The Ten Commandments Of Buying A Home

Are you jazzed about your upcoming home purchase? Good. But slow down, Turbo! There are a few things you need to know. More specifically, ten things. They’re called “The Ten Commandments of Buying a Home.”

Read them. Absorb them. Emblazon them to memory, because one tiny mis-step can make your dream of homeownership come crashing down like a sandcastle at high tide.

10-commandments-of-buying-homes

Applying for a Mortgage When You’re Self-Employed

selfemployed

QuickenLoans.com| May 12, 2015| Kevin Graham| Link

Anyone who’s been self-employed knows you don’t just sit around eating cheese balls and watching soap operas every day. You work your tail off to put food on the table and make a living. You can even make a really good one.

Because you’re not employed by a traditional business, there’s some additional documentation required to qualify for a mortgage. It doesn’t have to be a hindrance; it just requires a little preparation.

Employment Verification

One of the great draws of self-employment is the ability to strike out on your own and be your own boss. Taking responsibility for your own success can be very freeing.

It does, however make the process of verifying your employment a little different. What would normally require a phone call to your employer instead requires you to furnish a little bit of paperwork. The good news is you can provide any of the following as documentation:

  • Current statement of bond insurance (policy must be at least two years old)
  • A letter from your licensed CPA, enrolled agent or tax preparer
  • Letters from clients indicating service has been performed
  • A membership letter from a professional organization that can verify through your membership at least two years of self-employment.
  • Any state license and business license that may be required in your profession
  • Evidence of workers’ compensation and employer’s liability insurance
  • A DBA (Doing Business As) issued at least two years ago

If you’re using a DBA for verification, you must prove current self-employment with two months of recent business account statements, creditor statements or company invoices.

Income Documentation

Quicken Loans Mortgage Banker Dennis Spensley said one of the most important things a client can do to move the process along is to have income documentation ready at the beginning.

He went over what documents are needed if you’re a sole proprietor.

“When I am helping a self-employed client, I try to set the right expectation upfront,” Spensley said. “We’ll need two years of tax returns, both business and personal. We also typically need to have the client’s accountant prepare a (year-to-date) profit and loss and a balance sheet. If they have extended (their tax filing time) for the previous year, we’ll need a copy of the extension form and a profit and loss prepared for the previous year as well.”

If you’ve been self-employed for less than two years, it may be necessary to show additional documentation regarding the likelihood of continued income.

While the specific forms necessary are dependent on how you incorporate your business, in general, we’ll need personal tax returns (and, if it’s a corporation, W-2s) as well as a statement showing your portion of the business’s profit or loss. Profit and loss forms might include a Schedule C, Form 1120S or K-1, depending on your business structure.

It’s important to note that you generally can’t qualify if you show an income decline of greater than 25%.

Get Organized

Spensley also noted it’s helpful if you can separate your business assets from your personal assets.

“Self-employed clients typically have their business and personal assets intermingled,” he said. “If they can keep the funds that they will use for down payment and settlement fees isolated from their business assets in a personal savings account, that would work best.”

Depending on the type of loan, a minimum contribution to the down payment is required from your personal funds. Separating it from your business accounts will just make things easier.

 

It’s Business As Usual for Interest Rates

Model of a house behind a fence from dollars

RISMedia| June 19, 2015| Suzanne De Vita| Link

Prospective homebuyers may see a few more weeks of near-zero mortgage rates following news that the Federal Reserve will maintain its current interest rate policy. Economists have long anticipated a rate change in September of this year.

“The (Federal Open Market) Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its two percent objective over the medium term,” the Fed statement read.

Though the Fed does not set mortgage rates, its actions tend to impact those that do. After the unexpected employment gain in May, 30-year-fixed mortgage rates rose to 4.04 percent, marking the first week since November of last year that rates topped four percent.

“The housing market can handle interest rates well above four percent as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers–especially first-time buyers–are able to obtain a mortgage,” said Lawrence Yun, chief economist of the National Association of REALTORS®, in a recent market update.

