You’ve likely heard a ton about Millennials, but what about Gen Z? In the next 5 years, this generation will be between the ages of 23 and 28, and they’re eager to become homeowners faster than you may think.
According to realtor.com, “Nearly 80 percent of Generation Z members say they want to own a home before age 30,” and Concentrix Analytics said, “52% of prospective Gen Z buyers are already saving to buy a home.”
Wikipedia defines Generation Z (Gen Z) as “the demographic cohort after the Millennials. Demographers and researchers typically use the mid-1990s to mid-2000s as starting birth years.”
The report from Concentrix goes a little deeper on Gen Z, identifying the main reasons this cohort wants to own homes:
Although they’re eager to buy, this generation also perceives a few challenges ahead:
It is also interesting to note that 21% of Gen Zers think their parents will provide financial help, 17% will use a down payment assistance program, and 15% believe other family members will help them. One of the highlights of the report mentioned,
“More than half of Gen Zers who think they’ll receive help also think they will need to pay their parents back, compared to 40 percent of millennials.”
It is never too early to start saving for your own home, whether you are part of Gen Z or a different generation. If you would like to know where to start and how much you need to save to reach your goal of buying a home, let’s get together so you can better understand the process.
This coming year the housing market will be defined by 3 things- inventory, interest rates, and appreciation. But the biggest issue the housing market will face in 2020 is an inventory shortage. There aren't enough homes on the market for buyers, especially on the lower end of the market. This is a topic that has come up frequently within the past several months.
Based on what is forecasted, we know that interest rates are projected to remain low and that appreciation is expected to continue as we move into 2020. Additionally, the upcoming election will provoke many unique perspectives on the health of the US housing market. The challenge will be understanding what is actually happening and how you can best position yourself if you are thinking of buying or selling your home.
According to realtor.com:
Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.
Diana Olick at CNBC:
Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it's not enough to meet the increasingly strong demand.
George Ratiu, Senior Economist with realtor.com
“As millennials — the largest cohort of buyers in U.S. history — embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home.”
The most important thing you can do is understand what is happening in your local market. You may not be able to avoid some of the issues brought on by low inventory, but you can be educated and prepared. Let's connect and discuss the options that make the most sense for you and your family.
Saving for a down payment is a key step in the homebuying process, and it's not the only piece you need to include in your budget. Another factor that's important to plan for is the closing costs required to obtain a mortgage.
According to Trulia,
When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.
For those who buy a $250,000 home, for example, that amount could be between $5,000 and $12,500 in closing fees. Keep in mind, if you're in the market for a home above this price range, your costs could be significantly greater. As mentioned before,
Trulia gives more great advice, saying,
There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You'll get this form about three days before closing since, once you (the borrower) sign it, there's a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”
There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.
The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You'll get this form about three days before closing since, once you (the borrower) sign it, there's a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”
Let's get together to discuss the homebuying process, to be sure your plan includes budgeting for what you need to purchase your dream home – without any surprises!
One of the benefits of homeownership is that it is a “forced savings plan.” Here’s how it works: You make a mortgage payment each month. Part of that payment is applied to the principal balance of your mortgage. Each month you owe less on the home. The difference between the value of the home and what you owe is called equity.
If your home has appreciated since the time you purchased it, that increase in value also raises your equity. Over time, the equity in your home could be substantial. Recently, CoreLogic revealed that the average homeowner gained more than $65,000 in equity over the last 5 years.
Unlike last decade, homeowners are no longer foolishly tapping into that equity. In 2006-2008, many owners used their homes like an ATM by pulling equity out to purchase new cars, jet skis, or lavish vacations. They were pulling out cash (equity) from an appreciating asset, and then spending it on rapidly depreciating items. That is not happening anymore.
The number of homeowners that currently have at least 50% equity in their home is astonishing. According to the Urban Institute, 37.1% of all homes in the country are mortgage-free. In a home equity study, ATTOM Data Solutions revealed that of the 62.9% of homes with a mortgage, 25.6% have at least 50% equity. That number has been increasing over the last five years:By doing a little math, we can see that 53.2% of all homes in this country have at least 50% equity right now. Of all homes, 37.1% are mortgage-free and an additional 16.1% with a mortgage have at least 50% equity.
