Ashley D. ClinchMDCPS TeacherMiami, FL
ByKimberly Dawn NeumannFrom Realtor.comIs it really 2016 already? For those of you who happen to be planning on buying a home in the new year—or even just trying to—there’s a whole lot to celebrate. Why? A variety of financial vectors have dovetailed to make this the perfect storm for home buyers to get out there and make an (winning) offer. Here are six home-buying reasons to be thankful while ringing in the new year:
Reason No. 1: Interest rates are still at record lows
Even though they may creep up at any moment, it’s nonetheless a fact that interest rates on home loans are at historic lows, with a 30-year fixed-rate home loan still hovering around 4%.
“Remember 18.5% in the ’80s?” asks Tom Postilio, a real estate broker with Douglas Elliman Real Estate and a star of HGTV’s “Selling New York.”“It is likely that we’ll never see interest rates this low again. So while prices are high in some markets, the savings in interest payments could easily amount to hundreds of thousands of dollars over the life of the mortgage.”
Reason No. 2: Rents have skyrocketed
Another reason home buyers are lucky is that rents are going up, up, up! (This, on the other hand, is a reason not to be thankful if you’re a renter.) In fact, rents outpaced home values in 20 of the 35 biggest housing markets in 2015. What’s more, according to the 2015 Rent.com Rental Market Report, 88% of property managers raised their rent in the past 12 months, and an 8% hike is predicted for 2016.
“In most metropolitan cities, monthly rent is comparable to that of a monthly mortgage payment, sometimes more,” says Heather Garriock, mortgage agent for The Mortgage Group. “Doesn’t it make more sense to put those monthly chunks of money into your own appreciating asset rather than handing it over to your landlord and saying goodbye to it forever?”
Reason No. 3: Home prices are stabilizing
For the first time in years, prices that have been climbing steadily upward are stabilizing, restoring a level playing field that helps buyers drive a harder bargain with sellers, even in heated markets.
“Local markets vary, but generally we are experiencing a cooling period,” says Postilio. “At this moment, buyers have the opportunity to capitalize on this.”
Reason No. 4: Down payments don’t need to break the bank
Probably the biggest obstacle that prevents renters from becoming homeowners is pulling together a down payment. But today, that chunk of change can be smaller, thanks to a variety of programs to help home buyers. For instance, the new Fannie Mae and Freddie Mac Home Possible Advantage Program allows for a 3% down payment for credit scores as low as 620.
Reason No. 5: Mortgage insurance is a deal, too
If you do decide to put less than 20% down on a home, you are then required to have mortgage insurance (basically in case you default). A workaround to handle this, however, is to take out a loan from the Federal Housing Administration—a government mortgage insurer that backs loans with down payments as low as 3.5% and credit scores as low as 580. The fees are way down from 1.35% to 0.85% of the mortgage balance, meaning your monthly mortgage total will be significantly lower if you fund it this way. In fact, the FHA predicts this 37% annual premium cut will bring 250,000 first-time buyers into the market. Why not be one of them?
Reason No. 6: You’ll reap major tax breaks
Tax laws continue to favor homeowners, so you’re not just buying a place to live—you’re getting a tax break! The biggest one is that unless your home loan is more than $1 million, you can deduct all the monthly interest you are paying on that loan. Homeowners may also deduct certain home-related expenses and home property taxes._____________Teacher Next Door has grants and programs available for:
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Through this state of the art network, along with our highly trained staff, we are able to provide a seamless home buying experience.
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Nowadays most everyone has heard the term short sale. Prior to 2006 it was pretty much considered an “industry term” and represented less than 1% of all homes sold in the U.S. Back then it was usually the result of a buyer having to sell within the first year of purchase. Today, in many markets, short sales represent over half of all the homes listed.
So what is a short sale? Simply stated, a short sale is when the bank allows the seller to pay off the existing mortgage for less than what is owed. There are advantages and disadvantages for both the buyer and seller. The good news is there won’t be a test on any of this at the end of the blog.
When a seller has negative equity or owes more than the home is worth, they may benefit from a short sale for several reasons. First, it allows them to sell the house without having to bring cash to the closing or owe any additional money to the lender. Second, if the seller can’t afford the mortgage payments, it may keep them from foreclosure. Lastly, it allows them to price the home at today’s market value; otherwise it would never sell if it had to be priced high enough to pay off the current mortgage.
It is absolutely imperative that sellers receive proper professional and legal advice when completing a short sale. Among other things, they will need to be sure the lender is actually forgiving the remaining balance and not just releasing the title and also know the tax implications of the forgiven debt.
Buyer’s all want to know if a short sales is a good deal. If you love the home, then yes it’s a good deal. However in most cases, even if the bank is discounting over $100,000.00 of the seller’s debt, they are not going to accept a price less than the current market value. So in reality, the short sale is not saving you a significant amount of money.
The biggest draw-back to purchasing a short sale is the amount of time it takes to get the seller’s bank to approve the short sale. In a regular sale, the seller will usually accept the offer within a few days and you can expect to close 30 to 45 days later. With short sales, the bank can take over 30 days just to approve the sale and in some cases could even take up to 90 days. Then you begin the 30-45 day closing process. What’s worse, if the bank takes 90 days and doesn’t accept the short sale offer, you could have to choose another home and start all over.
You may have to include short sales in your search just because they represent such a large percentage of the homes available. What we usually recommend is three separate lists. Look first at regular listings, then HUD or bank owned foreclosures, then short sales. You can get a good deal on a foreclosure or short sale but the home buying process is definitely easier and quicker with a regular listing.
The experts at The Teacher Next Door will be happy to help guide you through the pre-approval and home buying process, including distinguishing between the different types of home listings.
Please feel free to add you comments or questions to our blog. You can also call or e-mail The Teacher Next Door with any questions you might have.