“You may see a 4.5 percent conventional interest rate by the end of the year,” opines Joe Petrowsky of Right Trac Financial Group in Manchester, Conn. “If the true employment numbers improve, rates should move up, but based on our current economy, it would be a bad move on the part of the Fed to raise rates. My sense is the Fed will attempt to raise rates throughout this year.”

In the interim, borrowers may choose to lock in a lower rate by timing the lock period with the projected closing date of sale.

The 20 Hottest U.S. Real Estate Markets in May 2015

california-beach-skateboard

Realtor.com | Cicely Wedgeworth| June 1. 2015| Link

The housing market is chugging ahead, with even higher home prices and more buyer activity—and in May, we’re seeing more than the ordinary seasonal uptick.

“On the demand side, we are seeing traffic and searches on realtor.com® continue to set new highs,” said our chief economist, Jonathan Smoke, who did a preliminary analysis of our site’s data in May. Visits and searches are expected to be up more than 50% and 35%, respectively, year over year.

Helping create more opportunities for buyers, the listings inventory is now growing faster, at 4% over April—but it’s still down compared with last year, so buyers will need to keep on their toes. In part because of the limited inventory, the median list price increased nationally to $228,000, up 7% over the previous year and 1% over April. At the same time, homes are moving more quickly: Median days on market, now at 66, continued a sharp decline, down 11% year over year and 10% month over month.

Smoke’s team also ranked the nation’s 20 hottest real estate markets for buyers and sellers. Looking at the nation’s 300 largest markets, the team used the number of views per listing on realtor.com to gauge demand, and the median age of inventory to assess supply.

California dominated the list, with half of the country’s 20 hottest real estate markets, because of its tight supply of homes and economic-powered growth in demand. San Francisco and San Jose maintain the second and third spots from the April rankings, while the state capital, Sacramento, leaped from No. 21 in April to No. 12 in May.

“Sacramento typically follows strong growth in Silicon Valley and the San Francisco Bay Area, as it is a relatively more affordable alternative,” Smoke said. “But this market has had strong employment growth above the national average and is seeing strong household growth as a result.”

Three states pulled off a two-fer on the list: Texas, with No. 4 Dallas–Fort Worth and No. 16 Austin; Colorado, with No. 1 Denver and No. 13 Boulder; and Michigan, with No. 9 Ann Arbor and No. 10 Detroit. These markets’ success also reflects economic-powered gains, but the Texas and Colorado story is more of a continuing saga that shows the resilience and diversified nature of the states’ economies despite the declines in oil. Michigan’s performance is related to economic recovery and very strong affordability.

Denver resoundingly maintained the top ranking as inventory there shaved six days off the median age while listing views grew 7% over April. Like Dallas, Denver is experiencing substantial economic growth, and the tight supply of housing is resulting in the fastest-moving inventory in the country.

The 20 Hottest Real Estate Markets in May 2015

Market May Rank April Rank
Denver-Aurora-Lakewood, CO 1
San Francisco-Oakland-Hayward, CA 2
San Jose-Sunnyvale-Santa Clara, CA 3
Dallas-Fort Worth-Arlington, TX 4
Vallejo-Fairfield, CA 5
Boston-Cambridge-Newton, MA-NH 6
Santa Cruz-Watsonville, CA 8
Santa Rosa, CA 7
Ann Arbor, MI 9
Detroit-Warren-Dearborn, MI 10  11
San Diego-Carlsbad, CA 11  10
Sacramento-Roseville-Arden-Arcade, CA 12  21
Boulder, CO 13  17
Fargo, ND-MN 14  12
Los Angeles-Long Beach-Anaheim, CA 15  15
Austin-Round Rock, TX 16  14
Oxnard-Thousand Oaks-Ventura, CA 17  13
Manchester-Nashua, NH 18 31
Columbus, OH 19 22
Stockton-Lodi, CA 20 38

A Home Buyer’s Guide to a Seller’s Market

Realtor.com| May 26, 2015| Annamaria Androitis|Link

In many parts of the country, this is a good time to sell a home. That could make it a risky time to buy one.

