Boston home buyers, whether first time or not, face many challenges before closing on the home of their dreams.
Getting a mortgage can be a challenge in and of itself these days. Then you need to find the right real estate agent to assist you, looking at perhaps dozens and dozens of homes looking for that perfect fit. All this while trying to stay within a budget.
Just because you think you can afford mortgage payments doesn’t necessarily mean you can afford the home. There’s more to it than that.
Homeowner’s insurance, taxes, homeowners association dues, maintenance, and higher electric and water bills are some of the costs first-time homebuyers tend to overlook. Keep in mind, property taxes and insurance have a tendency of going up every year.
Home buying doesn’t begin with home searching. It begins with a mortgage pre-qualification. Get pre-approved, THEN find a home. This way you’ll make a financial decision versus an emotional one.
Spending all or most of your savings on a down payment and closing costs is one of the biggest mistakes first-time homebuyers make. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but they are left with no savings at all.
If you have to use every dime you have in savings in order to scrape up enough cash (20%) to avoid paying mortgage insurance, you’d be better off not living on the edge and pay the mortgage insurance premium until you have enough equity in the home to have the insurance dropped.
So you’ve found the perfect property and gotten pre-qualified for the mortgage. The contract is signed, and you close in 30 days. Don’t go out and start buying furniture for the house and run up credit bills in the process. There’s a good chance the Lender will pull your credit report again before closing to make sure your financial situation hasn’t changed since the loan was approved.
Buying a home can be a rewarding time in your life, but it can also be a stressful time, so make sure you take these things into consideration before you even start the process.
Filed under Home Buying Tips by 
President Obama has now presented his 2013 fiscal year budget and while many believe Congress will not support the proposed cuts and added spending, the National Association of Realtors (NAR) is focusing on the mortgage interest deduction (MID). NAR notes that “As in previous years, the budget would reduce the value of itemized deductions to 28 percent for married couples with incomes over $250,000 and individuals with income over $200,000. Currently, depending on the tax bracket these households are in, the value of their deductions could be as high as 33 or 35 percent.”
NAR President Moe Veissi said in a statement that the association would strongly oppose this or any proposal that would limit MID and other itemized deductions. “The mortgage interest deduction is vital to the stability of the American housing market and economy. We urge the president and Congress to do no harm” to today’s fragile economic recovery, Vessi said. “The nation’s homeowners already pay 80 to 90 percent of U.S. federal income taxes. Raising taxes on them, now or in the future, could critically erode home values at all price levels.”
Of the $3.8 trillion budget, NAR notes “several hundred billion would be new spending for infrastructure, research and development, and other priorities of the administration. The budget envisions cutting about half a trillion dollars from the defense budget, and another roughly half a trillion dollars through tax law changes, including the NAR-opposed curbs to the value of MID for upper-income households. More savings would come from allowing tax cuts enacted during President George W. Bush’s administration to expire for all households except those earning less than $250,000.”
NAR has made it clear they oppose any reduction of mortgage interest deductions and while the overall budget will not likely be passed in its current form, the association has many challenges ahead as they fight to keep the deductions alive.
We feel the President’s inclusion of mortgage interest deduction is just one of the items he fully expects to get chopped by Congress, and he’ll go along with their axing this item in exchange for other cuts he wants made worse than the mortgage interest deduction. What do you think? We’d love to know your feelings about this being back in the new budget proposed by the President.
Filed under Real Estate News by
Ben Bernanke presided over his first meeting as Federal Reserve chairman in March 2006 believing the nation’s economy could pull off a “soft landing” from falling home prices…
Questions or comments? Click the comment link below and sound off. We’d love to hear from you.
Filed under Real Estate News by
Thinking of getting a roommate to share expenses on housing costs? This video highlights three ways to ensure that money is not a divisive issue amongst new roommates…
Had a roommate issue before? Have other suggestions for avoiding problems? We’d love to hear your thoughts. Just click the comment link and sound off.
Filed under Economy by
U.S. home builder sentiment rose in February to the highest level in nearly five years, a clear sign of improvement for an industry trying to climb out of a deep slump.
The National Association of Home Builders says its housing market index grew to 29 from 25 in January. The increase was the fifth in a row and carried the index to its highest since May 2007. The results were better than expected. Economists polled by Dow Jones Newswires had forecast a reading of 26.
