Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
So… what exactly is PMI?
Freddie Mac defines PMI as…
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly hosing cost will be. But Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family. I can also connect you with lenders who have your best interested at the height of their priority.
Here are four reasons to consider buying today instead of waiting:
1. Prices will likely continue to rise.
CoreLogic’s latest U.S. Home Price Insights reports that home prices have appreciated by 3.7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.8% over the next year.
Home values will continue to appreciate. Waiting may no longer makes sense.
2. Mortgage interest rates are projected to increase.
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year fixed rate mortgage have started to level off around 4.3%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting rates will increase by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
3. Either way, you are paying mortgage.
Some renters have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing cost to work for you?
4. It’s time to move on with your life.
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Examine the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, greater safety for your family, or you just want to have control over renovations, now could be the time to buy.
If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.
So, you’ve been searching for that perfect house to call “home” and you’ve finally found it! The price is right, and in such a competitive market, you want to make sure you make a good offer so that you can guarantee that your dream of making this house YOURS comes true!
Below are 4 steps provided by Freddie Mac to help buyers make offers, along with some additional information for your consideration:
1. Determine Your Price
“You’ve found the perfect home and you’re ready to buy. Now what? Your real estate agent will be by your side, helping you determine an offer price that is fair.”
Based on your agent’s experience and key considerations (like similar homes recently sold in the same neighborhood or the condition of the house and what you can afford), your agent will help you to determine the offer that you are going to present.
Getting pre-approved will not only show home-sellers that you are serious about buying, but it will also allow you to make your offer with confidence because you’ll know that you have already been approved for a mortgage in that amount.
2. Submit an Offer
“Once you’ve determined your price, your agent will draw up an offer, or purchase agreement, to submit to the seller’s real estate agent. This offer will include the purchase price and terms and conditions of the purchase.”
Talk with your agent to find out if there are any ways in which you can make your offer stand out in this competitive market! A licensed real estate agent who is active in the neighborhoods you are considering will be instrumental in helping you put in a solid offer.
3. Negotiate the Offer
“Oftentimes, the seller will counter the offer, typically asking for a higher purchase price or to adjust the closing date. In these cases, the seller’s agent will submit a counteroffer to your agent, detailing their desired changes, at this time, you can either accept the offer or decide if you want to counter.
Each time changes are made through a counteroffer, you or the seller have the option to accept, reject or counter it again. The contract is considered final when both parties sign the written offer.”
If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home.” If the inspector uncovers undisclosed problems or issues, you can discuss any repairs that may need to be made with the seller or even cancel the contract altogether.
4. Act Fast
The inventory of homes listed for sale has remained well below the 6-month supply that is needed for a “normal” market. Buyer demand has continued to outpace the supply of homes for sale, causing buyers to compete with each other for their dream homes.
Make sure that as soon as you decide that you want to make an offer, you work with your agent to present it as quickly as possible.
Whether buying your first home or your fifth, having a local real estate professional who is an expert in his or her market on your side is your best bet in making sure the process goes smoothly. Let’s talk about how we can make your dream of homeownership a reality!
According to a new survey from Move.com, the wave of first-time homebuyers hitting the market this summer has resulted in an interesting statistic. Nearly 60% of buyers searching for a home this spring are willing to consider buying a fixer-upper, with 95% believing that the projects needed will increase their new home’s value!
Realtor.com’s Chief Economist, Danielle Hale, pointed to low-inventory at the entry-level price range for the increase in willingness to renovate.
“The combination of rising home prices and limited entry-level homes for sale is prompting many home shoppers to consider homes that need renovating.
Replete with inspiration at their fingertips – like Pinterest, Instagram, and various home renovation TV shows – some home shoppers are comfortable tackling home renovation jobs to find a home that balances their needs with their budget.”
Just over half of all respondents who said they would be willing to buy a home in need of some TLC, would also spend more $20,000 to make the home fit their needs.
The most common ‘expected’ renovation is a kitchen remodel which can run anywhere from $22,000 for a minor remodel to $66,000 for a major remodel.
This isn’t a new trend by any means. According to the Joint Center for Housing Studies at Harvard University, home improvement project spending reached a new high in 2018.
“Americans spent $336.9 billion on remodeling projects, up 7.4% from the $313.6 billion a year earlier.”
