Buy Now or Rent Longer? 5 Questions to Answer Before Purchasing Your First Home

Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership.  A real estate boom during the pandemic pushed home prices to an all-time high.1 Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down. But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage.2 And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future. So, what's the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we'll help walk you through your options. You may also find it helpful to ask yourself the following questions:   1. How long do I plan to stay in the home? You'll get the most financial benefit from a home purchase if you own the property for at least five years.3 If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you. There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures. Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time.4 The longer you own a property, the more you are likely to benefit from its appreciation. Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall. Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.   2. Is it a better value to buy or rent in my area? If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area. One helpful tool for evaluating your options is a neighborhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.5 Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term. According to the National Association of Realtors, a typical U.S. homeowner who purchased a single-family existing home 10 years ago would have gained roughly $225,000 in equity — all while maintaining a steady mortgage payment.6 In contrast, someone who chose to rent for the past 10 years would have not only missed out on those equity gains, but they would have also seen U.S. rental prices increase by around 66%.7 So even if renting seems like a better bargain today, buying could be the better long-term financial play. Ready to compare your options? Then reach out to schedule a free consultation. As local market experts, we can help you interpret the numbers to determine if buying or renting is the better value in your particular neighborhood.   3. Can I afford to be a homeowner? If you determine that buying a home is the better value, you’ll want to evaluate your financial readiness. Start by examining how much you have in savings. After committing a down payment and closing costs, will you still have enough money left over for ancillary expenses and emergencies? If not, that’s a sign you may be better off waiting until you’ve built a larger rainy-day fund. Then consider how your monthly budget will be impacted. Remember, your monthly mortgage payment won’t be your only expense going forward. You may also need to factor in property taxes, insurance, association fees, maintenance, and repairs. Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option. Plus, even though you’ll be in charge of financing your home’s upkeep if you buy, you’ll also be the one who stands to benefit from the fruits of your investment. Every major upgrade, for example, not only makes your home a nicer place to live; it also helps boost your home's market value. If you want to buy a home but aren’t sure you can afford it, give us a call to discuss your goals and budget. We can give you a realistic assessment of your options and help you determine if your homeownership dreams are within reach.   4. Can I qualify for a mortgage? If you’re prepared to handle the costs of homeownership, you’ll next want to look into how likely you are to get approved for a mortgage. Every lender will have its own criteria. But, in general, you can expect a creditor to scrutinize your job stability, credit history, and savings to make sure you can handle a monthly mortgage payment. For example, lenders like to see evidence that your income is stable and predictable. So if you’re self-employed, you may need to provide additional documentation proving that your earnings are dependable. A lender will also compare your monthly debt payments to your income to make sure you aren’t at risk of becoming financially overextended. In addition, a lender will check your credit report to verify that you have a history of on-time payments and can be trusted to pay your bills. Generally, the higher your credit score, the better your odds of securing a competitive rate. Whatever your circumstances, it’s always a good idea to get preapproved for a mortgage before you start house hunting. Let us know if you’re interested, and we’ll give you a referral to a loan officer or mortgage broker who can help. Want to learn more about applying for a mortgage? Reach out to request a copy of our report: “8 Strategies to Secure a Lower Mortgage Rate”   5. How would owning a home change my life? Before you begin the preapproval process, however, it’s important