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Whether you are considering the purchase of your first home or trading up to the home your family frequently fantasizes about, there are three crucial questions you must know the answer to:
A survey conducted by Fannie Mae revealed startling information: most Americans don’t know the answer to these three crucially important questions. Here is a graphic showing the results of the survey:
The percentages are quite disturbing but can explain why so many people believe they are not eligible to purchase a home whether it is a first home or a trade-up home. Here are the actually requirements as per Fannie Mae:
If you are considering purchasing a home, make sure you are aware of all your options before moving forward.
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The widespread myth that perfect credit and large down payments are necessary to buy a home are holding many potential home buyers on the sidelines. According to Ellie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.
Below is a graph of the distribution of FICO scores of approved loans in May (the latest available data):
Looking at the chart above, it becomes obvious that not only do you not need a 750+ credit score, but 54.9% of approved loans actually had a score between 600 and 749.
More and more experts are speaking up about the fact that if potential buyers realized they could be approved for a mortgage with a credit score at, or above, 600, the distribution in the chart above would shift further to the left.
Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage:
“The high median credit score is due to many millennials believing they won’t qualify with the score they have – and are therefore waiting to apply for a mortgage until they have the score they think they need.” (emphasis added)
CoreLogic’s latest MarketPulse Report agrees that the median FICO score does not always tell the whole story:
“The observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity.”
It’s not just millennials who believe high credit scores and large down payments are needed. Many current homeowners are delaying moving on to a home that better fits their current needs due to a belief that they would not qualify for a mortgage today.
Moe put it this way:
“Many potential home buyers are ‘disqualifying’ themselves. You don’t need a 750 FICO Score and a 20% down payment to buy.”
If you are one of the many Americans who has always thought homeownership was out of your reach, let’s get together to start the process of getting you pre-qualified and see if you are able to buy now!
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The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:
John Taylor, CEO of the National Community Reinvestment Coalition, explains that those who lack the opportunity to become homeowners have a weakened ability to reinvest their wealth:
“We traditionally have been huge supporters of homeownership. We see it as a way to provide stability for households but also as an asset-building strategy. If you continue to be a renter, locked out of the homeownership arena, increasingly those things are further and further out of reach. They’re joined at the hip. They perpetuate each other.”
Does owning your home really create a more stable environment for your family?
A survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:
We can see from these survey results that renting will provide anything but a stable environment in the near future.
Homeowners enjoy a more stable environment and at the same time are given the opportunity to build their family’s net worth.
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The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:
John Taylor, CEO of the National Community Reinvestment Coalition, explains that those who lack the opportunity to become homeowners have a weakened ability to reinvest their wealth:
“We traditionally have been huge supporters of homeownership. We see it as a way to provide stability for households but also as an asset-building strategy. If you continue to be a renter, locked out of the homeownership arena, increasingly those things are further and further out of reach. They’re joined at the hip. They perpetuate each other.”
Does owning your home really create a more stable environment for your family?
A survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:
We can see from these survey results that renting will provide anything but a stable environment in the near future.
Homeowners enjoy a more stable environment and at the same time are given the opportunity to build their family’s net worth.
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As a seller, you will be most concerned with the ‘short term price’ – where home values are headed over the next six months. As a buyer, you must be concerned not with price but instead with the ‘long term cost’ of the home.
Many economists have pointed to Brexit (Britain’s exit from the European Union) as a reason that interest rates will remain low for the next few months. But Trulia’s Chief Economist Ralph McLaughlin warns that this will not always be the case in a recent post:
“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”
The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac all project that mortgage interest rates will increase by close to a full percentage point over the next twelve months.
According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 5.3% over the next 12 months.
Here is a simple demonstration of what impact an interest rate increase would have on the mortgage payment of a home selling for approximately $250,000 today if home prices appreciate by the 5.3% predicted by CoreLogic over the next twelve months:
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Last week, the National Association of Realtors (NAR) released their Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings. The report revealed that this May’s numbers weren’t quite as good as the year before:
“With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014.”
The mainstream media ran headlines highlighting that the index had dropped for the first time in two years. Many read this as an indication that the housing market must be slowing down.
If you were thinking that now may be the perfect time to put your house on the market, these reports may have caused you some concern. We want to alleviate that concern today.
Though it is true that the index dropped in last month’s report, let’s take a closer look at the numbers. Below is a graph of the index since January 2014. We can see that the index has increased every month over the last eighteen months, leading up to this past May.
Lawrence Yun, Chief Economist at NAR, explained that it wasn’t a slowing of the market that caused the index to slip, but instead a lack of housing inventory:
“Total housing inventory at the end of each month has remarkably decreased year-over-year now for an entire year. There are simply not enough homes coming onto the market to catch up with demand.”
Here is a graph depicting the situation Yun was referencing:
Did the latest numbers from the Pending Home Sales Index cause you to question if now is a good time to put your house on the market? If anything, it indicated the exact opposite: that this may be the perfect time to sell!!
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Every homeowner wants to make sure they get the best price when selling their home. But how do you guarantee that you receive maximum value for your house? Here are two keys to ensuring you get the highest price possible.
This may seem counterintuitive. However, let’s look at this concept for a moment. Many homeowners think that pricing their home a little OVER market value will leave them room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).
Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price it so that demand for the home is maximized. In that way, the seller will not be fighting with a buyer over the price, but instead will have multiple buyers fighting with each other over the house.
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.”
This too may seem counterintuitive. The seller may think they would net more money if they didn’t have to pay a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by a real estate professional.
Research posted by the Economists’ Outlook Blog revealed that:
“The median selling price for all FSBO homes was $210,000 last year. When the buyer knew the seller in FSBO sales, the number sinks to the median selling price of $151,900. However, homes that were sold with the assistance of an agent had a median selling price of $249,000 – nearly $40,000 more for the typical home sale.”
Price your house at or slightly below the current market value and hire a professional. That will guarantee you maximize the price you get for your house.
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Summer is here! The temperature isn’t the only thing heating up right now, so too is the housing market in many areas of the country! Here are four great reasons to consider buying a home today instead of waiting.
CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.3% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.2% a year for the next 5 years.
The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will be up almost a full percentage point by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
As a paper from the Joint Center for Housing Studies at Harvard University explains:
“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.
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