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The Federal Reserve Bank of New York recently released the 2015 SCE Housing Survey. The survey revealed that most current renters would prefer owning and that 61.9% of them plan to buy a home within the next five years.
68.3% stated they would prefer owning (with 45.6% saying they ‘strongly’ prefer owning). When asked at what point in the future do they think they will own a primary residence:
Of the 68.3% who would prefer to own, 2 out of 3 cited difficulty in getting a mortgage for the reason they do not own. However, many believe that the reason so many think that it would be difficult to get a mortgage is not fully based on current market realities.
For example, studies have shown that there is confusion over the amount of money needed for a down payment. Research has shown that 40 to 50% of Americans believe that between 15-20% is the minimum required for a down payment. In reality, there are many programs available at 5% and even 3%. There are even some programs that don’t require any down payment (ex. VA loans).
Others fear they need a perfect credit score or believe that the overall mortgaging process has become almost impossible. Actually, the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association, has shown that, over the last seven months, access to mortgages has gotten much more available.
And the NY Fed study suggests that some renters are waiting for interest mortgage rates to fall even further. Fifty percent of the renters surveyed believe mortgage interest rates will fall over the nextyear and almost 10% believe that they will fall by more than 1%. However, the reality of the situation is that Freddie Mac, the Mortgage Bankers Association and the National Association of Realtorsare all projecting that rates will be significantly higher at this time next year. They are all predicting mortgage rates will be almost 1% higher!
Many renters want to own their own home. Some are not moving forward based on misunderstandings regarding the mortgage process. If you are currently a renter who desires the benefits of homeownership, let’s sit down and determine what your options actually are.
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First it is best to be represented by an experienced Realtor® when buying or selling & preferably before signing any contract. There is much less chance of misunderstandings and missed deadlines, which can be costly on both sides. The return on your investment can be invaluable.
Hire a LOCAL mortgage broker or lender. Internet and out-of-state lenders can wreak havoc on closing. Find a local lender who will be sitting at the closing table with you and be accountable for what was promised and what is delivered.
Your title company and processor are your friends. They should freely provide information requested, and share information that may be pertinent to the transaction.
Know the deadline dates in your contract. Do you have copies of all relevant documents? What is the effective contract date? When must inspections be performed repairs negotiated, etc.? When is your mortgage commitment due? When must title commitment notices be given?
When purchasing a new home, town house or a condominium, it’s imperative to have your homeowners and flood (if applicable) insurance in place at least one week before closing. (If a hail storm is brewing, you may find yourself uninsured and unable to close.)
If you must bring money to closing, don’t wait until the last minute to make arrangements for a wire or guaranteed funds check. Complete this task at least a day or two before closing, unless you are obtaining funds from a brokerage account or IRA – then it’s imperative that you make those arrangements 7 to 10 days prior to closing.
Try not to schedule your closing on the last day of the month – this is the busiest day of the month for lenders, title agents, and Realtors®. Despite everyone’s best efforts, there are often snafus.
When possible, do your walk-thru the day before closing. If there are any problems or disputes this will allow time to work it out or extend the contract. If an escrow agreement is needed, at the very least, this will give the title agent time to prepare that document.
It’s also advisable to schedule your closing for the mid-morning or early afternoon. If you can’t do a walk-thru the day before, a mid-morning/early afternoon closing gives everyone time to work through any issues that may arise. It also gives the lenders time to get their money to the closing table so the transaction can fund. Unfortunately, there are also times a Seller’s proceeds are not available the day of closing. When that happens, it often means the Seller incurs additional interest charges if there is a mortgage on the property. Finally, Sellers should be prepared to provide wiring instructions or a physical address for overnight delivery if you are leaving town right after closing.
Be sure to notify the closing officier of any changes to dates, times and contractual agreements.
… Buy not Rent
There are many young people debating whether they should renew the lease on their apartment or sign a contract to purchase their first home. Based on a recent study, here are two reasons buying a home might make more sense:
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