Historically, the reading still is low. A reading above 50 in the NAHB index would mean more builders view conditions as good rather than poor. The gauge has not been in positive territory since April 2006.
This is the longest period of sustained improvement we have seen…since 2007.
Foreclosures are still competing with new-home sales. Many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.
All three components of the builders’ index increased. Builders’ assessment of traffic from potential buyers, current sales conditions, and builders’ expectations for sales over the next six months all reached the highest point since mid-2007.
The February index was based on a survey of 389 builders.
Filed under Real Estate News by
A landmark $25 billion settlement with the nation’s top mortgage lenders was hailed by government officials as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit…
Know anyone who may actually benefit from this settlement? We’d love to hear about it. Just use the comment link below to tell us what you know. (No names please, and your email address will never be shared on this site.)
Filed under Mortgage Info by
When trying to sell a home, correct pricing of that home is crucial, and the psychology that goes into determining a price can leave your stomach doing backflips.
Should you start out high and see if you can get top dollar? Should you start low knowing the competition out there is tough? If you just drop your price later, how many buyers did you miss out on at the start?
The decision to price your home is extremely important. Pricing your home not only dictates how much money you will make, it also dictates how many people will see your home. Here are a few things to consider before you set the price of your home.
Change Your Mindset
Emotional attachment to a home can end up costing a home seller thousands of dollars. Sellers tend to price their homes too high because they are stuck in the mindset of: My home is worth more because it’s mine.
This is called the “endowment effect” and is a psychological human emotion. We tend to think, even with something of little value, since we own it, the item is worth more than it really is.
Buyer’s don’t really care how much you paid for your home when you bought it. They care about what comparable homes are selling for today. This is a large step for home sellers to overcome.
You can’t price your home to sell for what you owe if the market says it’s worth less. Once you understand this and overcome the emotions of pricing your home, you’re on your way to a successful sale.
Identify your homes true value and price it just below.
For example; if your market analysis comes in at $250k, pricing your home at $245k will give you a lot more activity.
Even though you’re priced slightly below market value, with the amount of activity that price will bring, you may end up getting multiple offers which will drive the price back up. If you don’t get multiple offers, you will at least get an offer close to asking price.
How fast do you need to sell?
What’s more important to your situation: Time or money? If you need to sell within 30 days, price your home lower than if you could hold out for 60-90 days. You may get less with the 30 day sale, but you will get rid of the home faster. If you price for 90 days, you may get more money, but you’ll lose out on time.
If you sell within the first 90 days, you’ll be okay. If you’re home sits longer, you could end up losing a lot more money and time than anticipated with your original list price. Pricing your home too high will end up netting you less money in the long run during a declining market. You will end up chasing lower prices, and you should try to avoid that situation if at all possible.
If your home sits too long, don’t be afraid to get aggressive.
The longer your home sits on the market the more stale it becomes to buyers in that price range. Obviously, after sitting for an extended amount of time, your home isn’t worth what your asking.
To get out of that “stale” market, take decisive action and drop your price a substantial amount. By doing this, you will attract new buyers in new price ranges. If you drop the price in small increments, it’s like dying a slow death by torture.
Buyers can see all your price reductions, and it shows you’re getting more desperate the more you cut the price. A quick, substantial cut in price is going to give buyers a real incentive to take another look at your property.
If, after all of this, you still can’t get your home sold, it may be time to take it off the market or consider a short sale.
If you can’t afford to price a home at a price that will allow it to sell, talk to your agent about the possibilities of a short sale if you feel you need to go that route.
Filed under Home Selling Tips by
Cheap real estate, rock-bottom refis, deals on electronics, quality stocks for less. Just a few of the ways you can take advantage of this down economy…
Have any other suggestions for taking advantage of the down economy? We’d love to hear your ideas. Just leave them by clicking the comment link below.
Filed under Economy by
How much home can I afford? This is the question every person thinking of buying a home should ask. Or better yet, how much home can I easily pay for?
Before you even start looking at homes on the Internet, or thinking about going to see a real estate agent, you should take a hard look at your finances. If you’re barely able to make your rent payment each month, buying a home may not be your best option.