Homeownership is different than renting. When you own, your housing expense (the mortgage payment) comes back to you in the form of equity in your home. That doesn’t happen with your rent payment. Your rent helps build your landlord’s equity instead.
Last week realtor.com released the results of a survey that produced three major revelations:
Since we are currently experiencing the longest-ever economic expansion in American history, there is reason to believe a recession could occur in the not-too-distant future. And, it does make sense that buyers and sellers remember the horrors of 2008 when they hear the word “recession.”
Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:
“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”
Most experts, however, believe if there is a recession, it will not resemble 2008. This housing market is in no way the same as it was just over a decade ago.
Zillow Economist, Jeff Tucker, explained the difference in a recent article, Recessions Typically Have Limited Effect on the Housing Market:
“As we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages. The housing market is simply much less risky than it was 15 years ago.”
George Ratiu, Senior Economist at realtor.com, also weighed in on the subject:
“This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008…The housing market is in a better position.”
In the past 23 years, there have been two national recessions – the dot-com crash in 2001 and the Great Recession in 2008. It is true that home values fell 19.7% during the 2008 recession, which was caused by a mortgage meltdown that heavily impacted the housing market. However, while stock prices fell almost 25% in 2001, home values appreciated 6.6%. The triggers of the next recession will more closely mirror those from 2001 – not those from 2008.
No one can accurately predict when the next recession will occur, but expecting one could possibly take place in the next 18-24 months is understandable. It is, however, important to realize that the impact of a recession on the housing market will in no way resemble 2008.
We’re in the back half of the year, and with a decline in interest rates as well as home price and wage appreciation, many are wondering what the predictions are for the remainder of 2019.
Ralph McLaughlin, Deputy Chief Economist for CoreLogic
“We see the cooldown flattening or even reversing course in the coming months and expect the housing market to continue coming into balance. In the meantime, buyers are likely claiming some ground from what has been seller’s territory over the past few years. If mortgage rates stay low, wages continue to grow, and inventory picks up, we can expect the U.S. housing market to further stabilize throughout the remainder of the year.”
Lawrence Yun, Chief Economist at NAR
“We expect the second half of year will be notably better than the first half in terms of home sales, mainly because of lower mortgage rates.”
Freddie Mac
“The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase demand is up five percent from a year ago and has noticeably strengthened since the early summer months…The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity.”
The housing market will be strong for the rest of 2019. If you’d like to know more about our specific market, let’s get together to discuss what’s happening in our area.
Every three years, the Federal Reserve conducts its Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.
The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).
These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.
As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.
That is why Gallup reported Americans picked real estate as the best long-term investment for the sixth year in a row. According to this year’s results, 35% of Americans chose real estate. Stocks followed at 27%, then savings accounts and gold.
If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to help you through the process.
Fannie Mae just released the July edition of their Home Purchase Sentiment Index (HPSI). The HPSI takes information regarding consumers’ confidence in the real estate market from Fannie Mae’s National Housing Survey and condenses it into a single number. Therefore, the HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions.
Great News! The index reached its highest level since Fannie Mae began their survey. Breaking it down, the report revealed:
The day after the index was released, Freddie Mac also announced the 30-year fixed-rate mortgage rate fell to its lowest level in three years.
Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae explained the uptick in the index:
“Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges. Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category.”
Consumers are feeling good about the real estate market. Since Americans are not worried about their jobs, see mortgage rates near an all-time low, and believe it is a good time to buy, the housing market will remain strong for the rest of the year.
One of the many benefits of owning your own home is the freedom to find your ‘furever’ friend. By pointing out the aspects of your home that make it ‘pet-friendly’ in your listing, you’ll attract these buyers, rather than alienating the 68% of American households that have a pet!
If you are one of the many homeowners looking to list your home for sale, how do you stand out to the millions of pet parents searching for their dream home?
