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Posts Tagged: Purchasing A Home

What to Consider as a First-Time Homebuyer

First Home

Buying a home for the first time can be intimidating.

Whether you're fresh out of college or buying for the first time later in life, there are several things potential homeowners need to consider before making a purchase. Making a wrong decision when it comes to buying a home will not only be disappointing, it will be costly.

What You Need to Know About Home Bidding Wars

Bidding War

With limited housing supply in many highly sought-after areas, bidding wars between buyers have started springing up. For home sellers, this can be a good thing, driving the price of a house up significantly. However, it can also bust buyers' budgets, potentially putting the home of their dreams out of reach.   

Avoiding a bidding war is crucial because most buyers are pre-approved only up to a certain amount. If the home cost rises above what you've been pre-approved for, it could require another approval - which is unlikely given that it may necessitate another credit inquiry.

To make sure you secure the home you want, here a few tips for avoiding - and, if unavoidable, winning - a bidding war:

Preparing Your Home for an Appraisal

Appraisal

An essential part of the mortgage refinance process, a home appraisal is a way to judge what your property is currently worth - and how lenders can ensure that you are able to leverage the full value of your equity. When it comes to an appraisal, it is in the homeowner's best interest that it be evaluated as high as possible. With that in mind, here are a few simple steps to make sure that your appraiser sees a home at the peak of its value:

Shop around and pick your appraisers carefully
Since an appraisal is ultimately a subjective assessment of a home's value, it makes sense that different appraisers may come up with different values. Look for an appraiser who is well-reviewed by their customers, has worked with similar homes in your area and knows the local market. Most important, look to see that they are state certified.

"Be sure to inform an appraiser of any major renovations or projects you have spearheaded."

Keep an eye on your neighbors' homes
Have your neighbors recently had their homes appraised? Talk to them about who they went with and what kinds of issues they ran into. Also keep in mind that part of the home's value is tied to the property values around it. A gorgeously appointed home in a dingy area is likely to fetch a lower price than a similar home in an up-and-coming area.

Make sure your appraiser has all the facts
Even a knowledgeable, locally-based appraiser is more than likely walking in with limited information on your specific home. That means that some of the home improvements and investment you have made in your property may go unnoticed - unless you speak up. Be sure to inform an appraiser of any major renovations or projects you have spearheaded that may have bumped up the value of your home.

Why More People are Choosing Nonbank Mortgages

Main Street

Homeowners and buyers have more mortgage options at their disposal than they may realize. That's truer than ever as a new breed of mortgage lender, known as nonbank lenders, are reshaping the home loan market.

In fact, according to the Washington Post, hundreds of new institutions have come into the fold of the mortgage market, attracting as much or even more business than some of the nation's biggest banks. In 2011, the top five mortgage lenders by market share were all brand-name retail banks. In 2016, this changed dramatically, with one private lender cracking the top three, and a majority of new home loans being underwritten by nonbank lenders.

What nonbank lenders can do

There are many reasons behind this extraordinary shift. Primarily, consumers have discovered they can get better rates and a more personalized level of service through a nonbank lender. But why, exactly?

As explained by Paul Noring, a financial consultant who spoke with the Washington Post, many of these new mortgage lenders deal only in home loans. By focusing on just one product, scrapping traditional banking services like checking accounts, nonbank lenders can save money and pass that onto borrowers.

Borrowers also have been attracted to nonbanks thanks to their faster adoption of new technology and support systems that make the application process easier.

In addition, nonbank lenders are tending toward favoring borrowers who may have been rejected by big banks in past attempts to apply for a mortgage. In the aftermath of the financial crisis of 2008, banks became stricter in their mortgage lending requirements, making it more difficult for those with poor credit history to secure a home loan. As nonbank lenders have entered the market, they have also been able to extend loans to more of these borrowers, according to Mortgage News Daily. Credit reporting agencies have also adopted new ways to evaluate credit history that may favor a wider segment of homebuyers.

Through a combination of competitive rates and innovative support systems, nonbank lenders have been instrumental in the revitalization of the U.S. housing market. That's why it shouldn't come as a surprise that more homeowners and buyers are choosing these loans.

West Coast Inventory Lowest in Nation While Prices Languish Elsewhere

Lighthouse

The demand for housing around the U.S. has slightly outpaced the available supply of new and existing homes for the last few years. But certain markets have seen a much more dramatic crunch than others. This trend is particularly pronounced throughout much of the West Coast, where home prices are surging due to a shortage of inventory. 