Yes, sometimes a mortgage can be cheaper than rent, but don’t forget, as a homeowner, you’re also responsible for taxes, homeowners insurance, repairs, and sometimes association fees. So figure out how much you can pay, then how much you can “easily” pay.
Debt To Income Ratios
Lenders use ratios to determine what you can afford to pay for a home. To follow their example, figure out your debt to income ratio yourself. It’s a handy number to have whether you obtain a mortgage or not.
Front End Ratio
This will be shown as a percentage of your gross monthly income. This number reflects what the lender believes you can afford as a loan payment based on your gross monthly income.
Back End Ratio
This number is your new mortgage payment plus all recurring debt. For example, if you pay $300 per month on your car and you pay $150 per month on a credit card, the total of $450 plus your new mortgage payment makes up the back end ratio.
Most lenders want you to keep your debt to income ratio between 34 and 38 percent. Meaning, your total monthly debt should not exceed 34 to 38 percent of your monthly income.
Expect to pay anywhere from 2 to 3 percent of the sales price for closing costs. So for example a $150,000 home will run you closing costs of about $4500 in addition to your down payment.
Loan programs can vary greatly between lenders, so it’s helpful to enlist the aid of a mortgage broker when shopping for a mortgage because they know the requirements and guidelines of many different lenders. They can shorten your shopping time and potentially save you from getting a loan with less than desirable terms.
Different lenders will have different underwriting criteria to determine the risk they are willing to undertake by providing you with a mortgage. Part of that criteria is the down payment. Programs range from no money down, a/k/a “100% financing”, to 20% down or more, and a number of factors will determine which ones (if any) you will qualify for.
Determine Your Price Range
Now that you know how much of a mortgage you can likely be approved for, you can work backwards to determine what sales price range you need to focus your search efforts on.
Experts recommend that once you’ve determined how much you believe you can afford to pay, set aside the difference between what you’re paying now and what you would be paying as a homeowner, factoring in a set amount for any unforseen home repairs. Think of it as a “dry run” to see how well you do.
Interest rates will change how much your mortgage payment will be, and those rates change often – daily, and sometimes even hourly.
If things are too tight, consider eliminating debts and/or opting for a smaller home. Many individuals have started small and worked their way “up the ladder” of home ownership, buying successively larger homes until settling upon the one they want to live out their remaining years in.
Nothing stays the same forever – things happen, jobs are lost, people get sick, houses catch fire, whatever, so it’s a wise home buyer who plans for such contingencies, allowing plenty of breathing space between what they can afford and what they can easily pay for.
If you need help determining what that amount is, feel free to contact us for a no-obligation consultation, or find a reputable mortgage broker to help.
Filed under Home Buying Tips by
When you get a mortgage for your home purchase, if it’s a fixed-rate mortgage, the only amount that is likely to change over the life of your loan is your escrow payment – the amount set aside for taxes and insurance.
Industry experts warn that homeowners should look carefully at their own escrow statements, as mistakes do sometimes occur, especially if the property is in an area with several taxing authorities and one of them is overlooked.
Other mistakes may be made later on: the lender or mortgage servicer may have missed a tax payment or allowed the balance to grow beyond limits allowed under the Real Estate Settlement Procedures Act. The federal law allows lenders to keep a cushion of up to two months’ total escrow payments.
One way to avoid any problems is to request to pay your homeowners’ insurance and property taxes yourself. Borrowers can request to do so before the mortgage closing or by contacting the customer service department of the lender or servicer of the loan.
Some lenders charge a one-time fee to forgo an escrow, typically around a quarter of a percentage point of the loan balance, or $500 on a $200,000 mortgage.
Many homeowners are filing property-tax grievances to reduce their assessed valuation and tax payments, since many towns and municipalities only reassess properties every five to seven years, and property values have dropped so dramatically in recent years, some homeowners may be paying tax on an old valuation of their property.
One thing to keep in mind however, even if your home’s value has decreased, your taxes may not fall, because some cities and towns are raising millage rates, or the rate at which property taxes are calculated, to preserve local services.
If your lender is handling your escrow and you successfully appeal your tax assessment, your lender may continue with the same escrow payment, at least until the next tax bill arrives, and possible even longer. You could be paying more into the escrow than you need to be paying, so it’s always wise to monitor your escrow statement carefully.
Filed under Mortgage Info by
Related News