Whether a dog person, a cat person, or someone who prefers the company of another pet species, 99% of pet owners say that they consider their animal to be family. When finding a home, 95% of animal owners believe it is important that a housing community allows animals.
A study by the National Association of Realtors (NAR) revealed that there are many aspects of the home buying, selling and owning experience that have been greatly impacted by our love for our pets.
This should come as no surprise, as $72 billion was spent on pets in the U.S in 2018. NAR’s President William E. Brown shed some light on the impact of pet owners and their home search.
“It is important to understand the unique needs and wants of animal owners when it comes to homeownership. REALTORS® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.”
New home builders have actually begun installing retractable pet gates that tuck away neatly inside door jams as a highly requested feature in new homes to attract pet-parents.
So, if you are a homeowner looking to sell in today’s pet-friendly environment, point out the features of your home that will attract pet owners:
Americans love their pets and will look for pet-friendly features in the home they wish to buy, so take advantage of this knowledge by pointing out your home’s ability to meet their needs.
The housing market has been hot for a while now. Homes have been flying off the shelves as fast as they have been listed. Buyers have been competing in bidding wars just to find a home to buy, let alone find their dream home.
This ‘seller’s market’ has driven home prices to new heights. Home price appreciation averaged over 6% across the country.
However, home price growth has recently started to cool down. The latest report from CoreLogic shows that home prices have only risen by 4.7% over the last 12 months.
Many buyers and sellers planning to enter the housing market this year have started to wonder if we are headed towards another housing crash. Ralph McLaughlin, Deputy Chief Economist at CoreLogic, recently stated in an interview,
“There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash. The real elephant in the room here is housing supply.”
“There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash.
The simple answer is we are returning to a ‘normal’ market. The inventory of homes for sale more closely matches the demand in the market. The added supply means fewer buyers are outbidding each other. Therefore, prices are experiencing less upward pressure. McLaughlin went on to explain,
“If there are a lot of homes on the market and suddenly no one wants to buy them, you’ll get into a downward spiral of price competition. Right now, however, we’re in the opposite situation, there isn’t an over-abundance of homes on the market.”
As more renters looking for their piece of the American Dream enter the housing market, demand for housing will continue to grow. The Joint Center for Housing Studies at Harvard University estimates over 30 million new households will enter the market from now through 2040.
“There’s the natural life cycle of young people getting older and starting to do adult life things which include … buying a house and that’s a lot of potential inertia that could last indefinitely.”
Home prices will start to appreciate by historical norms as we continue to head towards a more ‘normal’ market, rather than the over 6% seen over the course of the last couple of years. This is great news! Homeowners looking to sell their home will have buyers, as more buyers will be able to afford them!
Every three years, the Federal Reserve conducts their Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.
That is why Gallup reported that Americans picked real estate as the best long-term investment for the fifth year in a row. According to this year’s results, 34% of Americans chose real estate. Stocks followed at 26%, and then gold, savings accounts/CDs, or bonds.
If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to guide you through the process.
The results of the 2018 Rental Affordability Report from ATTOM show that buying a median-priced home is more affordable than renting a three-bedroom property in 54% of U.S. counties analyzed for the report.
The updated numbers show that renting a three-bedroom property in the United States requires an average of 38.8% of income.
The least affordable market for renting was Marin County, CA, just over the Golden Gate Bridge from San Francisco, where renters spend a staggering 79.5% of average wages on rent, while the most affordable market was Madison County, AL where 22.3% of average wages went to rent.
Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.
Just like with any product or service, the law of supply and demand impacts home prices. Any time that there is less supply than the market demands, prices increase.
In many areas of the country, the supply of homes for sale in the starter and trade-up home markets is so low that bidding wars have ensued, and the busy spring-buying season is just around the corner.
CoreLogic recently conducted an analysis on national home prices at the time of sale for their January 2018 MarketPulse Report and found that a third of homes sold for at least list price.
“The share selling above list price was almost three times the trough in January 2008 and represented more than one-fifth of total sales.”
