close

Rae Hartley Beck

 

After months of searching and having several offers rejected, you’re finally under contract and can start bribing your relatives to come help you move. Congrats! But what day do you book the truck for? The timeline that it takes your individual mortgage to close varies more than you might think.

 

 

Closing Time Lines by Mortgage Type

 

Conventional mortgages are the most common type of mortgage. They take an average of 57 days to close in 2021, the most recent figures available, according to ICE Mortgage Technology (formerly Ellie Mae, the mortgage applications processor).

Federal Housing Administration (FHA) loans take a bit longer to close due to additional documentation requirements. They take an average of 62 days to close.

U.S. Department of Veterans Affairs (VA) loans have the most complex underwriting requirements and are only available through VA-approved lenders. As a result, they take the longest time to close—an average of 66 days.

 

Steps of the Closing Process

 

Once your offer is accepted, there are still several steps to your closing process. You can save a lot of time during closing by choosing your lender, your loan type, and your home inspector in advance. You also will want to get pre-approved with your preferred lender and have all of your documents in order before you ever go under contract. Note: Some of the following steps can be completed out of order or done out of order depending on your lender.

  1. Schedule your home inspection right away. Depending on your area, home inspectors may be in high demand and scheduling several weeks out.
  2. Authorize a hard credit pull with your lender.
  3. Lock your rate. Deciding when to lock your mortgage rate can be difficult, but decide it quickly so that your loan can close on time.
  4. Have your lender schedule your appraisal right away. Appraisers are frequently booked out several weeks.
  5. Provide documentation to your lender. This will depend on your personal situation, but at a minimum, you should be prepared to submit bank statements, pay stubs, two years of tax returns, a photo ID, and your Social Security card.
  6. The home inspection is completed. Negotiate any issues that are found with the seller to your satisfaction and your lender’s.
  7. The appraisal is completed. If there is a discrepancy between the appraised amount and the sale amount, you’ll have to cover the difference, secure alternate financing, or negotiate the seller down.
  8. Respond to any of your lender’s questions or requests for additional information as quickly as possible.
  9. Receive and review your closing disclosure. By law, your lender is required to give you a closing disclosure at least three business days before you close.
  10. Close on your new home!

 

 

Home Buying October 28, 2023

Young Women Want to Be Homeowners by Age 30, Study Finds. Here’s How They Can Achieve That Goal.

Young Women Want to Be Homeowners by Age 30, Study Finds. Here’s How They Can Achieve That Goal.

Ana Teresa Solá

 

Girls and young women want to be homeowners by the time they’re 30 — a higher priority even than getting married or earning a lot of money.

About half, 52%, of young women ages 7 to 21 want to buy a house by 30, the most of any goal, according to Girlguiding’s Girls’ Attitudes Survey 2023. To compare, 48% want to be married by age 30, and 39% said it’s a goal to earn a lot of money. The organization polled 2,614 girls and young women in the U.K. between the ages of 7 and 21 earlier this year.

The report echoes findings from U.S. teens, 85% of whom think owning a home is part of “the good life,” according to the 2022 Junior Achievement and Fannie Mae Youth Homeownership survey.

While teens dream of owning a home years from now, it’s a daunting market right now. Houses are more expensive than they were pre-pandemic and mortgage rates are higher. The median U.S. home sale price rose 3% year over year to $420,846 in August, the largest annual increase since October 2022, according to real estate brokerage firm Redfin.

Experts say prices are not likely to come down any time soon as the Federal Reserve may continue its interest rate hikes later in the year and homebuyers face a low supply.

On the other hand, young adults looking ahead to homeownership have time on their side.

“Hopefully by the time they are ready to buy, we will be in a different rate environment, there will be more inventory and a more balanced real estate market,” said Melissa Cohn, regional vice president of William Raveis Mortgage in New York.

 

Three key components to buy your first home

Middle and high school students can start gaining financial literacy early, said certified financial planner Kamila Elliott, co-founder and CEO of Collective Wealth Partners in Atlanta. It will set them up for success in the housing market when their turn comes around.

To that point, there are three key components to being able to buy your first home, said Cohn.

 

1. Down payment

The down payment for a home is the biggest hurdle for most homebuyers. Although the standard is 20%, you can get by with much less. Shoppers come up with just 6% or 7% as a down payment on their first home more often, Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told CNBC.

If a high school student wants to buy a house in roughly 10 to 15 years, they can get started with a part-time job and set aside their money for that goal, Elliott explained.

A savings account is key for short-term goals, but if you have been putting aside money in retirement accounts, you may be able to use funds there for your down payment, too.

For instance, a Roth IRA is a retirement account with rules that benefit first-time homebuyers, said CFP Lazetta Rainey Braxton, co-founder and co-CEO of virtual firm 2050 Wealth Partners. Homebuyers can pull out of a Roth IRA account up to $10,000 for the down payment of their first home without penalty, said Braxton, who is a member of the CNBC Financial Advisor Council.

