| Tweet |
The Ultimate Guide for First-Time Home Buyers
Buying your own home is probably one of the most exciting moments of your entire life and something you’ll remember forever. It’s a start of a new life and a way to leave all your troubles behind. However, not all homes are the same and you need to think long and hard before making the final decision. If you too are currently in the process of purchasing your first house or flat, here are a couple of things you need to know.
Location vs. price
This is one of the biggest decision all home buyers face, especially if this is their first time. Finding a perfect home is virtually impossible, so you’ll probably have to settle for something other than your ideal spot. Therefore, you’ll need to decide whether to stick to a certain location and pick just whatever property is available there, or make the most of your money and purchase a larger property in an area you haven’t initially considered.
The decision between the location and the price is quite hard and you need to think about lots of things – from the demographics of the neighborhood and transportation options, to the proximity of schools and available parking space.
https://i.imgur.com/BJe8eXa.jpg
Envision the future
Where do you see yourself in ten years? With a family, two or three children, a dog and a car, maybe? Can you picture it all? Most importantly, can you picture all of you living in a property you’re getting ready to buy? If not, step back and think again.
Envisioning your future is quite important when purchasing a property and you need to be certain every member of your family is going to have enough living space. That’s precisely why you mustn’t buy a home that will turn out to be too small, unless you want to move somewhere else in a couple of years.
Consider the space
Talking to previous owners of your potential new home is a great way to get some inside scoop into the advantages and disadvantages of a particular place. And if you’re lucky enough to find a property that was designed by a competent architect, don’t hesitate to purchase it right away – since these homes were built by trustworthy professionals, they’re generally better and more durable than the most, and will certainly prove to be a great place to start your family.
Double check your credit
Most first-time home buyers don’t have all the money they need in advance, even though they’ve been saving for quite some time, which is why they have to visit a bank and consider taking a loan. However, lots of people simply aren’t familiar with all the technical terms that appear in the financial lingo and are hence confused when talking to their advisors.
If taking out a mortgage loan is your only option, you need to be absolutely sure everything’s all right with your credit score. This will ultimately determine the terms of your loan and control your interest rate, so check it two or three times before signing any documents.
Although these things sound serious and frightening, purchasing a home for the very first time still is an experience like no other. So, focus on every part of the process and find that perfect place!
5 Factors that Can Influence Comps
Ah, the Comp. It’s a word you’ll hear over and over again in real estate. Comp is short for comparable property, and it is how a real estate agent will arrive at a market value for your home. If you are the seller, your agent will use comps to arrive at a recommended list price. If you’re the buyer, your agent will use comps to help suggest a fair purchase price. You may think that sale price is the only factor when you’re looking at comps and trying to set a price for your listing. But it’s actually a bit more complicated. Here are five things that affect comps that you might not be aware of:
- New construction nearby: Because of low prices for lots and varying prices in home building materials, new homes can actually be cheaper and cost less per square foot than existing homes. If there’s a lot of new construction nearby, that can affect the price for your own listing. A seasoned agent can account for this by using comps that are closer in age to your property, and assessing the quality of the finishes in a new construction compared to the subject property.
- Renovations: Recently renovated homes typically sell for more than homes that haven’t been updated in a while. If you’ve recently upgraded your home–especially sought-after upgrades like the kitchen or master bath, your home should be priced appropriately.
- Developable lots: Not all lots are created equal. Even if the square acreage is the same, a lot that’s easily developable will get a better price than a hilly or rocky lot that needs a lot of preparation. In this same vein is the zoning of the property. If your lot is zoned for multiple dwellings, it can fetch a higher price than a single family dwelling.
- Listing price vs. sale price: Whether sellers actually get their asking price depends greatly on the market. When you’re pricing your home, it’s important to look at sales prices, not just listing prices. The listing price doesn’t always accurately reflect what a home will sell for. Be sure to take note of average list price vs sold price as well. If homes are consistently selling for over or under listing price, it can give you a good idea of what a fair market value would be.
- Location: Nearby amenities, safety, schools, and noise levels can vary greatly within a neighborhood. Homes in more desirable parts of the neighborhood will sell for a higher price, all else being equal. Walkability is usually a very desirable trait, and so proximity to amenities can be a boost your home’s value. Similarly, being on too-busy of a street can lower your home’s value compared to other homes.
