Inventory Continues to be a Challenge

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In any given market, inventories fluctuate based on supply and demand considering area and price range. The National Association of REALTORS considers a balanced market to be a six-month supply of homes.

If it takes longer than six months to sell, it is thought to be a buyer’s market and less than six months, a seller’s market. Most buyers and sellers probably feel a balanced inventory is more like three months’ supply of homes.

The inventory of existing homes has been reduced to approximately 1.5 million houses which is 10.3% lower than a year ago. According to the Federal Reserve Bank of St. Louis there are 5.7 months’ supply of new homes currently on the market in the U.S.

Inventory has a direct impact on price. When demand is constant, but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.

As easy as it is to recognize the signs of spring, one should be able to spot the direction prices will be moving. When prices and mortgage rates are increasing, buyers are affected by not being able to afford the same price or size of homes.

Your Refund Could be the Difference

One of the silver linings to filing your income tax return is finding out that you are going to receive a refund. If you happen to be one of these fortunate taxpayers, your next decision is what to do with it. With the average tax refund around $3,000, it could be the difference that makes a home a reality sooner rather than later.

Many would-be buyers think it takes 10% or more down payment to purchase a home, but actually, it can be much less. There are VA and USDA mortgages that have no down payment for qualified buyers. FHA has a 3.5% down payment program and FNMA has 3% down payment mortgages for qualified creditors.

Closing costs for originating new mortgages can easily range from two to three percent of the purchase price but most lenders will allow the seller to pay part or all of them based on the agreement in the sales contract.

While the average tax refund might not cover the down payment on the median price home, it certainly helps. Your refund could make it as simple as 1-2-3 to get into a home.

  1. Get the hard, cold facts for the homes and mortgages in your area and price range.
  2. Get pre-approved with a trusted mortgage professional.
  3. Start looking at homes.

Call me at (281) 370-5100 or valery_blank@att.net to get started.

CONGRATS TO VALERY BLANK SHE IS NOW A LICENSED BROKER ASSOCIATE!!

Val has successfully past her broker exam and is now officially a licensed Broker Associate that will be remaining with RE/MAX Integrity.  Being a Broker is a big responsibility as well as the highest designation a realtor can earn.  To qualify to become a broker realtors must be licensed over 4 years, complete over 900 hours of continuing education as well as meeting a minimum standard of closed transactions.

Val & our team cant wait to work with you as well as your family and friends, to be able to share her knowledge and expertise.

Congratulations Val!!!

We are proud of you and grateful to be a part of your team!

Sincerely,

Your team

Indecision is Not a Decision

There could be some legitimate reasons for not buying a home but indecision is not one of them. Indecision is rooted in not having enough information to move forward to own a home or continue renting.18443593-250.jpg

If you keep renting, at the end of the year, you have had a place to live and a pile of receipts that helped the landlord pay for his house. Deciding to buy a home will give you a place to live that is yours and all the things that come with that.

When you consider principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you’re paying. The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation as the home goes up in value. The equity is part of your net worth and an investment in your family’s future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes are greater than the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It’s been said that whether you rent or own, you’re paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own and then, call us to help make it happen.

Risk Rate Relationship

Regardless of what a lender quotes on mortgage rates, the actual rate a borrower pays is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.Sorry not available.png

Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

  • Loan amounts – conventional mortgages above conforming limits as set by Fannie Mae and Freddie Mac are considered jumbo loans and generally have a higher interest rate.
  • FICO score – the lowest interest rate is reserved for the highest score; the lower the score, the higher the rate the borrower will pay.
  • Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
  • Loan purpose – purchase transactions generally have the lowest interest rate with refinancing for better rates and terms being priced slightly higher. An even higher rate might be charged for refinancing and taking cash out of the property.
  • Debt-to-Income Ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.
  • Property Type – some types of property are considered higher risk than others which could adversely affect the rate.
  • Loan-to-value – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Pre-approval by a trusted mortgage professional can be the best way to know what rate you can expect to pay. Please call for a recommendation of a trusted mortgage professional.

Pre-approval is Good for Everyone

 

Buyer’s mortgage pre-approval is good for everyone in the transaction. It saves time, money and removes the uncertainty of knowing whether the buyer will be qualified after negotiating a contract. The direct benefits include:

  • Looking at “Right” homes – price, size, amenities, location
  • Find the best loan – rate, term, type
  • Uncover credit issues early – time to cure possible problems
  • Negotiating power – price, terms, & timing
  • Close quicker – verifications have been made

There is a significant difference in having a trusted mortgage professional take a loan application and run all the necessary verifications compared to going through calculators on a lender’s website. Beside the peace of mind, the cost of being pre-approved is a bargain and generally, limited to the cost of the credit report.

Even if a person has been pre-approved, a second opinion from a different lender may be a good option. It can verify there is a good deal or you’ll discover that you can improve it. Either way, it works to your advantage. Contact me if you’d like a recommendation of a trusted mortgage officer.

