There are hundreds of thousands of people who believe, for one reason or another, they cannot afford to buy a home currently. Some people may not for any number of reasons but it would be very surprising to know how many who can buy but have gotten some bad information along the way. It’s worth digging a little deeper to find out the facts.
John and Karen have been renting a home for the last five years at $2,000 a month. During that time, the value of the home they were renting went up by $30,000 in value while the unpaid balance decreased by $18, 400. Even though they were fortunate enough the rent remained constant over the five years, they missed out on close to $50,000 of equity that the owner realized instead of them.
Another thing to consider with today’s low interest rates, it is quite common for a mortgage payment to be lower than a tenant is paying rent for a similar property. So, in this example, John & Karen paid more to rent than a house payment would have been and missed out on the equity build-up that occurred due to appreciation and amortization.
The simple fact is when tenants like John and Karen pay their rent, the landlord is the beneficiary of the rent received as well as the equity earned. Over time, the rent paid by John and Karen and other tenants will pay for the landlord’s rental. It a great concept and a good investment.
True, not everyone can afford a home. A buyer needs money for a down payment and closing costs. They also need to have income and good credit to qualify for the mortgage. Some of these may seem insurmountable but instead of imagining that buying a home is not in the cards at the current time, talking to a real estate professional is a better route to take.
There are lots of low-down payment mortgages available including 100% financing for qualified veterans and USDA eligible buyers. It is sometimes more difficult to find sellers willing to pay all or part of a buyers closing costs when inventory is low, but lenders do allow it. It is a matter of finding the willing seller.
The source of the down payment could be a gift from a family member as long as there is no repayment expected. It’s amazing how many parents or grandparents might be willing to help a relative get into a home. Funds for a down payment may be available as loans or withdrawals from qualified retirement programs like IRAs or 401k plans. It’s worth investigating based on what retirement programs you have.
Good credit is necessary to qualify for a loan but buyers should not assume that theirs is not adequate. A trusted mortgage professional can assess a situation and may be able to suggest some things that will not only raise the score enough to be approved but possibly, even raise the score enough to qualify for a better interest rate.
There are a lot of misunderstandings about whether a person can or cannot qualify for a home at this time. Instead of relying on second hand information or something that might be floating around on the Internet, spend some time with a real estate professional who can give you the facts, assess your situation and if necessary, point you in the right direction to get help from a trusted mortgage professional. Call (971) 337-9396 to schedule an appointment where we’ll help you dig deeper to determine whether you can buy a home now.
Download our Buyers Guide to give you more information.
Three reasons to refinance a home include lowering the cost of housing, shortening the term of the mortgage to pay it off sooner or to using the equity to accomplish another purpose.
Replacing the mortgage at a lower interest rate, which is entirely possible in today’s market, would reduce the payment. On the other hand, shortening the term of the mortgage could make the payments increase but would allow the home to be paid for sooner. In either case, the equity would not be reduced unless the refinancing costs were rolled into the new mortgage.
Refinancing the home to take money out would increase the mortgage on the property and lower an owner’s equity; careful consideration should be made before doing so.
Mortgage rates are considerably lower than credit card rates and usually lower than short term borrowing like student loans or car loans. For that reason, homeowners will sometimes refinance to payoff higher cost debt.
Some people refinance for more than their current balance to improve their cash position, possibly, to have funds available in case they need it. Other reasons could be to use it for an investment such as rental property or other things. Still others may use it to make capital improvements on their home like remodeling or a pool.
Another legitimate reason to refinance may be to combine a first and second lien on the home that might result in lower payments and a savings in interest.
One more situation that causes a person to refinance a home is to remove a former spouse or co-borrower from the existing mortgage. In the case of a divorce, a couple may no longer be married and one of the former spouses may have no financial interest in the home any longer but because they signed the note originally, they are still liable along with the other spouse. This could be an untenable position.
There can be a lot of reasons that cause a homeowner to refinance the home. The equity is a valuable asset that has powerful borrowing power combined with the good credit and income of the homeowner. A Refinance Analysis can help you to determine the new payments and how long it will recapture the cost of refinancing.
For the recommendation of a trust lender, give me a call at (971) 337-9396
Whether you like to or not, buying and selling a home involves negotiation at all stages of the process. It is not like the retail world where once you decide to purchase, you pay the price. It is easily the most expensive purchase or sale that most people experience and emotions get involved that could affect the negotiations adversely.