First-time homebuyers can also take advantage of down payment assistance programs some banks and states offer, Cohn said.

 

2. Credit score

When you apply for your mortgage, banks will look at your credit score, which is a measure of how well you manage debt. The score generally ranges between 300 and 850. The higher the score, the lower — and better — the interest rate you may qualify for on your loan.

For mortgages, banks like to see you are able to make consistent payments and are responsible with debt, said Cohn.

To maintain a high score, it’s important to manage the credit card responsibly and make on-time payments in full, said Elliott, who is also a member of the CNBC FA Council.

 

3. Income

Having a good income can also make you a more competitive buyer, added Cohn.

Lenders look at your debt-to-income ratio to figure out how much mortgage debt you can take on. Monthly payments for student loan debt, an auto loan or any other lines of credit can affect that calculation.

If you haven’t been working in a job for two years and your income is based on bonus or commissions, you may need a parent or family member to cosign the mortgage to show more stability in history of income, Cohn added.

 

‘Understand what it is to be a homeowner’

If homeownership is a goal for early adulthood, it’s important to anticipate your responsibilities as a new homeowner, experts say. Outside of the mortgage, property taxes and insurance costs, utility and maintenance costs also tend to be higher in a house than an apartment.

“Understand what it is to be a homeowner and how things work,” Elliott said.

Keep in mind that your first home might not check all your boxes. It should be in an area you like and meets your needs.

“Your first home will not be your ‘forever home,’” Elliott said. “It may not [have dream amenities like] an open-air kitchen, the fireplace or a pool in the backyard.”

Home SellingTips and Advice September 15, 2023

Dos and Don’ts of Selling a Home: A Guide for First-Time Sellers

Dos and Don’ts of Selling a Home: A Guide for First-Time Sellers

Peter Warden

 

 

Selling your home for the first time

Just like buying a home for the first time, selling yours can be an exciting venture.

Similarly still, it comes with a list of things you should and shouldn’t do in order to get the best deal for yourself.

Read on to see the best ways to prepare yourself and your property before putting it up for sale.

 

 

Dos of selling a home

Most real estate agents now talk about marketing a home rather than selling a home. And they’re right to do so.

Selling techniques get you only so far. That means understanding what motivates your “target market,” which is the pool of potential buyers who are looking to buy a property in your area and price range.

Put yourself in their shoes and try to imagine what most of them want. At a minimum, it’s safe to assume they’ll be looking for a home that is:

  1. In good condition — no cracked sidings, missing tiles or other obvious defects
  2. Clean and smelling fresh
  3. Attractive from the street and with tidy yards, front and back
  4. Tastefully decorated in mainstream, neutral colors
  5. Uncluttered
  6. Somewhere they can easily aspire to live in

Get those things right before you even begin to market your home and you’ll give yourself a head start.

Should you use a real estate agent when selling a home?

Real estate agents charge high commissions, often between 5% and 6% of the sale price, depending on where you live. And nobody likes paying out that sort of money.

But you might benefit from appointing an agent for the first time you sell, if only because that buys you a ringside seat of the whole process. That way, you can use what you learn when you’re selling in the future.

Plus, many sellers value the service they get enough to continue using agents for all their future sales. The range of functions and expertise they provide throughout the sales process can often be the difference between a quick sale at a great price and a slow one that sees you settling for too little. But you must pick a good one.

Should you get a seller’s home inspection?

Traditionally, the buyer commissions a home inspection. So why would the seller pay an average of $340 for one before even putting the home on the market?

Well, it’s a marketing tool. An independent home inspection can give buyers confidence that they’re not buying a money pit with hidden defects. Or if there are defects, they are clear and easy to assess. And that might embolden potential buyers to offer a higher price than they otherwise would.

Are these worth it? The International Association of Home Inspectors lays out the pros and cons from the inspector’s point of view. But it’s also revealing for home sellers.

Setting the right asking price

If you have a real estate agent, you should explore the optimum asking price with them. A good agent will understand the current dynamics of the local housing market and provide good advice. But it’s ultimately your choice.

The danger of asking too high a price is that your home might sit on the market for months or years with close to zero interest. And every potential buyer will have seen it and actively ruled it out. That presents the risk of eventually having to reduce the price, perhaps to less than you could have gotten within weeks had you listed it more reasonably.

If you’re not using an agent, it’s up to you to decide your own asking price. To figure out your property’s value, there are four helpful tips to follow.

 

 

Don’ts of selling a home

Marketers talk about the “Four Ps,” which are fundamental to success: product, price, place, promotion (aka the “marketing mix”). Let’s use those as headings to explore the things that home sellers often get wrong.