The Obvious Alternative Investment

Rental homes can be a natural alternative investment choice for homeowners because they are already familiar with houses. Maintenance on a rental is not that much different than on your personal home. The same plumbers, painters and other workmen can be used to make repairs.

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Single family homes offer an investor high loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with defined tax advantages and more control than other investments.

  1. High loan-to-value mortgages – most investments require that you pay cash but rental properties can be purchased with 20% down payment.
  2. Fixed interest rates – most commercial loans are based on a floating rate such as prime interest plus one or two percent compared to real estate loans as fixed rates for the term.
  3. Long terms – commercial loans are generally short-term such as six months or a year with the possibility of being renewed for another six months or a year unlike real estate where a 30-year mortgage is commonplace.
  4. Appreciating assets – real estate has a long-term history of going up in value.
  5. Defined tax advantages – many investments are taxed as ordinary income but rental real estate enjoys a non-cash deduction called cost recovery, the profits from sale are taxed at lower long-term capital gains rates or may be eligible for a tax-deferred exchange.
  6. Control – rental homes don’t require partners and afford the investor more options than investing in mutual funds and other traditional investments.

The demand for good rentals is strong and the rents continue to go up in most markets.  There are people who choose not to buy or cannot buy a home who would prefer to live in a single family home rather than an apartment.

7 Out of 50 Could Save Money

It is estimated that seven million out of 50 million homeowners could save money by refinancing their existing mortgages. Obviously, if the replacement mortgage has a lower rate than your existing one, you will save money.

If you bought a home before 2011 and are paying mortgage insurance, you should investigate refinancing to eliminate that requirement. Even if you don’t get a lower interest rate, the savings could amount to hundreds of dollars a month.

If a home you purchased since 2011 has appreciated enough, it could easily justify refinancing to eliminate the required mortgage insurance. Most loans don’t require mortgage insurance if the loan-to-value is 80% or less. There are some programs for 90% mortgages that don’t require mortgage insurance. It is certainly worth investigating with a trusted mortgage professional.

Continuing to pay mortgage insurance that could be eliminated is like having a broken cell phone and continuing to make the monthly payments for something you can’t use and don’t need.

If your current mortgage is several years old, instead of getting a new 30 year mortgage, you might consider a 15-year term. The money you save with a lower interest rate could help you to retire your loan in a shorter time so that your home would be paid for.

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You may never stop paying for home improvements

 

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You’ve saved the money and are ready to pay cash to build a new pool for your home.  However, that’s just the beginning of your soon to be increased expenses which will include maintenance, higher utilities and higher taxes.

Homeowners obviously benefit by a larger equity when their home increases in value due to appreciation.   A not-so-obvious effect that will also more than likely take place is that their property taxes will increase.  In most cases, a property’s assessed value is generally tied to market value to calculate the property taxes based on the tax rate for that year.

Similarly, a homeowner can affect the value of their home by making capital improvements.  Some small items may never be recognized by the taxing authority but items that require a permit, certainly are brought to their attention.  Items such as a fence, roof, remodeling, windows, new rooms or swimming pools can easily increase the assessed value of a property.

Most states have an established time frame in which to challenge the current tax assessment for that year.  The process is relatively simple and doesn’t require professional representation.  It generally involves showing that there is an error which has overstated the value or that current comparable sales indicate a lower value.

If you’d like more information or need the comparable sales data, please let us know.  We would be happy to help you investigate the possibility of lowering your property taxes.

Your Home’s Value: Worth More Than You Think!

Your home may be worth a lot more than you think

Real estate lost a lot of value during the recession but most areas have rebounded considerably.  In some cases, the homes are worth more than they were before the housing bubble burst.

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The dynamics are classic for this type of market: inventories are low, mortgage rates are low and demand is high.  All price ranges are on the rise with some at an even higher rate because the short supply is causing competition among buyers.

Another reason many homeowners’ may have more equity is simply not staying current with what is going on in the market.  In a recent FNMA study, it indicates that 23% of owners believe they have negative equity in their home when actually, it is 9%.  37% believe they have greater than 20% equity in their home when actually 69% of homeowners do.

Even if you’re not planning to sell your home, knowing the value helps you understand your financial position better.  Home equity debt up to a $100,000 limit is tax deductible and can be used for any purpose.  Owner’s commonly refinance to eliminate mortgage insurance, consolidate mortgages, pay off higher interest rate debt like credit cards or student loans or to buy out an ex-spouse’s equity.

Be aware that an automated value model like Zillow Zestimates uses algorithms to determine a price and while it might be in the ballpark, AVM results may only be accurate about 20% of the time.  A comparable marketing analysis or broker’s price opinion will be more accurate due the subjective approach that will be used by an agent with personal experience in the area.  An agent will consider factors like condition, floorplan, marketability and demand.