Many markets in the western part of the country and around major cities are experiencing higher shares of homes selling above list price.
“San Francisco had the largest share of homes—76 percent—that sold for at least the list price, and Seattle and Los Angeles followed with 63 and 51 percent, respectively. Miami had the lowest share—16 percent—of homes selling at or above the list price.”
Increased demand during the spring and summer months, the traditionally busier seasons for real estate, will no doubt influence how many homes continue to sell over list price.
This should not be seen by sellers as permission to overprice their homes, though. Buyers are becoming more and more educated, especially those who have been searching for their dream homes for a while now while waiting for new inventory to come to market.
Realtor.com gives this advice:
“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”
Without a large wave of new listings coming to market, buyers will continue competing with each other for the homes that are available. If you are thinking of selling your home, now may be the time to do so before more competition comes this spring. Let’s get together to determine the demand for your house in our area.
Many potential homebuyers believe that they need a 20% down payment and a 780 FICO® score to qualify to buy a home, which stops many of them from even trying! Here are some facts:
Married couples once again dominated the first-time homebuyer statistics last year at 66% of all buyers, according to the most recent Profile of Home Buyers & Sellers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.
Many couples are deciding to use what would otherwise be their wedding fund as a down payment on their first home, as unmarried couples made up 8% of all first-time buyers last year. If you’re single, don’t fret; you can still buy your dream home! Single women made up 17% of first-time buyers in 2016, while single men accounted for 7% of buyers.
According to a survey by the Wedding Report, the average cost of a wedding in the United States at the start of the year was $25,961, which equates to a 10% down payment on a median priced home.
A recent article from the New York Times found that many singles are now asking their parents to allow them to use the money they’ve saved up for their wedding day to instead buy a home.
In the case of Carrie Graham, a Protestant minister from Austin, TX, her parents had saved a ‘five-figure sum’ for her wedding and were more than willing to give her that money as a down payment on her dream home. Graham told The New York Times,
“Buying the home wasn’t me saying, ‘I’m never going to get married’ or I am going to get married.’ My own home had way more than equity benefits. It was a real gift to have a home in an extremely desirable neighborhood in a city that I love. It’s brought me joy.”
More and more first-time homebuyers are finding a way to purchase their dream homes, even if that means delaying their dream weddings.
Questions to ask moversWhen choosing movers, it's important to have them come to your home to give you visual estimates so they can see exactly what you need moved. When they're in your home, it's also important to ask them questions about themselves and the moving company. Here are some to ask them - and the answers you should expect.
A bad moving company won't stay in business very long, so if it's been around for a decade or more, that's a good sign. Also ask how many moves they do a year - the more they do of something, the better the odds that they're pretty good at it.
This is a good test of their knowledge of the moving industry, and of their customer service skills. You want someone who explains the often confusing terminology in the moving industry, and not someone who rushes through their explanations or seems to be using insider language in an effort to confuse you. If you don't understand something, ask.
Experience counts for a lot - it's not easy tallying up the costs for moving quotes, so someone who's relatively new at it, or new to the moving industry, should be a bit of a concern, particularly if they have any problems answering your other questions.
The worst trait in a mover is overpromising, either on price or when you can expect to get your things. You will receive your delivery within a particular time frame, so you should be wary of any moving company that tries to give you an exact date for your items to arrive - there are just too many things that could go wrong to foul those dates. Here's more information on moving company delivery windows.
Most movers have the usual canned references; avoid these. Ask instead if the moving company does repeat work for any area businesses - businesses won't put up with shoddy treatment, so if they use the same mover time and again, that's a great sign.
In particular, ask about whether you'll pay for packing materials. A commonly heard complaint is that the moving company overcharged for packing materials that the customer didn't know about. And don't ask about 'hidden costs'. No moving company will admit to the costs being hidden. Instead, they'll say that they're in the contract. So ask to see all of the charges in the contract instead.
This is another test of the moving consultant's knowledge, as well as a test of how you can expect to be treated. A thoughtful and complete answer is a good sign that you will be treated thoughtfully during your move.
There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage - either yours or your landlord’s.