to consider how homeownership would affect your life, aside from the long-term financial gains. In general, you should be prepared to invest more time and energy in owning a home than you do renting one. There can be a fair amount of upkeep involved, especially if you buy a fixer-upper or overcommit yourself to a lot of DIY projects. If you’ve only lived in an apartment, for example, you could be surprised by the amount of time you spend maintaining a lawn. On the other hand, you might relish the chance to tinker in your very own garden, make HGTV-inspired improvements, or play with your dog in a big backyard. Or, if you’re more social, you might enjoy hosting family gatherings or attending block parties with other committed homeowners. The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next. The choice – like the home – is all yours.     HAVE MORE QUESTIONS? WE’VE GOT ANSWERS The decision to buy or rent a home is among the most consequential you will make in your lifetime. We can make the process easier by helping you compare your options using real-time local market data. So don't hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. We'd be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals.   The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs. Sources: CNN - https://www.cnn.com/2022/08/11/homes/home-prices-second-quarter/index.html NPR - https://www.npr.org/2022/07/14/1109345201/theres-a-massive-housing-shortage-across-the-u-s-heres-how-bad-it-is-where-you-l Bankrate - https://www.bankrate.com/mortgages/5-year-real-estate-rule/ Federal Reserve Bank of St. Louis -https://fred.stlouisfed.org/series/MSPUS National Association of REALTORS - https://www.nar.realtor/blogs/economists-outlook/price-to-rent-ratios-by-state-from-2014-2019 National Association of REALTORS -https://www.nar.realtor/blogs/economists-outlook/single-family-homeowners-typically-accumulated-225K-in-housing-wealth-over-10-years Statista - https://www.statista.com/statistics/200223/median-apartment-rent-in-the-us-since-1980/  

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8 Strategies to Secure a Lower Mortgage Rate

Mortgage rates have been on a roller coaster ride this year, rising and falling amid inflationary pressures and economic uncertainty. And even the experts are divided when it comes to predicting where rates are headed next.1 This climate has been unsettling for some homebuyers and sellers. However, with proper planning, you can work toward qualifying for the best mortgage rates available today – and open up the possibility of refinancing at a lower rate in the future. How does a lower mortgage rate save you money? According to Trading Economics, the average new mortgage size in the United States is currently around $410,000.2 Let’s compare a 5.0% versus a 6.0% fixed-interest rate on that amount over a 30-year term.   Mortgage Rate (30-year fixed) Monthly Payment on $410,000 Loan(excludes taxes, insurance, etc.) Difference in Monthly Payment Total Interest Over 30 Years Difference in Interest 5.0% $2,200.97   $382,348.72   6.0% $2,458.16 + $257.19 $474,936.58 + $92,587.86   With a 5% rate, your monthly payments would be about $2,201. At 6%, those payments would jump to $2,458, or around $257 more. That adds up to a difference of almost $92,600 over the lifetime of the loan. In other words, shaving off just one percentage point on your mortgage could put nearly $100K in your pocket over time. So, how can you improve your chances of securing a low mortgage rate? Try these eight strategies:   1. Raise your credit score. Borrowers with higher credit scores are viewed as “less risky” to lenders, so they are offered lower interest rates. A good credit score typically starts at 690 and can move up into the 800s.3 If you don’t know your score, check with your bank or credit card company to see if they offer free access. If not, there are a plethora of both free and paid credit monitoring services you can utilize. If your credit score is low, you can take steps to improve it, including:4  Correct any errors on your credit reports, which can bring down your score. You can access reports for free by visiting AnnualCreditReport.com. * Pay down revolving debt. This includes credit card balances and home equity lines of credit. * Avoid closing old credit card accounts in good standing. It could lower your score by shortening your credit history and shrinking your total available credit. * Make all future payments on time. Payment history is a primary factor in determining your credit score, so make it a priority. * Limit your credit applications to avoid having your score dinged by too many inquiries. If you’re shopping around for a car loan or mortgage, minimize the impact by limiting your applications to a short period, usually 14 to 45 days.5 Over time, you should