The word “home” by itself conjures up emotions and selling a home you’ve lived in for a while could even complicate things more. A real estate professional can separate their emotions from the process to be able to help the one they are representing.
The price of the home, the type of financing and concessions, closing costs, personal property, closing dates and possession are just a few of the many things that can be negotiated in a contract. Since the seller wants to get the most for their house and the buyer wants to pay the least, their objectives are diametrically opposed.
Even after the contract is signed, removing the contingencies can cause considerable negotiations. The appraisal, the inspections or the repairs could be a source of reevaluating the terms and provisions of the contract.
Negotiating the sale or purchase of a home is a competition; for one person to get something, someone has to give something up. If you don’t feel comfortable with this, it is important to work with an agent who can bring their skills to the table on your behalf. As your advocate, they can champion your position.
I’d like to share how my skills, training and experience can benefit you in a sale or purchase. Call me at (971) 337-9396
The soothsayer in Shakespeare’s Julius Caesar issued his famous warning “Beware the Ides of March.” Who knew that in 2020, around the middle of March, the world, as we knew it, would force such dramatic changes on us from the Coronavirus.
In America, it has brought our economy to its knees as we sheltered in place for over four months. During this time, changes have affected our lives and many of those changes could be permanent.
Previously, smaller homes were becoming the trend for not only efficiency but upkeep so owners would have more time to do things including travel. Now, travel is minimal and our world, in some respects, is reduced to our home.
For families with children, their home has become a school. With so many people working from home, it has become our office or store or studio. If there is more than one working adult in a home, it needs to have space for each party to work. The home fitness industry is experiencing record sales in exercise equipment so the home can become a gym.
Since we’re all spending more time at home, it is also the place to recreate. We’re cooking more; a larger kitchen and dining area would be nice. We want to enjoy the yard, garden, pool or balcony and our current home may not even have them or we’d like to upgrade.
People are wanting and needing more space to do all of these things at home. Many experts are anticipating that these changes we thought were temporary may be part of the new normal even after a vaccine and cure have been discovered.
If you have had any of these thoughts and would like to know more about how to buy or sell a home in our current market, we would love to tell you about the many options available while being responsible to stay safe.
The National Association of REALTORS® just released the Market Recovery Survey of a random sampling to close to 100,000 members conducted June 24-26, 2020. The following statements are the members’ opinion on various aspects of the recovery to the Covid-19 pandemic as it relates to real estate.
In response to the safety of buyers, sellers and agents, REALTORS® are expecting within the next year to have increased demand for the following technologies used to market properties:
Nine out of ten respondents indicated that some of the buyers have returned to the market or never left the market. Agents currently working with buyers report that slightly more than half of buyer’s timeline has remained the same with about the same level of urgency. 27% believe the buyers have more urgency.
The most popular reason cited by buyers with an increased timeline is that the delay during the pandemic has amplified their demand for a new home. Others realize that new home features would make their home life more comfortable. Some buyers are wanting to buy before a potential second peak of Covid-19 occurs.
During the week the survey was taken, three out of four buyers saw the home in person physically while 26% did not.
Roughly 2/3 of the buyers are looking for the same features as they were prior to Covid-19 while new feature considerations include home office, space to accommodate family, larger home for more space, place to exercise and bigger kitchen.
Most buyers are looking for the same type home, however, respondents reported that 13% are moving away from multi-family properties to a single-family home and only 1% are going from SFH to multi-family.
89% of respondents stated that some of the sellers have returned to or never left the market. Only 23% reported more urgency to sell a home due to the pandemic.
On the commercial side, 2/3 of REALTOR® respondents felt like the demand for office space would decrease and 72% felt that retail space demand would decrease.
The stats mentioned in this article pertain nationwide. To find out specifics in your market, call me at (971) 337-9396.
The seller can put a price on the home but the value is ultimately, determined by the buyer. Individually, a buyer could pay over market value because they love the location, or the elevation of the home or the proximity to something that is important to them. The shortage of available homes resulting in increased competition among buyers could drive the value higher.
Most experts agree initially pricing it properly will generally result in the highest sales price. If a home starts out too high, it could actually sell for a lower price after it has been on the market for a while. It gives the impression that there must be something “wrong” with the house because it didn’t sell immediately.