Home renovation television shows have given many buyers hope that they could renovate a home they can afford into their dream home!
If you are one of the many Americans considering buying a home this spring, let’s get together to help you find a house with the potential to be your dream home!
Not exclusive of the residential real estate market, the price of any item is determined by the theory of ‘supply and demand.’ If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.
Historically, the supply of homes for sale dramatically increases every spring, according to the National Association of Realtors (NAR). As an example, here is what happened to housing inventory in 2018:
Putting your home on the market now, rather than waiting for increased competition in the spring, might make a lot of sense. THE BOTTOM LINE: Buyers in the market during the winter are truly motivated purchasers and they are more likely to want to buy now. With limited inventory currently available in most markets, sellers are in a great position to negotiate.
Contact me today so I can effectively market and sell your home before the competition creeps in.
Mortgage rates continue their six-week decline, falling to nine-month lows
Mortgage rates have been in a prolonged swoon, but it may be coming to an end.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 4.45 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.51 percent a week ago and 3.99 percent a year ago. The 30-year fixed rate dropped below 4.5 percent for the first time since April.
The 15-year fixed-rate average fell to 3.89 percent with an average 0.4 point. It was 3.99 percent a week ago and 3.44 percent a year ago. The five-year adjustable rate average sank to 3.83 percent with an average 0.3 point. It was 3.98 percent a week ago and 3.46 percent a year ago.
Fears about a slowdown in global growth, stock market volatility and the government shutdown had stoked economic uncertainty, sending mortgage rates into a free fall. But last week’s strong employment numbers eased some of those concerns.
Investors began pulling out of bonds, causing yields to rise. Since sinking to an 11-month low last week, the yield on the 10-year Treasury has risen 18 basis points to 2.74 percent. (A basis point is 0.01 percentage point.)
Because mortgage rates tend to follow the same path as long-term bonds, home loan rates are also expected to move higher.
“Friday’s blockbuster jobs report eased fears, at least for the moment, of an impending economic slowdown, but comments from Fed officials and the minutes from December’s Federal Reserve meeting revealed that some monetary policymakers are concerned about slowing global growth — sentiment that could imply a slower pace of interest rate hikes over the next year,” said Aaron Terrazas, senior economist at Zillow. “Key economic data releases are on hold while the federal government remains shut down, clouding markets’ read on the state of the economy at a critical moment when there is growing uncertainty about underlying economic fundamentals.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly half of the experts it surveyed say rates will rise in the coming week. Shashank Shekhar, CEO of Arcus Lending, is one who predicts rates are headed higher.
“It’s been a very volatile start to the year for mortgage rates,” Shekhar said. “After dipping to about a nine-month low, the rates have gone up in the last three days. Rising 10-year Treasury yields and stock-market favoring comments from Fed officials have been the main contributor. Both these factors may extend into the next week. There is also [talk] of positive momentum in the U.S.-China trade talks, which is another negative for the mortgage rates. Expect the mortgage rates to inch higher in the short term.”
Meanwhile, mortgage applications roared back after the holidays, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 23.5 percent from a week earlier. The refinance index jumped 35 percent from the previous week, while the purchase index climbed 17 percent.
The refinance share of mortgage activity was at its highest level in nearly a year, accounting for 45.8 percent of all applications.
“The first week of 2019 saw falling mortgage rates and a subsequent increase in refinance and purchase applications,” said Bob Broeksmit, MBA president and CEO. “The slow retreat in borrowing costs in recent weeks is welcome news for prospective home buyers, especially given last month’s stock market volatility and the ongoing government shutdown. Amidst this uncertainty, purchase mortgage applications were up 17 percent last week and 4 percent from a year ago.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability decreased in December. The MCAI fell 7.3 percent to 175 last month. A decline in the MCAI indicates that lending standards are tightening, while an increase signals they are loosening.
“The supply of credit dropped in December to its lowest since February 2017,” Joel Kan, an MBA economist, said in a statement. “The decline was driven by a sharp decrease in the conventional credit space, as we saw the expiration of the Home Affordable Refinance Program (HARP). Credit availability in government loans was stable over the month, ticking up slightly. We also saw a decline in high balance and super conforming programs, which drove the decline in the jumbo index.”