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Delay Will Usually Cost More

Two things can happen when the mortgage rates go up before you’ve found a home or locked-in your mortgage. You’ll either pay the current mortgage rate which means a higher payment, or you’ll have to increase your down payment to keep the monthly payment at the same level.

If the rate were to go up by ½%, the payment on a $275,000 mortgage would increase by $82.87 per month for the entire 30-year term. That would increase the cost of the home by $29,835.

Some people are purchasing the maximum home that they can qualify for. In that case, they cannot qualify for a higher payment and the only way to buy the same price home is to put more money down which may not be a possibility. The other alternative is to buy a lower price home which may not be…

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Will Points Make a Difference

Lenders typically quote mortgages at a market rate but can offer a lower interest rate loan if the borrower is willing to pay points up-front which is considered pre-paid interest. These points are generally tax deductible for the year paid when the borrower pays them in connection with buying, building or improving their principal residence.

A point is one-percent of the mortgage amount. A lender will quote a lower-rate mortgage with a certain number of points. There is not a standard amount; it is an individual company policy.

A simple comparison of the two alternatives based on the borrower’s ability to pay the points and whether the borrower will stay in the home long enough to recapture the costs will help to determine which loan will…

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Act Decisively

Whether it is hesitation or procrastination due to uncertainty, it can cost buyers by having to pay more for both the house and the financing. This is one of those markets where most of the experts expect interest rates and prices will continue to rise through 2019.

The National Association of REALTORS® reports there is currently a 4.2-month supply of homes for sale which is close to the same as last year’s inventory. Normal inventory is considered to be a 6-month supply.

If during the period you’re waiting to buy, the price of the home goes up by 5% and the mortgage rate increases by 1%, the payment on a $275,000 home with a 95% mortgage could be $233.80 more each and every month. Over a seven-year period, the delay to purchase would total…

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Rising Rates Affect the Cost Too

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased.

A ½% change in interest is approximately equal to…

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Inventory Continues to be a Challenge

In any given market, inventories fluctuate based on supply and demand considering area and price range. The National Association of REALTORS considers a balanced market to be a six-month supply of homes.

If it takes longer than six months to sell, it is thought to be a buyer’s market and less than six months, a seller’s market. Most buyers and sellers probably feel a balanced inventory is more like three months’ supply of homes.

The inventory of existing homes has been reduced to approximately 1.5 million houses which is 10.3% lower than a year ago. According to the Federal Reserve Bank of St. Louis there are 5.7 months’ supply of new homes currently on the market in the U.S.

Inventory has a direct impact on price. When demand is constant, but…

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Attracting Buyers

There is a common body of knowledge among real estate professionals that indicates that the longer a home is on the market, the lower the price will be. Many sellers discount this belief in the beginning because they feel confident their home will sell quickly.

Lowering the price is the most obvious thing that can be done to encourage buyers but it might be good to look at what builders do. Builders offer a variety of incentives such as upgrades, seller-paid closing costs, interest rate buy downs, washers, dryers, refrigerators or big screen TVs.

Interestingly, much of the resale market doesn’t employ these techniques. According to the latest NAR Home Buyers and Sellers Profile, 64% of sellers did not offer any incentives at all.

21% of sellers…

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It’s the Principal of the Thing

Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest.

If a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years.

If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to verify that the lender is applying the…

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Rental Real Estate is Preferred Choice

Real estate is the overwhelming preferred choice by Americans as identified in a recent survey. With the Dow Jones industrial average reaching record highs, it might be expected that the stock market would be the favored choice but that wasn’t the outcome.

Analysis of the report suggests that the popularity for houses could be that they are tangible assets that you can see where your money is actually invested compared to stocks and bonds which tend to be unclear where the money is invested.

There are several distinct advantages of homes as investments over other popular alternatives.

1. High loan-to-value mortgages available
2. At fixed interest rates
3. For long periods of time
4. On appreciating assets
5. With definite tax advantages
6. And…

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The Right Questions are Key

Asking the right questions will lead to the answers that help you determine which agent to use for one of the largest investments that most people make…the purchase or sale of their home.

Rudyard Kipling wrote the verse “I keep six serving men, they taught me all I knew; their names were what and why and when and how and where and who.” Prefacing your questions with one of these words can help you get the information you need to make a good decision about the REALTOR® you use.

• How long have you been selling homes and is this your full-time job?
• What designations or other credentials do you have?
• How many homes did you and your company sell last year?
• What is your average market time compared to MLS and your top competitors?
• What is…

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The Obvious Alternative Investment

Rental homes can be a natural alternative investment choice for homeowners because they are already familiar with houses. Maintenance on a rental is not that much different than on your personal home. The same plumbers, painters and other workmen can be used to make repairs.

Single family homes offer an investor high loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with defined tax advantages and more control than other investments.

1. High loan-to-value mortgages – most investments require that you pay cash but rental properties can be purchased with 20% down payment.
2. Fixed interest rates – most commercial loans are based on a floating rate such as prime interest plus one or two percent compared to real…

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