So, how does a seller determine what price to put on the home? It has nothing to do with what the seller needs to get out of it. Nor does the price the seller paid for it make any difference now. Even if the seller made considerable improvements, they may not affect the value of the home.
There are three common sources for a seller to determine market value: an appraisal, a broker price opinion or an automated value model found online.
AVM, automated value models, are mathematical estimates that analyze limited public record data to determine a value. While this process can easily compare square footage, age, number of bedrooms as objective data, it is much more challenging to make adjustments for subjective data like appeal, quality of construction, floorplan and updating. Zillow Zestimates are the most common AVMs but there are many others providing similar services.
Appraisals can only be made by a licensed appraiser. Most mortgages require an appraisal as part of the underwriting process to verify that there is ample collateral to secure the mortgage in case of default by the borrower. FHA, VA, FNMA, Freddie Mac and USDA as well as most private lenders require an appraisal especially for high loan-to-value mortgages. In some situations where the risk is lower, some lenders may use an AVM.
An appraisal requires the appraiser to visit the property, perform a visual inspection, analyze the property considering three approaches to value and accurately report the property information that is verifiable.
Broker Price Opinion, BPO, as the name indicates, is a price opinion on a property made by a licensed real estate agent. The determination of whether the estimate accurately reflects the market will depend on the experience of the agent with that type of property and market area. It is possible that a BPO could be more sensitive to the actual market because it will consider homes currently for sale and recently expired properties as well as comparable sales.
While all three methods, used recent, comparable sales to arrive at a value, the appraiser and the real estate professional can make a series of adjustments for the differences in the comparables. While the appraiser is highly trained in this technique, the real estate professional also adds credibility to this process based on their experience in how the buying public might react to specific features and the home in general including positive and negative influences.
Current condition of the property is very important for a number of reasons. In some price ranges, a buyer may only have the necessary down payment and closing costs but is not able to make improvements like paint, floor coverings, appliances or other major items. In this situation, a buyer would have to live with the house in its current condition until they could afford to make wanted improvements.
Investors may not be deterred by making an additional investment in the home after purchasing it but will probably be motivated to do so only if it will increase the potential profit to be made.
An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.
Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate. Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately. If you are curious what your home is worth, call (971)337-9396 or email Leigha@paramountoregon.com
You’ve done your homework, contacted a mortgage company and believe you are pre-approved. That part of the process is finished and you can concentrate of finding a home and moving…or can you?
Pre-qualified and pre-approved are two different things but some people, including some in the business, use the terms interchangeably. Pre-qualified is an opinion of likelihood that a borrower will be approved based on preliminary information about their income and credit. Whereas, in a pre-approval, the borrower’s credit report is updated and pulled, income and assets verified and involves pre-underwriting.
Even when you have a highly qualified loan officer, the real decision maker is the underwriter who can commit the lender. Generally speaking, a person who has been pre-approved receives a written letter stating the terms and conditions of the commitment.
A second opinion from a different lender can be a comforting thing for a borrower. It will either confirm that the first lender was correct and that the rate and terms being offered are competitive or it will reveal that there could be differences that would warrant more investigation.
Mortgage money is a commodity and while competition usually keeps lenders close to each other in the rates and terms they offer, you won’t know for sure unless you shop around. The cost for being pre-approved is usually a nominal amount and when you are considering the size of the mortgage you’ll be borrowing for up to thirty years, it makes sense to get a second opinion.
Occasionally, during the process of being pre-approved, an unexpected credit problem may be discovered. It is better to learn about it early so you’ll have time to correct it before you have contracted on a home.
Your real estate professional, Team Paramount, will be able to recommend lenders who are active, experienced in the area and can share their experience with you regarding previous loans they have made. The benefits far exceed the time and effort it takes. You’ll be looking at the right priced homes; getting the best loan, rate and terms; have increased negotiating power with the Seller and can close quicker because many of the verifications have already been made.
Paying off your mortgage can provide peace of mind and is a worthy goal but is it the best thing for you to do at this time.
Do you have higher interest rate debt currently? If you have credit card debt with double-digit rates or personal, car or student loans, you’ll probably save more money from interest by paying these things off before you pay off your mortgage which is usually one of the lower rates on debt.