Based on the most recent data available, Realtor.com found that many of the cities with fewer homes for sale last year were concentrated in several markets throughout Washington, Oregon and California. Seattle led the way with the biggest decrease in homes for sale in 2016 combined with the lowest percentage of housing stock for sale. Last year, according to the data, only 1 out of 263 existing homes in the Seattle area were for sale.

The trend hit an extreme in Eugene, Oregon, home to the state's biggest university. Only 0.6 percent of Eugene's homes were for sale in 2016, a year-over-year decrease of more than 27 percent. One real estate agent who spoke with Realtor.com said that homes in good condition around the Eugene area could be expected to sell in as little as 24 hours after listing. The agent did note that she expected 2017 to be slightly less hectic, however.

These supply shortages have not only made housing of any kind hard to find in certain markets, it's becoming especially hard to simply afford it. Four different parts of the Seattle metro area ranked among the top 10 most competitive real estate markets in 2016, according to analysis by Redfin. In some of these neighborhoods, homes sold as much as 80 percent over their list price, while overall home values grew by at least 20 percent. The median sale price of homes in those four white-hot Seattle markets ranged from $324,000 to a high of $708,500.

Why Millennials Still Have Difficulties Finding a Home

Despite historically low interest rates and a growing economy, millennial homebuyers still run into obstacles when trying to buy a home.

These days, millennial buyers simply can't find a home to purchase.

Inventory remains tight

According to the National Association of Realtors, housing inventory increased 2.4 percent in January to about 1.7 million homes, which is equal to a supply of about 3.6 months. However, inventory levels still remain at their lowest point since the NAR started tracking the statistic in 1999, and have declined year over year for the previous 20 months.

Many millennials now find themselves in the challenging position of wanting to buy a home, but there aren't any to purchase. A housing shortage directly affects millennial buyers in three ways.

First, having fewer available homes makes it difficult for buyers to take advantage of low interest rates before future hikes.

Second, a low supply prevents millennials from building more equity and wealth, as they may have to wait months or years to finally find a home, The Washington Post stated.

Finally, low inventory drives up home prices. Millennials finally think they can afford a starter home, but competition between other prospective buyers eventually puts a home out of financial reach. Not only are starter homes becoming more expensive, but they aren't lasting long on the market.

Millennials can prepare ahead of time

Given tight inventory, millennials have to act quickly when they find a home. Getting a mortgage preapproval is one way millennials can quickly close on a home, because they have all the necessary paperwork taken care of ahead of time.

Preapprovals typically last 30-60 days. If millennials want to buy a home during the spring or summer, they should meet with a lender soon to start the process.

 

 

 

 

 

 

 

 

Factors That Can Hurt Home Value

Most of us are aware of the effect that certain environmental facets of a home and its surroundings can have on our health. Government agencies and businesses everywhere have made huge strides toward combating air pollution in cities, for example, since smoke and engine exhaust are known to be harmful to humans and the environment. But there is another form of pollution that is invisible yet perhaps equally harmful: noise.

"Local noise could be a nuisance as well as a detriment to home values."

Environmental noise, even if it's as typical as the sounds of a busy city, can have surprising, detrimental effects on health, according to a growing body of research. Reuters reported that, based on recent studies from public health experts, urban noise could be contributing to as much as $3 billion per year in extra health care costs in the U.S. This is due to the well-known effects of noise that many would consider little more than an annoyance - car horns, busy sidewalks, commuter trains. Research cited by Reuters estimated that 46.2 million Americans are exposed to daily noise that could lead to a 17 percent higher chance of chronic conditions like high blood pressure and heart disease.

Perhaps this research makes it more clear why homes in louder areas tend to be assessed at lower values compared to nearby properties. According to an article from Realtor.com, even seemingly innocuous neighborhood features could be the cause of significant reductions in appraised value or listing price. Some of the more surprising discounts for noise disturbances include:

  • Places of worship: Believe it or not, living near a church, synagogue, mosque or other religious institution with weekly attendance of 2,000 people or more could reduce surrounding property value by 5.2 percent. This effect could be demonstrated from as far as a half-mile radius from the building itself.
  • 24-hour supermarket: While certainly convenient, 24-hour markets reduce nearby home prices by 5.1 percent on average, according to Realtor.com's research. This effect only applies within a 0.1 mile radius.
Emergency services: Living close to a hospital emergency room or fire station could lead to a major price reduction. A hospital with an ER was found to slash home prices by 7.6 percent on average, while fire stations imparted a more modest 1.8 percent reduction.

Why Millennials Still Have Difficulties Finding a Home

Despite historically low interest rates and a growing economy, millennial homebuyers still run into obstacles when trying to buy a home.