Product

Don’t launch your product (your home) before it’s ready to market. Your job is to optimize its appeal to as many people in your target demographic as possible.

We listed the basic requirements in the opening section of this article. But don’t spend too much on preparing your home for sale (see next section). The chances of getting your money back on major works (remodeling, additions, landscaping) are slim. So, stick to the basics.

 

Price

No matter what you’re marketing, getting your price point right is vital. We covered that in the last section.

Place

No, we’re not going to suggest you physically move your home. In this context, “place” refers to the environments where you are going to market your product. If you have one, your agent should handle this.

Today, an online presence is essential. You should always get your home on the Multiple Listing Service (MLS). Your agent should do this for free. But you can get a listing on the MLS for a small fee ($99 is sometimes advertised) if you’re selling by yourself. And find other online outlets, such as community boards and local media, though you may have to pay for some ads.

Consider a For Sale sign in your front yard to catch desperate home buyers who often cruise the neighborhoods in which they want to buy. You could even try delivering flyers to neighbors and leaving bunches of them in local stores.

 

Promotion

Again, this is your agent’s job. But, if you’re a do-it-yourself seller, this is the range of marketing techniques (the “promotional mix”) open to you: advertising, sales promotion, publicity (PR), direct marketing (direct mail and email) and personal selling.

Personal selling is huge if you’re marketing a home by yourself. It’s when you show people around your home and negotiate with them. Sales promotion could be an open house, complete with balloons and an invitation sign outside and refreshments inside.

Advertising is likely the most expensive but gives your message reach. Publicity (free coverage of the fact the home’s for sale in news media) is unlikely unless your property is unique or historically important. Direct marketing? Well, if friends or relations have admired your home in the past, reach out to let them know it’s for sale.

Disclosures

This has nothing to do with marketing or promotions. But it’s a legal requirement across America. Legal website NOLO explains:

“When selling your home in the United States, you are likely obligated to disclose problems that could affect the property’s value or desirability. In all states, it is illegal to actively, fraudulently conceal major physical defects in your property. Beyond this, however, most states’ laws require sellers to take a proactive role in making problems known to buyers, by making written disclosures about the condition of the property, usually using a standard form.”

NOLO also lists disclosure laws by state. Don’t get this wrong or your buyer could sue you — and likely win.

 

 

Preparing your home for sale

We already listed the minimums that most buyers are likely to require in the opening section. But this is something many buyers struggle with.

When you’re living in it, there’s absolutely nothing wrong with your home being an expression of your personality. So what if some people find your color scheme garish or your decorations too much? It’s your home.

But when you come to sell, you either cater to majority tastes you might find bland — or risk selling for a lower price than you could otherwise achieve with a narrowed pool of interested buyers.

Do-it-yourself staging

Unless your home is worth a fortune, you won’t want to get it professionally staged. But check out listings of high-end properties that have been and try to copy that look.

Find another place to store your knickknacks, ornaments, collections and any oversized furniture that makes your rooms look smaller than they really are. Similarly, store any excess clothing and shoes that make your closets look inadequate or cluttered.

Decorate in the neutral shades you see on property renovation shows and in magazines. And add splashes of color using framed prints and posters, cushions and rugs. If you don’t have those, consider buying some that you like and taking them with you to your next home. With art, make sure you don’t display anything anyone is likely to find offensive.

 

The sweet smell of a sale

Even more important than your home looking great is that it’s scrupulously clean and smells good. If you lack the time, ability or inclination to do it yourself, hire a cleaning crew. Once it’s done, keep it that way. And pay particular attention to pet smells creeping back in.

Equally important, make sure any obvious defects are fixed before you list your home — no slipped or missing roof tiles, cracked sidings or damaged panes of glass. And try to spruce up (pressure washing or painting) the exterior as best you can. That should improve your home’s curb appeal.

 

 

Enhancing curb appeal when selling a home

Remember how we mentioned eager home buyers cruising neighborhoods? It’s why For Sale signs can be a good idea in your front yard.

But such signs are useless if they stand in an uncared-for yard. First impressions count. And that’s why real estate professionals go on about “curb appeal.” That’s how attractive your home is when potential buyers first see your home from the road.

And that applies to everyone, not just the weekend cruisers. Real estate agents have endless stories of buyers telling them to drive on because a home looks bad from the road.

It’s worth investing a little in upgrading your yard. If it has a lawn, keep it closely cropped and looking lush. Prune scraggly shrubs and trees. And buy some flowers that will bring color and beauty. Potted plants and hanging baskets can add yet more color and add to your home’s attractiveness.

Unless it’s visible from the road, your backyard doesn’t affect your home’s curb appeal. But you should still keep it in good shape. Your front yard will have raised expectations that you don’t want to dash. However, keeping it neat should be enough.