start to see your credit score climb — which will help you qualify for a lower mortgage rate.   2. Keep steady employment. If you are preparing to purchase a home, it might not be the best time to make a major career change. Unfortunately, frequent job moves or gaps in your résumé could hurt your borrower eligibility. When you apply for a mortgage, lenders will typically review your employment and income over the past 24 months.5 If you’ve earned a steady paycheck, you could qualify for a better interest rate. A stable employment history gives lenders more confidence in your ability to repay the loan. That doesn’t mean a job change will automatically disqualify you from purchasing a home. But certain moves, like switching from W-2 to 1099 (independent contractor) income, could throw a wrench in your home buying plans.6   3. Lower your debt-to-income ratios. Even with a high credit score and a great job, lenders will be concerned if your debt payments are consuming too much of your income. That’s where your debt-to-income (DTI) ratios will come into play. There are two types of DTI ratios:7 1. Front-end ratio — What percentage of your gross monthly income will go towards covering housing expenses (mortgage, taxes, insurance, and dues or association fees)? 2. Back-end ratio — What percentage of your gross monthly income will go towards covering ALL debt obligations (housing expenses, credit cards, student loans, and other debt)? What’s considered a good DTI ratio? For better rates, lenders typically want to see a front-end DTI ratio that’s no higher than 28% and a back-end ratio that’s 36% or less.7 If your DTI ratios are higher, you can take steps to lower them, like purchasing a less expensive home or increasing your down payment. Your back-end ratio can also be decreased by paying down your existing debt. A bump in your monthly income will also bring down your DTI ratios.   4. Increase your down payment. Minimum down payment requirements vary by loan type. But, in some cases, you can qualify for a lower mortgage rate if you make a larger down payment.8 Why do lenders care about your down payment size? Because borrowers with significant equity in their homes are less likely to default on their mortgages. That’s why conventional lenders often require borrowers to purchase private mortgage insurance (PMI) if they put down less than 20%. A larger down payment will also lower your overall borrowing costs and decrease your monthly mortgage payment since you’ll be taking out a smaller loan. Just be sure to keep enough cash on hand to cover closing costs, moving expenses, and any furniture or other items you’ll need to get settled into your new space.   5. Compare loan types.  All mortgages are not created equal. The loan type you choose could save (or cost) you money depending on your qualifications and circumstances. For example, here are several common loan types available in the U.S. today:9 * Conventional — These offer lower mortgage rates but have more stringent credit and down payment requirements than some other types. * FHA — Backed by the government, these loans are easier to qualify for but often charge a higher interest rate. * Specialty — Certain specialty loans, like VA or USDA loans, might be available if you meet specific criteria. * Jumbo — Mortgages that exceed the local conforming loan limit are subject to stricter requirements and may have higher interest rates and fees.10 When considering loan type, you’ll also want to weigh the pros and cons of a fixed-rate versus variable-rate mortgage:11 * Fixed rate — With a fixed-rate mortgage, you’re guaranteed to keep the same interest rate for the entire life of the loan. Traditionally, these have been the most popular type of mortgage in the U.S. because they offer stability and predictability. * Adjustable rate — Adjustable-rate mortgages, or ARMs, have a lower introductory interest rate than fixed-rate mortgages, but the rate can rise after a set period of time — typically 3 to 10 years. According to the Mortgage Bankers Association, 10% of American homebuyers are now selecting ARMs, up from just 4% at the start of this year.12 An ARM might be a good option if you plan to sell your home before the rate resets. However, life is unpredictable, so it’s important to weigh the benefits and risks involved.   6. Shorten your mortgage term. A mortgage term is the length of time your mortgage agreement is in effect. The terms are typically 15, 20, or 30 years.13 Although the majority of homebuyers choose 30-year terms, if your goal is to minimize the amount you pay in interest, you should crunch the numbers on a 15-year or 20-year mortgage. With shorter loan terms, the risk of default is less, so lenders typically offer lower interest rates.13 However, it’s important to note that even though you’ll pay less interest, your mortgage payment will be higher each month, since you’ll be making fewer total payments. So before you agree to a shorter term, make sure you have enough room in your budget to comfortably afford the larger payment.   