As Entrepreneur Magazine, a premier source for small business, explained this month in their article, “12 Practical Steps to Getting Rich”:
“While renting on a temporary basis isn't terrible, you should most certainly own the roof over your head if you're serious about your finances. It won't make you rich overnight, but by renting, you're paying someone else's mortgage. In effect, you're making someone else rich.”
Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:
“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”
As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.
Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.23% last week.
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
Many Americans got some depressing news last week; either their tax return was not as large as they had hoped or, in some cases, they were told they owed additional money to either the Federal or State government or both. One way to save on taxes is to own your own home.
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, and a quote on each, from the Briefing Book:
“Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage. The deduction is limited to interest paid on up to $1 million of debt incurred to purchase or substantially rehabilitate a home. Homeowners also may deduct interest paid on up to $100,000 of home equity debt, regardless of how they use the borrowed funds. Taxpayers who do not own their home have no comparable ability to deduct interest paid on debt incurred to purchase goods and services.”
“Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.”
“Buying a home is an investment, part of the returns from which is the opportunity to live in the home rent-free. Unlike returns from other investments, the return on homeownership—what economists call “imputed rent”—is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords.”
“Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale. But homeowners may exclude from taxable income up to $250,000 ($500,000 for joint filers) of capital gains on the sale of their home if they satisfy certain criteria: they must have maintained the home as their principal residence in two out of the preceding five years, and they generally may not have claimed the capital gains exclusion for the sale of another home during the previous two years.”
We are not suggesting that you purchase a house just to save on your taxes. However, if you have been on the fence as to whether 2017 is the year you should become a homeowner, this information might help with that decision.
Disclaimer: Always check with your accountant to find out what tax advantages apply to you in your area.
What is a pre-approval and why do you need it? When shopping for a home, you're going to be asked at some point whether you've been "pre-approved" or whether you have mortgage "pre-approval." You're going to want to answer "yes" to these questions -- buyers who can are in a much better position to purchase a home. Why? Read on to find out.
In real estate lingo, to say you have been "pre-approved" or that you have mortgage "pre-approval" means you have a commitment in writing from a lender to lend you a specific amount to buy a home under certain conditions (e.g., length of the loan and interest rate). A pre-approval holds more weight than a loan pre-qualification, which is an estimate of how much you may be able to borrow.
It's important to have pre-approval for several reasons: It will let you know how much you can spend on a home and the size of mortgage you'll be able to obtain, it will give you an advantage when it comes time to bid on a property, and it will speed up the process when you find a home you want to buy.
When you have a pre-approval letter for a loan, you'll know exactly how much you can borrow, and possibly the length of the loan (15 years, 30 years, etc.) and your interest rate. This will give you an idea of how much you can spend on a home and what your monthly payments will be like should you purchase the property.
Buyers prefer sellers who have their financing in place. They don't want to choose a buyer who seems to be a qualified buyer, but can't come up with the funds to buy the house.
If you are pre-approved with a reputable lender, you may be able to win a bid over another buyer should multiple buyers be interested in a particular home -- even if the offers from the other buyers are higher.
When it comes time to place an offer on a home, having a pre-approval letter will speed up the process. That's because you won't have to wait to hear from a lender as to whether or not you've been approved.
You'll want to talk to a few lenders to search out loans that will best suit you and your financial situation. The lenders will require certain information, including: your income, your employment situation, how long you've been employed, and any debts you may have -- e.g., student loans, car loans and credit card debt -- and the source of your down payment.
You may be asked to show your tax returns, bank statements and W2 forms. The lender will use this information to determine the maximum loan you can qualify for and your monthly mortgage payment.
The lenders will also check your credit report and whether you have funds for a down payment and closing costs.
But, even when you do get pre-approved, remember that there are some caveats: Pre-approval letters can be time-sensitive and are subject to an appraisal on the home you're purchasing, so while a pre-approval gives you a firm idea of how much you may be able to borrow, it's still not a concrete guarantee that you'll get the loan.