Many financial advisors recommend funding your annual retirement contribution before paying down a mortgage. If your company offers matching funds for your contribution, you would be leaving money on the table by not making the contribution to your retirement. For instance, you would be getting a $10,000 value by putting $5,000 into your retirement if your company matches it.
Creating an emergency fund is another favorite of financial advisors. When the rainy day arrives and you need funds, it may be difficult to get money from the equity of your home, especially if you have lost your job. Six months’ worth of living expenses is a good target to have available should you need it and a year’s worth would be even better.
Children’s college funds may be another priority that takes precedent overpaying off the mortgage. Whether you’re saving or investing to pay for their education, it is going to cost more than it did when you were in school.
When you are ready to start paying off your mortgage, decide on the best way to do it. Regular principal contributions on a monthly basis are very predictable and will get the job done. Setting up an automatic bill pay with your bank will assure that you don’t re-prioritize that extra amount every month because there is always going to be something else to do with extra money.
It is important to be sure that the lender applies the additional payment amounts to the principal and not to the escrow account.
Use the Refinance Analysis to see what extra amount you’d have to pay to retire your mortgage in a certain time frame or by making a specific additional amount each payment, you can find out when the loan will be paid. Regardless of which way you go, prepaying a loan will save interest, build equity and shorten the term on a fixed-rate mortgage.
Homeowners still have considerable advantages from the amortization of the mortgage and the appreciation enjoyed by most homes even with taking the standard deduction instead of itemizing to take the interest and property tax deduction.
There is an adage, “Rent or buy, you pay for the house you occupy.” You either pay for it yourself or for your landlord. The people who have job security, sufficient income, good credit and the funds for the down payment and closing costs can enjoy the many financial and emotional benefits of homeownership.
Looking at a $350,000 home purchased with an FHA mortgage with 3.5% down payment at 3.25% interest for 30-years, the total payment would be $2,420 a month. During the first year, the average monthly principal reduction is $573 a month which build the owner’s equity in the home.
At an estimated 3% appreciation, this home would increase in value at the rate of $875 a month during the first year which again builds the owner’s equity in the home.
Even if you consider the buyer will now be responsible for repairs and possibly homeowner’s association fees, the monthly net cost of housing in this example is $1,122 or less than half the monthly payment. The difference goes to equity which a tenant does not benefit from.
If the buyer were paying $2,750 monthly rent, they would be paying $1,628 more each month to rent than to own. In a year’s time, they would lose $19,500 of equity by continuing to rent. The down payment in this example is only $12,250 which would leave $7,000 to pay for buyer’s closing costs.
|Total Monthly Payment (PITI + MIP)||
|Less Monthly Principal Reduction (average first year)||
|Less Monthly Appreciation (average first year at 3% annually)||
|Plus Estimated Maintenance & HOA||
|Net Cost of Housing||
The equity for the homeowner in this example at the end of seven years would be almost $140,000 based on the appreciation and amortization of the mortgage. Whether you rent or buy, you pay for the house you occupy.
Use this Rent vs. Own to plug in your own numbers for the price home you’d like to buy. If you need help with it, contact me and we can do it over the phone at (503) 385-1518 or in an online meeting.
Homeownership is a privilege and a responsibility. Even after decades of owning a home, you may still need some help to handle some of its challenges by focusing on the three “M”s of homeownership: maintenance, minimizing expenses and managing debt and risk.
While many people recognize the benefits of annual wellness, financial, vehicle and equipment maintenance visits, an important checkup that you may not have considered is an annual homeowner advisory or real estate review. Why would you treat the investment in your home with less care than you treat your car or your HVAC system?
Consider exploring the following:
This service is part of my point of difference as a real estate professional to provide information to help homeowners not only when they buy and sell but all the years in between too. My goal is to create lifelong relationships with our customers as their “go to” person whenever they have a real estate question.
My strategy is to provide reliable, consumer-based information about homeownership on a regular basis through email and social networking. If it benefits you by helping you be a better homeowner, maybe you’ll consider us your real estate professional.
When you don’t know the answers to real estate questions, you know where to get them.
We’re always here to serve your real estate needs. By helping you with the three “M”s of homeownership, we can earn your confidence and trust for the next time you move or a friend of yours needs a recommendation.
If you’d like to have a list of the market activity in your area or any of the other information mentioned, please contact me at (971) 337-9396 or Leigha@paramountoregon.com