At the end of the day, fair market value is the price a buyer is willing to pay and a seller is willing to accept for a property. The best way to get your home in front of the most qualified and serious buyers is to have a competitively and accurately priced home, something a seasoned real estate broker can help you with!
Buying Soon? Make Sure Your Credit is in Order
Here’s one that I know my friends in the mortgage industry can get behind. There’s no more important time to work on your credit score than when you’re about to apply for a mortgage. There was once a time when if you could fog a mirror, you could get a loan (hello 2006!) but those days are long behind us. Now if you want to apply for a home loan, there are lots of qualifications. Having good credit is right at the top of that list. The higher your credit score, the lower the down payment you need to qualify, and likely the lower your interest rate. Improving your credit can save you a ton of money—we’re talking about thousands of dollars over the life of the loan. Here are the actions you can take that will have a notable impact on your score:
Pay down your credit card balances
Credit utilization is one of the biggest factors in determining your credit score. Your credit utilization should at least be less than 30 percent of your limit, and it’s even better if you can get it below 15 percent. This rule applies to both individual cards and your overall credit limit.
It may even be worthwhile to use some of the cash funds you were planning to use for a down payment to pay off credit card balances. Speak to your mortgage lender about the best avenues to take to ensure you’re getting the best loan possible!
Do no harm
Current credit minimums for FHA loans
Possibly the most important item on this list! While you certainly want to improve your score if possible, at the very least you’ll want to keep it steady. Avoid opening new lines of credit if you’re applying for a mortgage in the very near future. This will cause a hard inquiry to show up on your credit report. Whatever you do, don’t go car shopping or start furnishing your new home before the closing date! Otherwise your lender and Realtor® will be none too happy with you!
Take care of negative items
It’s good practice to check your credit report for negative items a few times a year—you can get one free report from each of the three major bureaus (Experian, Equifax, and TransUnion) per year. Sites like Creditkarma.com are great for keeping track of your credit scores for free as well.
If you find any negative items (collections, late payments, etc.), write a letter to the original creditor. Explain the circumstances that led to the negative item, and request that it be removed from your report. It can be surprisingly effective, and removing a negative item will improve your credit score in a hurry. You can find some good templates for a request letter online.
Once your credit is in order, your lender will be able to get you pre-approved for a loan amount. Make sure you get pre-approved before you start house hunting, or else you might fall in love with a home outside your budget!
Got any other credit tips? Leave them in the comments!
Is Now the Right Time to Refinance?
Even though interest rates are on the rise, they are still at historic lows. If you have an Adjustable Rate Mortgage (ARM), it may be a good time to consider refinancing your home. If you have thought about refinancing in the past, but were worried about being locked into a rate, getting in on the current low rates could be very financially advantageous. It’s expected that rates will continue to rise over the new months, so waiting too long to refinance may end up getting you a higher rate.There’s no one-size-fits-all answer to whether your should refinance, so here are a few of the main considerations:
How long does your introductory rate last?
Most ARMs have a fixed rate for the beginning of the mortgage. This is an introductory period (usually 3-10 years) when your rate will remain constant before it can be adjusted. If you have several years left in your introductory period, you can monitor interest rates for a while before making a decision. But if the intro rate is ending soon, it’s a great time to explore refinancing at a fixed rate. Be sure to take note of what the rate cap is for your loan. Usually, your APR cannot increase more than a certain percent during each period (so if you’re at 5% and you have a cap of 2%/year, your rate could go as high as 7%). If you’re not willing or prepared to pay the max of what the cap could be, refinancing may be an excellent option.
How long are you staying?
If you plan to sell your home soon—especially if you’re still on a fixed introductory rate—there’s not much motivation to refinance. But if you’ll be at your home indefinitely, you should consider your refinancing options. You could eliminate the stress of not knowing what your future mortgage rate and payments will be. This also could allow you to put more into savings, since you’re no longer having to account for the possibility of a dramatic increase in your mortgage payment.
What’s your loan balance?
The change in your mortgage payment will of course be determined in part by your remaining balance. If you owe $100,000-$200,000, a new interest rate may not greatly affect your monthly payment. On the other hand, if you owe $500,000, a change in interest rate could lead to a much higher payment.
Other factors
The previous items are just a few of the factors that should go into a decision about refinancing. Changes in income and your current credit score should also be considered, so be sure to weigh your options and make an educated decision. Talk to a mortgage professional who can help you figure out if refinancing is right for you. If you’re in the Portland area, I can point you to a lender who will work with you to figure out your best options.