Home buying negotiation tips You've found the home of your dreams, now it's time to negotiate with the seller to make it yours. Follow these tips to negotiate the best price you can without upsetting the seller and ruining the deal.
Start off negotiations by offering a fair price to the seller. You can offer a price that's lower than the asking price; just don't offer one that's too far off-base from the home's fair market price. If you start off with a severely low-ball offer, you'll negatively taint the negotiations from the get-go, and may even prompt the seller to reject your offer outright.
Know as much about your local market as you can, such as the selling price of homes comparable to the one you hope to purchase -- before entering into the negotiation process. Seek out the advice of your real estate agent (she or he has most likely been through the negotiation process multiple times) and get advice from family and friends who've recently purchased a home.
Try to find out as much as you can about the home seller's situation. Is the seller in a hurry to move, say because of a job transfer or a divorce? If so, he or she may be willing to offer a lower price to make a sale happen. Or, has the seller owned the home for quite some time and seen substantial appreciation in the home? In that case, the seller may be more willing to negotiate on price (versus a seller who's purchased recently and may not have seen much appreciation in the home's value).
This may sound silly, but if the seller can see you as a person -- not as some dollar-signs attached to an offer, you may be able to get a better deal. Write a letter to the seller, telling him or her how much you like the home and why it's the perfect one for you. You may want to add why it's a perfect one for your children to grow up in -- don't be afraid to tug a few heartstrings!
While it may help to establish a personal connection with the seller, you don't want to let the seller know too much, either. Try not to tell the homeowner exactly how much you love the home -- it may come to hurt you during the negotiation process. If the seller were to know, for example, that the house is the perfect one for you and you'd be willing to do almost anything to get it, this will give him or her the upper hand. Try to keep a "poker face" as much as you can during the negotiation.
Decide what's most important to you during the negotiation. Is it getting the absolutely lowest price or getting the seller to make needed fixes to the home? If you decide what's most important to you, you can smooth the way during the negotiation process by compromising with the seller on some points while holding out for the ones that matter most.
Don't assume that items like the washer and dryer are included with the house. Negotiate what will be included in the sale -- e.g., the refrigerator, the dishwasher, etc., and make sure that those items are written in your contract.
While you'll want to get what you've negotiated into writing, you may want to get it in photos, too. Take some pictures of items that you've negotiated to remain in the home and include them with the contract. That way, there's no way to debate, for example, just which custom window treatments are supposed to stay in the home.
It's a good idea to ask for more than you want during the negotiation process. Don't ask for the sky, but you might want to request more concessions than you need -- say, also asking to keep the dining room chandelier when you really only want the roof repaired. That way, you can "give in" to the seller on items like the chandelier, but get items that really matter -- like moving into a house where the roof won't leak.
Negotiations proceed best when both parties are reasonable and don't let their feelings get in the way. When negotiating the purchase of your new home, try not to let your emotions take control. The worst atmosphere for negotiations is an adversarial one, where the buyer and seller are at odds with each other and refuse to compromise. Listen to the seller and try to understand where they are coming from.
You've survived house hunting and the bidding and negotiating on your new home, and now it's time to make it yours. But to do so, you have to sit down with various people, which may include the seller, your real estate agent, title and mortgage company officials and possibly your attorney at what's known in real estate lingo as the "closing table."
At closing, you will close on the purchase of your new home, and if you are taking out a mortgage, on your home loan, as well. The whole process may take about an hour. Here's what's expected of you:
Before the actual closing, you'll most likely have the opportunity to perform a walkthrough of the property and confirm that the condition of the home is as it should be, as specified in the sales contract.
At closing, you'll be paying for your share of the closing costs, and will be bringing the down payment, so be sure to bring a certified check or a cashier's check. Your lender will provide a lender's check for the remaining balance that's due on the home.
Your HUD Uniform Settlement Statement (which both you and the seller will sign) will detail the closing costs (plus all the monies involved in the transaction), as well as who is expected to pay them.
You will also be required to show proof of your identification, such as your driver's license or passport.