7. Get quotes from multiple lenders. When shopping for a mortgage, be sure to solicit quotes from several different lenders and lender types to compare the interest rates and fees. Depending upon your situation, you could find that one institution offers a better deal for the type of loan and term length you want.Some borrowers choose to work with a mortgage broker. Like an insurance broker, they can help you gather quotes and find the best rate. However, if you use a broker, make sure you understand how they are compensated and contact more than one so you can compare their recommendations and fees.14 Don’t forget that we can be a valuable resource in finding a lender, especially if you are new to the home buying process. After a consultation, we can discuss your financing needs and connect you with loan officers or brokers best suited for your situation.   8. Consider mortgage points. Even if you score a great interest rate on your mortgage, you can lower it even further by paying for points. When you buy mortgage points — also known as discount points — you essentially pay your lender an upfront fee in exchange for a lower interest rate. The cost to purchase a point is 1% of your mortgage amount. For each point you buy, your mortgage rate will decrease by a set amount, typically 0.25%.15 You’ll need upfront cash to pay for the points, but you can more than make up for the cost in interest savings over time. However, it only makes sense to buy mortgage points if you plan to stay in the home long enough to recoup the cost. You can determine the breakeven point, or the period of time you’d need to keep the mortgage to make up for the fee, by dividing the cost by the amount saved each month.15 This can help you determine whether or not mortgage points would be a good investment for you.   Getting Started Unfortunately, the rock-bottom mortgage rates we saw during the height of the pandemic are behind us. However, today’s 30-year fixed rates still fall beneath the historical average of around 8% — and are well below the all-time peak of 18.45% in 1981.16, 17 And although higher mortgage rates have made it more expensive to finance a home purchase, they have also eliminated some of the competition from the market. Consequently, today’s buyers are finding more homes to choose from, fewer bidding wars, and more sellers willing to negotiate or offer incentives such as cash toward closing costs or mortgage points. If you’re ready and able to buy a home, there’s no reason that concerns about mortgage rates should sideline your plans. The reality is that many economists predict home prices to continue climbing.18 So you may be better off buying today at a slightly higher rate than waiting and paying more for a home a few years from now. You can always refinance if mortgage rates go down, but you can’t make up for the lost years of equity growth and appreciation. If you have questions or would like more information about buying or selling a home, reach out to schedule a free consultation. We’d love to help you weigh your options, navigate this shifting market, and reach your real estate goals!   Sources: Washington Post - https://www.washingtonpost.com/business/2022/08/04/mortgage-rates-sink-below-5-percent-first-time-four-months/ Trading Economics - https://tradingeconomics.com/united-states/average-mortgage-size NerdWallet - https://www.nerdwallet.com/article/finance/what-is-a-good-credit-score org - https://www.debt.org/credit/improving-your-score/ The Balance - https://www.thebalance.com/will-multiple-loan-applications-hurt-my-credit-score-960544 Time - https://time.com/nextadvisor/mortgages/how-lenders-evaluate-your-employment/ Bankrate - https://www.bankrate.com/mortgages/why-debt-to-income-matters-in-mortgages/ NerdWallet - https://www.nerdwallet.com/article/mortgages/payment-buy-home Consumer Financial Protection Bureau - https://www.consumerfinance.gov/owning-a-home/loan-options/ NerdWallet - https://www.nerdwallet.com/article/mortgages/jumbo-loans-what-you-need-to-know Bankrate - https://www.bankrate.com/mortgages/arm-vs-fixed-rate/ MarketWatch - https://www.marketwatch.com/picks/as-mortgage-rates-rise-heres-exactly-how-more-homebuyers-are-snagging-mortgage-rates-around-4-01656513665 Consumer Financial Protection Bureau - https://www.consumerfinance.gov/owning-a-home/loan-options/#anchor_loan-term_361c08846349fe Federal Trade Commission - https://consumer.ftc.gov/articles/shopping-mortgage-faqs Bankrate - https://www.bankrate.com/mortgages/mortgage-points/ CNBC - https://www.cnbc.com/select/mortgage-rates-today-still-relatively-low/ Rocket Mortgage - https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed MarketWatch - https://www.marketwatch.com/picks/continuing-home-price-deceleration-heres-what-5-economists-and-real-estate-pros-predict-will-happen-to-the-housing-market-this-year-01659347993    