Houses are selling fast and prices are going up. Sales of existing homes nationwide are expected to reach the highest volume since 2006, according to the National Association of Realtors.

In the first quarter, median sales prices of single-family homes were at least 10% higher than a year prior in 51 metropolitan areas, according to the trade group. That included Charlotte, N.C., up 18%, and Denver, up 17%. Nationwide, median prices rose 7.4%, to $205,200.

A shortage of homes for sale is helping to drive the market higher, experts say, along with a gradually improving economy and a growing concern that a period of historically low interest rates may not last much longer.

wsj-graphic-snapped-up-homes

Competition among buyers can be fierce, and some are aggressively wooing sellers in an attempt to stand out.

Amanda Corona bid more than the asking price on a 2,100-square-foot townhouse in Atlanta, and she agreed to see the deal through even if the home was appraised for less than the purchase price.

“I guess I’m a risk taker,” says Ms. Corona, an insurance executive who is 38 years old. The appraisal came in above the purchase price of $365,000 and she closed on the house this month.

Buyers should consider what could go wrong in this kind of market. A bidding war could entice you to spend more than you can afford. An inflated price could leave you owing more than you can sell the house for down the road, if prices fall.

Some strategies could limit the danger. Study whether prices in your city are being driven by low inventory, which could be a warning sign, or a solid economy, which could sustain prices.

Set a budget and stick to it. And see if new homes may hit your local market soon, which could cool things down. On Tuesday, the Commerce Department said that in April construction on new homes rose to the highest level since before the recession.

Keep in mind that it could still be a good time to buy. Mortgage rates remain near historic lows and home prices could keep rising. Buyers should also factor in how long they plan to keep a home, because short-term volatility may not matter for a long-term owner.

Here is a buyer’s guide to navigating a seller’s market.

Supply and demand

House-hunting can be difficult when homes for sale are hard to find.

In a market balanced between buyers and sellers, there are enough existing homes available to satisfy demand for six to seven months, according to the Realtors association. But in the first quarter, the association says, there was only 4.6 months’ worth of inventory available nationwide on average, down from 4.9 months in the same period of 2014.

Listings have grown scarcer in many big cities. In Seattle, there were 8,465 homes listed for sale in April, down 23% from a year earlier, according to Redfin, a national brokerage based in Seattle. In Portland, Ore., there were 8,941 listings, down 27%. In Omaha, Neb., there were 4,158 listings, down 20%.

Some homeowners who bought at the top of the market are reluctant to sell because the value of their home plummeted in the financial crisis and still hasn’t fully recovered. Others are holding out for higher prices, experts say.

Whatever the cause, a shortage of listings can have a significant impact on prices even in an otherwise listless market.

In a March report, Fitch Ratings, a credit-rating firm, said that prices in many metropolitan areas are being driven up more by limited inventory than by a strong economy.

“With supply limited, small increases in demand can have outsized impacts on prices,” the report said.

Under construction

That puts a premium on taking the pulse of your local market.

Try to determine if the local economy is strong. If jobs are growing, incomes are rising and people are moving into town, that could be a sign that price increases are sustainable or that more houses will soon come onto the market.

Look for signs of new construction in the neighborhood. The number of lots that have been prepared for home building increased more than 21% over the 12 months through March, says Brad Hunter, chief economist at Metrostudy, a research and consulting firm that tracks the home-building industry.

The Commerce Department says the seasonally adjusted annual rate of housing starts increased 9.2% nationwide in April from a year earlier, and the rate of housing units authorized by building permits rose 6.4%.

Growth varies by region. In the Northeast, for example, housing starts increased 52% from a year ago and building permits increased 57%. In the South, the increases were 3.5% and 1.3%, respectively. In the Midwest, starts declined 10.5% and building permits declined 7.5%. In the West, starts rose 15% and permits rose 3.4%.