 

 

Negotiating with buyers when selling a home

This is the point where a real estate agent often really earns his or her commission. It’s difficult for an owner to remain calm and professional, especially when up against a buyer’s agent.

 

Don’t always immediately accept the highest offer. You need to be sure that the prospective purchaser:

  1. Is preapproved for a mortgage. It’s hard to take offers seriously from buyers who haven’t got their financing lined up. They might easily drop out later
  2. Requires only reasonable contingencies or none
  3. Has sufficient cash resources to provide an “earnest money” deposit (which is payable on signing the sales agreement but will be deducted from the proceeds you receive on closing). If not, why not?
  4. Will take ownership at a reasonably convenient time. There should be give-and-take on both sides when agreeing on the occupancy date

When you receive an offer, you may accept it, reject it or make a counteroffer. Your decision is likely to be largely determined by how easy it is to sell homes in the local housing market at that time. If it’s hard, you may have less leverage. Indeed, you might even be asked within the negotiation to agree to contribute to the buyer’s closing costs.

 

 

Closing the deal

Unfortunately, your duties don’t end when the sales agreement is signed. You’ll likely have to make your home available to a couple of professionals, the appraiser and the home inspector. And, if you don’t have a real estate agent, you might have to field queries from the buyer and chase progress across the whole process.

Closing day is when you finally receive the proceeds of the sale. But your real estate agent’s commission, the outstanding balance on your existing mortgage and any other related amounts due will be deducted before you get your hands on any cash.

 

And that might be a relatively small sum if most of your proceeds are going straight into a down payment on a home you’re buying. Often you’ll close on your purchase on the day you close on your sale so much of the money doesn’t touch the sides as it passes through.

Legal ownership of the home changes hands on closing day. And you’ll have to sign some documents before passing over the keys to your purchaser. Only then can you claim you’ve sold your home.

The process is overseen by an independent third party, sometimes an attorney, acting as a “settlement agent” or “escrowee.” And you’ll likely have to attend its offices on closing day.

 

 

Bottom line for home sellers

When you’re ready to sell your home, it’s important to take all the preparatory steps before listing. These include researching comps before setting your price, making your home clean and presentable, and boosting your curb appeal.

If you’re a first-time seller, a real estate agent can guide you throughout the process, providing valuable advice about how best to price and present your property. And their expertise and negotiating skills could see you save their commission.

Whichever route you take when selling your home, we hope your experience will be painless and profitable.

Home BuyingTips and Advice August 24, 2023

Homeownership Is A Great Way To Build Wealth

Homeownership Is A Great Way To Build Wealth

Lorie Konish

 

 

 

When it comes to buying a home now, there are plenty of challenges.

But homeownership can be a great way to build wealth and to maintain housing stability, said a certified financial planner and co-founder and CEO of a boutique advisory firm in Atlanta.

Achieving that goal now can be challenging, with home prices still elevated and higher interest rates pushing mortgage costs higher, said a member of CNBC’s Financial Advisor Council.

 

“If you plan on being in the area for five years, you love the home and you’ve done a budget to really assess all the costs of homeownership, I do still believe buying a home right now is a good idea,” she said.

There are tips she gives to her clients that may help other prospective homebuyers work toward that big-ticket goal.

 

 

1.  Prepare for monthly home payments in advance

 

One of the ways to be in the best financial position to purchase a home is to save, she said.

And that goes beyond just the down payment.

For example, if you are paying $2,000 a month in rent and you will be spending $3,000 a month once you buy a home, you should try to put away an extra $1,000 a month so taking on the cost of a new home won’t surprise you.

You should also work on improving your credit score, which will put you in the best possible position to get a good rate on your mortgage, she said. That means reducing utilization of your credit cards, watching your spending and looking at your credit report to correct any inaccuracies, if necessary.

 

 

2. Anticipate unexpected homeownership costs

 

One of the benefits of buying versus renting a home is the ability to have fixed costs, she said. But homeowners still need to anticipate surprises, she said.

With many cities increasing property taxes, prospective homeowners would be wise to anticipate those costs going up.

Additionally, they should anticipate paying for landscaping, furnishing and unexpected emergencies such as a pipe bursting.

Make sure you have enough liquidity to handle those additional expenses as a homeowner, she said.

 

 

3. Look for flexibility on your purchase

 

Though home prices and interest rates are high, there are still possible ways prospective homebuyers can cut costs.

By getting a shorter-term mortgage — say, for 15 years instead of 30 years — borrowers may access lower interest rates.

Homebuyers may also want to consider buying points on their mortgage, which can let them lock in a lower interest rate, she said.

Prospective buyers who have lower incomes should explore their city or county websites for homeownership or down-payment assistance programs.

As homebuying incentives start to come back, such as with closing costs, be sure to ask if there are opportunities to reduce the overall price of the home at this time, she said.