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10 Pro Tips for a Smooth Home Move

The process of buying a new home can be both exhilarating and exhausting. But the journey doesn’t stop when you close on your property. On the contrary, you still have quite a bit to do before you can begin the process of settling into your new place. Fortunately, you don’t have to do everything in a day. You don’t have to do it all alone, either. When you work with us to sell or purchase a home, you’ll have an ally by your side long after your transaction has closed. We’ll continue to be a resource, offering advice and referrals whenever you need them on packing, hiring movers and contractors, and acclimating to your new home and neighborhood. When it comes to a life event as stressful as moving, it pays to have a professional by your side. Here are some of our favorite pro tips to share with clients as they prepare for an upcoming move. Watch out for moving scams. Maybe you receive a flyer for a moving company in the mail. Perhaps you find a mover online. Either way, never assume that you’re getting accurate information. According to the Better Business Bureau, moving-related fraud is on the rise. In 2021 alone, individuals and families reported more than $730,000 lost to moving scams, an increase of 216% over the previous year.1 How can you tell if a moving deal is too good to be true? Trust your instincts. If the price appears too low or you can’t pin down the mover’s physical business address, try someone else. The same goes for any moving company representative who dodges questions. Reputable movers should offer transparent pricing, conduct in-home estimates, and provide referrals and copies of their insurance documents upon request.2 For help finding trustworthy movers, reach out. We’d be happy to share our recommendations.  Insure your belongings. Your moving company promises to take care of your custom piano or your antique furniture. But don’t just take their word for it. Ask to see how much insurance they carry and talk about how the claims process works. That way, you’ll know what is (and isn’t) covered in case of loss or damage. Of course, some items are priceless because they’re irreplaceable. You might want to move your more sensitive valuables (jewelry, documents, family heirlooms, etc.) in your own vehicle just to be safe. For added peace of mind, call your rental or home insurance provider if you’re moving anything yourself. You might already be protected or be able to purchase extra insurance to cover your move. If those options are unavailable, you could opt for moving insurance from a third-party carrier.3 Start packing when you start looking for a new home. As soon as your house hunting begins in earnest, think about packing away things you won’t need for the next few months. These could include seasonal or holiday decor, clothing, and books. Tackling just one or two boxes a day will give you a head start. If you're going to put your current home on the market, you'll want to declutter anyway. Decluttering will make your home seem larger, and depersonalizing helps buyers envision their own items in the space. Consider selling, donating, or throwing out possessions you no longer need. The things you want to keep can be placed in storage until you officially start moving to a new place. Pack to make unpacking easier. Have you ever opened a packed box only to find that it’s filled with an assortment of items that don’t belong together? This isn’t efficient and will only make unpacking harder. A better way to pack is to bundle items from a single room in a labeled box. Labels can let movers know (and remind you) where to place each box, whether it’s fragile, and which side needs to be up. Some people like to assign colors to each room in their new home to make distributing color-coded boxes a breeze. Feel free to unleash your inner organizer with this project. For example, you could create a spreadsheet and assign each box a number. As boxes are packed, simply fill in the spreadsheet with a list of contents. Anyone with access to the spreadsheet can log in and quickly find the desired item. Think outside the box when transporting clothes. Who wants to worry about boxing up clothes? If you plan on hiring professional movers, ask if you can leave clothing in your dressers. In many cases, they will use plastic to wrap the dresser so the drawers don’t fall out during transport. If keeping your clothes in your furniture makes it too heavy, the movers might be able to wrap and move drawers by themselves. Another