The Commerce Department provides data on building permits for many metropolitan areas. Other sources track local data on housing starts. According to Metrostudy. housing starts of single-family detached homes were up about 15% in Denver and Atlanta in the first quarter, compared with the same period last year, for example. In Las Vegas, they are up more than 36%, says Metrostudy.

Ask experts in your market what they are seeing. If construction activity is strong, you should be able to find evidence without too much trouble.

If new homes are going up, patience could pay off. Chris Langan and his partner put their five-month house search in Atlanta on hold in April after the couple grew tired of looking at houses that cost more than they wanted to spend and more than they thought the homes were worth, he says.

“When I see a lot of people going toward one thing—this mass frenzy—I like to step back and evaluate it,” says Mr. Langan, 31, a sales consultant for a food distributor. He says they plan to rent for two years, by which point he expects the market to be calmer.

Winning and losing

Buyers who push ahead could get lured into bidding wars, where winning in the short term can later feel like losing if you pay too much.

Bidding wars were more common in the first quarter than they were a year earlier in several markets, including Denver; Fort Lauderdale, Fla.; Oakland, Calif.; Philadelphia, Pa.; Portland, Ore.; and Seattle, Wash., according to Redfin, which bases its figures on the number of bids submitted by its agents that face at least one competing offer.

Other markets saw fewer bidding wars over the same period, including Atlanta; Baltimore; Chicago; Orange County, Calif.; and Washington, D.C., according to Redfin.

Buyers often need to move quickly, which can add to the frenzy. In Denver, Houston, Oakland and Seattle, more than 40% of the homes for sale in the first quarter were in contract within two weeks, according to Redfin.

As a result, buyers should figure out how much they can afford to spend ahead of time. Consider getting a preapproval from the mortgage lender you select.

That doesn’t mean you should borrow the full amount for which you are preapproved. Be sure the monthly mortgage payments will leave enough left over for living expenses and emergency funds. Think about how you would cover the cost if you were temporarily unemployed.

Once you set a budget, stick to it. Be prepared to walk away if prices get too high.

Consider looking at houses that aren’t selling as quickly. The owners may be more willing to lower the asking price. But get a thorough inspection to make sure you aren’t buying a house with serious flaws.

In Denver these days, a house that hasn’t been snapped up within two to four weeks is likely either to be overpriced or to need fixing up, says Tim Davis, owner and managing broker at Weichert Realtors Professionals in Denver.

Self-defense

Buyers who are eager to purchase a home are also waiving rights that are standard in sales contracts, experts say.

In addition to promising to plow ahead even if an appraisal values the house below the purchase price, buyers are agreeing to forgo the option of dropping out if an inspection shows the need for costly repairs or if they are unable to get a mortgage.

“We’re seeing strategies and situations that have never been experienced here, and I’ve been in the real-estate business since 1987,” says Mr. Davis, the Denver broker.

These kinds of contingency clauses, as they are known, are meant to protect buyers. If you agree to drop them, you could end up forfeiting your deposit if you back out anyway. The seller could also sue the buyer, though that is uncommon in a seller’s market, says Bob Lattas, a real-estate attorney in Chicago.

There are other risks, too. If an appraisal comes in low, buyers could have to put up fresh cash in a hurry in order to go through with the deal. That’s because lenders typically reduce the loan amount if a house is appraised at less than the purchase price.

If, for example, a buyer agrees to pay $400,000 for a house, but the appraised value is $380,000, the buyer could have to pay the seller an additional $20,000 out of pocket.

In such situations, buyers essentially acknowledge that they’re overpaying. They believe “the house will increase in value so much that even if something is wrong with it [they] will still be fine,” says Doug Miller, a real-estate attorney and executive director of Consumer Advocates in American Real Estate, a nonprofit based in Navarre, Minn.

The risk is that prices don’t continue to go up—or, even worse, drop.

Unless buyers are certain they can assume the risks, they may be better off avoiding situations where they have to drop contingency clauses in order to strike a deal, says Richard Vetstein, a real-estate attorney in Framingham, Mass.