These days, millennial buyers simply can't find a home to purchase.

Inventory remains tight

According to the National Association of Realtors, housing inventory increased 2.4 percent in January to about 1.7 million homes, which is equal to a supply of about 3.6 months. However, inventory levels still remain at their lowest point since the NAR started tracking the statistic in 1999, and have declined year over year for the previous 20 months.

Many millennials now find themselves in the challenging position of wanting to buy a home, but there aren't any to purchase. A housing shortage directly affects millennial buyers in three ways.

First, having fewer available homes makes it difficult for buyers to take advantage of low interest rates before future hikes.

Second, a low supply prevents millennials from building more equity and wealth, as they may have to wait months or years to finally find a home, The Washington Post stated.

Finally, low inventory drives up home prices. Millennials finally think they can afford a starter home, but competition between other prospective buyers eventually puts a home out of financial reach. Not only are starter homes becoming more expensive, but they aren't lasting long on the market.

What to consider as a first-time homebuyer

Buying a home for the first time can be intimidating. 

Whether you're fresh out of college or buying for the first time later in life, there are several things potential homeowners need to consider before making a purchase. Making a wrong decision when it comes to buying a home will not only be disappointing, it will be costly.

Here are a few things consumers should keep in mind before signing on the dotted line:

What type of mortgage is best?

Deciding what type of mortgage to pursue is one of the biggest decisions homeowners make before buying their home. Fixed-rate and adjustable-rate mortgages each have their own advantages, but they can be costly for individuals who choose the wrong one. To ensure that doesn't happen, consumers should consider three things: how long they plan to stay in a home, how much they can afford as a monthly payment and how high interest rates are at the time they want to purchase.

Fixed mortgages tend to be better for homeowners who plan to stay in their homes for many years. Adjustable-rate mortgages go up over time, which means homeowners in it for the long haul might find themselves making higher monthly payments several years later than when they first started. Individuals who don't have room in their budget for an increasing payment might consider shying away from this option.

However, adjustable-rate mortgages can be great for homeowners who think they might move in a few years. If an individual purchases a home when interest rates are low, they will likely reap the reward of lower rates on the monthly payments and leave before rates increase. Adjustable-rate mortgages can also be a savvy choice if interest rates are high when a homebuyers move into their home. In this case, as interest rates fall over time, homeowners will also see their monthly payments drop.

How can I impress my lender?

For those who have never applied for a mortgage before, it can be confusing to know what lenders will use to determine a consumer's eligibility. Simply having a lot of money in the bank won't guarantee a lender's approval. An individual's credit score will hold the most sway over lenders when they are determining whether to approve someone for a loan. Banks will typically look at that score, any unpaid collections, or previous bankruptcies or foreclosures.

To maximize the likelihood of getting approved for a loan, individuals should seek to reduce their debt-to-income ratio and pay down any outstanding debts. This can give a quick boost to a person's credit score in the month before a lender makes a decision about a loan. If it's within their budget, individuals who make a larger down payment also increase their chances of approval and getting a lower interest rate from lenders, according to Nerd Wallet.

The hidden homebuying costs that you should prepare for

While your lender and mortgage broker will disclose the set costs related to your home financing, the truth is that homebuying can be an expensive proposition. First-time homebuyers may not fully understand or be prepared for what purchasing a property has in store.

The sticker price is just one of many costs related to becoming a homeowner. Here are some of the secret expenses that often pop up once you have entered the market.

Earnest money deposit
When you make an offer on a house, often a seller may want you to put down a deposit as a sign of good faith and to facilitate the transaction. This is called the the earnest deposit and typically amounts to between 1 or 2 percent of the asking price. Ultimately this deposit can be applied to closing costs, but it means that if you find a home you like, be prepared with a few thousand dollars cash to secure it. 

"Often a seller may want you to put down a deposit as a sign of good faith." 

Escrow
Escrow refers to the way that homeowners pay property taxes in advance via a certain amount of money set aside in an untouchable account. However, this is often not widely understood by those entering the market. 

"Escrow is such a confusing part of the loan process," Jason Auerbach, divisional manager at First Choice Lending in New York City, told US News. "Four out of 10 times, we are having a discussion about escrow costs upfront, at the start of the lending process, and then right before closing as well."

Some lenders you work with will require you to escrow your first year of homeowners insurance premiums and property tax payments, particularly if you are making a less than 20 percent down payment. Payments are made directly from the account by the mortgage company. While these costs can sometimes be wrapped up in your overall financing, doing so may mean that you end up paying more over time.