easy transport trick involves turning clean garbage bags into garment bags. Poke a hole in the bottom of a garbage bag, turn the bag upside down, slide it over five to seven garments on hangers, and lay the items flat in the back seat or trunk of your vehicle. The bags will help prevent wrinkling, and your clothes will be ready to hang up when you get to your new home. Document prior to disassembling appliances and furnishings. Few things are as confusing as looking at a plastic baggie filled with nuts, bolts, and screws from your disassembled dining room table or sorting through a box of electrical wires and cords to see which ones fit your TV. The best workaround to easier reassembly is to document the disassembly process. Take photos and videos or thorough notes as you go. Whether it’s your headboard or treadmill, be very precise. And just a tip: Construct your beds first when you get to your new home. After a long moving day, the very last thing you want is to be assembling beds into the wee hours of the morning. Prioritize unpacking kids’ rooms. Children can become very stressed by a big move. To ease their transition, consider prioritizing unpacking their rooms as their “safe zones.”4 You aren’t obligated to unpack everything, certainly. However, set up your children’s rooms to be functional. That way, your kids can hang out in a private oasis away from the chaos while you’re running around and moving everything else. Depending upon how old your youngsters are, you might want to give them decorating leeway, too. Even if it’s just letting them choose where furniture goes, it gives them a sense of buy-in. This can help ease the blues of leaving a former home they loved. Be a thoughtful pet parent. Many types of pets can’t handle the commotion of moving day. Knowing this, be considerate and seek ways to give your pets breaks from the action. You might ask a friend to pet sit your pooch or keep your kitty in a quieter room, like a guest bathroom. Be sure to check in on your pet frequently. Pets like to know that you’re around. Give them treats, food, and water throughout the day. When it’s time to transport your pet, do it calmly. At your new property, give your pet access to just a room or two at first. Pets typically prefer to acclimate themselves slowly to unfamiliar environments.5 Plan for your move like you’re planning for an exciting vacation. When you plan vacations, you probably look up local restaurants, shops, and recreational areas. Who says you can’t do the same thing when moving? Create a list of all the places you want to go and things you want to do around your newly purchased home. Having a to-explore list keeps everyone’s spirits high and gives you starting points to settle into the neighborhood. And don’t feel that you have to cook that first night. Once the moving trucks are gone, you can always pop over to a local eatery or order DoorDash for major convenience. The first meal in your new home should be a happy, welcoming treat. And if you’re relocating to our neck of the woods, we would love to introduce you to all the hot spots in town and recommend our local favorites. Pack an “Open Me First!” box. You won’t be able to unpack all your boxes in one day, but you shouldn’t go without your sheets, pillows, or toothbrush. Designate some boxes with “Open Me First!” labels. (Pro tip: Keep a tool kit front and center for all that reassembling.) Along these lines, use luggage and duffel bags to transport everyone’s personal must-have items and enough clothing for a couple of days. That way, you won’t have to rummage through everything in the middle of your move looking for sneakers or snacks. When packing your “Open Me First!” boxes, think about which items you’ll need in those first 24 hours. For example, toilet paper and hand soap are musts. A box cutter will make unpacking a lot easier, and paper towels and trash bags are sure to come in handy. Reach out for a complete, printable list of “Open Me First!” box essentials to keep on hand for your next move! LET’S GET MOVING Getting the phone call from your real estate agent that your bid was accepted is a thrilling moment. Make sure you keep the positivity flowing during the following weeks by mapping out a streamlined, efficient move. Feel free to get in touch with us today to help make your big move your best move. Sources: Better Business Bureau - https://www.bbb.org/article/scams/24198-bbb-scam-alert-avoid-moving-scams-this-national-moving-mont org - https://www.move.org/how-to-tell-moving-company-scam/ Forbes - https://www.forbes.com/advisor/homeowners-insurance/moving-insurance/ New York Times - https://www.nytimes.com/2020/07/13/parenting/moving-tips-kids.html ASPCA - https://www.aspca.org/pet-care/general-pet-care/moving-your-pet

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