Bring a copy of and proof of payment for your homeowner's insurance, plus your flood insurance policy, if you have one. Your lender may want to review these before allowing you to close on the home.
To transfer ownership of the home, both the buyer and seller will be required to sign several documents.
You may be required to review and sign the purchase agreement, a promissory note for your loan, mortgage documents, title documents, the settlement statement and the truth in lending statement (which will outline the costs of your loan, your payment schedule and amount financed), while the seller will also sign the settlement sheet -- and, importantly -- the deed to the home to transfer ownership of the property to you. Copies of these documents will be filed at the county recorder's office, but be sure to keep your own copies as well.
Once all the necessary paperwork is completed and everything is in order, you will be given keys to the home. While you will no doubt immediately change the locks upon moving in, the keys are the final sign that the home is indeed yours.
4 Ways to Deal If Your Appraisal Comes in Low
The home-buying process is a high-stakes thrill ride full of exhilarating ups and scary downs, but unquestionably one of the most deflating moments is when the appraisal comes in significantly lower than the accepted offer. This is, to use technical real estate lingo, “a bummer.”
Either you feel as though you got the raw end of a deal by paying more than the property’s worth or, if you don’t have extra cash to hand over, the deal can crumble into dust. (Your lender’s not going to fork over money for a higher loan amount if the appraisal came in lower than expected, so you’ll have to make up that difference yourself.)
“In a rising market, low valuations are pretty common because appraisals are based upon sales that closed when prices were lower,” says Diane Saatchi, a senior broker with Saunders & Associates in Bridgehampton, NY. “The reverse is so in a declining market.”
In other words: Appraisals can’t keep up with how quickly homes are selling in a hot market, so you’re bound to see lower-than-expected values placed on homes.
So, what do you do if this happens to you? You have four options:
1. Appeal the appraisal
Sometimes called a “rebuttal of value,” the appraisal appeal takes some work. In fact, it’s a total team effort.
The homeowner, loan officer, and often the real estate agent work together to find better comparable market data to justify a higher valuation.
That means everyone puts on their best Sherlock Holmes garb and gets to work looking for anything that helps the claim for higher valuation. Perhaps the appraiser overlooked some comps (homes similar in style, location, and square footage sold within the past few years).
It’s not uncommon to discover, for instance, that the appraiser used a comparable sale that looks like it’s in great condition, when in fact the home was trashed when purchased and has already been rehabilitated.
The loan officer writes an appeal using the new comparables and then sends it to the appraiser. There might be some negotiating back and forth until all parties come to a compromise with a new valuation.
Spoiler: It’s a hard battle to fight.
2. Order a second appraisal
Most often, if the appraised value is not as high as the agreed (contract) price, the seller’s agent will ask to see the comps and get a second or third appraisal.
But it will likely cost you–you’re not only paying for the first appraisal (in your closing costs), but you’ll pony up for any additional appraisals as well. They can range between a few hundred dollars and $1,000 depending on the area. Occasionally, real estate agents or sellers will foot the bill if they really want to keep the sale.
3. Negotiate with the seller
If you’re lucky, you and the seller will both budge a little.
You might go back to the sellers and ask them to reduce the price or split the difference. The seller is under no obligation to do so, but they may prefer to do this rather than take a chance of losing you as a buyer, and starting over again. It is likely that another buyer will have the same issue, so the seller might be better off renegotiating with you unless they have other offers.
Sellers might be more willing to cooperate, especially if the Federal Housing Administration is involved. Lenders often require the use of their own FHA-approved appraiser, and these appraisals are “locked in” for six months.
The seller could be forced to take a poor appraisal or wait it out for a buyer with a different loan.
While the seller will usually be upset about the low appraisal value, most reasonable sellers eventually come to terms with the fact that any other appraisal values by potential future buyers will most likely come in at about the same value.
4. Walk away
No one wants to let a property slip through their fingers, especially if it feels like their dream home. But beware of ignoring a low appraisal—you could end up losing thousands whenever you decide to sell.
If you have an appraisal contingency in your contract, you can walk away, get your deposit back, and hope for better luck the next time around.
