1st Time Home Buyers

2016: Homeowner’s Net Worth Will Be 45x Greater Than a Renter

2016: Homeowner’s Net Worth Will Be 45x Greater Than a Renter | Simplifying The Market

Every three years the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a recent Forbes article the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that in 2016 the net worth gap will widen even further to 45 times greater.

The graph below demonstrates the results of the last two Federal Reserve studies and Yun’s prediction:

Increasing Gap in Family Wealth | Simplifying The Market

Put Your Housing Cost to Work For You

Simply put, homeownership is a form of ‘forced savings’. Every time you pay your mortgage you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

The latest National Housing Pulse Survey from NAR reveals that 80% of consumers believe that purchasing a home is a good financial decision. Yun comments:

“Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked.”

Bottom Line

If you are interested in finding out if you could put your housing cost to work for you through homeownership, let’s get together and discuss your options.

Applying For A Mortgage: Why So Much Paperwork?

Applying For A Mortgage: Why So Much Paperwork? | Simplifying The Market

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
  2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably at or below 4%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Do You Really Think Your Landlord Pays for Repairs?

Do You Really Think Your Landlord Pays for Repairs? | Simplifying The Market

A recent article that appeared on Nasdaq.com addressed the issue of whether it is best to buy or rent in today’s real estate environment. The article was very fair in discussing both options.

However, there was one portion of the article that we questioned. One of the experts was quoted as saying:

“For some people, the choice is very clear: Buying a home can be more costly, given the cost of the purchase itself, plus taxes and insurance, plus maintenance and repairs.”

This argument is often made in defense of renting. However, we don’t believe it makes logical sense. They claim that, as a renter, you won’t have the expenses of “taxes and insurance, plus maintenance and repairs”. Do they really believe that the landlord pays all those expenses for their tenants?

The vast majority of landlords own rentable real estate as a form of investment. As any other investor would, they expect to make a return on that investment (ROI) – otherwise known as profit. In order to make a profit, the landlord needs to include EVERY expense they incur into the rent…AND THEN ADD A PROFIT MARGIN!!

We think it is incorrect to advise a prospective renter that they won’t have the same expenses that a homeowner would have. They just pay those expenses to a landlord with a “premium” built in.

Credit Score Requirements LOWER As Interest Rates CREEP UP! [INFOGRAPHIC]

Credit Score Requirements LOWER As Interest Rates CREEP UP! [INFOGRAPHIC] | Keeping Current Matters

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Some Highlights:

  • The average 30-year rate for all loans closed in August eclipsed 4.3% for the first time since October 2014.
  • The average FICO score for all closed loans in August reached a new yearly low at 724 (the lowest since February 2014!)
  • The average down payment of FHA loans closed was just 4%!

What Do You Really Need to Qualify for a Mortgage?

ESPAÑOL VERSION

What Do You Really Need to Qualify for a Mortgage? | Keeping Current Matters

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.

Here are the results from a Digital Risk survey done on Millennials:

Millennials Down Payments | Keeping Current Matters

2. FICO Scores

The Ipsos survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower.

Here are the numbers from a recent Ellie Mae report:

FICO Score Of Approved Loans | Keeping Current Matters

Bottom Line

If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able’, sit down with someone who can help you understand your true options.

Don’t Wait to Move Up to Your Dream Home!

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Don’t Wait to Move Up to Your Dream Home! | Simplifying The Market

Now that the housing market has stabilized, more and more homeowners are considering moving up to their dream home. With interest rates still near 4% and home values on the rise, now may be a great time to make a move.

Sellers should realize that waiting while mortgage rates are increasing probably doesn’t make sense. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain budget for your monthly housing costs.

Here is a chart detailing this point: Click to Enlarge 

Buyer's Purchasing Power | Simplifying The Market

With each quarter percent increase in interest rate, the value of the home you can afford decreases by 2.5%, (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.

Act now to get the most house for your hard earned money.

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First-Time Homebuyers Lead the Way in May

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First-Time Homebuyers Lead the Way in May | Simplifying The Market

The National Association of Realtors’ (NAR) latest Existing Home Sales Report revealed that first time homebuyers made up 32% of all sales in the month of May; marking the highest share since September 2012 and up from 27% the same time last year.

NAR’s Chief Economist, Lawrence Yun, cited “strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs,” as contributing factors to the increase in first-time buyers.

Existing-home sales rose 5.1% to a seasonally adjusted rate of 5.35 million. Total housing inventory for sale remains under the 6.0 months needed for a historically normal market at a 5.1 month supply.

Homes sold quickly in May, as 45% of homes sold in less than a month. May also marked the 39thconsecutive month of year-over-year price gains as the median existing home price rose 7.9% above May 2014 to $228,700.

Below is a chart showing the breakdown of price increases by region:

Existing Home Prices by Region | Simplifying The Market

Yun went on to say,

“Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers.” 

“However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent.”

Bottom Line

“More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise.”

If you are a homeowner considering a move this year, meet with a local real estate agent who can show you the opportunities available right now! Don’t miss out on the influx of new buyers entering the market every day.

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Do I Need Perfect Credit to Buy a Home?

Do I Need Perfect Credit to Buy a Home? [INFOGRAPHIC] | Simplifying The Market

 June 19, 2015  Down PaymentsFirst Time Home BuyersFor Buyers

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Some Highlights:

  • The average FICO score of Approved Conventional Loans was 757 in May
  • The average FICO score of Approved FHA Loans was 688 in May
  • Since April 2013, the ability of Americans to obtain a mortgage has increased substantially!

Get In Touch with Us …For All Your Real Estate Needs!

FOLLOW or CONNECT with US

Simply click the Follow button in the column on the left:

FollowWordpressButton

FREE SEARCH INFO :

 AREA HOMES     REALTORS      HOME VALUE        A  LENDER

THE HOME BUYERS GUIDE      Use Code: H B G

THE HOME SELLERS GUIDE     Use Code: H S G

MARKET SNAPSHOT                     Use Code: M S S                                               (To Find Out What Your Neighborhood Is Doing)

WEBSITE

SEARCH A NEIGHBORHOOD

Ask for: Joi or Guy McKinney, REALTORS® at 214-699-6788