If you do decide to waive contingency clauses, try to determine how nasty the financial surprise might be.

Keep in mind that price and value aren’t the same thing. Carole Short, a real-estate agent with Coldwell Banker Residential Brokerage in Atlanta, says some agents are agreeing to list homes at high prices in order to win the business.

She says, “We are starting to see some greedy-seller overpriced listings at numbers where you go, ‘Oh my God, are you kidding? That house isn’t worth that.’ ”

12 Tips for Spring Homebuying in a Seller’s Market

spring

US News & World Report| Teresa Mears| April 13, 2015| Link

With spring finally here for most of the nation, prospective homebuyers can look at houses and condos without traipsing through snow and ice. Better weather, plus the traditional belief that families search for homes so they can move in between school years, makes spring a major homebuying season in much of the country.

“Especially considering this winter, we’re expecting a very busy spring season,” says Daniel Hedaya, president of Platinum Properties in New York City. “We’re already seeing an uptick.”

The biggest challenge facing homebuyers in many markets may be finding a home to buy. The inventory of available homes for sale remains low in many cities, especially in certain price ranges.

At the end of February, according to the latest data from the National Association of Realtors, there was nearly a five-month supply of homes available for sale, slightly below the number available a year earlier. That means that, at the current sales rate, it would take five months to sell all the listed homes. That’s a nationwide average, and the supply is even tighter in many cities. A six-month supply is considered a balanced market.

“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” said Lawrence Yun, the chief economist for the NAR, in a news release. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”

The median price of a home sold in February was 7.5 percent above the median price a year previously, according to NAR data.

A seller’s market means that buyers have to be smart and prepared if they want to get the right house at the right price. Agents suggest that prospective buyers start by looking online at homes, narrowing down neighborhood choices and deciding between must-have and preferred features.

At the same time, buyers should visit a mortgage professional and get their financing in order. It’s best to start that process before you start looking at homes, in case your credit needs repair or you need to pay off debts to qualify for a mortgage. In a competitive market, agents may not even show homes to buyers who don’t have a mortgage preapproval.

A desirable listing may be sold in days or hours, meaning there is no time to organize financing or mull over preferred features before making an offer.

“Any market here in the Midwest is very fast-paced right now,” says Missy Price, an agent with Better Homes and Gardens Real Estate Kansas City Homes. “If they do see the property that they want and they love, they’re going to have to act on it.”

It’s also important to know how much house you can afford before you get started. Looking at more expensive houses and then scaling down several thousand dollars often leads to disappointment. “I do not like to show somebody out of their price range unless the house is terribly overpriced,” says Sharon Voss, president of the Orlando Regional Realtor Association and an agent with Watson Realty Corp. “You get people prequalified, and you’re not going to have a problem.”

Here are 12 tips for buying a home this spring:

Get mortgage prequalification or, even better, preapproval before you start shopping. This helps you know what you can afford and makes your offer much stronger in the eyes of a seller. In a competitive situation, you may even consider waiving the mortgage contingency clause, which is something you want to avoid unless you are sure you can get the loan. “In New York City, it’s always advisable to see if you can go in without a financial contingency,” Hedaya says. “It’s a market that’s dominated by cash.”

Find a good agent. Using a real estate agent costs buyers nothing because the seller pays the real estate commission. Ask friends, family and co-workers for referrals. Look for a full-time agent who works often in the neighborhoods where you’re looking. You may want to interview several agents to find a good fit. If you can only look for homes on weekends, for example, you don’t want an agent who takes weekends off.

Do your research. Use the Internet and apps from major portals such as Zillow, Trulia and Redfin to research neighborhoods and asking prices for the type of home you want. But you should keep in mind that you’re not always getting a complete picture.

Visit neighborhoods you’re considering at different times of day. A neighborhood that’s quiet during the middle of the workday may be noisy and crowded at night and on weekends. Get out and walk the streets, talking to people who live in the neighborhood, visiting shops and restaurants and “trying out” your desired location. Drive to and from work during commuting hours to get an idea of what a typical day might be like.