Rent vs. Buy. Which Makes More Sense?
The title of this post is a question that if I had a dollar for every time someone asked me, I could probably already be retired. Unfortunately, there’s no easy answer that applies to everyone. One of the biggest determiners is location. For instance, here in Portland, the rental market has gotten so out of control in the past few years, that rent increases are exceeding housing price increases. Couple that with the fact that mortgage rates are still so low, that more and more renters are looking at home ownership as they find that monthly mortgage payments are actually more affordable than their current rent. Now, this isn’t the case everywhere, but it is happening all over the US. This article from Bloomberg shows the strain that high rents are causing people all over the country.
Many real estate sites will tell you that you should never, ever rent and that you need to buy now. There’s a reason so many people decide to rent, though. Renting isn’t always a bad idea. If you’re the type of person that never likes to stay in the same place for too long, then it probably doesn’t make a whole lot of sense to buy a house. Zillow’s Breakeven Horizon estimates the number of years you would have to live in a home before buying it would become more financially advantageous than renting it. At the end of 2015, the national breakeven average was 1.9 years. So if you’re not planning on staying somewhere for more than 2 years, it definitely behooves you to rent. If you’re lucky enough to be somewhere that’s rent-controlled, and you’re happy with your amenities, why would you walk away from that? Having a landlord means that you aren’t the one that’s ultimately responsible for the home, which can be a big allure to some people. For anyone that falls into these categories, by all means, keep renting!
Many of us, however, dislike the idea of paying down someone else’s mortgage, but aren’t sure if buying is right, either. While there are pros and cons to both buying and renting, here are some pros to being a home owner:
- Buying is cheaper than renting. According to a study done by Trulia in May 2015, nationally, buying is 35% cheaper than renting due to low mortgage rates and home price increases and rent increases being on par with each other.
- Freedom! Want to paint the kitchen a different color, or add carpeting to the bedrooms? When you own, those decisions are up to you and you alone (well, maybe your budget, too). Unless you have an HOA, you are free to make changes as you wish, and really create a space that is all you.
- Wealth Building. Real estate is usually someone’s biggest financial investment. Home prices tend to appreciate as time goes on, so you’re building wealth just by being in your home. Also, the more you pay down your mortgage, the more equity you have in your home. So the longer you stay, the more wealth you’re building!
- Homeowners get more tax breaks. You may be able to deduct your mortgage interest payments every year, as well as any deductions for any energy efficient improvements that you make to your home. Contact a tax professional to find out all the ways home owners can get tax breaks.
- Fixed rate mortgages don’t increase, rents do. Unless you’re somewhere that’s rent controlled, your rent will go up. It is just a part of the rental market. If you choose a fixed rate mortgage, your monthly payment won’t increase for the life of the loan. There’s definitely a peace of mind in knowing that you’ll always be paying the same amount every month.
Ultimately, it’s going to be up to you whether renting or buying better suits your lifestyle. If you’ve been on the fence for a while now, however, this is a good jumping off point to help make your decision.
What Does the Future Hold? 2016 Economic & Housing Forecast
There are so many things I love about working for Windermere, but what I love most is the access we get to information that I can pass along to all of you. Now that 2016 is officially upon us, and we’ve started to settle back into post-holiday life, I wanted to share with you guys some numbers that we can use to figure out what to look forward to this year.
Windermere is fortunate to have Chief Economist Matthew Gardner on staff to provide valuable analysis of the economy and housing market. Matthew recently completed his national economic forecast which details his predictions for the 2016 economy and housing market. I’ve added it here below for you. Take a look, and let us all know what you think in the comments. I think 2016 is looking to be a great year!
What Does the Future Hold? 2016 Economic & Housing Forecast
There are so many things I love about working for Windermere, but what I love most is the access we get to information that I can pass along to all of you. Now that 2016 is officially upon us, and we’ve started to settle back into post-holiday life, I wanted to share with you guys some numbers that we can use to figure out what to look forward to this year.
Windermere is fortunate to have Chief Economist Matthew Gardner on staff to provide valuable analysis of the economy and housing market. Matthew recently completed his national economic forecast which details his predictions for the 2016 economy and housing market. I’ve added it here below for you. Take a look, and let us all know what you think in the comments. I think 2016 is looking to be a great year!