Expect to provide lots of documentation to get a mortgage. Since the recession, mortgage lenders have become much stricter about documentation, income verification and other paperwork. Well-qualified buyers can still get a mortgage, with rates for 30-year loans at 3.66 percent last week. “Borrowing has become much, much more difficult,” says Steve Roney, CEO and owner of Berkshire Hathaway HomeServices Utah Properties. “It has become a much more cumbersome process.”

Separate your needs from your wants. In a competitive market, most buyers find they have to compromise on location, amenities or condition of home. It’s easier to make a choice when you know going in which features you must have and which you’d like to have but can live without. “Be flexible,” Hedaya says. “Be prepared to compromise.”

Be ready to move fast. A well-located house in good condition and priced right will sell quickly, sometimes the first day it goes on the market. You need to be ready to make a decision when you find a home you like. “You have to be prepared to act fast because we’re seeing bidding wars,” Price says. “If they don’t know what they want, the property is going to be gone.”

Don’t expect to get a smoking deal. The days of getting a house at a discount are long gone. That doesn’t mean you can’t ever get a substantial discount on a house that needs work, is in a less popular location or otherwise is in less demand. But in a seller’s market, there is usually very little negotiating room on price.

Understand that no house is perfect. Making your offer contingent on a home inspection is a good move, but all homes have small defects. Many sellers won’t fix anything, and there is no reason for them to if there is a backup offer waiting if you walk away. “You can’t nitpick a house,” Voss says. “It is a used house.”

Find a way to sweeten your offer. Most buyers can’t pay all cash, but there are ways beyond price to make your offer more attractive to a seller. Have your agent ask the seller’s agent if he would like a faster or slower closing. Consider whether you can waive mortgage or inspection contingencies (which does not mean forgoing an inspection), go without a seller-provided warranty or otherwise improve the deal from the seller’s perspective.

Don’t buy more than you can afford. Lenders will often approve a buyer for a higher payment than he or she can make comfortably. When you’re calculating what you can afford to pay, remember that a mortgage payment is only part of the cost of homeownership. “Buyers should make sure they’re taking into account all the secondary costs,” Roney says, including insurance, taxes, lawn maintenance, condo or homeowners association fees, repairs and even furniture.

Don’t buy a house you don’t love. While most buyers may have to compromise on some of the features they wanted, they shouldn’t settle for a home they don’t like. If you don’t find the right home this year, maybe you should rent and try again later rather than make a purchase you’ll regret. “Make sure that you have a really strong emotional attachment to what you want to buy,” Roney says. “Make sure you love it before you buy it.”

3 Questions to Ask Yourself Before Buying A Home

3-Questions-To-Ask

If you are debating purchasing a home right now, you are surely getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.

There are 3 questions you should ask before purchasing in today’s market:

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances.

A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

Here is what the experts projected in the latest survey:

  • Home values will appreciate by 4.4% in 2015.
  • The cumulative appreciation will be 19.3% by 2019.
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 11.7% by 2019.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.

Bottom Line

Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.

Who Pays What in Santa Clara County?

Confused about what the buyer and seller typically pay in a real estate transaction?  This info-graphic shows which side generally pays what in the sale of a home in Santa Clara County.

 whopays what

Which home loans are best for new buyers?

Kunal-Mehta_206927164

Inman| Hank Bailey| January 19, 2015| Link

Renting can certainly be a solid choice while you’re saving for a down payment or repairing or building credit to obtain a mortgage, but recent findings show that homeownership is still a better deal. The cost to rent is rising faster than any other time in the last six years, according to the Bureau of Labor Statistics, while rental inventory stands at a 20-year low.

There is great benefit in knowing what types of loans are available that might assist buyers who require a low down payment so that they can become new homeowners in 2015.

In a recent press release, Zillow added to the conversation: “Over the past 14 years, rents have grown at twice the pace of income due to weak income growth, burgeoning rental demand, and insufficient growth in the supply of rental housing. This has created real opportunities for rental housing owners and investors, but has also been a bitter pill to swallow for tenants, particularly those on an entry-level salary and those would-be buyers struggling to save for a down payment on a home of their own,” said Zillow Chief Economist Stan Humphries. “Next year, we expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen this year isn’t out of the question. In fact, it’s probable.”

Although the increasing cost to rent and lack of inventory might nudge renters into buying a home, the National Association of Realtors points out that tight credit standards, large student debts and the growth of multigenerational households are contributing to the lowest number of first-time homebuyers in decades. Additionally, we are told that rising rent prices mean less money to put away for that down payment.

Even with these difficulties, first-time homebuyers are projected to be more active in the 2015 housing market. These concerns about rising rents and other debts are a concern to first-time or new buyers, but we are also seeing options for homebuyers today. For example, new conventional loan guidelines create an open door for homebuyers even as the Federal Housing Administration has changed its fees and loan structure, making both less buyer-friendly.

Amy Buynoski, a mortgage banker and the vice president of Fidelity Bank, says that the benefit to Fidelity’s program “is it is not FHA, and the buyer can put 3 percent down, and it can be a gift or grant. Mortgage insurance will come off once they have the 20 percent equity, unlike FHA. There is also no upfront funding fee at closing. Credit score requirements are relatively low at 640, but this is subject to approval (based on the body of the credit and strength of the buyer). One buyer on the loan does have to be a first-time homebuyer or have no homeownership in the last three years, and they do have to take a class.”

Another option that’s not always available in metro areas but can be found within rural residential markets is the USDA rural development (RD) loan. There is no mortgage insurance with an RD loan, but like a loan through FHA, there is an upfront funding fee at closing, and it is a 100 percent loan. These are for purchase loans on primary residential properties only, and the loan has a nice renovation component that is much simpler than FHA’s PowerSave Pilot 203(k) loan program in case the buyer would like to make some updates or upgrades to the property after closing.

The downside is that it’s possible to make too much money to qualify, and the property must be eligible for the loan. According to Jennifer Sims of Homestar Financial, “FHA and USDA (RD) are both great loans for first-time and second-time homebuyers. The USDA is a true 100 percent loan in eligible rural areas if you qualify under the income limits for the county. FHA also has a great loan, which can allow gift funds for the low 3.5 percent down payment. Both allow medium credit scores with some open collections as well. The USDA loan is the loan that can allow you to get into a home for truly 0 percent down as long as the home appraises. Also, there can be a repair escrow feature on both loans. The USDA can authorize up to 10 percent or $10,000 (whichever is less) to make repairs for appraiser-required issues. And FHA has a rehab loan called the 203(k) where you can borrow between $5,000 and $35,000 for upgrades or repairs to your home.”

As noted, FHA is still the old fallback and perfect for buyers rebuilding credit; it’s a bit more forgiving of past credit indiscretions compared with conventional loan guidelines. The costs and limitations are real. Mortgage insurance is expensive, and it will never fall off the FHA loan. For someone who had a credit blemish in the past, an FHA loan might be the best route to take to get back into homeownership.

Housing Inventory Slowly Disappearing

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KeepingCurrentMatters.com| March 26, 2015| Link

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) released their latest Existing Home Sales Report this week.

Inventory Levels & Demand

Amidst reporting on the fact that sales of existing homes rose 1.2% from January, and outpaced year-over-year figures for the fifth consecutive month, was the news that total unsold housing inventory is at 4.6-month supply.

This is down 0.5% from last February and remains below the 6 months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still under 4%, new programs available for down payments as low as 3%, and you have an attractive market for buyers.

Buyer demand for housing remains twice as high as this time last year.

Prices Rising

February marked the 36th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $202,600 (up 7.5% from 2014).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

March2015-16KCM

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices. Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before (interest) rates rise.”

Bottom Line

If you are debating putting your home on the market this year, now may be the time. The amount of buyers ready and willing to make a purchase is at the highest level in years. Contact a local professional in your area to get the process started.